Starting a company in Australia, especially one in the high tech sector, is fraught with challenges that are simply not present in other regions around the world. There are numerous other factors which have limited the growth of our startup ecosystem, many of which are centred around getting new ideas funded. For many the biggest challenge comes when they want to grow their business beyond the bootstrap phase, where they look to venture capitalists to help with their expansion. Australia’s regulatory framework, coupled with our traditionally risk adverse investor network means that the large amounts of capital we do have (thanks to the superannuation scheme) are often locked away from startups. This, combined with the numerous other challenges Australian startups face, have seen many great business go overseas in their pursuit of success. Today however Malcolm Turnbull has announced numerous initiatives totalling over $1 billion in new funding to kick start Australia’s startup ecosystem.
At a purely financial level the changes that are being made to investing in startups in Australia is significant, putting it on par with other investment vehicles. For starters any early stage investment in a startup company (which seems to be broadly defined as a company making less than $200K/year, with less than $1 million in expenses) attracts a 20% offset against the investor’s taxable income. That’s essentially a one off negative gearing payment, reducing the risk of the investment by up to 10% or so (for the highest marginal rate). Additionally that investment, if held for for more than 3 years, is exempt from capital gains for 10 years. This means early stage investors who happen upon the sacred unicorn aren’t going to be burdened with a large tax bill when they sell their stake. It might not sound like much for regular investors but for angels looking to invest in Australia startups the proposition just became a whole lot more tenable.
In addition to this there are several more initiatives designed to allow startups to depreciate intangible assets (like acquired patents), recoup losses and a better insolvency framework so that entrepreneurs aren’t unduly affected by failed businesses. Whilst your’e able to depreciate intangible assets now the actual useful life of them might not be in line with the legally required framework. Under the new legislation startups can self assess the effective life of such assets, allowing them to recoup the losses more quickly.
Additionally, under previous legislation, losses like this that incurred more funding (and hence a change in ownership) would prevent the startup from offsetting those losses against future income due to the “same business test“. The new legislation changes this test to a “predominately similar business test” which means changes in ownership like that, which are somewhat common with startups, won’t see those losses negated.
Finally the reforms to the insolvency framework allow entrepreneurs to tackle the kinds of risky ideas that these companies are known for without the spectre of bankruptcy looming over them. The default bankruptcy period has been reduced to one year from three, allowing them to return to the startup community much faster. There’s also a new safe harbour provision which allows company directors (typically the founders) to avoid personal liability for an insolvent company if they appoint a restructuring advisor to help bring the company back into the black. This eliminates some of the potential risk that’s inherent in reducing the bankruptcy period (as, hopefully, less companies should go bankrupt) whilst also opening up a secondary industry to veteran entrepreneurs to help right the ship of a failing startup.
There’s also a myriad of new funding for a bunch of programs that are intended to spur on research, inspire students to pursue STEM careers and initiatives to attract and retain talent both here in Australia and overseas. All of these programs are necessary pipelines that will feed the Australian startup ecosystem with the talent it will need to grow and sustain itself long term and it’s great to see the Turnbull government recognizing this.
All told there are over 20 new initiatives that have been discussed each of which is designed to build up momentum for the Australian startup economy. Whilst I’d be remiss if I didn’t mention that a lot of the ideas were lifted from a previous proposal from Labor it’s still great to see the Liberal party championing it. Hopefully this means that many of the initiatives will pass with both party’s support and soon we’ll start to see the benefits far in excess of the projected costs. Personally I hope this spurs on our superannuation industry to start looking at startup investing seriously as there’s vast amounts of capital, only a small fraction of which would be needed to see amazing returns, just waiting to be used. No matter what happens though the future is looking incredibly bright for startups in Australia and that makes this humble writer incredibly happy.
There’s little doubt now that the Multi-Technology Mix was a viable path forward for the NBN. The tenants of faster, cheaper and sooner have all fallen by the wayside in one way or another. The speed guarantees were dropped very quickly as NBNCo (now known as just nbn™) came face to face with the reality that the copper network simply couldn’t support them. The cost of their solution has come into question numerous times and has shown to be completely incorrect. Worst still the subsequent cost blowouts are almost wholly attributed to the changes made by the MTM switch, not the original FTTP solution. Lastly with the delays that the FTTN trials have experienced along with the disruption to provisioning activities that were already under way there is no chance that we’ll have it sooner. Worse still it appears that the HFC network, the backbone upon which Turnbull built his MTM idea, isn’t up to the task of providing NBN services.
The leaked report shows that, in its current state, the Optus HFC network simply doesn’t have the capacity nor is it up to the standards required to service NBN customers. Chief among the numerous issues listed in the presentation is the fact that the Optus cable network is heavily oversubscribed and would require additional backhaul and nodes to support new customers. Among the other issues listed are pieces of equipment that are in need of replacement, the presence of ingress noise reducing user speeds and the complexity of the established HFC network’s multipathing infrastructure. All said the cost of remediating this network (or “overbuilding” it as they are saying) ranges from $150 million up to $800 million in addition to the capital already spent to acquire the network.
Some of the options presented to fix this solution are frankly comical, like the idea that nbn should engage Telstra to extend their HFC network to cover the areas currently serviced by Optus. Further options peg FTTP as the most expensive with FTTdp (fiber to the distribution point) and FTTN coming in as the cheaper alternatives. The last one is some horrendous mix of FTTdp and Telstra HFC which would just lead to confusion for consumers, what with 2 NBN offerings in the same suburb that had wildly different services and speeds available on them. Put simply Optus’ HFC network being in the state it is has no good solution other than the one that the original NBN plan had in mind.
The ubiquitous fiber approach that the original NBN sought to implement avoided all the issues that the MTM solution is now encountering for the simple fact that we can’t trust the current state of any of the networks deployed in Australia. It has been known for a long time that the copper network is aging and in dire need of replacement, unable to reliably provide the speeds that many consumers now demand. The HFC network has always been riddled with issues with nearly every metro deployment suffering from major congestion issues from the day it was implemented. Relying on both these things to deliver broadband services was doomed to fail and it’s not surprising that that’s exactly what we’ve seen ever since the MTM solution was announced.
Frankly this kind of news no longer surprises me. I had hoped that the Liberals would have just taken credit for the original idea that Labor put forward but they went one step further and trashed the whole thing. A full FTTP solution would have catapulted Australia to the forefront of the global digital economy, providing benefits far in excess of its cost. Now however we’re likely decades away from achieving that, all thanks to the short sightedness of a potential one term government. There really is little to hope for when it comes to the future of the NBN and there’s no question in my mind of who is to blame.
Filtering Australian’s Internet is something all good politicians learned to avoid long ago after the fiasco that was Labor’s Clean Feed. It quickly turned from being what seemed like an easily defensible policy (Think of the children!) to the horrendous mess that it was, something that threatened the very core of what the Internet was built on. Thus any policy that dares to tread similar ground has, for the most part, been put down long before the legislation makes it to the floor of our parliament. However it seems that, in true Liberal fashion, our current government wants to put a filter in but is flatly denying that that’s what they’re doing.
Last year Brandis and Turnbull got in cahoots with each other to start devising some reforms to Australia’s copyright system, most likely in response to some of the secret Trans-Pacific Partnership talks that have been going on. These reforms largely ignored the actual problem and instead adopted the reactionary measures that other countries have adopted, all of which have proven ineffective in curbing copyright infringement. However one of the measures, the requirement for ISPs to block links to infringing content when contacted, had a strange bit of familiarity of it.
It sounded an awful lot like an Internet filter.
When he was made aware of this comparison Turnbull was quick to distance it from the idea, calling it “complete BS”. However whilst you might not want to call it a filter (obviously for fear of being tarred with the same brush, but I’m about to do that anyway) it, unfortunately, has all the makings of Internet filter. It’ll be overseen by the courts, which likely means there’ll be some kind of central list of blocked content, which all ISPs will be required to block using whatever means they have. If you cast your mind back a few years you’ll see that this was pretty much identical to Labor’s voluntary mandatory system, the one that was dumped for “budgetary” reasons.
The time has long since passed when this was just an issue for the technical elite and freedom of speech warriors of Australia as the entire country is far more invested in its access to the Internet than it ever has been. We want it to be fast and unfettered, ideals which the current government seems hellbent on trashing in order to appease big businesses both here and overseas. Unfortunately for them it looks like they’re slow learners, unable to recognise the mistakes of their predecessors and are simply dooming themselves to repeat them. Not that this was entirely unexpected, but that doesn’t stop it all from being just as rage inducing.
Copyright law in Australia isn’t as cut and dry as many believe it to be. Whilst some of our laws are in line with what the general public thinks they are (I.E. United States based) there’s a lot of things that are more draconian, like the lack of safe harbor provisions, and others that are a lot more lax like the lack of any formal infringement notification systems. This has often been cited as one of the main reasons why piracy is so rampant in Australia although that’s really only a minor part of the equation. Still this hasn’t stopped rights holders from lobbying members of our parliament into getting the laws changed and a recently leaked discussion paper, from the offices of Senator Brandis and Minister Turnbull, showcases a rather disturbing future for Australian copyright.
The discussion paper reads as a wish list of measures that rights holders would like to see implemented that would be used to curb copyright infringement behaviour within Australia, taking inspiration from similar schemes overseas. The proposed measures will be familiar to anyone who’s been involved in the copyright debate ranging from requiring ISPs to take “reasonable action” against infringing users (something our High Court has ruled against in the past), blocking websites that facilitate infringement and the measures required to support those processes. There are some potential positive questions for discussion in there, like the expansion of safe harbor provisions, but the rest of them will only cause more headaches than they will solve.
The first discussion point around ISP’s taking “reasonable steps” towards discouraging users from engaging in copyright infringement is a blatant attempt to skirt around the high court’s previous ruling that there are no such steps that an ISP can take. Essentially it comes down to a question of liability as increasing the exposure that the ISPs have make them a better target for litigation than the thousands of individuals beneath them do. The worst thing about this is that it will most certainly lead to increased costs for consumers with no benefits for anyone but the rights holders themselves. Honestly this smacks of the “mandatory voluntary” system that Conroy proposed, and then swiftly abandoned, all those years ago. If it didn’t work then I fail to see how it could work now.
The second point revolves around blocking some sites outright which they’re proposing to do at the ISP level. Now the paper doesn’t go into details about how the site would be blocked, just that injunctions could be granted, however we know that whatever method they use will end up being ineffectual. DNS blacklisting, IP blocks and all other methods that other countries have used in the past simply do not work in an environment with users with a modicum of technical experience. Heck there are dozens of browser extensions which help with this and there’s already a healthy number of Australians completely circumventing any ISP level blocking through the use of VPNs. So realistically the discussion point about what matters should be considered in granting an injunction are moot as it won’t stop the site from being available.
The last 3 points dig into what the impacts will be (both in terms of reducing infringement and the cost to business) as well as asking if there are any alternative measures that can be taken. Honestly I feel these are the points that should be front and center rather than the previous two I mentioned as this is the real crux of the copyright issue in Australia. In terms of the discussion paper though they feel like afterthoughts, each given a brief paragraph with a one liner question following them. It really looks like the other points are, essentially, already agreed to and these are just there to placate those who feel that they need to have their voice heard.
What this discussion paper completely misses is the real issue here: the lack of content systems that are on the same level available overseas. The Australian tax is no longer just catch cry, it’s a fact, and the residents of this country have voted with their wallets. Indeed the high use of Netflix within Australia shows that we’re ready, willing and able to pay for the services should rights holders be willing to provide them but instead this paper wants to focus on the stick rather than the carrot.
If Brandis and Turnbull are serious about copyright reform in Australia they should be looking into what they can do to encourage those services to come Australia rather than attempt to dissuade people from pirating their content. History has shown that the latter can never be prevented, no matter what legislation you put in or DRM you attempt to ram down the customer’s throats. The latter has a tried and true history of being successful and I have no doubts that rights holders would see similar success in Australia should they choose to bring their services here. For now though it seems like they’re still stuck in the past, trying to protect business models that are failing in the new Internet powered economy. They’ll have to come around eventually, it’s just a question of whether they do it before someone else does.
Oh wait they already are. Time to wake the fuck up.
There’s 2 main reasons why I’ve avoided writing about the NBN for the last couple months. For the most part it’s been because there’s really been nothing of note to report and sifting through hours of senate talks to find a nugget of new information to write about isn’t really something I’m particularly enthused about doing. Secondly as someone who’s deeply interested in technology (and makes his living out of services that could make heavy use of the NBN) the current state of the project is, frankly, infuriating and I don’t think people enjoy reading about how angry I am. Still it seems that the Liberal’s MTM NBN plan has turned from a hypothetical farce into a factual one and I’m not one to pass up an opportunity to lay down criticism where criticism is due.
The slogan the Liberal’s ran with during their election campaign was “Fast. Affordable, Sooner.” promising that they’d be able to deliver at least 25Mbps to every Australian by the end of 2016 with that ramping up to 50Mbps by the end of 2019. This ended up being called the Multi-Technology Mix (MTM) NBN which would now include the HFC rather than overbuilding them and would switch to FTTN technology rather than FTTP. The issues with this plan were vast and numerous (ones I’ve covered in great detail in the past) and suffice to say the technology community in Australia didn’t buy into the ideas one bit. Indeed as time as progressed the core promises of the plan have dropped off one by one with NBNCo now proceeding with the MTM solution despite a cost-benefit analysis not being completed and the speed guarantee is now gone completely. If that wasn’t enough it’s come to my attention that even though they’ve gone ahead with the solution NBNCo hasn’t been able to connect a single customer to the FTTN solution.
It seems the Liberal’s promises simply don’t stand up to reality, fancy that.
The issues they seem to be encountering with deploying their FTTN trial are what many of the more vocal critics had been harping on for a long time, primarily the power and maintenance requirements that FTTN cabinets would require. Their Epping trial has faced several months of delays because they weren’t able to source adequate power, a problem which currently doesn’t have a timeline for a solution yet. The FTTP NBN which was using Gigabit Passive Optical Network (GPON) technology does not suffer from this kind of issue at all and this was showing in the ramp up in deployment numbers that NBNCo was seeing before it stopped its FTTP rollouts. If just the trial of the MTM solution is having this many issues then it follows that the full rollout will fare no better and that puts an axe to the Liberal’s election promises.
We’re rapidly approaching the end of this year which means that the timeline the Liberals laid out is starting to look less and less feasible. Even if the trial site gets everyone on board before the end of this year that still gives only 2 years for the rest of the infrastructure to be rolled out. The FTTP NBN wasn’t even approaching those numbers so there’s no way in hell that the MTM solution would be able to accomplish that, even with their little cheat of using the HFC networks.
So there goes the idea of us getting the NBN sooner but do any of their other promises hold true?
Well the speed guarantee went away some time ago so even the Liberals admit that their solution won’t be fast so the only thing they might be able to argue is that they can do it cheaper. Unfortunately for Turnbull his assumption that Telstra would just hand over the copper free of charge something which Telstra had no interest in doing. Indeed as part of the renegotiation of the contract with Telstra NBNCo will be paying some $150 million for access to 200,000 premises worth of copper which, if extrapolated to all of Australia, would be around $5.8 billion. This does not include the cabinets or remediating any copper that can’t handle FTTN speeds which will quickly eat into any savings on the deal. That’s not going into the ongoing costs these cabinets will incur during their lifetimes which is an order of magnitude more than what a GPON network would.
I know I’m not really treading any new ground by writing all this but the MTM NBN is beyond a joke now; a failed election promise that’s done nothing to help the Liberal’s waning credibility and will only do damage to Australia’s technology sector. Even if they do get voted out come next election it’ll be years before the damage can be undone which is a royal shame as the NBN was one of the best bits of policy to come out of the tumultuous time that was Labor’s last 2 terms in office. Maybe one day I’ll be able to look back on all my rants on this topic and laugh about it but until that day comes I’ll just be yet another angry IT sector worker, forever cursing the government that took away my fibre filled dream.
Governments often avoid long term policy goals for fear of never seeing them completed. This unfortunately means that large infrastructure projects fall by the wayside as it’s unlikely that they’ll be finished in a single term, leaving a potential political win on the table for an incoming government. The National Broadband Network then was something of an oddity, forced into being due to the lack of interest the private sector showed in building it (despite heavy government funding) it was one of the few examples of a multi-term policy that would have tangible benefits for all Australians. Like any big project it had its issues but I, and many others, still thought it was worth the investment.
If you were to believe the Liberal’s rhetoric of the past couple years however you’d likely be thinking otherwise. Whilst the initial volleys launched at the NBN were mostly focused on the fact that it was an expensive ploy by Labor to buy votes it soon metastasised into a fully fledged attack that had little rhyme or reason. It’s ultimate form was the Liberal’s FTTN NBN, a policy which many saw as a half hearted attempt to placate Liberal voters who saw the NBN as an expensive Labor policy whilst trying to retain the tech vote which they had spent so many years losing. After they got into government however many of us, myself included, thought that it was all a load of hot air and that they’d simply continue with the current NBN plan, possibly with someone else building it.
Oh how wrong we all were.
I mentioned last week that Turnbull needed to start listening to the evidence that was piling up that the FTTP NBN was the way to go, figuring that the unbiased strategic review would find in favour of it given the large body of evidence saying so. However the report was anything but saying that the current NBN plan was woefully behind schedule and would likely end up costing almost 50% more than it was currently expected to. The new NBNCo board then recommended a plan of action that looked frightfully similar to that of the Liberal’s FTTN NBN, even touting the same party lines of faster, cheaper and sooner. Needless to say I have some issues with, not least of which is the fact that it seems to be wildly out of touch with reality.
For starters I find it extremely hard to believe that NBNCo, a highly transparent company who’s financials have been available for scrutiny for years, would be unaware of a cost blow out exceeding some $28 billion. The assumption for the cost blow out seems to stem from an ill formed idea that the cost per premise will increase over time, something which is the exact opposite of reality. There also seems to be a major disconnect between the Liberal’s figures on take up rates and plan speeds which makes it appear like there’s a huge hole in the revenue that NBNCo would hope to generate. Indeed if we look at the 2013-2016 corporate plan the figures in there are drastically different to the ones the review is using, signalling that either NBNCo was lying about it (which they weren’t) or the strategic review is deliberately using misleading figures to suit an agenda.
I won’t mince words here as it’s clear that many aspects of the review have a political agenda behind them. The $28 billion blowout in the FTTP NBN seems to have been calculated to make the $11 billion increase in peak funding for the Liberal’s NBN seem a lot more palatable, even though its cost is now basically the same as the original costings for the FTTP NBN. Honestly we should have expected this when the majority of the new NBNCo board is staffed with former executives from telcos who have large investments in Hybrid Fiber Coaxial networks, something which the new NBN will be on the hook for (even though the Liberals seem to think they’ll get those for free).
In short the review is laughable, an exercise in fudging numbers to suit a political agenda that has absolutely zero groundings in reality. The end of it is that we, the Internet users of Australia, will get horrendously screwed with outdated technology that will have to be replaced eventually anyway and at a cost that will far exceed that of a pure FTTP solution. Of course it’s now clear that it was never Turnbull’s intention to do a fair and honest review and was only interested in being given evidence to support his skewed view of technology.