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back to article Australia’s NBN too expensive: EIU

The headlines say all you need to know, surely? As reported all over the place, Australia’s NBN (National Broadband Network) has been rated as too expensive and relying too much on government support, according to the Economist Intelligence Unit. Australia cherishes a characteristic called “cultural cringe”. A full explanation …

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Another interesting factor

What is the average occupation of each domestic building? I suspect the vast majority of Australians (like us in the UK) live in owner-occupied houses - one family per dwelling. I suspect that a substantial proportion (? the majority) of S Koreans live in large multi-occupied apartment blocks.

If my suspicions are correct, it's much easier and cheaper to lay a fibre to the apartment block - immediately giving all its occupants a (shared) 100Mbps (or even 1Gbps) Internet connection, whereas you'd be lucky to get better than a DSL link to your house in the suburbs, let alone out in the countryside. That could easily account for an order of magnitude difference in the performance/cost ratio.

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NBN, EIU, GFC

If these terms had been defined in the first couple of paras I might have had a chance to understand what the piece was on about. Not being Australian I don't recognize them.

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(Written by Reg staff) Gold badge

Re: NBN, EIU, GFC

Noted. Article has been updated.

NBN is Australia's National Broadband Network.

GFC is Austalianese for "GLOBAL FINANCIAL CRISIS"

EIU is self-explanatory from article

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Happy

Re: Re: NBN, EIU, GFC

Thank you very much, kind sir. The defns are appreciated.

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No comparison

These Europeans don't understand just how big Australia is. South Korea is about 400Km x 200Km. That is, about half of the populated areas of Victoria, the smallest state on the mainland. As for the last mile -- Koreans live in apartment blocks, Australians live in suburban houses. So the per-capita cost of the last mile cable is necessarily more massive in Australia.

There's a good reason South Korea was the first country to do this. Because it is cheaper to do there than almost anywhere else on earth.

BTW, I particularly loved how they included the Korean upgrade plans but not the Australian upgrade plans -- counting Korea as 1000Mbps and Australia as 100Mbps -- so they could achieve their "ten times slower" result.

I've lost a lot of respect for the EIU. This is pretty shoddy work. Apparently in aid of making a philosophical point.

The bottom line is. We're a rich country. In good economic times (unlike the rest of the world). Now is a good time to be spending on infrastructure which will lower our CO2 footprint.

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why tell me

Why do people continue to defend the NBN?

Why does the Gov't continue to lead Australians and Austrlian industry down the garden path?

There was a very cheap shot linking the Economist's analysis to the GFC and Credit Rating Agencies, weak and of little relevance.

However, while we are on that topic, I would rather illustrate how the Gov't in AU of both parties have been heavily manipulating politics and economics for a very long time.

The gov't is artificially propping up a housing bubble, it is pumping more money into tax breaks for property investment -and- free grants to stop a very very unstable market from crashing that is bring the economy deep into recession.

At least the phoney gov't policy and spin of the EU and USA have come crumbling down like a house of cards, and now revealed to all the level of government incompetencies and corruption in all of this, and dont forget, the GFC is far from over.

Australia is tied with China, as long as China does not crash and its shifty policies brought into the light of day, the Aust. gov't can continue to create use farcial policies like the NBN and mislead the public. We have enough mining profits to keep us afloat, we have a two speed economy and dwindling capacity in other industries, the gov't is doing little, can do little, so they busy themselves with make believe schemes like the NBN.

Australia is await a BIG correction, when it comes, it will be a relief for a lot of people, a lot of people will be hurt, and the govt will not have the luxury of creating pointless policies like the NBN as they will be busying putting out fires to repair what has been neglected for a long time

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Excellent article Richard

It seems that almost all of the news regardig the NBN reported in the old news media falls along party/lobbyist lines. Personally I think the NBN has a high chance of success if it can be tied ito greater external bandwidth, in and out of the country and if the old vested interests can limited in their influence.

Why anyone listens to these economists when they can't acurately model what has happened now or in the past, let alone in the future, is beyond me.

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Spot on!

Thanks for this analysis.

The reporting here on this has been absolutely shocking. I expected little else from the Murdoch rags, like The Australian (once a great newspaper) and the Herald Sun, which just parrot whatever Tony "shit happens" Abbott spouts after listening to his morning Weet-Bix.

However, the supposedly Labor-leaning Fairfax rags have been just as clueless. Possibly less willfully so.

At least the Murdoch empire publications have clear marching orders according to an ideological line. The Fairfax coverage was just breathtaking in its stupidity and ignorance.

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Unhappy

In the end...

...it comes down to whether we want our broadband supplied by the corrupt (business) or the incompetent (govt.).

Of course, not long after the tax payer has finished funding it, the whole lot will get sold off to the polliticians' (both sides) big business buddies for a song anyway. Then the pollies take their large pensions and retire to a nice comfy board position.

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FAIL

Good analysis

the hysteria in the local rags is at fever pitch. I am waiting for Abbot to print out the report and start waving it around in Parliament in a similar fashion to Moses coming down off the mountain with the Ten Commandments. If only Conjob wasn't such a dickhead.

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Dear EIU,

Fuck off.

Love and kisses,

Australia

PS: Public bad, private good? Certainly not for major infrastructure projects. This country has a history of privately owned infrastructure being allowed to decay without maintenance because it might cut into profits to pay people to actually work on it.

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Anonymous Coward

meh

"This country has a history of privately owned infrastructure being allowed to decay without maintenance because it might cut into profits"

Which ones, specifically?

We certainly don't need to look far to find examples of where Australian government (federal or local) has absolutely butchered execution of infrastructure-related projects, whether public-private (Lane Cove Tunnel, Sydney desalination plant, Sydney airport rail link, Sydney Harbour tunnel) or fully public (BER, pink batts, Strategic Indigenous Housing and Infrastructure Program). The corruption of state governments and the ineptitude of federal government in Australia would astonish the Reg's readers outside Australia).

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Flame

Re: meh

"Which ones, specifically?"

Well, if you live in Adelaide, you get to enjoy hours-long power outages in summer because AGL and Origin can't be bothered upgrading or maintaining outdated, *privately owned* infrastructure;

Water being shut off in our area for two days because a *privately owned* water main burst and it took the company that long to fix it;

*Privately owned* buses and trains running late or not at all because of cost-cutting measures (and the strikes they cause).

You laissez-faire capitalists and your "everything should be privatised" mentality have brought this world to the brink of ruin. Public infrastructure should be publicly owned. Without it, civilisation would not exist. Surely the organisations that maintain these very foundations of civilisation should have some accountability to that civilisation, instead of just a few wealthy shareholders?

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Big Brother

Costs too opaque to tell

Richo may be right about specious claims from what we have a right to expect to be a respectable economic analysis unit. However, the current opacity surrounding NBN costs (as opposed to figures bandied around in press releases) makes even fantasy claims as valid as creditable analysis.

The NBN is currently exempt from FOI laws, and it's anyone's guess what the real costs are projected to be, what real expenditure has already been, and what the actual bandwidth delivered to end users will be capable of. Let's not forget that services currently sold as 'up to 3 Mbps' probably deliver no more than an average 70 Kbps, and Australian vendors are still milking the market according to pricing models that relate to data transfer, not the actual costs of network infrastructure.

A feature of that dynamic is that bandwidth use sometimes exceeds capacity without penalty to vendors regardless of bandwidth promises, and sometimes falls short of capacity but is choked by vendors for no other reason than they can gouge more cash from customers by doing so.

While these shenanigans are going on in the private sector, why should we trust 'guarantees' from politicians (who are not known for integrity or truth) about the NBN, which is controlled by politicians no matter how much they wiggle about 'independent company'?

The truth of the matter is that until the NBN financial situation is completely transparent, or completely divorced from government (including taxpayer funding and state directives on CSOs), a credible financial analysis is impossible.

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FAIL

This is Australia, Mate!

I know this may be sounding a bit bitter, but i have yet to seen any government project in Australia that hasn't come in at least three times the initial promised budget.

When looking at the $43 billion price tag it would be more correct to look at it as a $120 billion given history repeating.

Hell, if it goes the way of the Opera House, it will be 16X the cost and take 5 times as long as initially promised.

Private companies are at least held to contract and the country will be compensated if they fall behind deadline and we won't be over charged if they go over budget. Not to mention that their original quotes were somewhere in the realm of $7 billion making them a much more economical choice.

We can not say the same for our government who have proven consistently to be incapable of coming in on time or under budget.

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Anonymous Coward

telco worker

Do you know for instance the largest telco contractors in AU, ie. those who will build the network, of course NBNCo wont be building it...it will be contracted are some of the shiftiest operators in the business?

namely VisionStream, Silcar communications, and service stream. These are currently the bastard offspring of former Telstra network unit, NDC, ie. network design and construction. I can tell you, they are not better when they were a govt. business unit as part of Telstra, as they are today as 3 separate outsourced companies.

how do i know this? I've work for all four of them, and im currently employed by two of them.

Visionstream apparently is looking at 11Bn worth of contracts from NBNCo. Visionstream and Silcar are subsidaries of Leighton. Having seen the practices there and the massive inefficiencies and poor practices, eg. outsourcing and use of contractors that dont meet industry standards or accreditations etc. I see little hope of this project meeting its mark.

Service Stream is the worst of the bunch, ask anyone in the Telco construction business and they will cringe at the name, they are renouned for their poor quality work. Ex CEO of servicestream became COO of NBNCo if I am not mistaken, this is when NBNCo's credibility sank for those in the business and in the know.

The telco construction sector is a shambles, anyone working in it will tell you this, and will also tell you that there is a great deal of corruption since Telstra no longer wanted to take on the responsibility of maintaining its network and control of its design and construction. For this reason i think the cost of building the network would be considerable higher in the best case secnario, in the worst case, it would be riddled with corruption and bureaucratic red tape.

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WTF?

RTFA

Did you read the article? South Korea's NBN costs are about the same as Australia's.

South Korea's NBN was also a government initiative.

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Really

"it will be contracted are some of the shiftiest operators in the business ... namely VisionStream, Silcar communications, and service stream. These are currently the bastard offspring of former Telstra network unit, NDC, ie. network design and construction.

How do i know this? I've work for all four of them, and im currently employed by two of them."

Really?

Visionstream - the business unit Telstra created to build the HFC pay-tv network; later sold to Leightons. Was never part of NDC; in fact, Visionstream was deliberately created so that Telstra could employ an army of contractors, make Foxtel look more independent, and avoid giving the work to NDC's mostly award/EBA-based workforce.

Silcar - a joint venture between Siemens and Thiess; never had anything to do with Telstra - except when they started winding down their technical staff in various support services (e.g. power systems, etc), Silcar got the contract. Later they expanded into end-user installation and support (e.g. phone lines, Pay TV, etc).

ServiceStream - started life as TCI; a 3rd-party project management and services company, contracted by Telstra to take over some of NDC's role in order to made NDC look more 'independent' when they were trying to sell them off. Again, later expanded into end-user install / support and more.

How do I know this? I worked for Telstra for 24 years, before getting smart, getting a redundancy, and getting out. All the above went down during the time I was there.

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True

Richards analysis of Oz media is correct.. IMNSHO, it is also an accurate assessment of the ruling elites and self appointed clever people, like media owners, intellectuals, (left and right, whatever those tags mean as they are all economic rationalists with collectivist beliefs).

Oz governments and firms bring in some foreigner from completely different geographies and blindly take their advice as unholy writ.

As for the broadband issue, as one who travels across the more densely populated states, I note that phone coverage is unreliable to poor outside all towns below 10,000 usually, despite the misrepresentation of various phone companies Ironically, the ex-government owned telco still has the best coverage and highest prices. This entire technological and policy mess comes from blindly applying thinking from densely populated countries to a large mostly desert land mass that has 15 large cities and a thin sprinkle of small regional centers with even thinner residences and hamlets between them.

It is time Oz citizens rejected the foolish colonial attitudes of their rulers and pundits.

As for the NBN, lets see the figures. Since they are still a state secret, it is a reasonable conclusion it is another example of corporate charity from the taxpayers.

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FAIL

If we wait for private sector

We'd stay in digital stone age. This is about Australia mate, here private sector either doesn't have the money or doesn't spend the money on infrastructure.

NBN itself is good, however the problem is with gov. Let's face it, regardless who is in power, it will be always under budgeted (therefore need more than "planned") and horribly delayed.

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WTF?

perspective ?

Good to get some of these big numbers into perspective.

$43 billion over 8 years for NBN - apparently crippling cost to the nation.

$35 billion over 1 year quoted costs for recent floods to the economy.

NBN suddenly looks cheap and affordable.

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a little off topic... but I gotta say bravo!

"...credit ratings agencies that gave junk mortgages the “AAA” stamp, thus sparking the GFC (global financial crisis)..."

i was developing for an investment bank while this unfolded and wrote stuff for monitoring portfolio ratings exposure for US RMBS securities - I watched the whole thing in slow motion like a car crash. And nobody in all the media analysis and BS that followed ever really gave S&P and the rest of the rating agencies the slice of the blame pie they deserved. Nice to see a cutting little throwaway spliced into an unrelated article.

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FAIL

2% or 0.2%

The quote from the EIU says 90% of the Australian population lives in 0.2% of the land area.

The later calculation in the article uses 2%, not 0.2% - BIG DIFFERENCE.

It makes a complete nonsense of the calculations in this article.

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