Friday, 21 June 2013

NBN: Comparing the Plans, costs under 10% different

The whole raging argument between the Coalition and Government over building an NBN is over $175 for each of us, $450 per house for 75% of fixed-lines, around 10% of the $3,700 per house total cost. This is over ten years and doesn't come directly from taxes: the investment will pay for itself, if allowed to. During the build, each house will pay 700 times more than that in tax.

The Coalition 'savings', even if real, are a fleabite. They deliver a much worse system, for savings that are illusory.

A friend phrased his confusion like this:
I think that most people, including myself, just can't conceive what an enormous amount of money that really is. Is it really a good value proposition?
It's $1,350 per premise to connect Fibre. That's a conceivable amount.
There's also another ~$150 for common equipment and links "upstream".

Another $850 goes to payoff Telstra: buying access to your house over their ducts, pipes & pits. The asbestos remediation kerfuffle is over Telstra meeting their contractual requirements.

For 12 million houses, that's a big number in aggregate. But you don't have to worry about that number.
It's like the Federal Budget, an unimaginable $350 billion!!!!
But if you break it down to $30,000 per household, it's much more reasonable and easier to relate to.

There are another $800-$1000/premise in overheads, like provisioning and billing systems. This includes a 10% contingency, interest and losses while the network is being built. With a Big Bang replacement, you need a full staff and running network if you have 10 customers or 10 million. It takes a while for revenues to build up and the operation to break-even.

For the 7% of households in difficult or remote areas where its gets expensive to run Fibre, Fixed Wireless (3G or 4G mobile) and Satellite have more like $5,000 a household spent on them.

It's a subsidy of around $1,500 per household to allow our Country Cousins to have decent broadband for the first time. For me, that's a simple and worthy action.

That's the Big Deal all the argument is over. Installing Fibre is about one third the full cost of building the NBN, around $350 a year for something no other country has and that will last us another 100 years.

The Coalition wants to destroy the value and usefulness of the NBN for the sake of $35 a year.

But its worse, the Coalition VDSL/FTTN plan forces costs directly onto householders. In the first year alone, you get to pay over $450 for a new VDSL modem/router ($160) and to have a "Central Splitter" installed ($300) by a certified cabler.  Expect to buy a new modem/router every 4-5 years.

But the kicker is: The Coalition are saving $450 just so they can throw the whole thing away in ten years and then spend at least another $1500 rolling out direct Fibre.

Who will pay for that? You and I, the schmucks who use the network.

The numbers are simple and they've never added up. At the end of 2008, this is exactly what the NBN Expert Committee said when evaluating tenders: forget FTTN, it's an expensive deadend.

Some numbers from another piece.

Perspective: How much we are talking about here?

From all the sloganeering, "Great Big Expensive" whatever, you might think that the NBN investment was a massive drain on the National Accounts.

These are the facts:
  • Currently, Australians spend over $1,000 per household per year on Telecommunications.
  • The NBN will be built over 10 years. The cost/expenditure is spread over that time.
  • The Federal Budget is around $350 billion per year.
  • There are 12 million households, or
    • $30,000 per year per household is raised by the Government
    • $300,000 per household over the life of the NBN Co project.
  • The difference between the NBN Co plan and the Coalition, the actual cost per premise of gold-plating is:
    • NBN Co per premise cost of Fibre: $1,350
    • Coalition suggested cost of Copper VDSL22: $900
      • per premise cost of "gold-plating" $450
      • or $45 per household per year over the life of the NBN Co project
  • The amount in dispute is 0.15% of the Federal Budget and under 5% of what we already pay to the phone companies and ISP's.
The difference has much less impact than that, because we're not paying for the NBN Co project out of taxes. The Government and the Coalition are both going to borrow to invest and build the NBN, and then that will be paid off, actually making the Government money.

Under $50 per household per year is a very small amount to pay to bring-forward a reliable, future-proof Fibre network, with guarantee speeds and an ability to scale up speeds eighty times, right now.

Oh, and the Coalition NBN Plan is to throw away our $900 investment, completely. Either in 10 years or 15 years, well before the technically useful lifetime expires of their VDSL2/FTTN. That plan sounds  incredibly profligate and wasteful to me.


  1. Another great post.

    Steve, this is the type of evidence that Turnbull and his sycophants don't want released. Expect a lot of heat and character assassination attempts over this.

    All this leaves Turnbull with is his tired old claims of how the NBN is being mismanaged and taking too long. He refuses to acknowledge that delays to civil works will apply to his "alternative" policy.

  2. Add in the cost of maintaining and or replacing degraded copper wire that just won't work.

    For example, my next door neighbour who runs to the same pit as me couldn't get a decent pair to get internet on (seems I got the last pair) - so now he gets internet from me, via a small length of conduited cat5 between our houses.

    And even my connection is temperamental when it rains.


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