The future of the NBN (7); Inquiry into the business case of the NBN

In October 2019, the Parliamentary body overseeing the NBN - the Joint Standing Committee on the NBN, launched an Inquiry into the Business Case for the NBN and the experiences of Small Business.  Submissions were due a couple of weeks ago (17 Jan), and my submission (#16) went public this week. Data is at Figshare. I previously responded to a similar Inquiry in 2018 (Data) with a model to calculate the value of the NBN. On 25 Feb, I will talk on this topic at Telsoc. Slides now available at: Slideshare.

Committee Focus

The Committee were interested in "the rollout of the [NBN] and the performance of nbn co", particularly:

a.the economics of the NBN, including key operational and financial performance forecasts in the Corporate Plan 2020-23;
b.current pricing structures, including wholesale pricing, affordability and take-up, particularly as they relate to low-income and rural and regional customers;
c.network coverage issues; including reporting of outages planned and unplanned
d.the delivery of the business segment strategy, including to enterprise and government customers, and small to medium businesses;
e.the experiences of small and medium business in relation to the utilisation, accessibility, customer service and affordability of the NBN;
f.compliance with the NBN Statement of Expectations and adequacy of that Statement
g.any other related matters. Source: Parliament of Australia

Australia vs OECD and Top 10 Trading Partners

I presented the material from the future of the NBN posts (1-6), especially NBN speeds vs OECD, but narrowed that down to Australia's Top 10 Trading Partners (Source; OEC - Observatory of Economic Complexity), which are an interesting mix of countries, including:

• China | United States | Singapore
• South Korea | Japan | New Zealand
• Thailand | India | Germany | United Kingdom.

Australia per OECD (2018) was close to the bottom (see Figure 2 below), but post-build NBN, we come back to middle of the pack. An Appendix shows the NBN plans for each of these countries (Table 1). The Broadband Commission produced a nice summary graphic (Figure 1) comparing NBN target speeds and coverage for UK, EU, USA, South Korea, NZ and DE (plus others).

Figure 1. Broadband Commission summary of NBN Plans; Australian and Top 10 Trading Partners highlighted. Broadband Commission: The State of Broadband (2018), p.37.

Figure 2. Appendix 2 of Ferrers (2020) Submission. Australia Broadband speeds vs OECD (2018). Source: OECD 2018. Raw data (OECD xls).

Summary of Australia's Top 10 Trading Partners - NBN Plans - Appendix 1 - Submission

Country	Target	Speed (Mbps)	Year
Australia	90%	50	2020
Australia	100%	25	2020
China	50%	100	2020
China	70%	50	2020
China	some	1000	2020
India	100%	50	2022
India	Villages	1000	2020
India	Villages	>1000	2022
Japan	98%	Fibre	Now
New Zealand	75%	Fibre 100	2019
New Zealand	87%	Fibre 100	2022
Germany	100%	50	2018
Germany	Regional	1000	2025
Singapore	?? oops left it out - in error
South Korea	99%	Fibre	now
South Korea	50%	>1000	2022
Thailand	Cities	100	2020
Thailand	95%	broadband	2020
United Kingdom	15M(55%)	Fibre	2025
United Kingdom	100%	Fibre	2033
United States	100M(80%)	100	2020
United States	extensive	wireless	2020

Table 1: Comparing Australia's and Top 10 Trading Partners - NBNs.
Source UNESCO/ITU Broadband Commission | List of Plans (NZ: Wikipedia)(South Korea, Japan International Broadband Scorecard, Ofcom)

Fast Broadband (at/over 100Mbps) - Australian and Selected Top 10 Trading Partners

What was really interesting, and surprising, was China has rolled out an NBN since 2013, and now has 250M fast broadband connections (77% of fibre users; which are 93% of internet users; Future of NBN 6), compared to US 30M fast broadband users, where fast is at or over 100Mbps. Both countries report coverage of 90% for access to fast broadband services. US reports about 10 subs (of fast broadband) per 100 people, whereas China has close to double, around 20 subs per 100 people.

Figure 3.  Figure 1b. in Ferrers (2020) Submission. Millions of fast Broadband Subscribers. Australia and selected Top 10 Trading Partners. NB: Japan, South Korea did not report in OECD 2018.

I also looked at more recent data from Ookla, which reports average speeds by country of its Speedtest service. Australia does not fare well on this metrics. Australia rates near the bottom of our Top 10 Trading Partners (Figure 4).

Figure 4. Appendix 4 in Ferrers (2020) Submission. Download Average Speeds - Australia and Selected Top 10 Trading Partners. Ookla Global Index 2018, 2019.

What I realised (in Figure 2 - gold bars), was that other countries have a lot of fast (over 100Mbps) connections whereas Australia does not.  In 2018, we reported 0% fast broadband to OECD. In the Ookla graph from mid-2019, we showed close to 0% at or over 100Mbps. This year (around May 2020), NBN will release more affordable gigabit services for around 50% of users (FTTP, FTTC, HFC). I argued in my submission that even small percentages using gigiabit will have a significant impact on Australia's average speeds (which is often complained about). New Zealand currently has about 10% gigabit users, so this level of takeup seems quite possible for Australia too, if the price is affordable. So I am optimistic that Australia can increase its national download performance, if affordable prices can be set for gigiabit services.

Scenario	Average Speed	Ranking against Top 10 Trading Partners
OECD 2018	21mbps	10th
NBN post-build	50mbps	10th
5% gigabit	98mbps	7th
10% gigabit	145mbps	3rd
20% gigabit	240mbps	1st

Table 2: Adding Gigabit substantially raises Australia's national average broadband speed, relative to Top 10 Trading Partners
Source: Appendix 5, Ferrers (2020) Submission.

Overall my recommendations in my submission (data at Figshare) were:

1. Encourage NBN gigabit services at affordable prices.
2. Update NBN Co's Statement of Expectations to upgrade the network (preferably bi-partisan), and guide how NBN Co will spend cash NBN will generate on debt repayment, dividends and network improvement.
3. Focus NBN Co on encouraging use of the NBN (so we are more like China - heavily used, than US - accessible but less used at fastest speeds).
4. NBN Co publish customer satisfaction results with the network by major customer categories eg business, consumer, FTTP, FTTN, FTTC etc. (bearing in mind that satisfaction comes from more than just speed eg ITU/UNESCO 2025 Broadband Goals), and lastly
5. NBN Co include in its Corporate Plans a section on how Australia compares to other countries, along key performance metrics, and particularly the Top 10 Trading Partners. Ongoing NBN performance targets should reflect shareholder preference for Australia's performance relative to our major trading partners.

Afterword
 In contrast, and we should not forget, Australia has come a long way, with NBN and broadband from ten years ago. In 2009, nearly everyone had less than 25mbps, and about 30% had less than 2Mbps. Going back to 2006 (from ABS Internet 8153.0 Usage), some 45% of Australia was on dialup. In 2009, those still on dialup (1M users) were downloading 10Mb per month. The average in 2009 across all users was 4Gb per month. NBN recently (at end 2019) reported NBN users were using 250Gb per month). Extraordinary growth in download consumption.

 

Figure 5: NBN Speeds 2009, 2018, post-build. Source: ABS, OECD 2018, NBN Co. | Tweet

Update: China reports (p.11,12) 2020 Internet development -
As of December 2019, the number of FTTH/O (home/office) 2019 users had reached 417 million, accounting for 92.9% of all fixed Internet broadband subscribers. The number of subscribers at/over 100Mbps reaches 85% of all fixed broadband users (up from 77% in 2019).