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FactCheck: will regional internet users pay more under the Coalition’s NBN plan?

“If people want to access high-speed fibre, they will have to pay $5000 for the privilege… We believe that people in regions should pay the same price as people in Brisbane CBD or Sydney CBD. Under the…

What do the two broadband policies mean for regional Australia? Broadband image from www.shutterstock.com

“If people want to access high-speed fibre, they will have to pay $5000 for the privilege… We believe that people in regions should pay the same price as people in Brisbane CBD or Sydney CBD. Under the Coalition plan, there will be different prices, one for the CBD and a higher price in regional Australia.” – Minister for Broadband, Communications and the Digital Economy, Anthony Albanese, press conference, 9 August.

Both major parties are trying to convince voters that their plan is better than their competitor’s. So, is it true that the Coalition’s broadband plan will cost more for regional households and businesses?

Competing NBN policies and costs

Albanese’s statement seems to conflate the cost of provision with the cost of access. The National Broadband Network’s (NBN) wholesale price is based on provision, access and usage:

  • Provision is the cost of installing a connection to the user premises.
  • Access is the monthly fee for being able to use the NBN, covering operations and recovering capital expenditure.
  • Usage refers to the charge per data volume or digitally delivered service. (Usage charges would be set by internet providers - not NBN Co or the government.)

The government’s NBN rollout includes both the deployment of technology - fibre, fixed wireless and satellite - and the provision of the connection to the premises itself. All of this is provided to the end user at no up-front cost in all but the most exceptional cases.

The Coalition’s policy brings the optical fibre connection to one of about 60,000 neighbourhood “nodes”, or kerbside cabinets, where that fibre connection is then adjusted and linked to the existing copper wire to the home. This technology is known as Fibre to the Node (FTTN) and is intended for 71% of premises.

The policy also provides for 22% of premises being connected by fibre all the way to the home for many new housing estates and where the copper has degraded to the point that fibre is more cost-effective.

Those who won’t be connected by fibre to their home can pay for their own connection or possibly co-fund their connection with local councils or private entrepreneurs (this would then split the cost of connection, making it cheaper for individual households).

If all this technical explanation is confusing, here’s a way to think about how both policies work. Suppose our major roads were sealed, minor roads were gravel, and access roads to homes were dirt. The ALP’s policy is like having all roads sealed, with 93% of access roads being sealed and the remaining 7% being upgraded to gravel. The Coalition’s policy is like having all minor roads sealed, but access roads will only be sealed if this is cheaper than gravel. If you want a sealed road to your home, you are welcome to pay for it yourself.

Albanese claims a self-funded connection under the Coalition’s plan will cost A$5000. It is unclear whether he means this is a typical figure, or a worst case. The comparable figure in the UK is between £700 to £1500 although other sources claim up to £3500. Shadow communications minister Malcolm Turnbull has quoted around A$3000 based on the UK figure for a 500 metre connection from the local node.

But using these UK figures can only give us a ballpark estimate of what it would cost in Australia. The UK and Australian circumstances are different, with different levels of urbanisation and costs of labour.

Whatever the actual figure will be, there seems to be broad agreement that it is thousands of dollars, and this will be a significant barrier to the take-up of optical fibre.

Will regional Australians pay more?

The government’s policy has a set uniform wholesale price – that is the price of access to the NBN that NBN Co sells on to internet service providers. For regional users, it’s more likely that they will be getting a satellite connection rather than fibre to the home. This technology is more expensive to provide but the cost of access would be the same. Effectively, this means the cost of accessing fibre in the city is cross-subsidising the more expensive satellite technology used in the country.

But the Coalition policy is subtly different. It has a cap on its wholesale price, meaning that the price could be lower. If there was more infrastructure competition, particularly if a competitor found a cheaper alternative technology, this could drive lower costs and lower wholesale pricing. To compete effectively NBN Co would then need to lower their own wholesale pricing.

History suggests price competition might occur in affluent parts of Sydney and Melbourne, and to a lesser extent in Brisbane, Perth and possibly Adelaide. But competition is unlikely to appear on a significant scale elsewhere in the country, including regional areas.

Modelling of this competition effect provided by the minister’s office suggests a wholesale price difference under the Coalition’s plan of just 7% by 2019 for a 12 megabits per second service. This is a difference of around $1.40 per month or $17 per year. A stronger example, including at a higher data rate, may have demonstrated a higher price.

But with the government’s current modelling, it hardly compares to the broader cost differences associated with the current city-country divide of private and government delivery of services. It’s important to note that reliable internet access would mean other costs of living in regional areas, particularly transport and education, could be reduced.

Verdict

Albanese’s claim that it will cost $5000 for a fibre connection to your home under the Coalition’s plan is no more reliable than the Coalition’s estimate of $3000, as there are so many potential cost variables - but clearly the cost will be in the thousands of dollars.

On the second claim about differences in regional and city prices, modelling provided by the minister’s office suggests a wholesale price differentiation of around 7% by 2019.


Review

The article provides a fair analysis. Regional consumers may pay more, but the user-pays principle under the Coalition’s policy also applies to residents in suburbs of the metropolitan cities. The extra user-pays charge for fibre access rather than copper access will dwarf the likely regional difference in retail usage charges over the first several years of usage, for those who want it. So, along with those living in regional areas, those living in more established suburban homes and single-tenant business premises will also be disadvantaged by the Coalition’s policy.

It’s worth noting as well that the final connection price would be affected by how many households or businesses in a given street decide to petition together for a fibre cable to be connected to their houses. Thus the average price for fibre access will likely be much less in high-income suburbs than in low-income suburbs.

On the article’s last point, few people will be using such a low speed as 12 Mbps by 2019. Even rural residents connected to the NBN by radio access will start receiving 25 Mbps by beginning of 2014. On current predictions, by 2019 the normal entry level for fibre to the home services is expected to be 100 Mbps. - Peter Gerrand.

The Conversation is fact checking political statements in the lead-up to this year’s federal election. Statements are checked by an academic with expertise in the area. A second academic expert reviews an anonymous copy of the article.

Request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.

Join the conversation

29 Comments sorted by

Comments on this article are now closed.

    1. George Michaelson

      Person

      In reply to Jack Arnold

      Turnbull has a farm at Scone, in the Hunter.

      I don't like his NBN policy but to suggest he has no contextual awareness of rural telecommunications is probably not sensible.

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    2. Eddie Jensz

      logged in via Facebook

      In reply to George Michaelson

      Turnbull may have a farm in Scone but his mind is in the city. He has no idea what it is like for people like us who have to choose between wired broadband or a clear signal on our copper based landline.

      My experience where I live has been that Telstra offered to give us access to "fast mobile broadband" because were had copper coils on our phone line to improve the voice signal. The mobile signal didn't work most of the time and then when it did it was slower than dial-up.

      We opted, after…

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  1. Stuart Eley

    logged in via email @gmail.com

    So am I right to assume that the 500m connection for $3000 would be a subsidised cost? The total cost of that would surely have to be higher. How far can they go in a day with one field crew on a standard suburban street?

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    1. Jack Arnold

      Director

      In reply to Stuart Eley

      Stuart, it seems unlikely that under Labor that would be the cost.

      The NBN has had a slow rollout for many reasons, including the distances between cottages in urban regional centres lacking blocks of multiple home unit boxes, commercial wrangling by Telstra over the cost of the copper network and usual installation delays caused by weather.

      Metro IT users have had high speed ADSL2 etc systems for some years, by wireless depending on local reception conditions, and early installation of fibre in cities.

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  2. Jack Arnold

    Director

    "The extra user-pays charge for fibre access rather than copper access will dwarf the likely regional difference in retail usage charges over the first several years of usage, for those who want it. So, along with those living in regional areas, those living in more established suburban homes and single-tenant business premises will also be disadvantaged by the Coalition’s policy."

    This Review point says it all .... The high speed NBN will cost more under than Coalition than Labor.

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    1. Terry Reynolds

      Financial and political strategist

      In reply to Felix MacNeill

      Felix, I would much rather be alive now. Australia has never been better.

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    2. Doug Hutcheson

      Poet

      In reply to Terry Reynolds

      "I would much rather be alive now." You mean, you're not alive now? Geez, I didn't realise the internet could reach out beyond the grave ...
      who is your ISP? <grin>

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    3. Terry Reynolds

      Financial and political strategist

      In reply to Doug Hutcheson

      Doug, I was speaking poetically. I am "alive and living well now", compared to how we just "existed" back then under frugal and post war tougher times. You may not have seen any difference if you don't live in Melbourne.

      Geez, don't bother sending me a book of your verses!

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    4. Doug Hutcheson

      Poet

      In reply to Terry Reynolds

      Ah, I see! Good thing I was grinning poetically. Don't worry about the book of verse: most people would rather be dead than read it. "8-)

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  3. George Michaelson

    Person

    I would be interested to what extent the price modelling of a 7% variance reflects current competition in ADSL and D/SLAM access, and pricing models in the current market. Always dangerous to go from the particular to the general but the difference I found in ongoing costs between providers when I moved between Optus, TPG and Internode exceeded 7%. The extent to which fixed monthlies come into this is one thing. the per-bit cost is another.

    I am very glued onto a belief that effective layer-2…

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    1. Fred Smith

      Electrical Engineer

      In reply to George Michaelson

      I agree with you that the investment of this scale is not unreasonable from the government. That, however, is the rub, as both NBN proposals call for the network to be sold off once complete to provide the return on investment. Neither side of politics has this right, and would rather sell off income generating assets such as the NBN to private concerns.
      There is a reason the NBN is not included in the budget, because the funding is off the books (bonds) and the ROI is from the sale when complete.

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  4. Johanna Kempff

    logged in via Facebook

    In our regional area there will be no optic fibre - just microwave towers. Apparently laying cables is too expensive because the area has too many hills (That's the contractor's excuse, not mine!)

    Our copper phone wire is so old that ADSL won't work properly. So we have wireless broadband internet at home, which by the way is painfully slow.....which makes me wonder if the wireless NBN in our region will be any better or faster at all.

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  5. Denise Cunningham

    farmer, teacher, writer

    Question:

    In what way(s) will "reliable internet access .....reduce other costs of living in regional areas, particularly transport and eduction".

    Anyone?

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    1. Henry Verberne

      Former IT Professional

      In reply to Denise Cunningham

      Off the top of my head I can think of being able to do reliable and reasonably fast internet banking for a start- potentially reduces transport costs by fewer trips to the nearest town to do one's banking. This assumes you have low speed internet now or unreliable connection due to inadequate infrastructure.

      There are undoubtedly quite a few other ways a good connection will benefit regional users. Others may be able to add some.

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    2. Phil S

      Physics PhD Student

      In reply to Denise Cunningham

      I think the idea is that you will be able to do more things over the internet rather than in person. One such area is e-health, for instance, consulting with specialists over an internet connection in high definition. Of course you would probably still have to visit a specialist in person at some point, but initial and follow-up consultations might be able to be done online. This would cut down on travel costs. You won't need to ravel a long distance just to find out you didn't actually need to bother…

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    3. Garry Baker

      researcher

      In reply to Phil S

      Turnbull is a proven fraud on this one. He wants to commercialise the NBN by using a partnership with an arm of the Chinese government. Indeed, an outfit banned by our own intelligence services - But they have the tech he needs

      https://theconversation.com/the-nbn-needs-vectoring-or-is-turnbull-just-hectoring-13455

      Remote medicine for instance, much like the R Flying Doctor S employ, won't see a whit of benefit from a 2nd rate NBN, yet the RFDS already have a major link of worlds best practice in place - Insofar as, when an outback station gets on the radio with a description of a sick persons condition - they have real doctor online back at home base. An ability to upload volumes of test data would improve things out of sight. Not available with a dirt track NBN though

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    4. Fred Smith

      Electrical Engineer

      In reply to Phil S

      I can't see eHealth working at all in the way you describe. The first issue would be liability, and finding a doctor to diagnose over a video link without being terrified of legal actions if they get it wrong would be near impossible. If you are refering to them going to a doctor or medical centre and them calling a specialist, I can't say that I have ever had a specialist on call. My experience has been several days wait. This could reduce travel times - local doctors office instead of major centre. Medical centres, as with all commercial centres, will get fibre under either proposal.
      It might be a bit cynical, but the internet revolves around piracy and porn. Being a residential network I am afraid it is aimed squarely at content consumption, and 4k TV is touted as one of reasons quite often.

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    5. Fred Smith

      Electrical Engineer

      In reply to Garry Baker

      Hmm? By remote medicine and refering to the flying doctors, you are clearly aiming at the 7% covered by satelite and fixed wireless. This is EXACTLY the same under either proposal.

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    6. Terry Reynolds

      Financial and political strategist

      In reply to Fred Smith

      Fred Smith, I am a strategist that regularly comes up with strategies that are adopted and prove to be unique and amazingly beneficial to the nation, and the NBN is just one of them. I have no connection with communication engineering but with financial strategizing to generate public benefit and substantial value for the owner of the asset. Unfortunately I find I am providing proposals in industries that the hundreds of thousand of experts such as in communications, banking and education cannot…

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    7. George Michaelson

      Person

      In reply to Denise Cunningham

      Mainly intermediating outcomes which benefit from everyone being co-conscious. If the local Elders ceases having enough business to maintain stocks of seed and feed, the cost per farmer rises to ship. If they all know they need to order, then they can collapse the shipping costs and achieve a direct reduction. This kind of thinking demands a return to the farmers cooperatives models of the earlier generation but I doubt would be a huge surprise to many older farmers.

      Commissioning specialized…

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    8. Denise Cunningham

      farmer, teacher, writer

      In reply to George Michaelson

      Thanks George, Phil S and Henry for your efforts to explain how the cost of living in rural areas will decrease post-NBN, but I haven't found anything to work for me yet.
      Banking is already done via internet, albeit with super slow 2-way satellite.
      E-health is supposed to already be happening for emergencies at the local hospital (there's no doctor) but I think it's more a case of "yep, looks like a heart attack to me, get the ambos to bring you to the Base, eh?" because of the liability issues…

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    9. Fred Smith

      Electrical Engineer

      In reply to Terry Reynolds

      Thanks for the reply. We have had part of this discussion before. I am in total agreement with the undergrounding all services in brownfield areas as part of the NBN project. That is doing it once and doing it right. I am also in total agreement that this could be done in such a way that the annual revenue would return the initial expense plus some.
      The politicising bit I can't bring myself to agree with.
      The flying doctors will have the same network under either NBN proposal for their regional and remote areas. As for remote diagnosis, I see lots of potential problems with that in terms of accuracy and liability. The only way I can see it working is contacting a specalist with a doctor present.
      The muppets on both sides plan to sell off the NBN to provide return on investment. I can not see that is in the benifit of the public at all, as we will end up in the same stagnant system we find ourselves in with Telstra.

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  6. Garry Baker

    researcher

    In a nutshell, Labor want to gift a valuable 21st century service to Australians - whereas the Liberal team want them to pay.

    Given that the proceeds of the mining boom have been squandered, there's no doubt the Libs just don't want to hand out gifts

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  7. Robin Braun

    Professor of Telecommunications Engineering at University of Technology, Sydney

    Unfortunately this article completely ignores the aspect of symmetry of data rates. It is not comparing apples with apples. Fibre has the potential to offer symmetrical data rates, while ADSL type of copper access can only offer high download rates and much lower upload rates. This is inherent to the electronics and noise environment. Even so called "vectoring" cannot fix this.

    It is this symmetrical aspect of fibre based systems that give them the potential to support future, as yet not dreamed of services. Copper based solutions will have to get replaced anyway as we progress into the future.

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  8. Lindi Devereux

    logged in via LinkedIn

    My question is will the coalitions plan, FIBRE TO NODE, mean it will be implemented quicker? I have no access to ADSL broadband and no alternative other than mobile broadband. NBN will not arrive to me till end 2016. My argument with Telstra over the last eighteen months and right up to the highest level is why I should have to pay the higher price of mobile broadband, the luxury end user price, when it is my only source of internet access in the home. Neither the radio, satelite or any of the contingencies…

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    1. Terry Reynolds

      Financial and political strategist

      In reply to Lindi Devereux

      Lindi, if you read Malcolm Turnbull's latest comments on the Liberal Party alternative to the NBN, he states today that most of us will have to continue to rely on the Foxtel co-axial cable - that ugly low slung thick black cable slung along almost every suburban street with overhead power cables, hat requires our street trees to be brutally hacked every year. The Fibre optic NBN cable is going underground. You will be charged for broadband width you choose not volume of download a month which is an Australian scam. Turnbull was Kerry Packer's boy in the past and now he is Rupert's. When you get to the polling booth, are you going to vote for Murdoch and his business interest, or your own..

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