Malcolm Turnbull (Wentworth, Liberal Party, Shadow Minister for Communications and Broadband) Share this | Hansard source

The honourable member for Lyne has been chairman of the committee on the NBN, which I have been a member of over the term of this parliament, and I am disappointed by his remarks. After all this time and after familiarising himself with the NBN, he still shows himself to be so terribly confused about the nature of internet bandwidth and the requirements of a network. He quotes from a recent report published by Cisco called The zettabyte era. The zettabyte is, as I recall, 10 to the power of 21. It comes before a yottabyte, which is not to be confused with the Nepalese concept of a yeti bite. He refers to this report which talks about a massive increase in data being transmitted over the internet. Of course that is well understood. There is nothing new in that and it is described extensively in our own policy. This is being driven, as the Cisco paper discloses, by a massive increase in video entertainment or video traffic being carried over the internet. This is the growth of IP TV and more and more movies and television shows being carried over the internet, to the point where one-third of all of the bandwidth in the United States is being consumed by one company, Netflix, which is a movie and television entertainment download business. That is well understood.

But the issue about the NBN is not whether there will be more bandwidth required in the network and not whether there will need to be more fibre capacity in the big cables in the core of the internet linking exchanges and linking countries and so forth. It is: what is the nature of the connection from the local exchange to the customer's premises—what is the size of the pipe in that last mile to the customer's premises? What the honourable member is confusing is an exponential growth in bandwidth across the network and assuming that that means you need to have a similar growth in the size of the pipe to the customer's home. If I can give honourable members an example that might make this clearer, it is a bit like this. If everybody in Sydney, for example, were to decide to have three one-hour-long showers every day, it would mean that Sydney Water would have to provide a lot more water. It may have to build another dam or another desalination plant. But it would not mean that every house had to have a bigger water pipe going into that house. You see, we will consume much more data through our internet connection but the size of the pipe—which is described misleadingly as talking about speed when it is really a question of capacity—whether it is 10 megabits per second or 25 or 30 or 40 or 100, does not necessarily need to grow. For example, if you want to watch a high-definition video, which is the biggest file that is typically transmitted over the internet to residential users, you need, we have assumed in our policy, about six megabits per second. Netflix know a bit more about this than any of us here, and their own publications say you need four megabits per second. So if you had, for example, a 25 megabit per second connection to the internet you could stream simultaneously four, or more than four—five or six—high-definition video streams. And so you could, as a household, be watching much more video, consuming much more data—hundreds and hundreds of gigabytes a month—but nonetheless not require that larger pipe. The issue, therefore, is: what is the utility of provisioning the larger pipe? We all understand that the utility of increased bandwidth, increased size of the pipe into your house, diminishes as it grows. To go from dial-up to five megabits per second, that is a big increase in utility. You can watch videos; there are a whole bunch of things that you can do that you could not do before. To go from five to 25 is another increase in utility, because if you have got a family with three or four people in it, they can all do that simultaneously. To go from 25 to 50, that may not be so much of an increase in utility. It is certainly not twice as useful. It may be a little bit better. To go from 50 to 100—it is very, very questionable how much of an increase in utility that is. The point is that it does not progress in a linear fashion.

The problem, however, is that because in order to reliably give everybody 100 megabits per second and more you would need to take, with current technology, fibre into every premise, the cost of taking everyone to 100 or better is enormous. Just as the marginal utility of higher speed starts to flatten out and become zero, that is when the cost of provisioning it goes through the roof. If you think about it in this context, if you can give everybody in a given area very high speeds, no one less than 25 and most people with 50 or better, for an investment of $1 million and meet all of their requirements—that is fibre to the node, that is the approach that we are talking about. If it costs you $5 million to take fibre to the premise so that they can have 100 or more, but with no incremental benefit to the customers, with no applications that they can use and value with that additional speed, then what you have got is $4 million of investment, enormous trouble and expense, enormous delay, and no return on it. Inevitably, you have a higher cost of connectivity.

The fundamental problem that the honourable member overlooks is this: he says that the NBN has a seven per cent rate of return. That is the most extraordinary nonsense! I cannot believe that he could seriously say that the one thing—if we have learnt anything on the NBN joint committee, we have learnt that their financial forecasts are completely discredited. The contractors are going broke; we all know that. The project is failing. It will be lucky to make 15 per cent of its forecast build by 30 June, and we are taking their financial forecasts seriously? Come on, Deputy Speaker. The NBN Co. is a financial disgrace. It is the largest blank cheque ever written in the country's history. The government does not know how long it will take to complete, and they do not know how much it will cost. That, regrettably, is the truth.

We get back to this fundamental question of fibre to the premise. What is the additional benefit of taking fibre to the premise, and does it justify the investment? That is the key question. We could have had a very reliable, very considered, thoughtful, well-informed answer to that question if the government had lived up to its pledge in 2007 and had a cost-benefit analysis into this project. If the honourable member for Lyne had supported us consistently on this matter—

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