Thursday, March 12, 2015

Turnbull still misleading, obfuscating and spinning over NBN.

Turnbull is again talking rabid nonsense while the mainstream media fail to call him out on it. Turnbull is executing his brief to "Destroy the NBN" and his spin, deception and smoke-screens are still allowed to stand.

What's completely missing in anything Turnbull has ever said on NBN Co is profitability and revenues.
Ledgers have two sides: expenses and revenues. Pretending they don't, that expenses only matter, is the chief deception and mislead that Turnbull has perpetrated.

This is a "gun for hire" barrister who'll say anything to make the case for his current client. That's what they do, this is who Turnbull was before being a politician, and now he builds on that 'talent'.

Turnbull is building a business that will fail, and he knows it will fail, because it purposely discarded all it's profitable customers: all the NBN Co profits come from the 'high-end' customers, the top 25% paying for 100Mbps to 1000Mbps.

The cost of providing a digital service, fibre, coax or DSL, is constant and unrelated to how the customer values the service: speed. This is an extraordinary product. Imagine being able to build a bicycle or Lamborghini for the same cost, yet sell them for current prices. You might sell just a few Lambos, but that's where your profit comes from. You either give away or subsidise the bicycles from the high-end customers.

Fibre is a 'nirvana', but for the business not customers. The business get to sell the identical service for anything between $24 and $150, simply by dialling up the speed. The Gross Profit Margin on 12/1Mbps, the entry level might be $2/mth, making the Margin on 1000/400Mbps $124/mth, or 6400% higher. Guess how the Quigley Business Plan made its money? From reducing the price of 1000Mbps services to bring in more high-profit customers. Turnbull's own Strategic Review noted the "Price Elasticity of Demand" at -60 (sixty). This means if you drop the price by $1, you increase revenue by $60. There is no business, not drugs, guns or people-smuggling, that is close to this profitable.

Turnbull has said he can't deliver even 25Mbps everywhere: he's purposely thrown away all the business that was to generate all the profits. The top 1% consumers download 10% of all data, the bottom 50% download 6.5%. That's a ratio of over 100:1 in demand, and we know from the NBN Co sales data, that both high-end & entry-level customers are very willing to pay the prices on offer.

1. From non-strop criticism of the ALP on every topic, there's no way Turnbull can assert he "threw out ideology, lies and spin". Turnbull is continuing with his central deceptions and the LNP ideology to "Destroy the NBN".

2. While Turnbull claims he's made NBN Co "more open and transparent", he's stopped reporting the fundamentals on market segments and demand. He's very deliberately hiding the revenue and profitability data.

3. When did Turnbull know that his election promise of 25Mbps everywhere was unachievable? It was uncovered very quickly by the reviews of his handpicked friends. Shouldn't he have done his due diligence on this issue before the election and been honest about this? Turnbull had more than a year to get this expert advice before the election from the same mates he later employed, but didn't.

4. Turnbull would have us believe that using "existing technologies" is somehow cheaper for NBN Co: that's utter nonsense, and he's well aware of it.
Has he forgotten he was in the Howard ministry that sold the remaining 51% of Telstra in 2006?

Only for the owners of the coax and copper, Telstra, could using the existing infrastructure be cheaper to use. The cost of gaining access to exactly those resources was why the Expert Panel in 2008, for first Rudd/Conroy tender for a DSL/FTTN NBN, rejected the idea. No complying bidder could be economic - they had to pay the Turnbull-privatised Telstra for access to Telstra copper. As Telstra didn't submit a compliant bid, nobody could build an economic DSL/FTTN NBN.

This situation still stands with Turnbull's 'pragmatic' NBN. The Expert Panel were experienced business and economic experts without a barrow to push and they unanimously came to the position that what Turnbull is doing now, paying a premium price to Telstra for access to it fully amortised copper C.A.N., was uneconomic and could never be profitable. How Turnbull has pulled off this economic miracle has never been explained by him.

One of the critical observations of the Expert Panel was that the money spent on the expensive DSL Nodes of an FTTN was just thrown away. Turnbull himself noted and acknowledged this in his pre-election document, as "50% CapEx Reuse". That's pollie-speak for "we're going to deliberately throw-away and waste half the taxpayer money we get".

5. "Sooner" and "Cheaper" are the sole criteria Turnbull has ever given for his NBN plans.
He's never talked Revenue, nor Profitability - very purposely. Any unbiased review of his very slow and expensive plans would show they can never turn a profit: as any good Pollie does, Turnbull has simply ignored the inconvenient facts.

In 1995, Telstra had plans to fully replace, with current (fibre) technologies, their existing Copper Customer Access Network by 2010: at no cost to the taxpayer. Turnbull's LNP was in-charge of Telstra from then to 2007 and somehow those plans were cancelled and instead many billions were wasted chasing poor business overseas during the Internet Boom/Bust.

The benchmark should be "was this done by 2010"?
Turnbull is still doing his best to prevent Full Fibre Network - this is not "quicker" or "cheaper", it's simply a rearguard action by vested interests designed to slow, or stop, the disruption of the Internet for as long as they can get away with. And it will cost the taxpayer hugely when, not if, NB Co fails and goes bankrupt.

6. Turnbull has always confused costs and revenues and painted benefits to be bad.
Fibre is a 'nirvana', but for the business. Fibre is many, many times more profitable than old and decrepit and unmaintained copper can ever be. Expecting the government to build a profitable, extensible and upgradeable network, without unnecessary mass wastage, isn't "nirvana" or "gold plating", it's just good practice.

"With the NBN, the first thing we threw out was ideology, lies, and spin. We told the truth about the project -- with an independent Strategic Review completed three months after the September 2013 election, by publishing weekly rollout statistics, through requiring the company to provide detailed quarterly financial and operational reports. In short, we made NBN Co as open and accountable as a publicly listed company," Turnbull said. 
The minister also appointed a new chairman, replaced most of the board, and appointed a new CEO. 
The first review also highlighted that the Coalition's election promise of having 25Mbps download speeds delivered to all Australians by 2016 was not achievable. 
But Turnbull said the approach he has taken to the NBN involves being "pragmatic" about the technology used. 
"Rather than engaging in theological debates about fibre versus copper versus other technologies, we would free the company to use whichever access technology enabled it to finish the job as quickly and cheaply as possible," he said. 
"Most end users accept this approach, and are happy to forgo Labor's fibre nirvana in favour of high-speed broadband deployed sooner and costing less."


  1. Hi Steve
    Your article alerts are coming in a day late can that be fixed? if not don't worry I can still link the next day, just thought I would ask
    would you delete after reading please Steve
    cheers from Lyn @lynlinking

  2. Lyn,
    Thanks very much for this heads up.
    I don't know how the Google Alerts work :(
    Will look at Blogger prefs in the morning.