NBN faces penalties but deeper issues can't be fixed

Australia's NBN Co is facing tougher penalties for poor network and service performance -- but no one has a plan to solve its biggest problems.

The Australian Competition and Consumer Commission (ACCC) is proposing financial penalties for missing minimum network speeds and lifting existing sanctions.

Currently NBN Co, the broadband wholesaler, must pay a rebate to retail service providers (RSPs) for network congestion and poor customer service such as missing an appointment.

Now the ACCC is proposing that the rebate be passed on to the end customer.

"We have heard long-standing concerns from consumers about how frustrating, inconvenient and costly these issues can be," ACCC chair Rod Sims said.

With the NBN rollout in its final stages, he wanted to see the wholesaler and the RSPs take steps to improve service, adding that it was "unusual" for a monopoly telco's service standards not to be regulated.

"Unusual" hardly begins to describe the Australian NBN.

It began a decade ago with the promise of taking the country into the future with a world-class network independent of the industry heavyweight Telstra.

Several changes of government and A$51 billion ($34.3 billion) later, a mere 17% of households are being connected by fiber.

In what is dubbed a "multi-technology mix," copper plus FTTN (fiber-to-the-node) or FTTC (fiber-to-the-curb) accounts for the biggest chunk of the rollout -- covering 48% of premises -- with HFC (hybrid fiber-coax) serving 22% of households and the rest covered by LTE fixed wireless and satellite.

State-owned NBN Co is expected to complete its mission of bringing broadband to more than 11 million premises by the second half of the next year.

So far it has connected around 10 million premises, but as of June 30 only 5.5 million were activated.

The relatively low activation rate is a sign of customer skepticism that goes beyond frustration about missed appointments.

Australians are going online with what is most likely the slowest and most expensive broadband service in the developed world.

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The country ranks 58th in the latest Speedtest global index, with an average download speed of 41.3 Mbit/s, and it has the highest entry-level prices among OECD countries.

As analyst Paul Budde has reportedly pointed out, the cost of the multi-technology-mix NBN has doubled from the A$25 billion promised in 2013. This means trying to extract more out of reluctant consumers while driving down RSP margins to as little as 10%, he notes.

One detail that stands out is NBN Co's purchase of 29,000 kilometers of copper -- enough to go three-quarters of the way around the world. Rod Tucker, professor emeritus at the University of Melbourne, estimates the cost at around A$10 billion -- a hefty investment in a technology that is fast disappearing in the rest of the world.

Despite the NBN rollout nearing its conclusion, there is a silence around its future.

Before the election in May this year, the opposition party proposed a review of NBN arrangements. That was the last attempt to generate a debate about just how Australia is going to climb the broadband rankings.

Eventually, the government will look for someone to take NBN Co off its hands, but Budde doesn't think that will happen quickly.

When it does, it will be keen to keep the asset in Australian hands, he told Light Reading.

"Telstra would be the obvious choice," he said. "But to make it interesting for Telstra, the government will have to write off at least half of the NBN's value."

— Robert Clark, contributing editor, special to Light Reading

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