Sunday, 28 July 2013

NBN: Cost of Turnbull's Fibre _from_ the Node Upgrade

The Turnbull Node Plan frequently asserts, as if self-evident, that it is more "cost-effective" ("cheaper") to reuse as much existing infrastructure as possible. The Turnbull Plan then allows "On-Demand" fibre upgrades and recognises that NBN Co will upgrade to full Fibre some time in the future.

There is a very high penalty incurred in "bespoke" connection of Fibre From The Node versus the efficiencies of scale from a "production line" roll-out. On-Demand is the most expensive approach possible, with the highest possible downsides. Here I estimate that it is 8-10 times more expensive per service than the mass Fibre roll-out already scheduled. The real cost advantage, per service, of copper is around $150, and nullified if "On-Demand" take-up is above 5% over the whole life of the Nodes.

Plus, because of the haphazard and random nature of "On-Demand" upgrades, a later mass rollout of Fibre must either remove or relay all the "On-Demand" cables or deal with the congestion and confusion in the pits, pipes and ducts. This is on top of removing all the nodes and transferring all services to direct Fibre.

But as a Customer, I'd like to know why I have to pay extra for what others get for free, or almost so.

Mass Rollout

NBN Co has released final fibre build costs of $1100-$1400. [in sources]

I believe this is in 4 parts:
  • upstream from local loop (fibre is laid in a continuous loop around a suburb). Transit etc.
  • loop past many premises.
  • tap + lead-in & PCD (external) install on premise
  • internal install + NTD/FWO/PSU. [85% take-up expected... Affects costs per-premise, averaged.] 
    • NTD = Network Termination Device. The white box you plug into.
    • FWO = Fibre Wall Outlet. Like a wall power outlet, but for Fibre to the NTD.
    • PSU = Power Supply Unit for the NTD. It may, if ordered, contain batteries.
    • PCD = Premises Connection Device. The white box on the outside of your house where the Fibre lead-in is terminated.
Which of those costs will be the same, which will vary?

I expect that the local loop and tap+lead-in are the big variables.

My estimate for mass-rollout would be $30-50,000/km to install loop (including trenching) and at 12.5m per premise, around $400.

Another $200 for lead-in + PCD [2 man-hours + lead-in].

Around 50% in those two parts: approx $750, possibly as low as $500.

On-Demand Install

For one-off upgrades, what pre-built infrastructure do you assume and what local challenges?
For example, congested or collapsed ducts.

Do we assume the average distance of 560m for an install. [For 800m maximum, half-area is 560m radius]

Remember we have to allow for three truck-rolls, versus two of a mass rollout.
  • site + route inspection [2-4 man-hours @ $150/hr: $500]
  • run local loop + lead in + Node Fibre card + network config. @ $50/m = $3,000 + lead-in ($300?) + Node ($150 + card ~$100) 
    • $550 min + $3,000 avg in fibre.
    • Allow 1.5 or 2.0 "fudge factor" for congestion problems...
  • internal install. [one-off, add $150 to mass-rollout figure, so ~$500]
I estimate $500 pre-install, $500 internal install, $500 node/lead-in + $3,000 +/- 50% for loop.
Or $1,500 Minimum and $5-6,000 Average, easily up to $7,500.

Comparing Mass Rollout to On-Demand

It's $500-$750 in a mass roll-out for comparable parts: fibre pass premise, run lead-in + PCD and internal install of equipment.

For a "bespoke" On-Demand install, given the ducts are not full and contractors can be found in a reasonable timeframe, the average (560m) cost could be up to $7,500, with the maximum around $10,000 and minimum $1,500.

It's justifiable to say that On-Demand Fibre upgrades will cost between 8-10 times more per service than a scheduled "production line" rollout.
They cannot cost less than 2-3 times and are unlikely to cost more than 20 times.

On NBN Co Formal Expectations: Final Network Upgrade to full Fibre

The Turnbull Node Plan directs NBN Co to make the network upgradeable to Fibre.

Does that mean NBN Co must lay the full 208,000km in the optimal GPON layout they've designed?
Or just the 160,000 km needed for nodes, with enough fibres in the uplink to convert to GPON (using a 32:1 or 64:1 multiplexing).

Do we assume worst-case install for single-service upgrades, "Fibre From The Node"?
If they haven't run the GPON loop, the ducts will become congested with many short-runs of low-count fibre to individual premises.

The per-user upgrade cost in ONLY ONE HALF of the problem.

The other half is the "final solution": full Fibre upgrade. The Coalition has always planned to throw-away its FTTN.

In "10 or 20 years", everyone has to be upgraded to Fibre CAN and the Copper CAN removed... [CAN = Customer Access Network]

For the final Fibre upgrade we have two types of customers:
  • those who've paid themselves for the Fibre upgrade, and
  • those who've stayed with copper, even 15%-25% without DSL, or maybe no Fixed Line at all.
Who will have to pay for what? Those who paid $1,500-$10,000 for an "On-Demand" service will, rightly, demand zero-cost conversion.

Will 1%, 5% or 10% of customers go for the "optional" fibre upgrade? Will they cheat and share the 4-port NTD with neighbours (Not illegal in my reading. Not a resale.) Meaning they'll displace DSL connections. A fully-converted network may look like 20% of fibre installs and zero use of copper.

Does the "Final Fibre Upgrade" provide GPON (Fibre) to every premise in the Fibre footprint, just like the current plan?

If so, at what cost?
Plus there's a real cost of removing nodes and copper local loops, and then a ~$1,000 (Coalition estimate is $1,500) payment to Telstra under the current contract, the "Definitive Agreement".

Who will bear these extra costs? In the end, it's always the customer.

Reusing the last 800m of Copper saves $450, of which at most half will be "reused", while forcing "On-Demand" connection costs up 5-10 times and transferring them onto subscribers, adding Node removal costs and extra cost/complexity to the already planned upgrade to a full FTTP network.

At best, the Coalition saves $225 per service and increases final costs. (Increase of not less than $50, possibly $500.)
An "on-demand" rate of only 10% of subscribers, over a 10-20 year life of the Nodes, makes the whole deal a financial disaster.

At $1,500 minimum, and an average of $2,500 "on-demand" upgrade fee and a modest $75/service increase in final upgrade cost (a $150 real saving for Copper):
at 5% take-up rate over the whole life of the Nodes, Copper is the more expensive choice.


Telstra 2011 Definitive Agreement:
 10% Discount Rate applied to sale of Lead-ins and Phone Service disconnection.

$1100 - $1400 final build cost per Fibre service. NBN Co, April.

Pg 6 of Coalition Background doc: $1,500
NBN Co has separately signed contracts that involve payments over forty years to Telstra with a face value exceeding $50 billion if paid in full. These include a ‘PSAA’ payment of about $1500 each time NBN Co takes over a premise previously connected to Telstra’s networks.
Pg 14 of Coalition Background doc. Implicit recognition of removal of FTTN and upgrade to FTTP
Discount Rate  8%
Capex Reused 50%

Pg 5 of Coalition Broadband Plan.
Networks should be upgraded in the most cost-effective way using the best-matched technology. This will vary from place to place. existing infrastructure almost always has a vital role to play.

Pg 10 of Coalition Broadband Plan.
Where the NBN is rolled out using FTTN, existing communications services at a given node will cut over to NBN Co control on the same date.

Pg 11 of Coalition Broadband Plan.
Fibre on demand, co-funded fibre and future fibre upgradesThe Coalition acknowledges that some users may want higher speeds than can be provided over FTTN before any evidence of such needs in the broader market. likewise, FTTP in some circumstances may be seen by other tiers of government, infrastructure operators or private investors as economically attractive or commercially attractive. finally, market needs will clearly evolve over time and eventually may require further upgrade of the network where fibre has not been extended to user premises.
Reflecting these three possibilities, the Coalition policy provides for: individuals to obtain fibre on a user- pays basis where feasible; external public or private investors to propose and co-fund FTTP rollouts if they are willing to put forward 50 per cent of the needed funding; and an explicit future upgrade path to be incorporated into all non-FTTP NBN Co fixed line construction.

Pg 12 of Coalition Broadband Plan.
Future upgrade pathWhere NBN Co extends fibre beyond an exchange but not to user premises (i.e. deploys FTTN) it will be required to plan and build in readiness for future upgrades that take fibre further into the field. all FTTN designs must be upgradeable. 

1 comment:

  1. Hi Steve,

    Just FYI there are 2 parts to NBNCo's fibre per premises costs:

    $1100-$1300- Distribution per premises. That is every from FAN to Multiport.

    $1000-$1200- Customer Connect- Premises drop and Internal Install.

    You can see that on the page below the "per premises cost"

    It is STILL significantly cheaper than on-demand on average. But just for the sake of being completely factual :)




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