Steve Baxter compares NBN fibre advocates to anti-vaxxers, suggests his issue fix
Steve Baxter compares NBN fibre advocates to anti-vaxxers, suggests his issue fix Fibre entrepreneur Steve Baxter has compared the NBN fibre vs copper debate to the anti-vaccination cause and says the real problem with NBN Co is a pricing regime which encourages highly contended use of the access network. Speaking to the Men2 podcast last... View Article
Steve Baxter compares NBN fibre advocates to anti-vaxxers, suggests his issue fix Fibre entrepreneur Steve Baxter has compared the NBN fibre vs copper debate to the anti-vaccination cause and says the real problem with NBN Co is a pricing regime which encourages highly contended use of the access network.
Speaking to the Men2 podcast last week, Baxter – who helped found Pipe Networks and is now known for his work in the start-up sector – said that any commentator who thought that more fibre investment was a solution to the NBN utilisation and price issue doesn’t know what they are talking about.
Baxter said the biggest issue with the NBN was that its high costs encouraged contention-based pricing and that this minimised the opportunity to get the maximum out of what is there already.
“If you honestly think the technology being fibre versus copper has anything to do with it, then you don’t deserve to be in the debate. Please, exit it, and go on and have an anti-vax debate somewhere,” Baxter said. “If we can assume that if we’re all Fibre, then it is going to cost more. And there’s a big point of debate over that. I’ve built lots of fibre networks. We all said it was going to cost between 70 to 100 billion dollars. I think the Libs came out and said it was going to be 90 something. I think it’s probably 70 something, but not the current 40 to 50,” Baxter added.
Baxter says that it is the high capex cost of the NBN that led to the creation of the connectivity virtual charge on access circuits. Even though the majority of NBN connections have theoretical peak speeds of 50 to 100Mbps, the CVC charge – which varies between $8 and $17.50 per Mb – is such that RSPs have incentives to economise on its purchase. This means the average connection is filtered through an average of around 1.7Mbps or so.
“If we’re going to maintain high CVC in order to repay the (NBN’s) capital, then the more we spend on that capital, the bigger the problem we’ve got. So, anything to reduce the price to build this steaming pile of s***, is actually better in the long run. Because, in a non-fault condition, if you have (less or uncontended) 50 meg to your house, if it comes in copper or comes in fibre, it’s just gonna do it.”
“The reality is, what’s actually happened, the reason NBN has gotten slow is be cause it costs so much to operate. There’s a proven price inelasticity in the market, it’s about 60 to 70 bucks a month. You can’t charge much more than that before your customers drop away. All I (as a RSP) can charge the customer is that. Then I’ve got to pay NBN, staff, and a whole bunch other things… NBN is just one part of their important expenses to their business,” Baxter said.
And so RSPs control cost by constraining CVC purchasing. “Now if that costs less, they would buy more, the size of that pipe would actually open up and everything would go faster all of a sudden. This literally is an accounting problem,” Baxter noted.
Baxter said this all could have been anticipated and ameliorated if more had been left to the market. But while the 1997 Telecommunications Act paved the way for competition, consecutive governments began regulating to protect monopoly, starting with prohibitions which disincented Optus’ cable rollout in the mid 1990s.
This is “what is wrong with government, the picking of winners,” Baxter claimed. “The geniuses who’ve been Labor union organisers their entire four year career before entering the Senate … think all of a sudden that they’re a genius on how to do this stuff. There’s a whole bunch of people – you know who you are – you’re the guys who champion this, and honestly, if I wasn’t worried about getting caught in defamation, because I reckon I’ll win the defamation case, I’d just smash them totally. That’s all you Melbourne academics, you know who you are.”
Baxter pointed out that where there had been free-flowing competition in areas such as fibre backhaul and submarine cables, private capital had filled the breach and prices had fallen dramatically. He pointed out that the cost of a megabit from Australia to the US was now a fraction of the cost of a NBN CVC megabit.
For the NBN going forward, “the minimum wholesale price at the moment is $45, right? That should be the charge. And if you did that, literally you had no speed tiers, you had no usage charges, or very light, like tens of cents, below a buck, then all of a sudden, people would use it a good deal more. And they’d find ways to use it, and they’d find ways to get productivity. You would actually then roll on all the productivity benefits. We’re not getting over that price value productivity hump at the moment.”
Although Baxter now concentrates on his start-up and television career, he still retains an involvement in the industry. Last year as Queensland chief entrepreneur he pushed successfully for the state government there to bundle up its agency fibre assets and lease them as a backhaul option to telcos.
Republished with permission from CommsDay 23rd April 2019