[AusNOG] Aust Govt will build National Broadband Network, no company will be awarded the tender.

Fri Apr 10 14:40:00 EST 2009

Last night I saw reference to 70% of the network being on power poles and only 30% underground. emm  I hope they don't get bush fires, cyclones, cars running into poles, garbage trucks pulling the cables down etc etc etc.  Copper cable is easy to locate and make temporary repairs quickly, not to mention copper is a lot tougher than fibre.  I fellow can locate and make temp repairs to copper cable, fibre splices need to be prepaired and protected making temporary repairs that would take 15 minutes on copper take 4 or 5 hours and more than 1 person on fibre.  If the $43Bn cost estimate is based on 70% aerial deployment then it may well blow out to $100BN + if it were to all be put underground.

I really don't think Conroy has had very good advise.  It would be lovely after a storm taking OTDRs and fusion splicers out to locate and repair faults or having to rebuild networks after bush fires.  The more I look at this the worse the decision appears.  Dont get me wrong, I think fibre to the home is the right way to go, but from what I have seen this is not based on either a good business case or good engineering design, let alone demonstrated need for it.  It looks more like a way to get even with Telstra, however I suspect if it is built it will have other collateral damage.  ie the networks that have been built by others such as NextGEN, Pipe, UEcomm, Opticom etc etc.  In the meantime it will discourage investment.

The question regarding Telstra.  I suspect they will be looking very seriously at expanding their network to either do VDSL or FTTH in strategic areas.  Startegic areas are those that have existing high value demand for such services.  Telstra already has that information.  Others will need to get it via estimation etc.  They have 95% of the network in place including duct.  Even if they are forced to divest of their HFC cable network, their new FTTH network will enable them to retain those customers on their HFC cable network on a lower cost of ownership network.  Also having the ability to to deliver sooner will also allow them to charge more in the short term which will allow them to recover some of the deployment costs more quickly.  NextG all over again

There is also the issue of the FTTH network only going to populations of 1000 or more.  The government plan is attempting to cherry pick the profitable areas.  This means that of the 32% of the population that don't currently have speeds,  over a third will now be forever destined to receive either satellite or wireless.  I would suggest more satellite than wireless.

The biggest issue with the NBN decision is that I suspect there will be little if any investment going forward, which will only do 2 things.  Either or allow Telstra to build out its network and cement its position and or leave consumers with little or no other alternatives going forward.  This decision to build the NBN mk2  will only benefit those telcos that were comfortable reselling services to customers.  Eventually because the business case is non existent and there will be cost over runs, consumers will pay more.  Governments are not good at building to a budget. 

Then there is the issue as to how much demand and how many applications currently exist to create the need for 100MB, but we won't go there, other than to say that building a 100 MB network to do what a 1MB network will do is like driving a 10 ton truck to do the grocery shopping.  Another more accurate analogy would be that you can only go shopping in a 2009 Holden Statesman.  Not everyone has the need or the ability to pay for a statesman, the same applies to FTTH.  Currently the speeds are deployed as the need arises and the  1 to 5% early adopters pay a premium, what this network will do is make the 95+% pay a premium for something they don't need or want to pay for, when the reality sinks in I guess the public support behind the project will decline.

My analysis would be that if Rudd is as keen as he is to build FTTH then he needs to buy/ re nationalise Telstra and build out the Telstra network and separate it etc.  That would be a cheaper way to do it.  The current NBN mk2 is simply dumb. The NBN process of trying to solve a solution for 32% of the country was flawed from the start because it excluded all the smaller telcos from submitting solutions.  It also looks like it is a result of not having advisors with Telco network install and design expertise and EXPERIENCE.  To many people reading to many books advising governments mixed with competitive telcos with self interest trying to get even with Telstra.  A more sensible way would have been to change the regulations to encourage sharing and network investment while at the same time allowing investors to obtain a return on investment.  If the regulations were set up as such and the government got out of the road and let the industry do what is financially viable with the certainty that comes with the need to make such investments then the market would provide the solutions.  In other areas the governement would need to provide incentives to invest, probably with an open access requirements.  The network would then develop as the demand develops.  Might I also add that not all government assistance needs to be in cash form.  Governments could also use their business as a catalyst to encourage investment etc.  This would result in a better outcome for taxpayers who ultimately pay for all of this.  

Regards

Tim

  ----- Original Message ----- 
  From: Glenn Powell 
  To: Tony 
  Cc: ausnog at ausnog.net ; lists 
  Sent: Friday, April 10, 2009 9:48 AM
  Subject: Re: [AusNOG] ALERT: Aust Govt will build National Broadband Network, no company will be awarded the tender.

  Id like to be a fly on the wall at Telstra right about now.....

  1. Do they sit back and hope they pick up a sizeable chunk of equity in the new company and sizeable part of the design and build (even though we all know the current CEO really does not like wholesaling).
  2. Outside of their cable network, do they speed up the deployment of road side cabinets and start to deploy VDSL2 or Fibre.
  3. Drop their retail prices by 50% sign up customers to 36month plans and attempt to make the economics look very bad for the NBN.

  The appointment of the next Telstra CEO became very interesting as of Tuesday....

  -----Original Message-----
  From: Tony <td_miles at yahoo.com>
  To: ausnog at ausnog.net, lists <technical at halenet.com.au>
  Subject: Re: [AusNOG] ALERT: Aust Govt will build National Broadband Network, no company will be awarded the tender.
  Date: Tue, 7 Apr 2009 14:20:58 -0700 (PDT)

It all depends whether you want to be optimistic or pessimistic about it.

Uptake is an issue, but on the subject of price I don't think the final figures you've quoted are unreasonable ($80-$100 per month).

If you look at Internode's current FTTH offering as an example:
http://www.internode.on.net/pdf/products/home-fibre-pricelist.pdf

The base plan (25/1Mbps, with 5GB quota) is $50pm. I believe this includes NodePhone (SIP phone service), but if you want a traditional PSTN interface, that is an extra $25pm. That's a total of $75 per month.

If you want to really start playing with figures, you can factor in inflation. If the debt is taken out in todays money, but repaid in the future it works to your advantage. $75 today at 3% inflation is $95 in 8 years time when it's finished. If you extrapolate that to your 40 year payoff period (48 years from now, allowing 8 years to build), then it becomes $310 per month. As long as you pay the interest only on the debt, the debt doesn't increase.

regards,
Tony.

(If I've got any of my figures wrong, feel free to correct me, it is early)

--- On Tue, 7/4/09, lists <technical at halenet.com.au> wrote:

> From: lists <technical at halenet.com.au>
> Subject: Re: [AusNOG] ALERT: Aust Govt will build National Broadband Network, no company will be awarded the tender.
> To: ausnog at ausnog.net
> Date: Tuesday, 7 April, 2009, 8:33 PM
> Hi All,
> 
> I don't like to be a wet blanket however personally I don't
> see how this can 
> be based on a viable business model.
> 
> $43, 000 million is $2000 per Australian  ouch. 
> It would be to depressing 
> to dived the number by the number of tax payers
> 
> using rounded figures there are about 10 million homes
> =  4300 per home investment
> assuming ever house 1. uses the internet and 2. takes up
> the service and 3. 
> a 40 year payback period with a  7.5% return (very
> long given the 
> electronics will have a lifespan of 10 or so years) then
> the business will 
> need to charge at least $28.30 ex to pay for the
> investment. plus add 
> running costs margin etc etc.  So I guess there will
> not be any change out 
> of $40.
> 
> The above is so totally unrealistic
> It is more likely the internet penetration is around 50% of
> which x% will 
> want a fixed connection.  So best case is the monthly
> fee will need to be 
> twice the $28.30 at least = 56.50 +
> GST.   How many customers want to pay 
> $80 to $100 per month for broadband? If there is not a
> large take up the 
> figures simply get worse
> 
> of the 50% some will use mobile broadband
> 
> All this equalls a bad investment.   There
> should be more emphasis on 
> filling black spots were there is a need/demand than
> wasting money 
> duplicating existing infrastructure.  While some may
> believe it will bring 
> Telstra to heal I doubt it.  This could end up being a
> white elephant, 
> especially if Telstra decides to build FTTH and other
> retail operators 
> decide to build out there own networks.  Then there is
> the issue of what it 
> will do to the business models of companies that have
> deployed ADSL 2+ 
> dslams.  What a financial mess, perhaps sanity will
> prevail. Perhaps the 
> government will buy back all the Telstra shares and
> restructure it to what 
> they want.  Who knows?  This decision seems
> rushed and ill thought out
> 
> Regards
> 
> Tim
> 
> 

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