NBN Financials: Hidden costs of a VDSL Fibre to the Node network

A long piece addressing specific differences between Copper and Fibre that have raised with me and highlighting additional costs, problems and deficiencies with a DSL/FTTN network.

Copper 

• Subscribers become responsible for supplying, maintaining and replacing their own Customer Premises Equipment, unlike the other 3 networks. There will be significant additional out-of-pocket expenses for DSL/FTTN subscribers.

• DSL/FTTN transfers extra costs to subscribers, these aren't included in the Coalition NBN Plan.
• The whole project cost, including additional costs forced on DSL subscribers that Fibre, Wireless and Satellite subscribers do not pay, is not included by the Coalition.

• No "identical service" option. under DSL/FTTN service: No standard Network Termination Device, NTD, option.
• No pure-digital service is offered like the other 3 networks
• No 4 data-port option is offered, like Fibre and Wireless.
• At retail pricing, these would cost $500-$1,000.
• Modern data networks are designed to be centrally monitored, managed and provisioned.
• All network devices are under administrative control of network owner, and only them.
• Firmware updates are remotely controlled.
• Local users have no administrative control of their local device.
• The Network Operations Centre, NOC, can remotely test, manage, monitor and control every device in the chain up from the User Premises.
• This includes remote tests of customer "local loop" for troubleshooting and diagnosis.
• This is not possible in a "Bring Your Own Device" network.

• modem costs over 10 years are high, around $500.
• $150+ to buy a modem retail, not $50 as repeatedly claimed by Coalition.
• These are domestic grade electronics, built down to a price.
• Subscribers will replace their modem every 4 years:
• over 10 years, need 3 new modems.
• some subscribers will suffer much more frequent modem failures.

• central splitter install is direct out-of-pocket expense to subscriber, around $300.
• Filters are required for all DSL services.
• All non-DSL equipment needs to have a filter fitted or else it will short out the high-frequency DSL signal.
• DIY in-line filters on every device/phone-point are usual today, but may not be considered by NBN Co as desirable.
• Central Splitters are the most desirable solution for a large-scale network provider. They can't be accidentally removed or bypassed and just one device makes the network safe for DSL.
• Each DSL standard operates at different frequencies. For best performance, a specific filter is required. While your ADSL1 or ADSL2 filters may allow a signal, they aren't designed for VDSL2 and cannot be optimal.
• ADSL1 worked on 1.1 Mhz
• ADSL2 on 2.2 MHz
• VDSL2 works on 17Mhz or 30Mhz.
• based on Telstra technician charges, will cost $300-$400 to install a Central Splitter on the Telco line before your first phone point, the network boundary.

• fibre can be automatically tested remotely (see standard NTD above)
• The NTD's for the Fibre/Wireless/Satellite are fully remotely managed and integrated into the NBN Co Network Operations and Provisioning systems.
• DIY VDSL2 modems will not be.

• Fibre more reliable than copper.
• newer technology
• not yet near theoretical or practical limits.
• Current production volume speeds of 100Gbps times 32 with DWDM (multi-colour)
• "born digital" not a hack.
• newer network, fewer age related faults
• no corrosion and insulation break-down problems.
• Fibre does have own problems. Glass is fragile and must be properly installed.

• no lightning and current surge problems from line. Electricity supply needs suppressors on all networks.

• copper faults can be intermittent because of high resistance joints and "copper oxide diodes" that persist without "whetting current" from 50V DC phone.

• the maintenance cost saving would pay for the NBN after floods rain.
•  lost sales due to more cash needed to maintain the copper.

• Nodes batteries power supply: regular replacement & disposal of lead.
• With 68,000 nodes, replacing & recycling their 8*6V batteries will be a large job with a lot of toxic (lead) and corrosive (sulphuric acid) waste to deal with.
• OH&S issues, not unlike Fibro-Asbestos pits.

Services & Features

• 4 data services per NTD:
• Work network, boarder, flatmates or adult kids pay own way.
• Households can receive multicast and On-demand TV over a specific connection.
• Higher speeds at lower cost for multicast.
• Much more secure network, isolated and controlled network for TV's & PVR's means better services, less hacking.
• Detailed data on household and per-device watching patterns available to 

• get exactly what you pay for, speed wise
• User can choose a speed that suits them.
• If the Fibre works at all, every connection is guaranteed to have full range of advertised speeds.

• high end subscribers subsidise low-end subscribers, massively.
• Physically, all Fibre NBN services are identical, but unlike VDSL/FTTN, the line access rate can be selected by the user.
• People who choose a lower line 'speed' pay less, even though it costs NBN Co exactly the same to run the service.
• Higher access rates directly subsidise entry-level users.
• Subsidies are more than just line speed, data volume as well.
• Download charges will halve every 3 years under the current Plan. More likely much faster.

Economics and Productivity Growth

• The 5-tier charging scheme for customer services, based on speed, when all services are physically identical and cost NBN Co identically to install, service and manage.
• This multiple charges for same service, reduces "Consumer Surplus" and increases the profits of the producer, NBN Co. This single capability massively improves profitability and economic sustainability.
• This is a massive financial effect that is not available with VDSL/FTTN solution.

• The Coalition admits their DSL/FTTN network is temporary, they are building it to throw away.
• What's the Network lifetime? 10 and 15 years have been alluded to.
• How much will be saved by deferring the build? very little: at most $150 in today's terms.
• 90-95% of Fibre network build costs are related to Labour, Parts and Equipment.
• Only 5-10% of Fibre network build costs, can reduce in price.
• Fibre cable in bulk is already cheap: $2/m or $25/premise.
• Who will pay for the upgrade in 10-15 years?
• Unknown and unspecified.
• How will it be funded?
• Unknown and unspecified.
• Will the DSL/FTTN network have paid for itself in 10-15 years?
• The Copper network and in-field active electronics have much higher maintenance and replacement/upgrade costs than Fibre.
• As an inferior service, DSL/FTTN can only be charged at a single, low-rate.
• Their is no growth path for DSL/FTTN after installation. Every user will be locked-in no matter how their needs change.
• With low revenues and high costs and no upgrades possible, the DSL/FTTN network is much less profitable than Fibre.
• To even pay for itself, let alone make a return on investment over 10-15 years is unlikely.

• Fibre will guarantee the same link speeds anywhere there is a connection.
• VDSL2 can't make any link speed guarantees.

• Fibre has 80-times upload speed compared to VDSL2. [1000/400 vs 25/5]

• Fibre has an 80-fold download speed range offered now(12Mbps to 1000Mbps], and able to be increased many-fold with current, production hardware.
• VDSL2 may reach 100Mbps with vectoring to a small proportion of subscribers. Nobody is talking of going to higher speeds.

• country people are being subsidised by those in the city.
• The biggest winners for full direct Fibre are country people.
• They get access to a cheap, affordable technology that eliminates geographical barriers for many applications. 
• Equality of access and Universal availability are cornerstones of the economic and social benefits of the NBN.

• the NBN project is NOT funded from Taxes in the budget.
• NBN Co is an investment that will pay for itself, given time.
• The government is borrowing money at 3%.
• The real cost to taxpayers is the interest payments, up until NBN Co starts to make a profit.

• Massive opportunity cost of not deploying Fibre now, when we can afford it.
• Australia will eventually need a full direct Fibre Telecomms infrastructure.
• Right now, we can go there and start to accrue all the economic benefits.
• The economic benefits of Fast Broadband build over time, due to the nature of Metcalfe's Law and the Network Effect.
• Start earlier, see results compound faster.

• lead the world now.
• As the Coalition is very quick to point out, "Nobody else in the world is doing this!".
• Which is exactly why Australia should be rolling out dependable, upgradeable, guaranteed fast broadband everywhere.
• Countries have just two economic factors to make them competitive:
• exchange-rate: this is beyond our control with a floating dollar. We don't have the market clout to fix our rate artificially low like China.
• Productivity: Computers plus Broadband are the single most powerful tool to increase Labour and Multi-Factor Productivity.

Voice, VoIP and costs

• VoIP allows ordinary residential users lowest charges possible and all the features business PABX users have had available.
• video calling finally becomes cheap and ubiquitous, even if not via the same phone number.
• HiDef video calls enable 
• high-fidelity voice calls, in stereo or more channels, are possible right now over RTSP (real time streaming protocol).
• This creates whole new, useful applications. Not just for hearing impaired.

• no line rental, $31.95 per month saving
• Access charges still apply, not called "line rental"
• Telcos will not make less money:
• lower DSL/FTTN revenues from multiple line speed & download volumes will require significantly higher charges to customers.
• no STD charges and no flagfall
• VoIP call costs are based in data volume: incredibly small compared to video, images and normal web traffic
• conference calls, transfers, voice mail, call-hold, etc, etc
• all calls between subscribers on VoIP plans, same provider, are FREE
• overseas calls 1.9 cents no flagfall to 80 countries
• every family member or ,flatmate can have own "phone number/account
• educational benefit -  learn to budget - kids paying their own accounts [joke]

Costs

• 1 $billion maintenance of Telstra Copper network: saving $6.94/month. Not a confirmed figure.

• "Fibre is 1/3 maintenance cost of Copper" [no source]
• 2/3 saving = $4.625/month for fibre

• Australians spend much more $1,000 per household per year on Telecommunications now.
• At under $350 per household extra for full direct Fibre, the capital investment difference is inconsequential.

Environment/Climate Change

• "power saving 2 power stations." [I don't think that this line of argument is winnable, but its been raised].
• Green Effect of FTTH/FTTB Networks, 2010. [PDF] Update 7-Jul-13
• FTTH (GPON) consumes 13% less energy compared to FTTN/VDSL scenario.
• For 1 million subscribers, operators could save ~35.5 GWh of electricity and about $3.66 million in energy cost per year with a GPON-based network vs. a FTTN/VDSL2 network.
• 35.5 GWh/yr is 4MW continuous.
• For Australia ~10M subs, 40MW.  Not "a power station".
• Good detailed analysis. Recommended.
• See also http://www.ftthcouncilap.org/
• Too complex to go there, an unwinnable argument.
• Accurately measuring the additional power needed by the DSL/FTTN network is difficult.
• Pricing that power, on top of other maintenance and install costs is hard.
• The consequential effects of additional in-home high-bandwidth devices by Fibre subscribers will drown out DSL effects.
• This is the nub of the question:
• Will the additional economic activity from sales of super-high-def TV's and content for them, enabled by direct Fibre but not DSL/FTTN, be significant?

Uncategorised.

• difference in labour, fibre versus cabinets (nodes):
• All line maintenance requires a "truck-roll" to a node, rather than "all here in the exchange building".
• The amount of additional travel time alone will double  or treble DSL/FTTN maintenance costs.
• Technicians have much worse working conditions with nodes.
• There are many more OH&S issues, working outdoors without shelter with live equipment.
• The electrical equipment in the nodes will have a much reduced life from the environmental stresses.
• For every 5-degree temperature rise, the service life of transistors is halved.

• 100,000s businesses, schools, govt departments, universities using and paying for the NBN as well.
• Residential customers are not the primary beneficiaries of the NBN speed advantages and lower volume charges.
• Other customers, just like in the current Telco networks, will contribute as much or more revenue to NBN Co.
• All these other users reduce charges for residential users by providing additional income to defray expenses.