Sound bites, political speak, media spin, tabloid sensationalism, propaganda and misinformation are the media's language. How do you see through the lies and discover the truth? Be discerning; critically analyse what you are being told. The media does not have a responsibility to report the news honestly; profit is the purpose of the media corporation. They answer to their shareholders. News and advertising is their product. The viewing public are their consumer. No Conspiracy theories here.
It’s unbelievable, but Monsanto and Co. are at it again. These profit-hungry biotech companies have found a way to gain exclusive control over the seeds of life – the source of our food. They’re trying to patent away varieties of our everyday vegetables and fruits like cucumber, broccoli and melons, virtually forcing growers to pay them for seed and risk being sued if they don’t.
But we can stop them from buying up Mother Earth. Companies like Monsanto have found loopholes in European law to have exclusive rights over conventional seeds, so we just need to close them shut before they set a dangerous global precedent. And to do that, we need key countries like Germany, France and the Netherlands -- where opposition is already growing -- to call for a vote to stop Monsanto’s greedy plans. The Avaaz community has shifted governments before, and we can do it again.
Many farmers and politicians are already against this -- we just need to bring in people power to pressure these countries to keep Monsanto’s hands off our food. Sign now and share with everyone to help build the biggest food defense call ever:
Once a patent exists in one country, trade agreements and negotiations often push other countries to honour it as well. That’s why patents change everything about how our food chain works: for thousands of years, farmers could choose which seeds they’d use without worrying about getting sued for violating intellectual property rights. But now, biotech companies are getting patents on the seeds and then charging farmers exorbitant royalty fees. And farmers can’t even save patented seeds for replanting the next season -- Monsanto has sued hundreds of them for practicing the age-old art of seed-saving and plant breeding. Monsanto and Co. claim that patents drive innovation -- but in fact they create a corporate monopoly of our food.
But luckily, the European Patent Office is controlled by 38 member states who, with one vote, can end dangerous patents on food that is bred using conventional methods. Even the European Parliament has issued a statement objecting to these kinds of destructive patents. Now, a massive wave of public outcry could push them to ban the patenting of our everyday food for good.
The situation is dire already -- Monsanto alone owns 36% of all tomato, 32% of sweet pepper and 49% of cauliflower varieties registered in the EU. With a simple regulatory change, we could protect our food, our farmers and our planet from corporate control -- and it's up to us to make it happen:
The Avaaz community has never been afraid to stand up to corporate capture of our institutions, from pushing back the Rupert Murdoch mafia, to helping ensure that telecoms keep their hands off our Internet. Now it’s time to defend our food supply from this corporate takeover.
With hope and determination,
Jeremy, Michelle, Oli, Dalia, Pascal, Ricken, Diego and the whole Avaaz team
Structures and developments of the swiss and international seed markets through the a case study on certain vegetables varieties (Berne decleration, Swissaid and others) (German only) http://www.evb.ch/cm_data/Saatgutmarkt_Juni_2012.pdf
Tony Abbott, Leader of the Opposition: Clarify which of the IPA's 75 policies the Coalition plans to implement.
The Coalition has consistently refused to unveil any policies; however Tony Abbott has indicated (in a speech to the IPA, now published on his web site) that his party supports the IPA's stance on many policy issues. These issues will adversely impact on millions of Australians.
Tony Abbott needs to state for the record which of the 75 policies the IPA published in August 2012 he and his party will take into the 2013 election, and which of these policies he and his party will pursue should they form government.
Address to Institute of Public Affairs 70th Anniversary Dinner, Melbourne
It was the most exclusive of events: a glittering $500
minimum per head gala fundraising dinner last week for a right-wing
think tank. Tony Abbott, Gina Rinehart and Rupert Mudoch took turns
sharing the stage. Andrew Bolt was MC. Tony praised his fellow key-note
speakers, especially Rupert, and promised the crowd a "big yes" to many
of the think tank's list of 75 policies to radically transform
Australia.
Read the IPA's 75 point list for Abbott
Repeal the carbon tax, and don't replace it. It will be one thing to remove the burden of the carbon tax from the Australian economy. But if it is just replaced by another costly scheme, most of the benefits will be undone.
Abolish the Department of Climate Change
Abolish the Clean Energy Fund
Repeal Section 18C of the Racial Discrimination Act
Abandon Australia's bid for a seat on the United Nations Security Council
Repeal the renewable energy target
Return income taxing powers to the states
Abolish the Commonwealth Grants Commission
Abolish the Australian Competition and Consumer Commission
Withdraw from the Kyoto Protocol
Introduce fee competition to Australian universities
Repeal the National Curriculum
Introduce competing private secondary school curriculum's
Abolish the Australian Communications and Media Authority (ACMA)
Eliminate laws that require radio and television broadcasters to be 'balanced'
Abolish television spectrum licensing and devolve spectrum management to the common law
End local content requirements for Australian television stations
Eliminate family tax benefits
Abandon the paid parental leave scheme
Means-test Medicare
End all corporate welfare and subsidies by closing the Department of Industry, Innovation, Science,
Research and Tertiary Education
Introduce voluntary voting
End mandatory disclosures on political donations
End media blackout in final days of election campaigns
End public funding to political parties
Remove anti-dumping laws
Eliminate media ownership restrictions
Abolish the Foreign Investment Review Board
Eliminate the National Preventative Health Agency
Cease subsidising the car industry
Formalise a one-in, one-out approach to regulatory reduction
Rule out federal funding for 2018 Commonwealth Games
Deregulate the parallel importation of books
End preferences for Industry Super Funds in workplace relations laws
Legislate a cap on government spending and tax as a percentage of GDP
Legislate a balanced budget amendment which strictly limits the size of budget deficits and the period the federal government can be in deficit
Force government agencies to put all of their spending online in a searchable database
Repeal plain packaging for cigarettes and rule it out for all other products, including alcohol and fast food
Reintroduce voluntary student unionism at universities
Introduce a voucher scheme for secondary schools
Repeal the alcopops tax
Introduce a special economic zone in the north of Australia including:
a) Lower personal income tax for residents
b) Significantly expanded 457 Visa programs for workers
c) Encourage the construction of dams
Repeal the mining tax
Devolve environmental approvals for major projects to the states
Introduce a single rate of income tax with a generous tax-free threshold
Cut company tax to an internationally competitive rate of 25 per cent
Cease funding the Australia Network
Privatise Australia Post
Privatise Medibank
Break up the ABC and put out to tender each individual function
Privatise SBS
Reduce the size of the public service from current levels of more than 260,000 to at least the 2001 low of 212,784
Repeal the Fair Work Act
Allow individuals and employers to negotiate directly terms of employment that suit them
Encourage independent contracting by overturning new regulations designed to punish contractors
Abolish the Baby Bonus
Abolish the First Home Owners' Grant
Allow the Northern Territory to become a state
Halve the size of the Coalition front bench from 32 to 16
Remove all remaining tariff and non-tariff barriers to international trade
Slash top public servant salaries to much lower international standards, like in the United States
End all public subsidies to sport and the arts
Privatise the Australian Institute of Sport
End all hidden protectionist measures, such as preferences for local manufacturers in government tendering
Abolish the Office for Film and Literature Classification
Rule out any government-supported or mandated internet censorship
Means test tertiary student loans
Allow people to opt out of superannuation in exchange for promising to forgo any government income support in retirement
Immediately halt construction of the National Broadband Network and privatise any sections that have already been built
End all government funded Nanny State advertising
Reject proposals for compulsory food and alcohol labelling
Viktor Bout earned a few monikers in his heyday: “Merchant of Death”, “Sanctions Buster” and “Lord of War”. He’s the poster boy for illicit arms brokers – a guild of shadowy intermediaries who link arms suppliers to their end users.
While Bout sits in a jail in the southern U.S. state of Illinois, U.N. member states are concluding an Arms Trade Treaty (ATT) – an international agreement that hopes to control a trillion-dollar industry and curtail the use of arms for human rights violations.
But “arms brokering” in general was hardly brought up during ATT negotiations at U.N. headquarters, from Mar. 18-28, even though Bout’s like-minded successors and contemporaries – many of who fuel the abuse of arms – remain at large.
“There’s something sinister here,” said Kathi Lynn Austin, executive director of the Conflict Awareness Project, referring to the relationships between governments and arms brokers.
“Governments around the world depend on brokers to carry out their national security operations,” she told IPS, pointing out that brokers are the main facilitators of any arms trade.[related_articles]
“If you talk about including these actors (in the ATT), and if you talk about bringing stronger control, then you open a can of worms and put a lot of governments on the spot,” said Austin, who’s own efforts led to Bout’s capture.
The reason brokering was not discussed, suspected Austin, was that governments made up their minds about brokering before ATT negotiations even began.
“Had there more time for (member states) to better understand the role of brokers and transporters, than you might have seen a stronger lobby for brokering,” she said.
“I just think we ran out of time (to convince them),” she added.
Brian Wood, head of arms control at Amnesty International, told IPS that there is an absence of national and international regulations surrounding brokering. Over two-thirds of U.N. member states lack national laws regulating the activity.
The final ATT itself contains only one small paragraph on brokering, which starts, “Each State Party shall take measures, pursuant to its national laws, to regulate brokering under its jurisdiction.”
Wood noted the significance of the phrase “pursuant to its national laws”. He said, “If two-thirds of countries don’t have (national) laws regulating brokering, then (by definition) the activity is not going to be illicit.”
Andrew Feinstein, author of “The Shadow World: Inside the Global Arms Trade”, told IPS that individual arms brokers are closely linked with defence contractors, governments and intelligence agencies.
Many governments and corporations are largely intertwined with arms brokers, using them as intermediaries to pay bribes and conduct other shadowy activities, he explained.
“Virtually every individual broker who is engaged in massive illegal arms trading activity are at one time or another being accessed by one or more intelligence agencies in the world,” he said.
Feinstein noted that such collusions might have played out during ATT negotiations.
“Defence companies, defence contractors and the defence sector are enormously powerful,” he said. “The ways their voices are heard are through the power they wield over governments.”
“These industries have incredibly close relationships with governments… They have an access to government which is quite unique,” said Feinstein, who served as a member of parliament for the African National Congress (ANC) in South Africa.
He also noted the U.K.’s position in the ATT talks. “The U.K. has been positive about some of the (strong ATT) measures imposed, but the way in which the U.K. engages in the trade is that they use a huge number of intermediaries from the world for the illicit trade,” he said.
“I think the U.K. is supporting transparency measures with the knowledge that the really big players (U.S., Russia and China) are going to put it back, and I don’t think they’re actually going to be that disappointed with it,” he added.
Feinstein warned that if the final ATT is too watered down, it might be worse than not having a treaty at all.
“It (would) effectively provide a stamp of approval for the status quo as it currently functions, a status quo that only intensifies conflict… and most ironically make the world a more dangerous place,” he said.
Who are the arms brokers?
Wood of Amnesty International told IPS, “The top arms brokers are what I call professors of the arms trade.
“They work systematically. They have a breadth of technical and legal knowledge. They have commercial acumen. They know the right people, and they’ll offer a ‘one-stop-shop’ type of service,” he said.
However, few people have a clear view of the arms brokering network. “No one has a list of arms brokers, because the governments don’t control them… We (only) get a snapshot of what’s happening,” said Wood.
The most “nefarious” brokers are the ones who are corrupt and who work to circumvent U.N. arms embargos, he added.
Feinstein, who spoke with an arms dealer as recently as last week, told IPS, “They have certain common characteristics. The first that strikes me about all of them is that they’re all these absolutely charming, larger than life, charismatic characters.”
Another characteristic, said Feinstein, is that “to a sociopathic extent”, these brokers are unable to comprehend the effects of their actions.
“They justify in the most compelling ways that what they do is actually good for the world, using phrases like ‘in defence of humanity’ and ‘arming people to keep the peace’,” he said.
“They’re unable to see the other side of what they do, the real human consequences of the ways they make huge amounts of money,” he added.
Brokering in the future
“Arms brokering thrives on globalisation,” said Wood, co-author of “The Arms Fixers: Controlling the Brokers and Shipping Agents” with Johan Peleman.
“There’s loads of submarkets for different things, thousands of products… this is tens of thousands of items being traded every day,” said Wood.
“The arms market themselves have become more differentiated,” he explained. “A lot of the stuff that’s traded are parts or components, so they’re not the finished systems.
“You have a lot of people who specialise in particular kinds of equipment. It’s a niche market,” he added.
“If they are not regulated… people may wake up and realise that brokers have taken them for a ride,” he warned.
In arguably the TV event of 2013 so far, House of Cards – a $100 million, 13-episode TV series starring Kevin Spacey, directed by David Fincher, and commissioned by Netflix, premiered exclusively online available only to Netflix subscribers in North and South America and in Scandinavia.
Metacritic, a site that aggregates critics’ reviews, reported that it received generally favourable reviews. It was also popular with viewers, and quickly became Netflix’s most-streamed program ever.
This is good news for Netflix. Over the past 18 months the company had been in dire straits, during which time it received a lot of press for its bold international expansion as well as its financial difficulties. Some observers postulate that it could become the next HBO, while others doubt that it will even survive the next five years.
So what is going on? How can a company that could be teetering on the brink spend $100 million commissioning a TV series, let alone push ahead with global expansion? Is Netflix’s business model sustainable? And if it is, what does its entry into original programming mean for the future of television?
Netflix built its brand with a compelling proposition as a virtual video store, where customers had 24/7 access to order DVDs online and rentals were shipped to subscribers via the US postal service with a postage-paid return envelop and no late fees, for a monthly subscription of $7.99. Netflix won customers away from the major video chains at the top end of the mass market; Redbox DVD kiosks focused on attracting cost-conscious customers; bricks-and-mortar behemoths like Blockbuster slid into oblivion.
In order to prepare customers for an eventual transition from physical disc rentals to streaming video rentals, Netflix introduced its “Watch Instantly” streaming service for about 10,000 titles from a much larger library, as a free value-add within the monthly subscription price in 2006. In doing so, it became the first mover of any scale in this emerging space.
The streaming video on demand (VoD) market for movie and TV shows only really took off in 2011, as Netflix was joined by Hulu Plus and Amazon’s streaming service for its Prime customers and annual revenue for SVoD (subscription VoD) in the US market online grew exponentially from only $4.3 million in 2010 to $454 million in 2011 +10,000%.
Total revenue for the online movie market (including SVoD, rentals and sell-through) tripled from $389 million in 2010 to $963 million in 2011.
Netflix had consistently met its financial targets and its share price rocketed to peak at $291 after it announced plans to expand into 43 Latin American countries following its previously successful international expansion into Canada.
Then it made an almost catastrophic mistake when it attempted to drive subscribers towards a faster transition away from physical DVDs to streaming. Netflix announced that it was splitting the two services, rebranding the DVD-only rental business as Qwikster with a monthly sub of $7.99 for DVD rentals only, and hiking the monthly subscription price more than 60% to $15.98 if customers wanted to have both DVD rentals plus streaming. Or, for $7.99, customers could continue to subscribe to the streaming-only Netflix Instant service.
The customer backlash was immediate and severe. DVD subscription churn increased significantly as angry customers departed in droves — one million per quarter. Netflix’s share price nosedived from its record high of $291.23 bottoming out at $52.81 per share in mid-2012.
Netflix quickly backtracked, abandoning the price increase, dumping new DVD rental service Qwikster and apologizing to customers. But the damage was done; a PR disaster ensued. The brand suffered badly and so did earnings.
Let’s dig a little deeper.
In December 2012, Moody’s downgraded Netflix ratings on two out of three scales – the CFR and Probability of Defaulting.
The rationale for Moody’s downgrade was that Netflix faced significantly higher risks transitioning from a high contribution margin DVD business to a lower margin, fixed-cost streaming service that would require a much higher level of subscribers to break even, in a market with low barriers to entry and intensifying competition some who might have differing motivations for entering this market, deeper pockets and might be prepared to undercut Netflix in order to take market share.
It also expressed concern about the damaging loss of many DVD customers following the Qwikster debacle, and speculated that streaming customers are likely to be “less sticky” than Netflix traditional DVD base, so it anticipated greater subscriber churn. This in turn would require Netflix to ensure a superior product offering to competitors and to deepen engagement with customers to attract sufficient volume of new subscribers and reduce churn to maintain market leadership and restore past levels of profitability.
Moody’s did, however, acknowledge that Netflix certainly had potential to increase its subscriber base and co-exist with rivals in a US market comprising 80 million US broadband households. Forbes magazine speculated that there could be up to 120 million broadband households in the US by 2019.
What options does Netflix have?
Raise prices
Following the angry customer backlash triggered by a hike in fees, Netflix has little choice currently than to stick to the $7.99 price-point. Management have taken a price hike off the table in the medium term. It is significant too that Hulu initially launched at $9.99, but was forced to reduce to $7.99 after it failed to gain any traction.
Increase the subscriber base
Netflix is the leading premium content streaming service in the American markets, way ahead of its domestic rivals. It currently also has the largest global footprint as Amazon operates only in the US and Europe (LoveFilm) and Hulu is only in US and Japan. No other direct competitor has truly global reach yet and a factor preventing truly global reach are territorial licensing restrictions that remain part of legacy contracts for existing release windows, but they impact Netflix, Hulu et al equally.
At the end of 2012, Netflix had 25.5 million in the US market and 33 million subscribers globally. Hulu Plus only had 3 million subscribers. Amazon does not release such data.
Concerns about Netflix being a company in transition are legitimate. DVD offered higher margins because once the cost of acquisition, warehousing, fulfilment, and postage were recouped, each video rental’s net was profit – split on a revenue sharing basis pre-agreed with the studio/network and Netflix, so the more times the unit was rented the more profit was realised leveraging economies of scale.
Streaming is different because it suffers from diseconomies of scale: as more popular rentals cost more to stream, a company will need more servers, and thus pay higher electricity bills. Add to that higher upfront establishment costs when entering new international territories, and profit margins are thinner. This means that to breakeven, Netflix requires many more subscribers in its home market (the US) than it did for DVD in order to achieve the same levels of past profitability – Moody’s estimated 35 million. Netflix has a solid base upon which to expand. It has increased its subscriber base by 4 million annually but that growth is slowing in the US market –hence the need for rapid expansion internationally.
In order to attract new subscribers and to reduce churn, Netflix must either pay premium prices for an exclusive window following theatrical release, as it has done with Disney in a deal that from 2013 provides Netflix with a range of Disney classics. From 2016, in a second stage deal, Netflix will have an exclusive window before pay TV for Disney, Marvel, Pixar and LucasFilm movies.
Add to this Netflix’s original programming such as Lilyhammer, House of Cards, and Arrested Development. Others will follow at the rate of five new series annually. These programs will premiere exclusively on the Netflix platform, which will allow it to differentiate itself from rivals.
Add value and package content at tiered price points
The traditional Pay TV model may become the preferred strategy for Netflix once Disney’s exclusive content deal activates in 2016 and Netflix has established its brand as a premium content provider. The key question is: if the only place highly engaged audiences can see a popular Netflix TV series or a Marvel or LucasFilm or Pixar movie in the first post-theatrical window is on the Netflix platform, will they pay a small monthly subscription? The history of pay TV indicates that they probably will.
Is Netflix the new HBO?
Netflix’s Chief Content Officer Ted Sarandos recently stated that Netflix’s goal was “to become HBO before it becomes us”.
In the fourth quarter of 2012, Netflix added 2.05 million subscribers in the US market, one year after the Qwikster debacle. With 25.5 million subscribers, if Netflix were a cable company, it would rank second behind HBO (28-29 million subscribers) and considerably ahead of Showtime (21.3 million) and the rest of the pack.
Netflix’s commissioning of quality original programming, combined with premium content deals, will offer a compelling and differentiated value proposition to online audiences.
Netflix and the future of TV
If the programming strategies of Netflix, Hulu, Amazon et al succeed, we may see the emergence of the first serious competitors to challenge industry incumbents. We already know that the future of home video is online, as the DVD and BluRay become obsolete. Online television services with potentially global reach could prove a serious threat to pay TV opereators and major networks in the looming battle for eyeballs and audience engagement online.
For the last two decades, media historian and activist Robert McChesney has been telling a critical if largely unheeded story about American media, capitalism and democracy. Its general theme can be inferred from McChesney’s many book titles, including “Corporate Media and the Threat to Democracy” (1997), “Rich Media, Poor Democracy” (1999) and “Our Media, Not Theirs” (2002). His overarching point is that media commercialization, from the early days of radio to the arrival of the Internet, has served American democracy poorly. For much of McChesney’s career, the roar of the digital revolution has drowned out his critique. But recent developments support it, and what seemed to be specialized concerns in the 1990s now bear directly on the role of media, old and new, in a healthy democracy.
McChesney’s latest book, “Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy,” begins with a simple but powerful claim: Most assessments of the digital revolution have failed to situate it in our political economy—not the textbook version, but how we actually do business and politics in America. “The ways capitalism works and does not work,” McChesney states plainly, “determine the role the Internet might play in society.” He fully appreciates the Internet’s transformative power and potential, but he quickly subjects the more extravagant forms of digital utopianism to well-deserved scrutiny. “The problem,” McChesney argues, “is that [Internet] celebrants often believe digital technology has superpowers over political economy.” The digital revolution has done nothing to ease U.S. income inequality, for example, and many experts think it has widened wealth gaps. Moreover, McChesney maintains, the expansion and consolidation of Internet power now pose grave risks to our key democratic institutions, including a free press.
McChesney builds his argument slowly, offering two early chapters on the history of capitalism and the political economy of communication. The first is an armchair survey of an enormous and complex literature, but he peppers it with arresting historical detail. Readers may be surprised that 19th century U.S. presidents, including Abraham Lincoln, frequently sounded like Occupy movement members when it came to questions of labor, capital and economic inequality. “The giant evil and danger in this country, the danger which transcends all others,” Rutherford B. Hayes said after his stint in the White House, “is the vast wealth owned or controlled by a few persons.” McChesney’s second chapter is similarly broad, reaching back to the origins of speech, writing and the printing press before concluding that the digital revolution is as significant as these precursors.
McChesney also draws on mainstream economics to discuss the crucial but frequently neglected notion of public goods, whose side effects tend to produce a healthier economy and society. Economists usually point to national security, infrastructure, law enforcement and education as the key examples of public goods, and though hard-core libertarians argue that companies can and should supply all of them, most economists maintain that free markets, left to their own devices, will fail to provide the appropriate quantity, mix and quality of public goods. For this reason, government investment in them is usually money well spent.
In a 2010 book co-authored with John Nichols, McChesney argued that political journalism is also public good, and he develops that point in “Digital Disconnect” by pinpointing two basic problems with market-oriented journalism today. The first is that the profit motive shapes the selection and presentation of news in ways that frustrate the goal of an informed (rather than an entertained or terrified) citizenry. For-profit media companies say they’re giving people what they want. If audiences like crime stories, even when crime rates are dropping, then crime stories it will be—along with generous doses of “entertainment news,” or thinly disguised advertisements for other media products. For these organizations, the public interest is a vague abstraction compared with profit maximization. When it comes to news, then, their operative principle is clear: It’s good dog food if the dog will eat it.
The second problem is that political journalism, the only kind the nation’s founders cared about, has always required some form of subsidy. Throughout the 19th century, the government supported newspapers through preferential postal rates and paid public notices. In the 20th century, advertisers picked up the bill for gathering, packaging and disseminating political news. But the digital revolution crashed that business model by decimating ad revenue and readership. Seemingly unaware of this history, U.S. news organizations continue to hope that their customers will eventually pay full price for a service that, in one way or another, has always been massively subsidized. It is a peculiarly American blind spot. Virtually every other advanced democracy supports public media and journalism more generously than we do. On a per capita basis, Canada furnishes about $20 of government support for every American dollar allocated to public media, and the United Kingdom outspends us 50 to one.
Yet even as serious American journalism craters, there are few calls for increased public support. Many reporters regard that support as a good way to turn government watchdogs into lapdogs. Although the evidence from other advanced democracies indicates the opposite, their suspicion is telling. Applying the same logic, corporate ownership and advertising should weaken business and economic reporting, but Americans consider these arrangements free of ideological taint. Meanwhile, Republicans continue to call for the elimination of the $446 million per year we now devote to all forms of public broadcasting, including children’s programming. It’s not about the money. The Pentagon spends $550 million per year on military music, and its annual budget for public relations—that is, the Pentagon-friendly packaging of war news—is $5 billion. It’s often said that the federal budget is the skeleton of the state stripped of all misleading ideologies. If so, the U.S. thinks that managing the war news is 10 times more important than all forms of public media combined.
The digital revolution so far has been disastrous for American journalism, but what about those cool new products and services? Proponents of the 1996 Telecommunications Act, which privatized and commercialized the Internet, claimed that the measure would usher in a new era of innovation and competition. In McChesney’s view, that legislation delivered reasonably well on the first promise. Search engines and social media, for example, have created or radically altered whole industries, not to mention our daily lives, and McChesney offers Wikipedia, perhaps the world’s greatest reference work, as a shining example of the noncommercial use of the new technology.
But textbook-style competition in the Internet world was quickly thwarted when the telephone and cable giants entered the arena, and the concentrations of market power are now alarming. Google controls 70 percent of the search engine market and 97 percent of the mobile search market. Apple accounts for 87 percent of music downloads, and Amazon sells the vast majority of books and e-books purchased online. These outcomes reflect the superior goods and services offered by these firms, but consumers are already feeling the pinch of monopoly power. About 20 percent of U.S. households have access to only one broadband provider. The United States ranks 26th in average consumer download speed, but a study of 22 global cities concludes that we pay higher prices for that poorer performance. “Deregulation,” McChesney claims, “has led to the worst of both worlds: fewer enormous firms with far less regulation.” He compares the current state of affairs to the classic scene from “The Godfather: Part II,” in which kingpin Hyman Roth divides his birthday cake—decorated with a map of Cuba—among a small group of assembled mobsters. If citizens and consumers aren’t at the Internet table, McChesney suggests, we’re probably on the menu.
Despite the libertarian rhetoric that regularly issues from Silicon Valley, these empires would have been impossible without government-sponsored research on basic technologies. But as McChesney reminds us, the government has also partnered with these firms in less uplifting ways. We know, for example, that telecommunication giants cooperated with the National Security Agency’s illegal wiretapping program in 2001. After a whistle-blower exposed that operation, no one was prosecuted, and Congress granted retroactive immunity to those corporations. When President Obama took office, the domestic spying program continued, and his administration got tough—with the whistle-blowers. In 2010, the largest telecommunications companies helped the NSA intercept and store 1.7 billion emails, telephone calls and other types of communication every day. The following year, Google received at least 10,000 requests for information from law enforcement and national security agencies, and the company has indicated that it complies with 95 percent of those requests. If Silicon Valley leaders are truly concerned about liberty and privacy, re-examining their own corporate policies is a good place to start.
McChesney’s recommendations for reform, which he offers in his final chapter, include the regulation of digital monopolies, public investments in journalism, stricter advertising and privacy rules, and protections against warrantless surveillance. One doesn’t have to share his leftist politics to endorse these sensible measures; the question is, who will enact them? Obama is unlikely to pick a fight with the Internet giants; indeed, some observers wonder whether he knows how to fight. Nor are such monopolies restricted to the digital economy. We see similar concentrations of market power in finance, retail, food and agriculture, and many other major sectors of the economy. Trust-busting is the next big item on the political agenda, and we may need a new Progressive Era, complete with old-school muckraking, to accomplish it. The Internet can be a valuable tool in that effort, but as McChesney’s important work makes clear, our political economy won’t change with the click of a mouse.
You're familiar, I'm sure, with the Double Irish Dutch Sandwich. It sounds tasty - but only to the big multinational companies that use it to avoid tax. According to the Assistant Treasurer, David Bradbury, in a speech he gave late last year, it's the device Google uses to pay very little Australian company tax on the profit it makes on an estimated $1 billion a year in Australian advertising revenue.
As Bradbury explains it - using media reports, he says, not inside information - the fine print of contracts Australian companies sign with Google says they're buying their advertising from an Irish subsidiary of Google.
Our rate of tax on company profits is 30 per cent, whereas Ireland's is 12.5 per cent. But that's just the start of the sandwich. The Irish subsidiary then pays a royalty payment to a Dutch subsidiary, but it's then paid back to a second Irish holding company of Google's, which is controlled in Bermuda - which has no company tax.
The media usually attribute the invention of the double Irish to Apple, Bradbury says. But evidence given to the British public accounts committee suggests Amazon paid no tax in Britain, despite about $4.9 billion in sales, by routing transactions through Luxembourg, where it faced an effective tax rate of 2.5 per cent.
The committee also heard that Starbucks paid no tax in Britain for three years, despite sales of about $1.8 billion, in part because of royalty payments for use of the brand.
With their government busy raising taxes and slashing government spending to get its budget deficit down, the Brits are pretty steamed up about multinationals not bearing their fair share of the tax burden.
In truth, governments in many developed countries are deciding tougher measures are needed to curb the multinationals' rorting of the system, and ours is no exception. It's a problem governments have been grappling with for decades, since the early days of globalisation and the rise of companies with operations in several countries.
Then, the game was simply for multinationals to shift their profits to countries where taxes were low. One way was for the part of the company in which taxes were lower to sell its products to subsidiaries in high-tax developed countries at inflated prices. The big countries developed rules to limit such ''transfer pricing''.
Another trick was for a subsidiary to borrow from head office most of the capital it needed, with head office then charging an interest payment that absorbed most of the subsidiary's profits. Our ''thin capitalisation'' rule limits interest deductions to $3 of debt for each $1 of share capital, and there's talk this may be tightened.
In a speech this month, Bradbury said you don't need to be doing business on the internet to use something like a double Irish scheme. ''What you do need is the global presence of a multinational enterprise and the ability to attribute a large part of your profits to intangible assets,'' he said.
And we know intangible assets - such as software, databases, patents, copyright and ''goodwill'' or ''brand value'' - play an increasingly important role in the global economy. In the US, investment in intangible assets has exceeded investment in tangible assets for more than a decade.
International legal arrangements rest heavily on the notion that income should be taxed in the country of its ''source''. When economic activity was dominated by farms, factories and mines, it usually wasn't hard to see that the source of income was where production was physically located.
But now ''the increasing importance of intangible capital to production challenges the very idea that we can always objectively determine where economic activity occurs,'' Bradbury said.
All this helps explain the emergence of ''stateless income'' - income not taxed in the source country of the production factors that gave rise to the income, nor in the ultimate parent company's jurisdiction. It's income that doesn't belong anywhere for tax purposes.
This, in turn, explains how the profits of US-controlled corporations in Luxembourg are equivalent to 18 per cent of its gross domestic product. For the Cayman Islands and Bermuda the proportions are more than 500 per cent of those countries' GDP.
Stateless income is not simply a product of transfer pricing abuses, but also arises from decisions about where to place financial capital within a multinational group. It involves exploiting differences in tax systems and hybrid instruments treated as borrowings in one country and shares in another.
Tricks such as these can place single-country businesses at a competitive disadvantage. They - and individual taxpayers - bear an unfair share of the tax burden.
But many big-business executives reject the notion that paying a fair share of tax is part of a broader social compact. Tax is just another business cost. If dodging it is legal, morality doesn't enter into it.
The Gillard government is working to ensure our transfer-pricing rules are up with world's best practice and the general anti-avoidance provision of our tax act is broadened to encompass the tricks multinationals try on.
It has asked Treasury to study what more can be done and will work to improve the information multinationals have to make public about their profits and tax payments.
And, with so many of its members feeling the budgetary pinch, the Organisation for Economic Co-operation and Development has had to lift its game in promoting multilateral action to limit tax rorting by global companies.
Julia Gillard's speech apologising from the nation to the broken-hearted women whose babies were taken from them at birth, the children who were adopted out before there was the chance of a bond developing and the fathers whose names often never appeared on the birth certificates of their own children was perhaps her finest.
Given the political events beginning to swirl around Parliament House, there was symmetry here: an echo of Kevin Rudd's first and certainly finest speech as prime minister - the apology to Australia's stolen generations in 2007.
Almost 1000 mothers, fathers, grown children and fractured families sat row upon row in the Great Hall of Parliament House, all of them silent for long stretches, to hear the apology denied them for decades. Attendants held boxes of tissues at the ready. Yet there was little weeping. Those rivers, it was possible to imagine, had flowed years ago, and most of those in the Great Hall had wrapped their anguish behind walls.
Opposition Leader Tony Abbott used his own experience of years believing he was the father of a child adopted out to empathise with the gathering. His speech, however, was interrupted by several women objecting loudly to his use of the term ''birth parent''. They were real parents, human mothers, they cried, and Mr Abbott found himself piling a personal apology to the offended upon the political apology, noting that he still had some things to learn, just as the nation did when it came to forced adoptions.
Ms Gillard was interrupted only by cheers and applause as she decried the ''shameful mistakes of the past''. Australia, she said, recognised that the practice of removing babies from mothers deemed by past standards unfit to raise a child ''continues to resonate through many, many lives''.
The apology for forced adoptions was one recommendation of a 2012 Senate inquiry, led by Greens senator Rachel Siewert, which found up to 250,000 babies were forcibly taken from their mothers. The practice was carried out by governments, hospitals, churches and charities - often illegally.
Branding it a ''cruel and immoral practice'', Ms Gillard said many mothers were tricked into signing the papers, drugged and shackled to their beds.
''For the loss, the grief, the disempowerment, the stigmatisation and the guilt, we say sorry,'' Ms Gillard said. ''To each of you who were adopted or removed, who were led to believe your mother had rejected you and who were denied the opportunity to grow up with your family and community of origin and to connect with your culture, we say sorry.''
Mr Abbott, having praised the ''eloquent and heartfelt statement'' by Ms Gillard, spoke about his former girlfriend Kathy Donnelly, who gave up her son Daniel for adoption in 1977. Mr Abbott thought for many years he was Daniel's father, only to discover - after meeting him and declaring parenthood - that Daniel was the son of another man.
''The late Kathy Donnelly was a beautiful person and a fine mother who loved all her children,'' Mr Abbott said. ''She deserved nothing but love and support, not coercive expectations, social stigma and - I say this with more than a pang of personal guilt - men in her life who had failed to live up to their responsibilities.''
This is an edited transcript of former ALP leader Mark Latham speaking to 2UE's Paul Murray on Thursday morning.
"We go through this every time about the inflated Rudd numbers. Kevin Rudd put his hand up for the Labor leadership six times, and in each case he has dramatically inflated his numbers in leaks to the media.
"You had silly Kieran Gilbert on Sky News today saying: 'Oh, will it be like last time, when Rudd had the numbers and then they fell apart when the ballot was held – his numbers dissipated.'
"Well, he didn't have the numbers in the first place; I mean, I just get amazed at the gullible nature of the media where, time after time after time after time, they buy the Rudd BS.
"He's always inflating his numbers. He's now got [Graham] Richardson, who, more than any other person, has wrecked the modern culture of the Labor Party. Why is Richardson supporting Rudd, and in there working on the numbers? Because Gillard won't listen to him, you see.
"Richardson is all about difference, unless he's the main numbers man and the one they listen to, he goes to do you in. He did Rudd in three years ago. He made out that he was a part of the coup against Kevin Rudd because Rudd wasn't listening to him. Now he wants to be a part of a coup against Gillard because she didn't listen to him.
"Why don't people listen to Graham Richardson? I'll give you one good reason – he's the man that walked up to Eddie Obeid once and said: 'Here, on this platter for you, I've got a seat in the NSW upper house on behalf of the Labor Party.'
"How can the man who put Eddie Obeid into the NSW Parliament be wandering around talking about political judgment, calling the Prime Minister an idiot? The biggest idiot in Labor politics today is the man who put Obeid in Parliament: Graham Fredrick Richardson.
"I've had a gutful of the bloke who was a paid lobbyist for Ron Medich, who got into scandals about Swiss bank accounts. How can you say you're a Labor man when you've set up Swiss bank accounts? Swiss bank accounts worked for Kerry Packer.
"It's shameful that this man has any reputation, the man who set up the wheeling and dealing, 'whatever it takes' culture in the modern Labor Party. He's the bloke who wrecked the place and he walks around like he's got clean hands like Mother Teresa, knows all the numbers. All he knows how to do is put people like Obeid in Parliament ... and it's a real achievement in public life for Richardson, but 20 years after he made that decision, it is contributing to the destruction of the federal Labor government. He should crawl under the rock from which he came.
"I know Joel Fitzgibbon well. Fitzgibbon's first instinct in public life is panic, and you saw that yesterday when he's wandering down the corridors saying, 'we've only got 31 per cent of the primary vote'. He's an amateur. He's a buffoon. He is not someone who – when I was running for leadership against Beazley – who we thought was good enough to come into our council of war.
"If Rudd is relying on Fitzgibbon, again, it just points to the fact that he's got the dregs of the labour movement with him. People like Richardson and Fitzgibbon. Fitzgibbon's second instinct in life is to blabber non-stop, on and off the record, to the media; he's addicted to the media as badly as Rudd ...
"They won't have a ballot in the caucus board ... I'll tell you what the ballot should be for. It should be for the position of chief government whip, because in the Westminster tradition, that position of chief government whip held by Joel Fitzgibbon only has one duty: to be loyal to the leader.
"And if you're a person of honour and you recognise that you can't discharge that duty any more, you have to resign from that position. Not take the extra taxpayers' money that comes with it.
"When you talk about Fitzgibbon, you're talking about someone who is not only the dregs of the labour movement, he's totally dishonourable.
"He's totally dishonourable, if he was a man of honour he wouldn't be walking around pocketing that extra money as the chief government whip. Because he's the chief government leaker, he's the chief government destabiliser, and it's shameful, shameful that he remains in that position today.
"They should have a ballot in the caucus – it should be for Fitzgibbon's position. He should be sacked. But more importantly, we should have high standards and people of honour in the labour movement. Fitzgibbon is very representative; no surprise he's now hanging out with Richardson, it's very representative of all the things that have gone wrong in the culture of the modern Labor Party.
"I'd say, don't listen to idiots like Richardson and Fitzgibbon, don't trust a word of people of dishonour who've shamed the labour movement consistently for a long, long while.
"Don't listen to a bloke like Richardson who put a bloke like Eddie Obeid into the NSW Parliament, we should be better than that, we should have a culture in the Labor Party that's not about wheeling and dealing and doing whatever it takes, its about public policy and a vision for the Australian people. It's about looking after the battlers, caring about poverty, caring about inequality.
"Let's not get sidetracked into the dregs of the labour movement – people like Fitzgibbon and Richardson – we should be better than that. And if we've got some good ideas for the Australian people, let's put them forward.
"We made a decision about the leader 12 months ago. The honourable Labor thing to do is abide by that, put forward our ideas for the Australian people – and if we lose on election day, far better, far better to die on our feet than to live on our knees.
"I find this so upsetting, the modern Labor Party lives on its knees when it associates with people like Richardson and Fitzgibbon's culture of wheeling and dealing, of panic. The number merchants who care nothing for the real issues that concern Labor supporters, they just concern themselves about being a big wheel in the system.
"This is not the Labor Party of Curtin, Chifley, Whitlam and Keating. It's the Labor Party of people who should be just kicked straight out the door and told, if they haven't got the honour to stand up for what's right, they've got no place in the modern Labor system.
"That's what I'd be saying to the colleagues. It's true – unless you deal with the bad people, you bring yourself down and if you live in a bad culture, that's never going to get better."
The Coalition's broadband policyslogan states that they will "Complete the current NBN cheaper and faster." This simply isn't true.
We'll continue to cover the sketchy claims of being 'faster' and 'cheaper' in other articles but for now we'll focus on the supposed similarities and differences.
The Coalition's NBN alternative is different by almost every measure. It uses different technologies to connect the bulk of the country; it has different uses and applications; it affects Australia's health service differently; it provides different levels of support in emergencies and natural disasters; it requires a different amount of power to operate; the cost of maintenance is different; the overall cost, the return on investment and the re-sale value are different; the management, ownership, governance, competition and monopoly factors will be different; it has a different life-span and upgradability issues; the effect on businesses (of all sizes) and GDP is different; the effects on television are different; the effect on Senior Citizens is different; the viability and potential for cost blowouts is different; the costs of buying broadband will be different; the reliability is different; the effect on property prices will be different; the timescale is different; the legacy is different. Ultimately, it has completely different aims.
In just about every case the Coalition's alternative compares unfavourably to the current plans - and usually in dramatic fashion. That's based upon the facts and the information currently available in the public domain.
There are few similarities: it appears that the Coalition's plans for Fixed Wireless technology and Satellite technology in rural areas may be similar (there's an near-total lack of detail in the Coalition's plans and much information is gathered through 'reading between the lines') but there are big questions regarding the differences in funding. Ultimately, the only obvious similarity is that people should be able to download web pages and videos a bit faster.
Here follows each facet listed in detail. In the spirit of crowdsourcing, and with the phenomenal success of it in terms of NBN research, if you can add any more information one way or the other, please contact us or leave the details in the comments.
Different technologies
The current NBN plans serve 93 per cent of the population with optic fibre. That means the current NBN will eventually provide absolute certainty that 93 per cent of the Australian population will have access to broadband that can operate at a known minimum speed and this speed will be future-proofed for at least the remainder of the century.
In contrast, the Coalition wants to use technology which relies upon Australia's existing copper networks. Consequently, all premises will have different connection speeds based upon their location and the haphazard quality of the copper line(s) that connects to each house. In premises with new(ish) copper that is in good condition and is near to an exchange/node cabinet, one might expect the claimed download speeds of 80Mb/s. However, over 80 per cent of the nation's copper network is over 30-years old and copper expires after 30 years - Telstra is currently in the process of ripping it up to make way for NBN fibre. Consequently most people won't get near such speeds (more on this here).
A standalone reason for the NBN is that it replaces the expired 'rotting' copper network. While we might be in one of the driest continents on earth, it can get very wet in our most popular settlements and water ingress is a perpetual problem. This manifests itself as low broadband speeds plus poor quality and unreliable phone calls.
The Coalition has not addressed copper's age and need for refresh with its choice of technology.
Different uses and applications
There's a more-detailed list of the main applications of fibre-based broadband here. In short it will revolutionise healthcare for everyone especially the elderly and those living in remote communities. It will revolutionise all levels of education (more here). It will revolutionise power distribution through the ability to micro-manage peak electricity demand (more here) plus assist in getting power back online quicker in times of emergency and disaster.
Fibre also offers revolution to television with every household being able to access the bulk of the developed world's TV channels as well as a plethora of on-demand and other services. Potentially, more importantly, fibre is the only medium capable of broadcasting to the new Ultra High Definition "4K" TVs. These might be new now, but in 10 years' time they'll be common (more on this below).
Fibre also means an end to paying phone line rental and expensive phone calls. It also means ubiquitous crystal-clear, high-definition sound quality on phones which will please people whose technology requirements don't stray far from an old-fashioned telephone.
Another potentially-innovative boost could come from Government services. For instance, if people could communicate with CentreLink by talking to their TVs instead of spending time travelling to offices, hardly any offices would be required - everything could be outsourced to a low-cost regional location. There are over 900 offices in Australia.
The Coalition's alternative does away with just about all of this. Those fortunate enough to have the country's very best copper connections should be able to access some of the above services. However, without everyone having access to such speeds, services are significantly less likely to develop. Ultimately, the Coalition has, thus far, said little about the uses of broadband beyond its ability to download web pages and YouTube-like video quicker.
In New Zealand, it's NZ$5.9bn ($4.8bn) over 20 years. The larger size and GDP of Australia should amplify that figure dramatically.
The prime reasons for this involve the reliability, low latencies, ubiquitous coverage plus the fast download AND upload speeds of fibre. It means people can turn on their TV and talk face-to-face with a doctor. There are numerous cost saving and efficiency (and health) benefits here but primary examples include reducing ambulance journeys which take the old and infirm to their regular doctor's appointments (at a potential cost of up to several thousand dollars per trip). The elderly and infirm can also be monitored easily in their own homes without requiring expensive healthcare visits or housing in expensive care homes while hospitals can save $1000 per patient per night simply monitoring patients (while freeing up staff and beds). The potential benefits for rapid diagnosis and triage are self-evident.
(Quick note: Cisco's imminent standard on medical-grade broadband requires reliability, low latency, plus 5Mb/s upstream, 5Mb/s downstream plus at least 7 Mb/s of bandwidth 'overhead' to ensure stability. This is counter to a Cisco stat on Malcolm Turnbull's Blog, (here) where high-quality video was claimed possible at under 2Mb/s (720p, 15fps). Cisco now admits this is a mistake.)
Support in emergencies and natural disasters
National emergencies, whether fire or flooding, are becoming a part of Australian life. Consequently, the benefits of a fibre-based NBN are becoming increasingly important. Chattanooga is a global-example of a fibre-connected city. It's also been devastated with tornados. The city found:
"With a fiber network deployed, [we] can now get near-real-time information when a catastrophe like that occurs. Faster info means faster recovery, and faster recovery means less time without the power needed to support emergency response efforts." More here.
Meanwhile, Hurricane Sandy recently caused "catastrophic failure" to the New York copper network with flooding while the fibre-based network was up and running very quickly:
"unlike copper, fiber optics aren't damaged by the water. As part of this process, crews have already pulled fiber up the major corridors." More here.
The Coalition has not mentioned broadband-related plans in this area.
Amount of power required to operate
Fibre-based broadband requires very little power to transmit a full-speed signal over many kilometres. Conversely, a network based upon VDSL and wireless technologies require so much power that, according to Rod Tucker at Melbourne University, Australia will need to build two-to-three small new power stations to make it work:
VDSL requires double the amount of power to transmit at peak speed and also eight large batteries per node (of which there would be some 50,000 to 70,000, all of which would regularly need to be replaced at enormous expense.
A counter to this is that fibre-based phones can go dead in power cuts. However, any wireless home phone will do too, so it's an only an issue for those still using very-basic, traditional telephones.
The Coalition has not yet addressed this.
The cost of maintenance
The current copper network costs over $1bn each year to maintain. Over 80 per cent of it is over 30 years old and copper expires after 30 years. Increasing anecdotal evidence suggests Telstra has all but given up on regular maintenance and fixes issues only when broken (if at all) - what's the point in paying to maintain a network that is on its way to the scrap heap?
This is the self-same network that the Coalition plans to use as the basis of its broadband infrastructure. What also comes with this is increased maintenance work for some 50,000 to 70,000 'nodes' (large roadside cabinets).
Water is the enemy to copper. However, glass fibres are chemically stable and, by comparison, incredibly robust. They hardly suffer at all from rain or deluge. Fibre maintenance is much cheaper than that of copper.
The overall cost, the return on investment and the re-sale value
The net cost is zero and it will pay for itself in at least four different ways. Rather than using tax-payer's money that could be used on other things (a common myth) it sees Australia borrowing $27bn using its Triple-A credit rating (Australia is currently one of only seven countries in the world to have this. It provides us with the cheapest form of borrowing) to use in addition to another $11bn of private investment. This money ultimately comes back to the government with a seven per cent profit.
In addition, the cost savings to existing infrastructures, particularly health and power generation are such that the money saved from their annual bills will pay for the network on their own.
The basic build is generally agreed to cost around $15bn (likely the root of the Coalition's 'cheaper' claims). Next we add $3bn for Fixed Wireless and Satellite to rural and remote Australia. Then we must add the cost of obtaining a copper network.
Alan Kohler and Malcolm Turnbull recently discussed the matter here, here and here.
In truth, anyone reading this will have as good an idea of what that costs. Here's the premise: all of the Coalition claims about its 'FttN-based technology being around one-third or one-quarter of the cost of the current NBN' are based on overseas examples where an incumbent telco already owns a copper network (which presumably is well-maintained and in good condition). But neither the government nor NBNco own a copper network and that means it must obtain one. A new one would cost around $40bn and is subsequently non-viable. That means enacting an election promise to buy or lease Telstra's copper network.
How much do you think Telstra will charge? There are a few things to consider.
Firstly, Telstra has never, in its commercial history, done anything at its shareholders' expense.
Former manager of regulatory strategy, Tony Warren, gave the Senate broadband inquiry details of the company's problems with its ageing copper network. He said ADSL, the high-speed internet service that runs over copper wires, was the bridging broadband technology Telstra was using until it replaced the network. He described ADSL as the "last sweat" of revenue Telstra could wring out of the 100-year-old copper wire network.
Since the NBN came knocking there is substantial anecdotal evidence from technicians and customers that subsequent maintenance practices have become 'fix only when broken' policies and as such the network is said to be in a sorry state and is barely fit for purpose.
So if Telstra sells cheap, does that mean the network is worth buying in the first place? If it is fit for purpose, and the government had no alternative but to buy or lease it, then bear in mind that Telstra recently charged NBNco $9bn just to lease the ducts which house the copper (many of which are collapsed, flooded and filled with crud).
When NBNco did a deal to migrate Telstra's customers over to the NBN it took more than 120 Telstra lawyers and over 30 NBNco lawyers two years to come to an arrangement.
With all this in mind, what do you think Telstra would charge? The Coalition says around $4bn - $5bn. Other commentators say it could be $20bn. That puts the cost of the Coalition's policy anywhere from a highly-optimistic $22bn to a possible $38bn. Until Telstra decides, there's no way of knowing. The amount being borrowed on the public's behalf by the government is currently $27bn for the NBN. Is $22bn (the very best case scenario) really significantly cheaper than $27bn?
Next there's the question of where the money would come from. It's difficult to envisage private companies investing in a copper-based network which is already moribund, literally on its way to the scrap heap and comes with enormous power bills, maintenance costs, no premium applications and no obvious return on investment. Could the Coalition be planning to spend tax-payers' money (capital expense) on the build? They've slammed the government repeatedly for doing that even though the claim is not true.
It's not clear why the Australian public would, en masse, subscribe to the new network. Do people really need extra speed for web pages and YouTube? We don't know what the Coalition's broadband is for. It hasn't mentioned any applications or benefits. What would the take up rate be?
"There is no evidence whatsoever that the massive increase in speeds delivered by fibre-the-home will deliver any extra value or benefit to Australian households."
One can't help but wonder what the reaction would be if that statement was read out at an international broadband conference. Nonetheless, pretending it's true for a moment, what are the benefits of the Coalition's alternative? Where's the value? How does it make its money back?
As we've seen, almost all of the cost savings to existing infrastructures would vanish. There's no visible or obvious business plan and leaving the market to its own devices (as stated) won't see a net return on government investment via subscriptions. Non-ubiquitous fibre adoption would significantly-curtail innovation or any boosts to GDP. That leaves resale value as the last vestige of the network being able to pay for itself.
But the question is then raised; who would buy a network that was declared moribund over a decade before it was started, that uses obsolete technology and comes with enormous liabilities in terms of power costs and maintenance?
Finally, once built, from what we can gather, the Coalition plans to upgrade the network to one similar to the current plans but it won't say how much extra that will cost. There are also big technological issues with this which we'll cover in a future article.
At present, without further information from the Coalition with regards to its costings, the available evidence strongly suggests that the Coalition's alternative will cost anywhere from $22bn to $40bn (plus power bills, maintenance and upgrade costs) with no obvious return on investment and it's not clear where the initial capital expense or investment will come from (another recent attempt at costing can be found here).
As such, without extraordinary detailing from a costings plan it appears that the Coalition's broadband alternative will be colossally more expensive than the current NBN and not cheaper by any reasonable definition.
The management, ownership, governance, competition and monopoly factors
The NBN will initially be operated by NBNco using a fixed wholesale price. Throughout this time it will make around a seven per cent profit. After completion it will likely be sold but the government will remain in control of maintenance (a good idea). The wholesale price drops over time (Page 67 of NBNco's coporate plan) and, once sold, will be subject to market forces - the initial requirement of them being artificially high (to subsidise the rollout to rural and remote Australia) will no longer exist.
This has been ignored by the Coalition which has said repeatedly that government-owned monopolies with fixed prices are traditionally more expensive because the wholesale price has little reason to drop long-term.
An enormous problem with the current system (and with networks around the world) is that incumbent operators are in charge of everything. Telstra both sells access to its network to resellers and is a reseller itself - one of the worst kinds of monopoly. However, in its deal last year, NBNco managed to structurally separate Telstra meaning no more monopoly. This came at the expense of an 11-month delay (for which NBNco was remorselessly criticized) but meant that several billion dollars were shaved off the overall build costs and the overall rollout duration was shortened. On balance, that's an extraordinary achievement for NBNco.
The new landscape generally sees NBNco selling access to the NBN at a fixed price regardless of the size of a service provider. As such many companies can go up against Goliaths like Telstra knowing that they're paying the same price. This is a near-ideal competitive platform. That said, a potential problem is that some smaller-scale players won't be able to afford the minimum AVC (Access Virtual Circuit) from NBNco. Their option will be to buy rolled-up NBN wholesale from the likes of Nextgen and AAPT. There will be a margin for those wholesale services.
At present customers are stuck with whoever can offer service in their area and, without a detailed explanation from the Coalition, their NBN-equivalent looks set to continue down this track. However, there are bigger concerns.
When Telstra last looked at implementing FttN in 2008 it said that sharing access to its cabinets with other service providers using all manner of different contractors would cause all manner of problems, that
"In practice it would be a disaster for customers."
The whole document is essentially a testament to how the only way FttN can work is if it is owned and serviced by a monopoly.
Furthermore, there are big problems with technologies like Alcatel-Lucent's 'Vectoring' which is a FttN technology that has been promoted by the Coalition.
Thanks to Richard Chirgwin for the following explanation, but skip a few paragraphs if tech jargon makes you feel unwell:-
1. Alcatel-Lucent Zero-Touch vectoring is a single-vendor solution. Without vendor competition, you have a monopoly supplier.
2. Vectoring is incompatible with "local loop unbundling" [a term which means giving competing companies access to the copper connected to houses - a further explanation, with diagram can be seen here]. Vectoring needs all the lines to be driven from the same DSLAM [the technology which connects the premises to an individual ISP]. This is because every line needs to be tested, analysed, and optimised, constantly and on-the-fly, for vectoring to work. This means, if you have TWO DSLAMs running vectoring in the same local area, you'd end up with an "arms race". DSLAM-1 will try to optimise all of the lines under its control; this appears as noise to DSLAM-2, which adjusts its behaviour accordingly. This increases the noise on DSLAM-1, and so on. [More complications are discussed, here.
3. Low-density, long-loop areas are non-viable because you'd have a DSLAM serving fewer than 100 customers, because most cable fanouts today serve fewer than 100 customers. In other words - VDSL2 plus vectoring would serve more like 50 per cent of the country than 93 per cent (a rough estimate; significant time and resources would need to be spent turning that into hard data).
He continues:
In the absence of wide adoption of the Vectoring standard, No telco will deploy a technology like vectoring on a wide scale.Experience suggests it would take at least 3-5 years. In other words "VDSL2 with Vectoring" deployment would be unlikely to start until 2017 or so. This puts it somewhat behind the NBN! You can't create a competitive tender with a single vendor to bid.
In addition to this, FttN cabinets creates so much noise on the network that you can only have one internet provider. The current exchange-based ADSL services from Australia's ISPs will no longer be available because their signals get drowned out.
It's not clear whether even the Coalition is aware of all of this. However, a first inkling made the public domain recently when Malcolm Turnbull said that areas with HFC coverage (one-third of the country) won't get a look in (troubling as many people in HFC areas can't get HFC connections), or will be at the back of the of any rollout. This means those areas will likely continue to be forced to continue to pay the highest broadband prices and lumbered with low upload speeds even on the best packages. More importantly, Multi Dwelling Units won't get a look in as Telstra does not connect cable to them unless the entire block pays to get connected. This also brought on the ire of some of Australia's major telcos who recognised that they'd be forced into negotiating with a monopoly provider and they weren't happy. We'll be examining how other countries have managed FttN in another article. For now though, it's also worth noting the inconsistency of the Coalition's argument. On the one hand it recently stated that it wants to keep the HFC network - but only if Telstra chooses to give all the money back that it's in the process of receiving for selling it.
Any suggestion that an NBN monopoly inflates prices is already disproved as nonsense. There are many plans available right now and they are practically all better value and/or cheaper than existing alternatives. Lifehacker has a great list here.
Where that infrastructure has been privatised, the results have been mixed. Regulatory intervention is frequently required to maintain services and competition, and prices (for example in the electricity sector) have risen in spite of the expected efficiencies of private ownership.
Ultimately, it's easy to dismiss NBNco as a monopoly that causes inflated prices - that's actually what it says on paper. However, the net result is an ultra-competitive, level playing field with low prices. Unless a detailed alternative is released by the Coalition we're forced to assume that its "market-driven" plans will only cause local monopolies, duopolies and inflated prices because that's what all of the available information and overseas examples (such as the United States, Canada and New Zealand), currently point towards. Different life-span and upgradability
The durable, chemically-unreactive nature of fibre means it has aced advanced aging tests which show it works flawlessly after 65-years. Even an advanced field "test" - where a cable washed out of a frozen Oregon mountain in a mudslide - showed "no degradation in fibre/cable performance" after a battery of tests.
There's currently no reason to think it won't last into the next century. Upgrading performance at this time doesn't require removing the fibre - just simply upgrading the electronics at the ends. The current long-distance data speed world record over fibre is "one petabit per second over 50 km" and in the lab, 100 petabit per second speeds have been achieved. Improvements are constant.
The bandwidth of light is the theoretical limit - and right now, we're only held back by the speed of the devices we attach to each end of the fibre. An uninterrupted FttH network can reach into the Terabits/second without replacing the glass. In short, once built, you won't need to rebuild a fibre network for generations.
The Coalition has suggested that once built, it will look into upgrading and that this cost-spreading method is more efficient. Slogans that have been used against this are, "Do it once, do it right" and "Buy cheap. Buy Twice."
Basically, the Coalition has two choices: One, to rip up its own FttN infrastructure and build exactly what we're building right now. Two, perform a more-elaborate upgrade which converts FttN cabinets into NBN-like FttP. This would need to happen as soon as the initial build was completed (possibly even sooner) according to traffic-usage forecasts.
We'll be examining the realities and worldwide existing examples in a separate article.
For now, though, it's worth noting that the current Coalition plan requires spending tens of billions of dollars on an infrastructure that we already know needs to be replaced/upgraded. If there are efficiency gains in doing this, it's not clear where they are.
Meanwhile the OECD (and others) believe that the NBN will increase GDP by at least one per cent ($15bn per year). That's before cost savings and revenue from the system itself. As such the NBN would cover the cost of capital in just two years.
Technology companies, large business and small businessleaders alike literally haven't shut up about 'The Cloud' for two years. Why? Because of its propensity to balloon productivity and slash costs. Business owners of all sizes, for instance will no longer need to buy computer and communications hardware in one expensive blow any more - they can switch from Capital Expense to Operating Expense - paying monthly fees to use only the services they need.
The savings are enormous. Why spend a fortune on a new server that has a short life expectancy and requires expensive support when you can rent one in the cloud? For further reading on business and the cloud see the Parallels studies here plus the many Business Blogs on ABC Tech.
Global business and governments at all levels are talking about the move into the cloud and Australia becoming the first nation to provide ubiquitous fibre presents many opportunities.
Fibre is best because it offers reliability, high bandwidth in both directions and low-latencies. Only the very best copper networks in the world can come close to offering this.
The alternative is to pay for specialised services at inflated prices. Telstra's NAS is a successful example, but the basic lesson here is that everyone could have access to such services with a fibre-based NBN.
The Coalition might just be the only government entity not to even refer to the importance of the cloud or broadband benefits to business in general. It is the future of the digital economy and that represents a significant-and-growing part of the global economy. The Coalition dearly needs to address its support for the cloud and describe how its copper-based policy ties into it.
The effects on Television
One of the new industries that NBN will bring is called Multicast. This allows things like live events to be broadcast more-easily and cheaply - think Group Nine rugby Grand Final plus concerts. It also has the potential to revolutionise traditional sports coverage - the AFL's Andrew Demetriou is on the record as wanting to sell direct to the public as is happening with US sports. While NBNco's current tariff model lacks a direct-to-content-owner option, it would be unlikely to ignore a revenue opportunity if it became clear that all the major sports want in.
Video on demand is flourishing globally with the likes of Sony now focusing on building TVs that will primarily display 'internet-based' rather than 'broadcast TV'. With ever-larger TVs appearing on the Australian market and with High Definition proving to be increasingly popular and with multiple televisions residing in homes, the strain on the internet infrastructure will be enormous. As long-term licensing agreements expire in Australia, more and more premium content will become available over the next decade and we'll see US-like traffic usage where one-third of ALL internet download traffic comes from video distribution service, Netflix.
For people who struggle to get good-quality access to Australia's main broadcast channels, having the choice of almost any channel in the developed world will be transformative.
However, sticking with the copper network means that multicast is ruled out and that video downloading will depend upon the connection to which each premises has plus how many people within the premises are using the connection at once - traffic can easily stack up.
The Coalition has not mentioned this area.
The effect on senior citizens
A common myth of the NBN is that it doesn't benefit the elderly - primarily those that don't use computers. It's hard to understate how wrong this is. At the most basic level, there'll be no more phone line rental, most calls will be free (globally) and those that do cost will cost very little.
The real benefit is telehealth. A minor example is that senior falls cost Australia $500,000,000 each year. NBN allows doctors to monitor patients doing their daily exercises and track mobility degeneration. Being able to talk directly to a doctor, just by turning on a television, potentially saves the country so much money in transport via ambulance (up to and over several thousand dollars per journey - not to mention the sometimes, hundreds of kilometres of travelling each month) that it would be well-worth buying seniors High Definition TVs just for the savings. Innovative solutions are also appearing which use Microsoft's Kinect Sensor to check whether people are getting out of bed in the morning, moving round the house and even doing their exercises. This can save a fortune by delaying admittance to expensive residential care homes. And it means seniors can stay in their homes for longer.
Another class of patient that would benefit from telehealth is those whose immune systems are suppressed, either by disease (AIDS is only the most famous, not the only immune-suppressing disorder) or by treatment either with steroids or a large number of chemotherapy drugs. Wherever possible, such patients need to avoid hospital, both for their benefit and so they don't become "Typhoid Mary" carriers of resistant bacteria to others.
The potential cost savings from not having to touch infectious patients are also substantial.
There are many other benefits to seniors. This is particularly important with so many baby boomers hitting retirement age - apparently there are over 800,000 65th birthday's every month. The cost of senior care is escalating and NBN can dramatically reduce the costs while improving the life of everyone involved.
While some of this may be possible with the Coalition's alternative, coverage will be haphazard, dramatically reduced and fewer services will be developed due to a lack of broadband ubiquity. We'll be covering more on the effects on seniors in future articles.
But the pitfalls facing a FttN implementation are enormous.
The bad state of the ducts is a double problem for the Coalition because the technology also relies upon the quality of the copper within those ducts and most of it is over 30 years old. In NBNco's case, where the Telstra duct is declared unusable, it makes its own new one. For the Coalition to do this would involve rolling out new copper - a ridiculous notion.
Indeed, much of the justification for the Coalition's alternative is that FttN is cheaper in overseas countries. However, this doesn't take into account the realities and challenges that overseas markets are facing or deal with the fact that Australia's geography, population density and, most-importantly, the standard of copper is not comparable to anywhere else.
1. Over 80 per cent of Australia's copper network is thirty years old and copper expires after thirty years. There are frequently reports of people who can't make phone calls when it's raining. One even reported that they can't get a dial tone when the wind blows such is the decrepitude of an overhead line. The copper network is an expired asset and if a government wants to literally spend tens of billions of tax payer's dollars acquiring it, a substantial condition report simply must be performed.
2. The Coalition's FttN technology node requires mains electricity power being connected to every single cabinet in the street. NBN contractors have already queried how this could possibly be achieved as local power companies are the only ones who can install power to infrastructure. The notion of coordinating electrical engineers with NBN engineers without massive delays, across 50,000 to 70,000 nodes drew very cynical comments from leading NBN contractors.
One reason that was brought up by NBN engineers was that many turrets aren't near power lines and so the cost of power connection explodes due to having to dig up whole streets. This has been seen in the UK where the standard cost of connecting a node to power has frequently ballooned from 2000 UK Pounds to 25,000 UK Pounds.
Such areas are then considered 'not economically viable.' Each cabinet has to be assessed on an individual basis. Any implementation study for FttN needs to factor in this cost and add an enormous contingency fund for the potential 1200+ per cent blowouts. In the UK, where such blowouts occur, the public don't get upgraded broadband. Geography means this problem is exacerbated in Australia.
Andrew Ferguson of the UK's ThinkBroadband says of his country's rollout:
"The install cost varies because sometimes the power is available a metre or two away, and other times a new trench across a road with all the associated costs is needed, and worst case there may be extra upgrades to the power capacity in the area to support the powered cabinet. So it is not a simple city versus rural issue, but down to specifics of each cabinet, e.g. rural cabinet with a street light nearby should be pretty cheap, but a city cabinet may need a busy pavement to be crossed which costs money to put back to an acceptable standard."
"While the Coalition policy represents the low cost alternative, it does little to reform the telecom industry, it effectively winds the reform process back three years and it still faces significant budgetary, political and legislative hurdles. We believe a major policy change will be difficult to achieve for the Coalition."
There's an entire section titled, 'Significant Hurdles' on page 8 which is worth reading. An interesting point says,
"We understand the Coalition will need to re-draft and pass new legislation, to enforce functional and structural separation under a revised broadband policy. This could take up to 18 months to prepare and pass. The Greens Control the Senate: Any new legislation will be subject to Senate approval, currently controlled by the Greens, a strong supporter of the NBN. This poses a major obstacle given the current state of the Senate."
4. According to one senior technician, Telstra's convoluted maintenance system has made FttN all but unviable. By using third-party technicians for repairs, maintenance and installations over the years, and through expecting them to "spend 30 minutes on hold to Telstra HQ" in order to inform them of the work carried out, there is now substantial anecdotal evidence to say that normal procedure is to fix the job in any way possible and leave without documenting what happened. This has been going on for many years. An audit which preceded Telstra's last FttN attempt found that one-third of the lines connecting to turrets do not go where they are supposed to. That means, that every single copper line in every single turret has to be tested with one engineer at the turret and another in someone's home in order to document which line is connected where. As such, the supposed, great-cost-saving, "FttN is simply a case of replacing turrets with cabinets", that happens in other countries, is not possible in Australia.
Performing such an audit on every single copper strand left in the network would prove enormously costly and time consuming. By all accounts, since the NBN came knocking, there has been little-to-no enforcement of many maintenance procedures meaning that the situation is now substantially worse than before.
This all means that audits of line quality, proximity to mains power and of accuracy of documentation, need to be performed in Australia whereas it hasn't (apparently) been necessary (at least to the same extent) in other countries. The potential for cost blowouts and delays is astronomical and it is for these reasons that many have said, it's better to rip it all up and start again.
But that's not all.
One of the cornerstones of the Coalition's broadband policy is to get superfast broadband to people who don't already have decent broadband. A survey is being used to identify them:
"A key element in our approach is to enable us to identify and prioritise those areas with the least adequate services."
There's also the question of expecting the general public to know about their broadband needs and opportunities. How can the uninformed make a decision?
The survey continues; "This information will enable us to ensure that if we are elected to Government the roll out of the NBN can be accelerated and targeted at the communities which need upgrades most."
The question that needs to be answered is, "How?" It's not obvious how a copper-based solution would work in Australia and any notion of moving to wireless is untenable.
As this graph from European FttN-provider, Asotel, illustrates. If you're more than 2KM from the node right now, FttN isn't going to help you at all.
At 2km from the node, ADSL speeds are similar to VDSL speeds.
Ultimately, how does the coalition's policy provide good copper-based broadband to people who don't already have it when a major reason they don't have it already is because of the copper-based network?
Could the Coalition's plan really be as unsophisticated as spending tens of billions of dollars on incredibly-elaborate and complex processes (with a very-low likelihood of success) on amp'ing up the copper in the hope that it might squeeze a few more megabits down the pipes?
The costs of buying broadband
We've already seen the costs of NBN broadband plans. Generally speaking, they offer better performance and better value than anything that's come before. Here's Lifehacker's extensive list.
In addition to this, there will no longer be a requirement of paying phone line rental to Telstra - an off-the-bat saving of $23 to $90 per month - and all phone call prices will be slashed if not free altogether - worldwide.
However, the Coalition's alternative, without details as to the contrary, appear to reinstate local monopolies and duopolies which usually ensure higher prices. For instance, in an area where Telstra charges $110 per month for cable internet access (the top, mainstream copper-based internet access in the country) and the only other option is Telstra NBN which gives better performance - would Telstra charge more or less for the 'NBN' connection?
However, a quick look at the cited prices showed that NBN plans offered ubiquitous coverage at a lower cost with higher speeds and superior data caps.
This needs to be addressed by the Coalition as its claims of prices being driven down through market-driven competition sound reasonable on paper, but in reality - as experienced within Australia and around the world - it invariably (to the best of our knowledge) means higher prices.
The reliability
Fibre offers the best reliability of any broadband connection that you can get. This is particularly important if you are hooked up to hospital monitoring, need to contact a doctor urgently or are running a business.
The lack of reliability in FttN also means that many of the applications, which can pay for the rollout, will be unavailable. It's also worth considering that in times of emergency, it's far easier to return power to emergency services and communities when they are using fibre. See Emergencies and natural disasters.
Effect on property value
NBN connections are already appearing in property listings on Domain and RealEstate.com.au along with proximity to schools and parking. There are plenty of conversations among online communities to show that early adopters are consulting NBNco's roll-out map to gain insight in where to live. It's already having an effect on NBN-ready Tasmania.
It's fair to say that of two neighbouring, identical properties - one with NBN and one without - the one WITH will command a premium.
Conversely, there have been mutterings from uninformed members of the public about refusing their NBN connection despite it being free. It's fair to say that doing so will lose value as connecting back to it will cost thousands of dollars and not happen straight away.
Interesting discussion is surrounding NBNco's Network Extension Program which lets people in Fixed Wireless zones upgrade to fibre if they pay a 'not-for-profit' price. The problem is that the price is very high - there have been few enquiries but one house was quoted at $150,000. (Another alternative is connecting your own fibre which some farmers have been doing in the UK.)
One wonders, however, would paying this money add $150,000 (at least) to the house's value? Does this represent a trifling expense for a business setting up in an area of low property value?
In Kansas City, USA, where Google fibre is being deployed, property is becoming more attractive and attracting start-up businesses because of the top-notch broadband. Data centre operators are also looking at cheap Australian real estate to set up shop.
The effects of the Coalition's policy are less clear cut. Some have said that having the large fridge-sized FttN cabinets outside your house will lower value. It probably depends on the premises' outlook. Some won't care, but as Selling Houses Australia tells us repeatedly, they are likely to polarise buyers and reduce the market - some will view them as monstrous carbuncles some will recognise the potential for really fast internet.
Are the large, fridge-sized cabinets a comforting reminder of man's ability to generate broadband?
Or a Monstrous Carbuncle on the face of a much-loved, elegant friend... that lowers property value?
Different Timescale
The bulk of the current NBN is scheduled to finish in 2021. Thus far it's on track but we'll know much more in the next few months.
The Coalition says it will complete its rollout much quicker. This appears to be based upon timeframes seen in countries like the UK where the process for upgrading to VDSL basically involves adding FttN cabinets to the street. In a standing start, this is definitely the faster option (ar least for suitable areas). But in Australia, and with several years already passed, the race is not nearly so simple: NBNco has a big head start and the Coaltion has much-bigger and unpredictable hurdles (see The Viability) to navigate.
"Since 2009, BT has rolled out FttN (in BT parlance, fibre-to-the-cabinet) services in 1376 exchange areas. At around 340 exchange areas per year, it would take eight years for Australia to put VDSL2 into all the areas now covered by ADSL2+."
(In the linked article, Chirgwin also points out that the UK is not ahead of us and that it's slow-starting rollout, is also scheduled to ramp up quickly.)
The government and NBNco has spent years planning the rollout, negotiating with the incumbents, negotiating with contractors and building trial sites.
If elected later this year, what's the earliest the Coalition could start building? Let's be optimistic and say 2015. How long to build FttN in ideal circumstances? The number that gets bandied about is five years (although, as Chirgwin says above, it's lilkely eight). Straight away, that puts the finish date at 2020. Is that really significantly quicker? Is 2019 or 2018 'much quicker' for that matter? These are incredibly-optimistic figures.
At present, and without a very detailed implementation study it's frankly impossible to see how the Coalition could implement its policy significantly quicker than the current plans. According to the facts and available information, it could just as easily take much longer.
The legacy
A traditional justification of spending billions on national infrastructure is that it lasts for generations. Australia has many prominent examples including The Overland Telegraph, The Snowy Mountains Scheme, The Sydney Harbour Bridge, all of which got panned by public and politicians at the time and all of which are still famous around the world. All of them were built with an eye on future requirements.
Australia will be the first country in the world to have ubiquitous Fibre-to-the-Premises, we already know what many of the revolutionary benefits will be and we know it will operate happily up to the next century.
In contrast the Coalition's alternative already needs to have its subsequent upgrade factored into its building plans. We also know that data requirements and speed will outstrip its capabilities by 2017 (see below) - when it might not have even started to be built yet (see The Viability).
Sydney's Harbour Bridge only needed one lane when it was built. Now, after being assisted by the Harbour Tunnel there is talk of adding extra layers to boost capacity. It's unlikely that even the visionaries predicted that. However, the data forecasts for global broadband are clear - broadband requirements will outstrip the performance of copper-based solutions within the next several years. We're already being held back by the copper-based constraints.
It raises the question that if the Coalition wants to build a network for Australians that is "sufficient for their needs" which needs are those? The ones of the general public in 2013 or of the nation in 2020?
Source: Cisco VNI
According to Cisco's world-leading VNI index (which is what governments and businesses around the world use to base infrastructure decisions upon), the amount of data moving over the internet has doubled since 2011. It will double again well before 2020. The trend is for it to keep rising.
This raises the following questions; are Cisco's forecasts wrong? Should expensive new infrastructure last generations? The Coalition's plans are to spend $20bn-to-$40bn of tax payer's money on infrastructure that can barely cope with today's requirements and certainly won't in the next several years.
The following graph was put forward by members of Australia's technology community to illustrate the long term, future-proof benefit of choosing fibre now.
In 10-to-20 years' time what will we think when looking at this graph? Source: Cabidas
Ultimately, the Coalition has only mentioned current needs. It needs to address the specifics of Australia's future requirements and the compatibility of its policies with Cisco's world-leading VNI forecast.
Other countries
It's fair to say that the Coalition is basing most, if not all, of its policy based on rollouts in other countries. We've demonstrated why Australia is largely incomparable above. Nonetheless, Malcolm Turnbull has criticized the ABC for not examining what's happening overseas.
In truth, we have been. The problem is: finding relevant positive role-models is challenging. The broad situations in countries like the USA (interesting, slightly-related-to-Australia debate, here) and Canada are only good if you like the thought of monopolies and duopolies exploiting the public by offering inferior services at inflated prices. Canada is stuck with some of the worst data charges in the Western World. The corporate and patchwork nature of America means most people rail against internet access. A few hot spots, like Seattle, Kansas City (and here), and Chattanooga (see also here and here), which are independently-deploying NBN-like FttP, are seeing enormous benefits from doing so. The US government is pushing for fibre across the whole country.
But the main issue is that every country in the world is moving to fibre and it's not hard to find political leaders in each and every country saying why - Angela Merkel, at last year's CeBit exhibition (the largest tech show in the world) said in her keynote that fibre was the future. This was echoed by the conference partner, Brazil, through President Dilma Rousseff. (Incidentally 2013's theme is "Shareconomy" based upon the cloud.)
Japan is too, but the Japanese cultural attitude to infrastructure construction makes it incomparable to other countries - they build things for the future and barely think twice about the cost. It already had one of the best copper networks on the planet.
But we'll focus on two that are particularly-relevant just briefly(ish). The Coalition constantly refers to the UK as a model for its alternative deployment. The UK's broadband policies have led to wildly-varying services. FttN works quite well in a limited number of areas. However, the underlying policy of getting a downright-laughable minimum 2Mb/s connection to the whole country has spent years of failing very hard.
Having recently returned from spending three weeks there, a common theme was to get fibre to avoid being left behind by the French. The overriding problem they have, however, is a total lack of money, (they're facing a triple-dip recession). Some comments are telling, none more so than from the country's Secretary of State for Culture, Olympics, Media and Sport, Jeremy Hunt.
From Delimiter:
"[He] said the impact of the Internet on modern economies was "now well-documented by a number of studies", accounting for a major proportion of growth in gross domestic product...
"My nightmare is that when it comes to broadband we could make the same mistake as we made with high speed rail. When our high speed rail network opens from London to Birmingham in 2026 it will be 45 years after the French opened theirs, and 62 years after the Japanese opened theirs. Just think how much our economy has been held back by lower productivity for over half a century. We must not make the same short-sighted mistake..."
"We simply will not have a competitive broadband network unless we recognise the massive growth in demand for higher and higher speeds," he said. Consequently, Hunt said he viewed fibre to the node/cabinet as only a short to medium term solution, referring to an earlier report by the UK's House of Lords into the matter.
"Whilst I am talking about the House of Lords report, let me address a further misunderstanding," he said. "They suggest that fibre to the cabinet is the sum of the government's ambitions. They are wrong. Where fibre to the cabinet is the chosen solution it is most likely to be a temporary stepping stone to fibre to the home - indeed by 2016 fibre to the home will be available on demand to over two thirds of the population."
"Fibre to the cabinet is one of the biggest mistakes humanity has made," he said. "It ties a knot in the cable in terms of bandwidth and imposes huge unreliability risks... It is a shame...
"What are the leaders doing? There is Sweden in greater Europe, and in the Far East you have Korea, Japan and China. They have a minimum level of 100 Mbps. That is where they start," Cochrane said.
"They are rolling out 1Gbps, but they are planning for the next phase of 10Gbps. To return to an earlier point, if you have got fibre to the cabinet and you are relying on copper, I can tell you that the network is going to collapse on copper when you get to 1Gbps. It will collapse much earlier."
There's more glowing praise and comparisons here plus some more recent developments, here and here.
Some have noted how the UK squandered its Natural resources (North Sea Oil) wealth without investing it for the future. Could that be a warning to Australia?
Meanwhile, in New Zealand...
New Zealand is probably the most relevant example. The Coalition used to cite New Zealand as an example for broadband implementation. This seems to have died down since New Zealand started copying Australia's NBN.
Of particular interest is that while no Cost Benefit Analysis has been performed for Australia, it has for New Zealand. Interestingly, the associated pecuniary benefits of New Zealand's benefits are so high that they would pay for Australia's NBN. That's impressive for a country whose GDP is almost 90 per cent smaller than Australia's. One wonders, what would the benefits to Australia amount to?
"[The report] uses a 'grass-roots' analysis to quantify the likely end-user economic benefits, called consumer surplus gains by economists, of a sample of high-speed broadband applications across the healthcare, education, business and agriculture sectors. The broadband applications considered include online doctor consultations, remote learning, teleworking and online farm management tools among a number of others. It calculates that the economic benefits to New Zealand end-users of the high-speed broadband applications considered will amount to NZ$32.8 billion ($26.8 billion) over 20 years."
The subsequent diagram "shows how this is calculated across the four sectors."
The NZ Cost Benefit Analysis illustrates the potential of an Australian Cost Benefit Analysis.
In the healthcare domain, the savings considered as part of the analysis included lower hospital admission and test costs, fewer emergency room visits, lower travel-related costs, lower long-term prescription drug costs, faster access to physicians and faster care delivery leading to savings in government expenditure on healthcare. The result was a NZ$5.9 billion [$4.8 billion] consumer surplus over 20 years.
In the education domain, the savings considered are those that result from lower costs of skill enhancement, as well as reduced cost of course materials and savings on field trips. The result was a NZ$3.6 billion [$2.9 billion] consumer surplus over 20 years.
Business services-related savings are achieved through improved productivity, lower travel-related costs, lower network and communication expenses, and savings (as well as new revenues) from the cloud-enablement of applications. The result in this domain was the largest - NZ$14.2 billion [$11.6 billion].
Economic gains in the dairy industry relate to increased dairy farm productivity and were calculated at NZ$9.1 billion [$7.4 billion] over 20 years. Annually the combined GDP impact of the build, and the consumer surplus from the applications, are worth about the same to New Zealand as the money we earn every year from our wine exports.
Once again, if the efficiency gains are worth this much money for New Zealand, what would they be worth for Australia?
Why is this so long?
Firstly, balance: if you're not thorough, you get swept away in the sea of opinions. Secondly, it's a resource for others in the media to help with groundwork and research. Thirdly as a resource for myself - future articles needn't be so long if I can link back to articles like this. Fourthly, it aims to answer any counter that someone puts towards an individual element.
Comments like the following appear all over mainstream media, almost completely unchallenged, and they may even be ramping up:
"The approach we will take - we plan to take is about a quarter of the cost and a quarter of the time to provide an upgraded broadband service than the approach of fibre-to-the-premises that that Government is insisting the NBN Co take."
"There is no evidence whatsoever that the massive increase in speeds delivered by fibre-the-home will deliver any extra value or benefit to Australian households."
"There is not one contractor in Australia that believes the Government is going to roll out its National Broadband Network for $32 billion. Expectations are as high as $60 billion, $70 billion or even $100 billion for the National Broadband Network.
These statements are demonstrably untrue and some border on the ridiculous. This naturally raises questions about media and politics in Australia. Feel free to discuss them below, but I'm sticking with the technology debate.
We'd like to discuss the technical details, but this rarely happens and discussions increasingly descend into resembling shambolic accusation fests like this and, sadly, this.
What's most important, however, is that the fundamental aims of the Coalition's policy don't appear to be possible. The technology and governance minefield ahead of it needs a detailed map that navigates all the hurdles mentioned above in order for the following statement to ring true:
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