Adrian Ballintine offers his opinion to the Australian Financial Review.  Published on Thursday May 27th 2010.

NBN Plan Misses Golden Opportunity In The Sky

OPINION PIECE – NewSat and National Broadband Network

By Adrian Ballintine,
Chief Executive Officer, NewSat

While the Federal Government should be given credit for proposing the possibility of delivering high quality broadband coverage to all Australians, a little thinking outside the square would not go astray.

The Government appears to have made up its mind on how the National Broadband Network (NBN) will work without any significant research at all.

Other mediums capable of delivering widespread broadband are scarcely considered in the recent KPMG and McKinsey implementation study. This is a failure to complete due diligence.

Grave concerns must be held when a Government decides what path it will take with $43 billion of taxpayers money, without due consideration of alternatives.

The launch of Australia’s first locally owned satellite, Jabiru-1, could well provide the answer to the Government’s nationwide coverage problem and would not cost taxpayers a cent.

Currently, the Government’s proposed NBN is expected to deliver high speed broadband to about 90 per cent of Australia, with various alternatives being explored to cover the remaining regional and remote locations.

However, satellite communication is a ready-made alternative to the range of impractical options being explored, and would come at zero cost to the taxpayer

Already, high quality broadband coverage can be delivered anywhere in Australia via satellite, with the capacity, speed and quality to be boosted further when the new satellite is launched.

A slot in GEO-stationery orbit has been secured and the project is full steam ahead.

While they have yet to formally respond, the Government is spruiking the results of the implementation study as positive. However when you consider the satellite communication alternative I suggest that those results don’t look particularly good at all.

So determined are the NBN Co. to cut a deal with Telstra, it even appears that extra payments to Telstra are being considered to possibly sweeten the deal.

The study bases some of its findings on some highly optimistic assumptions. It suggests that the profitability of the NBN, and thus the return for investors will be healthy, based on a projected take up rate of 70 per cent or more. That is also provided there are no cost blow outs in infrastructure.

In reality though, rates of direct cable connections to the home around the world are at about 40 per cent.  This doesn’t add up by my calculations. Yet again, the Government is rolling the dice and hoping.

It’s also important to remember that a nationalised communications service has been tried before. The Aussat network of satellites was launched in the early 1990’s, an ambitious Government plan in conjunction with a commercial partner, in this case Optus. The intention was to develop the project through an established Government body (sound familiar?) then float it publicly. The project blew up in their faces when the timings and costs predictably ran well over estimates, and the hardware was sold back to Optus wholly at a massive loss.

While the purpose of the project was achieved the then Government bungled their way through it at a significant cost to taxpayers. It would seem though that nothing has been learnt from this and the Government refuses to acknowledge options that are outside the square.

This is why I’m encouraging a line of thinking off the beaten path.

Australia’s defence and mining sectors rely heavily on satellite communications already so the infrastructure is already in place to deliver to remote areas.

And then there is the economics of the situation.

It’s understood that the Government plan to sell almost half of the NBN to the private sector during its construction, followed by the other half when it’s up and running. The implementation report suggests that the network would be profitable six years into the building phase, with the Government investment repaid after 15 years.

Also, the belief is that wholesale price will be around $30-$35 per month for access to the network, noted as comparable in price to the current market, according to the report. There is no consideration given to what cost Internet Service Providers will then pass on to consumers. Why wait that long for a National Broadband Network to provide high quality coverage to all Australians, and why wait that long for a return on investment? Why should Australians pay comparable prices when they can pay lower prices?

Why should the Government pay Telstra more just to get them involved, when Telstra can’t even deliver the service to every Australian? How can the Government promote competition when by going down this path they are effectively shutting others out and creating a monopoly?

Particularly when an alternative already exists, with tremendous scope for development, in a much faster turnaround time?

The current thinking about provision of the NBN needs to consider other potential options if it is to remain healthy.

The Government will own the proposed NBN until it’s completed and implemented. The Jabiru-1 project offers investors the chance to play a part in a pioneering event for Australia, while taking the burden off the taxpayer in what is supposed to be a bonus for all Australians.

The NBN is a bold and ambitious plan. It requires a large amount of things to go right, and there a just a shade too many variable factors in play to assure they do, for my liking. The questions raised by this plan, and the implementation study cant be answered in the short term and that is not good enough for the Australian public.

Satellite communication is the obvious alternative for a fair and equitable Australia-wide network solution, and at the moment we’re only at the tip of the iceberg.

Jabiru-1 presents a chance to uncover more of it, for the public, the Government and the investors the Government are so keen on getting on board their project.

A cheap, efficient and nationwide NBN is at our fingertips. If only the Government could see past their short-sighted conclusion.