The NBN saga: Q&A with Layer 10's Paul Brooks
- 05 December, 2008 10:30
Layer 10's founder and former TransACT CTO, Dr Paul Brooks.
With the deadline for NBN bids officially closed, much of the attention has been focused on Telstra's non-compliant bid. At 12 pages – almost 1000 pages shorter than the Optus-led Terria bid – Telstra's proposal to construct the NBN will be considered, communications minister, Stephen Conroy, said.
Other attention has focused on the seemingly never-ending debate around structural separation of the NBN builder, with Telstra declaring it is "impossible" to build an NBN if separation is entertained. Telco analyst, Paul Budde, said the time for Conroy to clarify the regulation surrounding his open access network had arrived.
Dr Paul Brooks is the founder of independent telecommunications strategy and design consultancy, Layer 10, and is an expert in telecommunications and broadband network design, planning and operation.
Brooks' expertise in next-generation network design and deployment stems from his practical experience, most notably as CTO at TransACT Communications in 2001-03 (a state-based bidder for the NBN), and with several startups. Brooks has also held executive positions at organisations such as Global One AsiaPacific, Flowcom/Macrocom, Consultel BWP and Vocus, and is currently working with Basslink as chief architect.
ARN spoke to Brooks to find out his thoughts on the events of the week:
What do you make of Telstra's "bid"? Is it a bid, and why have they not submitted a full bid?
Paul Brooks (PB): Yes, it is a bid, albeit very light on detail and non-compliant with the stated goals of the original RFP document. Telstra had to submit something to retain a seat at the table, and retain the opportunity to walk away at a later time. If Telstra had not submitted anything they would have lost the chance to participate in the ongoing process. Senator Conroy had already flagged that he would consider non-compliant bids, so this is a reasonable way to stay engaged with the process from Telstra's point of view.
Senator Conroy, while speaking on television this week, indicated that he expects the Expert Panel to engage with all the bidders as part of the evaluation process, and normally that would involve requesting further information and clarification. Normally, a bidder for a tender attempts to put as much information forward up-front, and then the subsequent clarifications are largely incremental information – which is the path the other bidders have evidently taken. Telstra have taken the opposite path, submitting a small amount of information upfront – but that then qualifies them to provide their more detailed information later during the clarification phase, at their own choosing. All the detailed bids are commercial-in-confidence, so currently the only difference between them is that the 'expert panel' has a lot less detail to evaluate in the Telstra mini-bid than they have with the other detailed bid documents – and I expect they have many weeks of solid reading sitting in front of them. It will be up to the expert panel now to work out within themselves how much extra material they will permit Telstra to introduce in the months after Wednesday's submission deadline.
If Telstra gets its wishes for more dialogue with the government to guarantee protection from regulation and no structural separation, what would that mean for the ISP industry which will be purchasing services to resell?
PB: If Telstra gets all the concessions they have asked for then for other ISPs it would result in a continuation (at best), or a worsening of the stranglehold that Telstra has at the moment. Telstra's bid letter shows they have little regard for separation, putting more detail around their proposed retail pricing than they did for wholesale pricing, and making very explicit that their retail arm would take full advantage of the natural monopoly advantage Telstra would have on the new network to introduce bundling discounts for bundles containing fixed telephone lines and broadband services.
It was notable that the only wholesale products discussed by Telstra were broadband services, and nowhere was there any mention of wholesaling the fixed telephone line services that other service providers will need to offer to provide a competitive solution to bundles – nowhere did Telstra mention a wholesale equivalent of the retail basic telephone service pricing they highlighted. The ability of Telstra as a wholesale owner to bundle services they don’t make available to other wholesale customers could make a complete mockery of the concept of open access.
In its bid letter Telstra said it is "impossible" to build or maintain a network if structural separation is enforced, is this true?
PB: No, of course not. They might not enjoy the same levels of cross-subsidisation they currently access regarding basic network infrastructure costs and high value-add retail products, but that's an economic argument, not an argument about whether it is possible or not. In practice, all the non-Telstra service providers today that use Telstra's wholesale and re-sold services and products are proof that it is possible to have a business model that works when a company provides value-added services, which are delivered through a combination of their own equipment and other parties' networks, including Telstra's. If the wholesale arm actually had incentive to make things easy for their customers, then the business case for the separated retail arms becomes even stronger.
What do you make of Optus' Terria backed bid – realistically are they capable of building the network and achieving the outcomes set out in the tender documents?
PB: Without seeing the proposal it is impossible to tell – only the expert panel and their advisors will be able to make a judgment on this. Certainly with enough time and money Optus can leverage and access any extra resources they might need beyond their current staffing levels to build the nationwide network. The question is whether they have the experience to manage all the parallel activities that need to occur to build all the national infrastructure in the 5 year timeframe.
Can Australia sustain multiple next-generation broadband networks?
PB: We can maintain multiple networks – in the CBD areas we already have multiple fibre networks, and nationally we have several mobile phone networks. There is nothing magical about having a single network, apart from the economies of scale available. What will be interesting in future discussions is working out how the state-based bids – Tasmania and the ACT – might inter-work with whoever builds out the rest of the country.
How realistic is it that whoever wins the tender will be able to achieve 98 per cent coverage, given Australia's geographical spread? And will it be future-proof?
PB: The interesting thing about Telstra's bid is that by only looking to cover 90 per cent of the population, compared to the 98 per cent that was requested, Telstra has been able to leave open its technology selection for the remaining 10 per cent. The winner, or winners, of the project have five years in which to achieve the required network coverage. Technology developments in that 5 years can easily make some of the initial network technology choices obsolete even before the final parts of the network are finished. It may well be that the detailed planning the other teams have done to cover that very difficult tail-end of the population distribution curve – which are likely to be built nearer the end of the project than the beginning – will be redundant depending on the future development of, for example, wireless standards, equipment, and spectrum usage.