[Linux-aus] Political Recognition for Technology in Australia - was Re: Seeking feedback - EFA Citizens Not Suspects campaign

[Russell Coker]

On Fri, 28 Jun 2013, Russell Stuart <russell-linuxaus at stuart.id.au> wrote:
> On Fri, 2013-06-28 at 17:24 +1000, Russell Coker wrote:
> > If there's $2 billion returned to the government then there will probably
> > be at least $2.5 billion in revenue.  If we divide that by 7600000
> > households then that's $329 per household as NBN REVENUE.  But no-one at
> > all will ever pay just for NBN, they pay NBN fees as part of an ISP
> > subscription, the ISP provides data access, services such as a mail
> > server, a help desk, and makes a profit.  So if every single household
> > in Australia signs up for the NBN then they would each be paying $500+
> > per annum for ISP service unless there were a small portion of the
> > population paying significantly higher rates.
> > 
> > My parents pay $600 per annum for home phone service and Internet.  I
> > don't think that model would allow for a $329 NBNco revenue from them
> > even if they wanted to switch.
> 
> You aren't comparing apples with apples.  In this case you are comparing
> what your parents are paying now with what the NBN must charge in 2030.

Where did the year 2030 come from?  If the NBN isn't expected to be profitable 
until 2030 then the interest paid on the investment (probably government bond 
interest rate) between now and then needs to be included in the cost of the 
NBN.  That makes it more expensive and makes the possibility of it ever being 
profitable in any normal business sense even more remote.

> If you assume a very modest 3% inflation rate, your parents $600 will be
> paying $1000 in 2030.

That hasn't been happening.  The amount that they have been paying in dollars 
(not indexed to inflation) has been generally decreasing.  Currently they have 
some sort of $50 per month pensioners deal from Optus that gives them cable 
net access and a phone line.  Previously they had a phone line and a 3G modem 
which cost them more and before that they had a phone line and a ADSL modem 
which cost them even more.

If it ever becomes possible to forward what used to be a land-line phone 
number to a mobile phone then they will move to Kogan 3G for all phone calls 
and net access and be paying $300 per year.  Kogan 3G is more than adequate 
for all their Internet needs.

I don't think it's at all likely that my parents will pay $1000 in 2030.  I 
think it's much more likely that they would have a single Kogan phone with 3G 
net access to use for everything.

> The same thing applies for the 7.6 million
> connections figure you are using.  That is expected to rise, and indeed
> it has already - Telstra has 8.1 fixed line connections now.  Allowing
> for a 1.5% growth rate in our population (which is well under the 2012
> 1.8% figure), that 7.6 million figure can be expected to rise to 10.2
> million in 2030.

The 8.1 million fixed lines are due to the fact that you need one line for 
every person who's speaking at the same time, one line for every modem or fax 
machine, and phone lines at offices.  The NBN is just going to be per home.  In 
fact one of the claimed benefits of the NBN is that it's fast enough that 
multiple people in one home can share net access without performance problems.

> Or to put it another way, last year Telstra earned $5.2 billion in
> revenue, and paid $3.5 billion of that to shareholders.  If that $5.2
> billion is again scaled for inflation, it becomes $9.1 billion in 2030.
> Scale that again for population growth, and it becomes $12B.

Telstra have a wide range of telephony products including VOIP, 3G/4G phones 
(which are really expensive), partnerships with pay TV, and lots of other 
things.  The NBN is only doing fixed line connections.

It is a possibility that NBNco could start doing some of the other things that 
Telstra is doing.  That would be a bad thing for us.

> > Kogan offers a nice 3G connection with 6G of data per month for $300
> > per annum, that would cover the Internet needs of a good portion of
> > the population.  If some portion of the population choose not to use
> > the NBN then that means  either the government gets less revenue than
> > they would like or the other customers pay more.
> 
> Indeed.  But it's a big if.  These data plans have been available for
> some time now, and yet year in year out the number of fixed lines keeps
> growing roughly in line with population growth, and the amount data
> those fixed lines keeps growing exponentially.  That exponential growth
> is the prime justification for the NBN.

It's not a "big if" at all.

I'm quite happy with my ADSL service and I'm not going to switch to the NBN 
unless ADSL is turned off or the NBN is cheaper.  My parents and mother in law 
are happy with Optus cable and also aren't going to change unless they get a 
cheaper offer or they are compelled to change - in which case Kogan 3G might be 
the winner.

The majority of the urban Australian population don't see any need for the 
type of net access that people on this list want and won't pay any extra for 
it.

> > But the NBN price model only supports paying 4* the base rate from
> > what they've told me (4 ports on the router) so that won't work.
> 
> I am not sure where you got that from, but it's wrong.  Last I looked
> the NBN charges your ISP $23/month ex GST for basic 12MB/sec access,
> plus an additional increment for each additional 12MB/sec increment,
> plus CVC data charges.

I attended an information session at the NBNco office a while ago, my 
recollection was that it was $24 per month for a port on the router.  They 
made no mention of different rates for different speeds.

> On top of that they have the 4 router ports as
> you say.  They will be rolling out a 1Gb/sec access presumably with
> 1Gb/sec pricing in the time frame you are talking about.  So just in the
> internet connection alone there is considerable scope for earnings
> growth.

There is only scope for growth if people want to pay more.

I'm currently paying $59.95 per month for Internode Naked ADSL with a 150G 
quota and I'm getting download speeds well in excess of 12Mbit per sec (did 
you mean megabit or megabyte?).  If NBNco charge extra for speeds greater than 
12MByte then hardly anyone will pay.  If they charge extra for speeds greater 
than 12Mbit then hardly anyone who has a cable or ADSL2+ connection that works 
well will want to use the NBN.

> They have ignored the the current cable systems for now, but it seems
> very unlikely to me the cable network will be maintained if the is a
> another network servicing the same neighbourhood with several orders of
> magnitude times the capacity.

Except of course if the current cable network is a lot cheaper and provides a 
service that's good enough.

> > The numbers just don't add up for the NBN as a commercial venture, we
> > need to stop considering it as such before the government starts
> > treating it like a toll road and cuts off competition.
> 
> That's a bit of an odd statement, given the Auditor General and the
> opposition have gone over it with a find tooth comb haven't found any of
> the "holes" you list here.

The first thing to keep in mind is that when the government decides to creat 
toll road monopolies and cut off competing roads or decides to give large 
amounts of money to car companies we don't seem to have any "find tooth comb" 
(sic) discovering problems.  The second thing to note is that you almost never 
see anyone do the financial analysis that I've done.  When the analysis of the 
financials stops at a single figure for the cost and doesn't consider the 
interest rates etc then you shouldn't regard it as being of any great value.

The next thing is that there are lots of wild assumptions about the entire 
population wanting to use the NBN when it becomes available.  That's a problem 
that you expect when non-technical people analyse such things.

But if you think that my analysis has an error then please point it out to me, 
I've included all my calculations - unlike every single person who has given a 
positive review of the NBN.

> That one area is whether they could actually pull off what is the
> biggest engineering challenge since the Snowy Mountains scheme.  The
> Snowy was smaller in absolute terms than the NBN of course, but as a
> percentage of GDP it's about the same scale.

Diverting a large river is a significant engineering challenge.  Installing 
optic fibers in place of copper wires is merely a lot of work IMHO.  Previous 
discussion in this thread have cited the ability to use the NBN for 50 years 
without much change.  It's now been 64 years since the start of the Snowy 
Mountains scheme and 39 years since it was completed - it's been proven to 
have a 50+ year life.

-- 
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