This is the first in a two-part blog-post series about the impact of Australian government policy on home based businesses that rely heavily on broadband connectivity.
We have all been bombarded with media reports in recent days about the Government’s NBN and the Oppositions plan for an alternative NBN. Both are offering to increase the download speed of the average house, and both are promising to spend a LOT of money doing it, but what actually do all the acronym’s and tech speak mean? In short, whose plan is better technically, and whose plan is the best value for money?
Getting Internet Today for your Home Based Business
In this first post, let’s start with the internet connection you are using now, and why it needs to be replaced. As a general rule you are probably reading this blog via an internet connection at home, hooked up in one of three ways – either wireless through Telstra, Optus or Vodafone or another reseller; Cable via Optus or Telstra; or lastly (and most numerously) via ADSL1 or ADSL2 down the telephone cable.
Let’s look at wireless first.
One of the major criticisms opponents of the NBN have is that it’s based on a physical connection to get the internet.
“This is a crock” they say – “everything is wireless now and it’s all going to get better – typical government wasting our money building networks which are out of date before they are finished”.
It’s a persuasive argument to those who either are not tech heads (as Tony Abbott once described himself on the 7:30 report), or those who only have a limited understanding of how wireless works. The fact is, , and the reasons are twofold.
Firstly, when people think wireless, most of the time they say WiFi which is the technology used to connect your iPad to your router at home, or to pick up that signal while enjoying a coffee at McDonalds watching the kids play in the adventure park. However, WiFi is just a mechanism for moving an already existing internet signal to your iPad or computer or phone or whatever. It’s a local wireless solution, and the internet signal you are picking up and broadcasting to is connected to a physical line such as ADSL or fibre. WiFi is great in the home or the office, but it’s not the way that the internet gets to you – it’s just the way it goes the last 10 metres or so.
The other wireless technology is 3G (or 4G now in some areas), and this indeed is a broad based competitor to a wired network. It’s broadcast from telecom towers (where the signal is connected to a fibre backbone), and is picked up by phones, tablets, and a range of other internet connected dongles. People usually look to this and say why do we need an NBN when we have this.
There are a couple of reasons why wireless solutions won’t cut it for home based businesses in the longterm.
The first is contention - Have you ever noticed that the more people who connect to a tower and download via 3G, the slower the connection is? That’s contention. I remember during the 2011 Queensland floods we lost power for three days, and the only news we could get was via my 3G phone, and it was PAINFUL. The signal was so slow and was virtually unusable. That’s because hundreds of thousands of homes had no power and were all trying to connect to 3G services to get their internet. Simply put 3G is broadcasting on a limited bandwidth, and once that bandwidth is full, it’s full – no exceptions. Critics of the NBN usually say something like “it will get better in time,” but there are physical limitations on the frequencies available to broadcast on. Simply put it is IMPOSSIBLE for 3G/4G or any of its successor technologies to handle anything close to the bandwidth used by Australians today, let alone in the next 10, 20 or 50 years. 3G/4G is great technology for those on the move, but it’s not a viable long term individual solution for everyone.
The other main reason wireless is not suitable is the download limits and the sheer cost of the currently available plans. In order to run a business properly you are likely going to use a fair amount of data, and thats going to leave a nasty taste in your mouth when the bill arrives. This may get better over the years, but the technology required means it is very unlikely that wireless internet will ever be anywhere near the cost of wired internet.
Secondly, we have cable.
This is usually HFC cable which was laid by Telstra or Optus in order to deliver pay TV. Cable is a good technology and is used fairly extensively in America to deliver internet (and pay TV) to the suburbs. Australia’s cable networks however are very limited. In the 90’s, Telstra and Optus both competed to roll cable out – sometimes following each other down the same street. This was a heady time for the telecommunications industry, but the fact is, it was unsustainable.
Telstra and Optus soon stopped their rollout and moved on to satellite as a means of delivering pay TV in a more efficient manner. As a result HFC cable has an extremely limited footprint and technically was connected only to a small number of homes (comparatively) and absolutely no unit blocks at all. HFC cable is also similar to wireless in that it suffers from contention. Those lucky users who have cable and are in areas where it is not heavily used can usually get a fast and fairly reliable connection. They unfortunately are in the minority of Australian users.
Thirdly, most homes in Australia have ADSL.
ADSL is a technology used for delivering internet signals down the same copper cable as your current fixed phone line is delivered by. ADSL is a good technology for delivering data, however it suffers from a range of issues – most importantly are the so called “Technology Blockers”.
In order to receive an ADSL signal, you must have several things in your favour.
- Firstly you must be within a reasonable distance of your exchange (which also must be upgraded to broadcast ADSL which is most exchanges nowadays) – no more than 5km on average, and secondly
- you must have a copper line direct from the exchange to your place. Most older buildings suit this capability, but there are huge numbers of new developments or redevelopments in older areas where these conditions are not me.
As a cost saving measure, Telstra has deployed either sub exchanges, or roadside cabinets called RIMS (Remote Integrated Multiplexors) which interrupt the signal from the exchange to your home. RIMS, in particular, are used in new estates where Telstra runs fibre optic cable from the exchange to a RIM, and then run copper from the RIM to your place. This suits the requirement of being able to provide a telephone signal, however, as ADSL requires a copper connection to the DSL equipment in the exchange, placing a part of the connection via a RIM means ADSL will not work. Telstra does have ways around this–specifically, a technology called a Minimux, which they can put inside a RIM. However, these are limited and often you can be in an area where there are plenty of ADSL connections available in an exchange, but you still cannot get the internet because of limitations on the RIM or sub exchange.
ADSL generally doesn’t suffer from contention like wireless or cable does, but it is severely limited by distance as the copper cable degrades the signal the further it has to travel. The further from the exchange (or RIM) you are, the weaker the signal. Once you get past a certain distance you cannot receive ADSL at all, and you are restricted to 3G/4G only.
The biggest issue with ADSL however is the limitation put on the signal by the copper cable itself..
Copper in Australia has been rolled out over the last 80 years or so, and there are areas where the copper network is 80 years old. Copper is a metal. It suffers in the ground. It oxidises. It gets wet. It decays. In addition the longer the signal has to travel, the weaker it gets. It may be only 1 kilometre as the crow flies to your local exchange, but the copper might be three or four times as long according to the network design.
Over the years, Telstra has spent billions on maintenance of the network. However, in the last ten years or so, Telstra has deliberately moved to a ‘just in time’ maintenance process, only fixing issues when they come up rather than proactively maintaining the network. This has been both a cost saver for now, and a future bet that the network would be decommissioned soon for a new network and is therefore no longer required. In some areas, the network is virtually unusable. At my house, I can only receive ADSL1 (as I am behind a RIM), and the internet frequently dies whenever we have heavy rain.
So what are the opposing parties’ (National Broadband Network) solutions?
Labor’s NBN Plan for the future
NBN Co is a company founded by the Labor government to replace 93% of Australian homes’ telephone and internet connections with fibre optic cable. This is simply a bundle of fine glass-based wires which transmit signals at up to the speed of light from the exchange to your house. Because it’s a light signal inside glass, there is minimal loss of signal when it’s transmitted over long distances, therefore there is no need for RIMS or other ways of getting the signal from point A to Point B.
This is called FTTH/P or Fibre to the Home/Premise.
Fibre Optic Cable will give internet speed of up to 1GB (compared with a max of 25mb on ADSL2+), but this is not the physical limit of the cable. The cable can potentially deliver speeds at a much faster rate (speed of light remember). However, the signal speed is limited by the capabilities of the equipment in the exchange (and in your house) to transmit and receive the signal. The Fibre optic cable also delivers your telephone signal, so there is no longer any need for the old copper cable at all. Simply – it’s an entirely new network based on 21st century technologies rather than the late 19th century technologies we have at the moment.
The downside, of course, is the cost. It’s not cheap. We are talking about connecting millions of homes directly to the various exchanges. The current projected cost is around the $40b mark, but let’s be honest, ANY big project like this will almost certainly suffer cost blowouts over the years. The opposition says it will cost $90b, which, frankly, appears to be a politically motivated figure they have picked out of the air, but it’s fair to say it’s likely to cost more than the $40b, the government says. My guess is, it will probably come close to the $50b mark by the time it’s completed (if it is).
That’s a lot of money, and it’s funded mainly by borrowings (both government and private). The government is using an administrative trick, which, ironically, Peter Costello first introduced when he was treasurer. They are treating the entire build as investment in an asset which will eventually give a return. Therefore it’s “off the books” as a budget investment. The opposition’s criticisms about this being an invalid way of doing things ring a bit hollow when you know that Costello was the architect of the method. It’s also a bit hypocritical when you look at the fact that the coalition NBN plan is actually funded the same way!
Because it’s funded by borrowings, it also does not take money away from other parts of the budget – i.e. if there was no NBN project, we would not have another $40b to spend elsewhere. The effect on the budget, bottom line, is effectively $0 (but the NBN co does carry debt). Eventually the network will generate a return, as they will (and do) sell access to the fibre optic cable to internet service providers, who onsell it to those lucky customers who have it. Getting a return, however, will take a LONG time. MUCH longer than any private sector company would be willing to accept (probably around the 20-30 year mark).
The opposition has been uniformly critical of the NBN since its inception (Tony Abbott charged Malcolm Turnbull to “destroy the NBN” when he became shadow communications minister). However, the NBN’s popularity has been a thorn in the opposition’s side for a long time, and as a result, they have now introduced their own NBN plan, which leads us to…
The Liberal/National Coalition NBN Plan.
The opposition NBN is a very different beast to the government one. Where the government intends to bring Fibre Optic to 93% of premises, the opposition plan is much, much smaller. In fact, only newly built estates will have fibre optic. Any currently built homes (or homes being built in established suburbs) will continue to have copper wiring to their front door. Instead, the opposition plans to install around 60,000 “nodes” on the sidewalks of Australia. Nodes are refrigerator-sized cabinets containing bulky batteries and a power supply, and are designed to be the intersection between fibre optic coming from the exchange, and your house.
In this way they are similar to the RIMS currently being employed by Telstra (but a LOT more numerous). Under the coalition plan the fibre optic cable will be run from the exchanges through to the nodes, where the existing copper cable coming into your house at the moment will be connected. This is called FTTN (Fibre to the Node).
Because there is Fibre Optic cable to the node, the speed of the internet connection will be extremely fast (as fast as the government’s plan) right up to the node, and maybe for one or two houses right next to the node. The speed will quickly degrade thereafter, unfortunately, as the signal travels down copper to your house. Copper has a low resistance factor to electronic signals, but it’s still magnitudes higher than Fibre Optic. Therefore, while it may be a Gigabit speed at the node, it’s down to 25 Megabits speed by the time it reaches your house one kilometre away from the node.
The cost of all this is around $25b, approximately $15b cheaper than the government’s version. The reason for the dramatic price reduction is the massive reduction in human labour in rolling out the fibre optic to every single house. This also contributes to the completion date which is about two years quicker than the government’s plan. Given that we would expect the government plan to bust its budget over the coming years, there is probably a fair case to say the same would apply to the opposition plan, as it has similar risk factors. $25b will probably end up being more like $35b by the time it’s all done and dusted.
The drawbacks to the opposition plan are obvious–lower speed (approximately 1/4 of the government speed and potentially much less), but, on the flip side we are looking at less outlay and a faster delivery. One thing which has not been mentioned much, though, is upload speed (which is essential for video conferencing applications–something a LOT of home based consultants use for things like live streaming broadcasts and webinars). (while also handling downstream signals), therefore the lower speed will be considerably less than 1/4 when looking at upstream signals.
So, which broadband policy is best? I’ll answer that question in the next post.
About Wayne McCullough
