CommsDay – NBN Rebooted
18 November 2014
It is a pleasure to be here at the NBN Rebooted Conference.
Following the election last year Comms Alliance and CommsDay took the initiative to hold the first of these conferences – and I am pleased that you have decided to continue the tradition in 2014.
That being said, it is my fervent hope that we are not all assembling for NBN Rebooted XII in 2024.
With the theme of this year's conference being 'Solving the Multi-Technology Puzzle', I want to focus my remarks on two particular parts of that puzzle: wireless and satellite.
First, I want to talk about the strengths of these technologies.
Secondly, I want to argue that the previous government got into a mess because it set the boundary incorrectly between these two technologies – and misunderstood their key features.
Thirdly, I want to talk about what we are doing to fix the problem – and to make best use of both satellite and wireless.
Strengths of Wireless and Satellite
Amidst all the fierce political contention over the NBN, there has never been any significant disagreement over the fundamental proposition that as you move out from the cities into lower population density areas, first wireless and then satellite become the optimal technologies to use.
The NBN Implementation Study commissioned by the previous government and conducted by McKinsey and KPMG, for example, found that the cost per premises of a fixed line broadband network rose steadily as you moved beyond the 90th percentile of premises ranked by cost to serve.
By the 93rd percentile it concluded that wireless was cheaper on a per premises basis than a fixed line network; and by the 97th percentile satellite was cheaper on a per premises basis than wireless.
Whether the Implementation Study identified the right crossover points of the cost curves is a separate issue – but the basic logic of the economic suitability of the three different technologies being dependent largely on population density is widely understood and agreed.
That being said, there are some subtleties about where to draw the dividing line between the three which are not always well understood.
The first subtlety is that while Australia has an enormous landmass – we are also a very highly urbanised nation.
74 percent of us live in areas where the population density exceeds 1000 people per square kilometre – whereas the comparable figure for the UK is only 48 per cent.
Three quarters of all the premises in Australia are within 50 kilometres of the centre of one of the twenty largest centres in the country.
The corollary of this is that a small number of premises are spread over a very large landmass – and over almost all of that area, satellite is the technology best suited economically to serve those premises.
The second subtlety, as the Fixed Wireless and Satellite Review highlighted, is that the three networks will not operate as three concentric rings. Instead, it is better to think of the fixed line network covering the big metropolitan areas, as well as some 600 'islands' or 'pockets' around Australia, with the rest of the country covered by fixed wireless or satellite.
The third subtlety is that while satellite may be the cheapest technology to use in serving customers across most of the Australian landmass, it is not cheap in an absolute sense – in fact it is far from cheap.
On a per-customer basis satellite is very expensive. For example, it costs around $7,300 per user to deliver services via NBN Co's Interim Satellite Service (ISS).
Satellite's real merit is that while it might be high cost, that cost remains unchanged regardless of location.
It costs exactly the same to provide satellite to a location in the Sydney suburbs as to one two hundred kilometres out of Alice Springs.
That means that across most of the Australian landmass satellite is the cheapest option – largely because everything else costs even more.
To quote the Implementation Study: "Satellite services will continue to be important for providing broadband in the future due to the prohibitive cost of serving lowest-density areas with other technologies."
Given the fundamental economics, the Coalition has never contested the choice by the previous government to use satellite in regional and remote Australia.
In fact, the Coalition has a long history of supporting the use of satellite technology.
Both the $107 million Higher Bandwidth Incentive Scheme (HiBIS) introduced by the Howard Government in 2004, and the Australian Broadband Guarantee brought in by the Howard Government in 2007, funded the provision of satellite broadband services.
Of course, the Coalition also has a long history of backing wireless for the delivery of broadband in regional and remote Australia. In 2007 the Howard Government concluded its competitive selection process under the Broadband Connect programme with an announcement that it had selected Optus and Elders to build a fixed wireless network to deliver broadband services, with total public funding of $958 million.
As history now records, shortly after coming into government Labor cancelled the contract with Optus and Elders. In one of the many rich ironies in this twisted saga, Optus and Elders planned to use 2.3GHz and 3.4GHz spectrum to deliver these services, and entered into a contract with Austar to purchase the spectrum for $65 million.
Three years later, NBNCo purchased exactly the same spectrum for $120 million.
The Previous Government Got Into a Mess on Fixed Wireless and Satellite
I want to now talk about some key problems with the fixed wireless and satellite rollout which we have inherited from the previous government. There are quite a few I could raise, but I want to highlight four:
- Underestimating demand
- Setting the wrong dividing line between fixed wireless and satellite
- Misunderstanding the economics of satellite
- Failing to recognise the economies of scope with mobile.
The first key mistake was that the previous government had severely underestimated demand for both fixed wireless and satellite.
This year's Fixed Wireless and Satellite Review found that between 440,000–620,000 connections would be required across the non-fixed-line footprint – whereas NBN Co's previous corporate plan was forecasting 230,000 connections.
Setting the wrong dividing line between fixed wireless and satellite
The next mistake was to see satellite as the 'mop-up' or residual network which would be used whenever a customer could not be served by the fixed or wireless networks.
This was compounded by organisation problems, meaning that the fixed wireless people in NBN Co would decide certain customers were too hard to serve – but fail to tell their colleagues in the satellite area.
In the slightly more polite words of the Fixed Wireless and Satellite Review, NBN Co's 'functional siloed organisation…inhibited visibility and effective decision making across fixed wireless and satellite.'
The Review expressed a clear and strong view on this point: NBN Co should not rely on satellite technology as a 'back-stop' for other access technologies.
It also recommended that NBN Co strike a very different balance between satellite and wireless than was previously proposed: going from 39% of users on fixed wireless and 57% on satellite, to 57% of users on fixed wireless and 40% on satellite. This will require almost doubling the number of fixed wireless base stations from 1,400 to 2,700.
Importantly, this approach will mean that the scarce capacity on the satellite is reserved for the users who really need it – and who cannot practically be served by other technologies – and in turn ensure that there is sufficient capacity so that they receive a good quality user experience.
Misunderstanding the economics of satellite
The third big mistake NBN Co made under Labor was to ignore the inherent capacity constraints of satellite by pretending that the technology has the same capacity and economics as a fixed line service.
This was revealed in its mismanagement of the Interim Satellite Service, and a failure to manage the finite satellite capacity properly.
The end user experience was increasingly degraded, as some retail service providers and a minority of heavy users evaded the 'fair use' policy by downloading large volumes of data and leaving little capacity available for other users.
The satellite network was configured on the assumption that each user would download nine gigabytes per month on average.
Yet there were resellers selling plans with download limits of 20 gigabytes or even 60 gigabytes per month.
Surprisingly, NBN Co had no tools to measure the amount of data individual end users were downloading – leaving the company blind to the actions of its resellers and their end-users and facing a rising number of complaints from customers experiencing internet speeds which were periodically slower than dial-up.
This has produced a disappointing outcome in the Interim Satellite Service which in recent months NBN Co has been working hard to fix – and just as importantly, to ensure is not repeated in the long term satellite service.
Failing to explore economies of scope with mobile
The fourth mistake made by the previous government was a failure to recognise that, as NBN Co was building out a fixed wireless network, there were likely to be economies of scope with the provision of mobile wireless services.
To take the most obvious question: if NBN Co builds a tower to deliver fixed wireless services, could that tower also be used by a mobile operator to deliver mobile wireless services?
In the last twelve months I have visited 35 electorates and over 60 locations around Australia for community consultations regarding regional and remote communications.
I have been to multiple locations where there is an NBN fixed wireless tower completed or under construction, but no mobile coverage: Sisters Beach in Tasmania, Dereel in Victoria and Dumbalk in Victoria just to name three.
This suggests to me that the opportunities are more than merely theoretical.
What We Are Doing to Fix the Problems
Let me turn now from a gloomy contemplation of the problems we inherited – to the more optimistic outlook as we work to get these problems fixed.
As I noted at last year's conference, we have a five point plan:
- maintain the satellite and wireless rollouts
- improve operational performance of the wireless and satellite businesses
- deliver fixed broadband services to more country towns – taking advantage of fibre to the node
- leverage the NBN to better support mobile communications
- specific funding support to extend mobile coverage in regional and remote Australia.
I want to update on three aspects of this plan in the time remaining:
- As part of improving operational performance, our work to allocate satellite capacity – on both the interim and long term satellite services – more fairly and rationally
- Our progress on fixed wireless – including the potential spin-offs for mobile communications
- Our $100 million mobile black spot programme.
Allocating Satellite Capacity More Fairly and Rationally
When it comes to allocating satellite capacity more fairly and rationally, we have both a short term objective – to fix up some of the problems on the interim satellite service – and a more fundamental objective to make sure we don't repeat these mistakes when it comes to the long term satellite service.
To meet our short term objective, the first step we have taken is for NBN Co to deploy new monitoring tools to better manage existing Interim Satellite Service capacity.
This will help prevent a small proportion of high volume users – what NBN Co calls 'top talkers' – from unfairly slowing the service levels of all other users. Analysis by NBN Co has revealed that the top 2% of users on the ISS are taking up around 20% of the capacity on the service.
NBN Co is now working with RSPs to better manage these users, to create a more sustainable service for the other 98% of users.
NBN Co has deployed around 130 Enex probe devices which connect to customer premises equipment to monitor 'real world' performance.
Another measure we have taken to address the short-term satellite issues is to upgrade capacity on the ISS. This has been done to address the choke-point of space-segment congestion.
In April this year, NBN Co announced that it would purchase $18.4 million worth of additional capacity for the 44,000 existing users of the ISS. This will allow each user to receive around a third more capacity.
NBN Co has now completed this upgrade, and end users have 33% more capacity on their service – from 30kbps mean busy-hour throughput (MBHT) to 40kbps.
I hasten to add that the mean busy-hour throughput metric should not be confused with end-user speeds, which will reflect NBNCo's advertised speeds of 6Mbps.
As part of this process, NBN Co has also concluded the process of re-pointing of some 1,200 end-user dishes which will deliver further improvements to speed and reliability.
This work is showing up in customer feedback: one RSP has noted that customer complaints about the service have almost halved from around 140 per month to around 80 per month.
NBN has further work to do with RSPs, with the aim of signing new arrangements to better define fair use policies for the ISS.
To deal with the lack of capacity on the Interim Satellite Service, we have launched the new NBN Satellite Support Scheme (NSS), which opened for applications in August.
This has capacity for up to 9,000 more premises to get satellite services on the IP Star network.
Already, over 1,000 individual customers have passed the eligibility criteria and successfully registered for the NSS Scheme. Active services are now being delivered, and registrations will continue until capacity is reached.
But our more fundamental objective is to deliver the Long Term Satellite Service (LTSS). NBN Co is currently building two identical satellites to provide broadband services to regional and remote Australians. Both are now scheduled to be operational in 2016.
The satellites will cover the entire Australian mainland and islands through 101 dedicated 'spot beams'.
Each satellite beam has a different capacity in terms of maximum bandwidth, which is split across all end users in the beam, and cannot be changed. The highest capacity beam can serve approximately 15,000 premises, while the lowest 20 lowest-capacity beams can serve an average of 700 premises each.
In recent weeks the first satellite has successfully completed what is called 'thermal vacuum testing', with favourable test results.
There are further tests to conduct including vibration dynamics, acoustics and deployment tests. But NBN Co reports that it is on track to meet the 2015 launch date, and to be operational in 2016.
As well as the construction of the satellites, NBN Co has also made progress in the development of pricing and products for LTSS services. Learning from the experience of the Interim Satellite Service, Fair Use Controls have been designed and NBN Co is developing their implementation into products.
NBN Co is also developing tiered pricing for its LTSS products, which will allow for increased choice for end users – ensuring that there are plans available for high-volume users needing larger download limits, while also ensuring that the standard service is priced affordably to offer a metro-comparable package.
NBN Co is also developing a migration plan for users transitioning from the ISS to the LTSS.
As for the build progress on the earth-side of the satellite project, NBN Co has now completed construction all but one of the 10 satellite ground stations.
Each ground station includes two 13.5 metre dishes, and the Kalgoorlie and Wolumla sites have an additional dish each for back-up, telemetry and tracking.
I had the opportunity to visit the Wolumla ground station in south-eastern New South Wales just last week, and it is an impressive facility.
The long term satellites will be a game changer in satellite services in Australia, offering downlink speeds of 25 Mbps as part of entry level plans, compared to 4 or 6 Mbps that Australians in regional or remote parts of the country experience now.
Our progress on fixed wireless
The rollout of the NBN fixed wireless network has improved markedly since the 2013 federal election. At the time of the election, there were just over 39,000 premises passed by fixed wireless technology and just 2,428 services in operation. Today, there are over 137,000 premises passed by the fixed wireless network and almost 25,000 services in operation – meaning the fixed wireless network has roughly ten times as many users today after just over a year of the Coalition being in government.
We are also continuing to encourage NBN Co to work with the mobile network operators to identity opportunities for NBN Co's taxpayer funded assets to facilitate increased mobile coverage in regional and remote Australia.
NBN Co is sharing details of its current and planned tower rollout with the mobile network operators to identify opportunities for sharing.
As I have seen with my own eyes – for example, recently visiting an NBN monopole fixed wireless tower about 20 minutes drive from Launceston – there is typically expansion capacity on NBN Co's towers which could be used either for additional fixed wireless antennas, or mobile antennas.
So there is at least the technical possibility of allowing mobile operators to use this space.
One of the non-Telstra operators has provided cost estimates of building a new mobile base station in a rural area from scratch. The civil works cost about sixty per cent; in addition backhaul, when converted to a capital cost equivalent, makes up some twenty per cent of the cost.
So if you are not building a base station from scratch – but instead co-locating on one of NBN Co's fixed wireless base stations – there should be significant savings available.
Under the previous government, it seemed NBN Co had little appetite to sell backhaul to mobile network operators. We have given different guidance to NBN Co, and its October 2014 product roadmap shows that NBN Co is presently consulting with industry on its proposed 'cell site access' product.
Where a mobile network operator co-locates on an NBN fixed wireless tower, and that tower is connected by NBN fibre, then NBN Co will have a backhaul product available for purchase. If NBN is using microwave backhaul, the likely model is that NBN will allow the mobile network operator to install its own microwave equipment on the tower.
Our progress on funding support to extend mobile coverage
Of course, the Coalition is also providing direct funding of $100 million to stimulate additional mobile coverage in outer metropolitan, regional and remote Australia.
At the CommsDay Melbourne congress in early October I announced that following an extensive public consultation process, the government was releasing a database of some 6,000 mobile black spots nominated by members of the public.
Since then, members of the public had a window of opportunity add or clarify any locations on the database. With the list of locations now finalised, this database will be used by mobile network operators and other bidding parties in a competitive selection process to determine which locations will receive public funds to build new base stations.
The government has conducted a thorough consultation process with mobile network operators, state and local governments on the guidelines for this competitive selection process, which we expect to begin in coming weeks.
Once the competitive selection process is concluded, the locations selected to be funded under the programme are expected to be named in the first half of 2015. We expect that the first base stations to be funded under the programme will begin to roll out in the second half of 2015.
The $100 million public investment is expected to leverage at least an additional $100 million from bidding parties as well as state and local governments.
For example, the WA state government had committed $45 million to fixing mobile black spots under its Royalties for Regions Fund.
We have also had a significant number of local councils offer either cash or in-kind contributions to the programme; such as road and power access, civil works, and discounted leases on land.
The programme is expected to fund between 250-300 new base stations around the country.
I should be clear that this does not equate to covering only 250-300 black spots from the total of some 6,000. In many cases a single base station will be capable of covering multiple locations – as around three quarters of the nominated locations are within a few kilometres of another nominated location.
Let me conclude with the observation that the theory of regional and remote communications is well understood – and wireless and satellite have a major contribution to make.
Turning theory into practice was not the strong suit of the previous government.
By contrast, the Abbott Government has a strong focus on implementation.
We also have a very deep commitment to regional and remote Australia – and it is no coincidence that the great majority of electorates in these parts of the country are represented by the Coalition.
As part of our focus on these issues, both Minister Turnbull and I have made a number of visits to regional Australia.
I believe we are very much on the right track – but there is a lot more work to do as we get on with giving residents of regional and remote Australia the broadband services they need.
1Implementation Study for the NBN, March 5, 2010, Exhibit 1-5, p 15.
2Implementation Study for the NBN, March 5, 2010, Exhibit 1-5, p 15.
3 NBN Co Fixed Wireless and Satellite Review, May 2014, p 22
5Implementation Study for the NBN, March 5, 2010, page 290
6NBNCo Fixed Wireless and Satellite Review p9
7Fixed Wireless and Satellite Review, p 10