Wednesday, 22 April 2009

Costs of NBN - National Broadband Network, Fibre-to-the-Home

Connecting Australia with broadband/fibre systems is closer to implementing Cable TV than a new Phone network. The $43B estimate is 3-5 times too high based on Cable TV rollouts.

That difference completely changes the economics of the project.

The $43B NBN estimate is for 90% houses connected, or ~$5,500 per house passed.

Stewart Fist estimated in an article, 'Pipe Dreams', in 1996, that it would cost $10Bn to roll-out cable TV to 66% of houses. That's not the 90% of the NBN, but indicates a factor of three difference in price.

Queensland Government in Project Vista ($550M) was looking at around $3,000/house, as was ConnectSEQ ($300M for '3 million people' - for perhaps 1M houses)

The Victorian Governments "Project Aurora" was estimating $1500/lot in a new subdivision, confirming the QLD ~$3000/house.

The Bis Shrapnel report to the ACCC in 2001 on "Telecommunications Infrastructure in Australia" cites:
  • TransActs' costs for fibre (phone & TV) and DSL services to 100,000 homes in Canberra as $80M - under $1,000 per house passed.
  • Optus HFC cable rollout (95-97) at $3,000M for 2.25M houses passed, and
  • Telstra's cable (94-97) $4,000M for 2.5M houses passed (underground cabling)
Circa 1995, costs were under $2,000/house for either aerial (Optus) or underground (Telstra).

In the Telstra/Optus roll-out, there's an 80% duplication factor. Optus, who started second, used a duplication factor of 10-15% in their Business Case. The inference I draw is they did not cause the massive, irrational and uneconomic duplication.

Elsewhere, a government report notes that years later Telstra wrote-down its cable network by ~$960M and Optus by $1.4B. There was also considerable litigation by Optus is gaining access to Foxtel content on its network. (Telstra had originally gained an exclusive distribution agreement.)

Moore's Law, mass manufacture and advances in lasers & optical fibre/jointing/laying since 1995 should've brought down the equipment & install costs 2-5 times in real terms.
Widespread use & availability of horizontal boring should've decreased underground laying costs by a large margin. In 1994, it was considered a novel technique in Australia.

Neighbourhood Cable offers cable TV and 50Mbps in Mildura, Ballarat and Geelong. One article claims it cost $65M for 32,000 homes in Ballarat: $2,000/house.

Wikipedia lists a number of existing fibre-to-the-home deployments in Australia.

The economics have to work if there are already companies providing FTTH services.

Historical costs of large scale cable rollouts are seriously at odds (by factor of 3-4) with the estimated $43Bn.

Something is wrong, but nobody is saying why the NBN estimates are so high.
What is being bought for the additional $25-$30B apparent overspend??

Canberra Region initiatives.

Around 2000, Adrian Blake ran an ISP in Cooma (2,600 houses, 300 businesses). He paid AGL to include 80km of plastic pipe in the trenches when gas was laid. (Fibre was to be later pulled in.) Promised funding failed to materialise when the 'dot boom' turned into the 'dot bust' and the ISP went into liquidation. The empty pipe asset was finally purchased by Telstra but not used to deliver domestic services.

TransACT rolled out a Fibre-to-the-node cable TV, broadband and telephone network over the aerial Electricity poles owned by its parent company, ACTEW (later merged with AGL). The key point of difference was 50Mbps VDSL over the short copper tails to support streaming TV and broadband.
In 1998, TransACT started a trial in the suburb of Aranda and was to fully deploy its network around 2000. It too was caught up by funding problems related to the 'dot bust'. It seems the rollout stopped in 2003.
Robin Eckermann was the original TransACT Chief Architect

In 1995, Telstra announced it would spend $20-30M laying 'fibre-to-the-kerb' in the new town of Gungahlin. Anthony Goonan, General Manager for Strategic Marketing for Telstra in Canberra, was interviewed by the ABC about the project at the time. The initiative seems to have sunk without trace after the announcement...

The ACT Government in 2004 ran a major project upgrading its internal network to 200 sites around the Territory over a private fibre network. Later upgrades included moving its 12,000 telephones from Telstra to VoIP running on this backbone.

ICON (Intra Government Communications Network) provides point-to-point dark fibre between Australian Government agencies around Canberra. ICON started in the mid-90's by DFAT (Foreign Affairs and Trade) and Defence for links between their systems. Management has moved from DFAT to Dept. Finance and Administration.

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