Saturday, 15 June 2013

NBN:Policy Questions for the Coalition

With the 43rd Parliament about to enter its final sitting weeks, it seemed a good time to recap NBN Policy Questions.

At first blush, the Coalition NBN Policy cannot meet its claimed savings and Whole-of-Project costs must be higher than the current direct Fibre plan. There are many important questions unanswered.
  • Will the Coalition be offering, for VDSL2/FTTN customers, a pure-digital Network Termination Device (NTD) with 4 UNI-D ports identical to the other two transmission networks: GPON/direct Fibre and Fixed Wireless? (Current Satellite NTD's have a single LAN/UNI-D port)
    • Will VDSL2 NTD bulk installs be offered to customers in the roll-out phase, the same as default Fibre PCD installs, or made available, like Fibre, by appointment?
    • This is an important detail:
      • Will identical offers be made to customers across the four transmission networks?
  • Will the Coalition be providing an independent, expert review of its NBN Policy costings well before the election?
    • The claimed $17 billion savings seem impossible when the advertised difference is, at best, a savings of $450 each for 9M premises, or a total of $4 billion.
  • The presumed single access-charge and lower average line access rates of VDSL2 FTTN, plus absence of high-end usage, must translate to significantly lower revenues for NBN Co, both in Access Charges (AVC's) and download volume (CVC's).
    • Any review of the Coalition NBN Policy must include a forecast of this foregone revenue.
    • In operation, NBN Co will be able to track this accurately, from the 25% of fixed-lines on direct-Fibre. Will the Coalition commit to regular release of these broken-out figures?
    • Will the Coalition publish estimates of lost revenue from "Cherry Picking", foregone revenue from the HFC area not being overbuilt?
  • Whilst the Coalition ran four stress-tests and one worst-case scenario against the 2012 NBN Co Corporate Plan, the following studies are needed for an Apples-and-Apples comparison of the two Plans:
    • Reworking NBN Co stress-tests with current, valid figures, not wildly inflated as current.
    • Running the same, or equivalent, stress-tests on the Coalition NBN Plan.
    • Running two high-growth scenarios on both the current NB Co and Coalition NBN Plans, with:
      • 50% CAGR (Compound Annual Growth Rate) in download volume demand, seen in the ABS figures.
      • 66% CAGR forecast in the CISCO VNI report for Australia.
  • The VDSL2/FTTN proposal includes significant additional costs transferred onto householders. Any review of the Coalition NBN Policy needs to include an estimated Whole-of-Project cost, NBN Co costs + householder costs to first data connection, to allow an Apples-and-Apples comparison:
    • Adam Internet, the only VDSL2 service in Australia, charges over $150 for VDSL2 modems. Because they offer a pure-digital VDSL2 service, no line-filters or splitters are needed and customers can install the modem themselves, unlike the hybrid telephone-digital service the Coalition will offer.
    • Telstra charges $300 or more for service connections that require a Technician visit, necessary if a Central Splitter is required.
      • If both are needed, it easily cancels all anticipated savings.
  • NBN Co may well mandate Central Splitters for the VDSL2/FTTN to meet service quality and network reliability targets.
    • If so, who will pay for the certified technicians to install the Central Splitters on the Telco side of the customer boundary, the customer or NBN Co?
    • If customers later have the option of upgrading to a pure-digital VDSL2 NTD, then:
      • Will they get a rebate for the install of the Central Splitter, if they've paid?
      • If Splitters are required to be removed, who will bear that extra cost?
  • The Coalition readily admits that a VDSL2 FTTN is only a temporary network. It has never said how long an FTTN will need to operate to recover its costs, nor how long their plan estimates it will operate before being replaced. Mr Turnbull has used example times of 10 and 15 years when explaining Net Present Value, but never revealed a figure. This raises two critical issues:
    • How long does the Coalition NBN Plan assume before the VDSL2 FTTN is replaced?
    • Who will pay for the replacement of the FTTN?
      • Will it be another Government-funded infrastructure project, which the Coalition have already stated is anathema to them?
      • Will it be funded by NBN Co out of revenue or by raising Debt?
      • Will this be the trigger to privatise NBN Co?
  • The Coalition NBN Policy sets a hard upper-limit on funding to NBN Co of $30 billion. What happens when, not if, NBN Co exceeds this figure because the Coalition costings are so wrong?
    • Will a Coalition Government force them to stop their roll-out work or declare them bankrupt?
    • Will the Coalition allow them to raise Debt, as Bonds, on the open market?
    • Will the Coalition privatise NBN Co at this point, offering shares first to their major creditors, Telstra and Optus?
  • Under any of these FTTN termination scenarios, what happens to subscribers and what they'll be charged:
    • For the forced replacement connection.
    • For access and download volumes, AVC & CVC wholesale charges to retailers.

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