NBN: Upgrade Projects: Piecemeal, Scheduled or What?

The NBN Co "Big Bang" rollout is designed to take advantage of two effects:

Economies of Scale and Riding the Learning Curve.

Together they can reduce costs 2-5 times, even for Australia's "small" population, over piecemeal or "on-demand" approaches. You avoid it only if you don't value commercially viable outcomes.

• Economies of Scale: it's cheaper to contract for all your cable/hardware/fittings in one go. Suppliers can schedule long-runs on dedicated plant with no uncertainty about sales. Suppliers can trim margins and maximise the efficiency of their production line for selected products.

• Riding the Learning Curve: The efficiency of structured manufacturing process was first noted by Adam Smith with the making of pins (10-50 times more productive labour) and was exploited in large-scale first by Henry Ford and his Model-T. In 1936, a study in aircraft manufacture quantified the relationship: double production volume decreased labour by 10-15%. Organisations and individuals learn, adapt and improve their performance. They get better at what they do with repetition, often discovering unnecessary steps (and deleting them) or adding quality or performance improving steps.

and as a side-effect, it also optimises another area:

• Overhead & co-ordination/clash costs minimisation: Teams, Contractors and specialist equipment can be dedicated to specific tasks for extended periods. "Truck roll" and mobilisation costs are minimised and spread across the maximum number of premises. Specialist crews are always available when needed and limiting resources can be best utilised. Spare Parts, Test Gear and essential tools are always to hand and available. Project Control and Cost Minimisation techniques, like Critical Path Analysis and Gantt Charts, can be used very effectively.

NBN Co is running both a scheduled and whole-network roll-out.

It is the most Cost Effective and Efficient project organisation possible, but does incur the highest capital intensity: you spend much less, but spend it more quickly.

The Coalition FTTN-NBN node-to-premises fibre upgrade project can adopt one of three organisations:

• Scheduled whole-network roll-out. This is least cost, least time, but comes with the highest capital intensity.
• Scheduled common-segment roll-out with On-Demand premises connection.
• On-Demand common-segment roll-out and premises connection.

Funding models can be varied between "Entirely Telco" to "Full Cost Recovery" from the Customer.

"Full Cost Recovery" is likely for "On-Demand".