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

[Rick Jones]

I think that this is a great idea, and I don't think it has anything to do
with being commercial or otherwise.  Giving out billions of dollars in
payments to the public didn't have a financial return either.  It was an
incentive package designed to achieve non-monetary goals.  This has a
component of this too.  Forget the spin.  Part of this is about spending a
portion of public monies in order to kick start a decent fibre
infrastructure in Australia.  At some point in the future, the government of
the day will get out of it and leave it to the industry to take it forward.

 

So, if we are going to do some sums, do it with a consideration that part of
the money will never be repaid, not in the commercial sense anyway.  The
taxpayers will pay it back in the future.  Now, I doubt that this will be
sold this way, not so close to a federal election anyway.   But nonetheless
there is an element of nation-building here, doing something because someone
thinks that it is in the country's long term interests.

 

 

From: ausnog-bounces at lists.ausnog.net
[mailto:ausnog-bounces at lists.ausnog.net] On Behalf Of Matthew Moyle-Croft
Sent: Saturday, 11 April 2009 11:40 PM
To: Bevan Slattery
Cc: ausnog at ausnog.net
Subject: Re: [AusNOG] Aust Govt will build National Broadband Network, no
company will be awarded the tender.

 

So,

What do you propose as a valid alternative?

 

- FTTN is a crap idea (so crap that even Krudd and Conroy could see it).

- The current Cu CAN is starting to near end of life and is straining to
provide broadband at the speeds they want to everyone.  Even fixing this
would require something looking much like FTTN anyway (eg. nodes to fill in
black spots etc).

- It's only going to get more expensive to do (inflation etc).

 

I'm not convinced this is commercially infeasible, but it's a close call
I'll admit (and mostly hinges on take up rates).

 

But if the government wants to do something game changing then what's the
real problem in doing so?

 

Many people seem to be saying this is a bad idea and yet propose no
alternative which has any real consideration.

 

MMC

 

On 11/04/2009, at 10:56 PM, Bevan Slattery wrote:





MMC, 




HFC, Telstra PSTN are run in the telecommunication height.  

Electrical is above that.  Not sure why anything on the poles 

would stop the electricity being upgraded. 


Because pole infrastructure is designed with certain 'weight' loading
ratings and wind loading ratings.  You start adding cables to poles that
were designed for a purpose and in particular at perpendicular
directions without a counter cable (such as a road crossing) you
starting increasing the load and things can get past their designed
limits at least with a certain margin for safety.  From my discussions
with the guys here at Energex HFC cables put more stress on poles due to
their size and weight that an ordinary local distribution cable.  I have
had it known that Optus has had to upgrade quite a number of poles in
Brisbane metro to run it's HFC back in the day.  Also that
'telecommunications height you mentioned will get squeezed when there
are three and possibly four cables in that space.  I understand the
power companies will 'beat it up' quite a lot, but the day poles start
'leaning' like they do in the US; my god the Local Authorities will go
off their brain and the power companies will say I told you so.  I can
also say that FttP fibre technology has come quite a long way in terms
of fitting down existing conduits and lead-ins and this should not be
ignored.




Ha!  The energy providers should have had the sense to run 

their own last-mile, but failed big time here in Oz.


I disagree entirely.  I think the smart ones did the business case and
it didn't stack up.  There was never a business case for it.  Heard of
Transact?  What a disaster.  I remember the Commonwealth Bank had
something like $50M in debt to the vehicle and was trying to figure how
to get out.  Why?  Because the debt was worth more than the company.
That could very well be the case with the new FttP/NBN.  Anyway, I'll
leave that to others to discuss.

I mean even when they had the duct and the rights of way (substations
etc.) the power companies still sucked at it.  UeComm, Powertel, and
ETSA all succeeded in blowing vast amounts of money against the
proverbial wall.  UeComm was literally within months if not weeks of
hitting the wall and racked up a $40M+ loss 2 months after it said it
would have a $20M+ profit.  I even think there was an ASIC investigation
to boot.  It wasn't until new management came in (and I think the
interest free loan) that it was able to turn-around.  Powertel was a
basket case having deployed $250k Cisco equipment in every basement that
someone bought an E1.  It was only when they became a real telco got new
management (and major shareholders), DTU sold out, went to a direct
fibre/ethernet in the local and started migrating products to be
delivered by copper they actually got somewhere.  ETSA really didn't
make any money outside it's selling services to it's owners despite
having access to the fibre too.  Aurora FttP? Western Power FttP?  They
all showed that as carriers these companies were good at distributing
electricity.
            



            It's going to be a hard road.  I sincerely hope that at 

the very least a

            new national backhaul infrastructure is created by amalgamating

            infrastructure from existing providers and new 

construction.  To me that

            would have made this whole mess worthwhile.

             

 

My understanding is that this is the plan.   Let's see what 

happens if Telstra decide to tip in some of their 

infrastructure - that might drive the cost down.


Doubt that one too.  On the back of my envelope numbers that might save
you a few billion here and there, but the cost is without question in
the last mile access to the premises.  If the inverse were true then
Telstra would not have paid Foxtel a lazy billion or so back in the late
90's to stop the HFC rollout to the juicy and easier inner metro areas
of our capital cities.  The agreement even included not forcing Telstra
to connect any home even when it had a cable going past the front door!
Maybe they'd change their mind.

There is one other point about that statement, and those by many others
which I find intriguing.  It is also important to note that if someone
puts in asset for equity, then they will be expecting a return on that
equity.  There is a cost for this.  By way of example.  If the
Government puts in $22B and the remaining $22B comes from a combination
of assets and debt (no-cash) then the projects total cost ISN'T $22B.
It still is $44B.  All those organisations who put in assets for equity
will require a return.  All those who put in debt will require a return
(and guarantee).  There may be a delta between selling off spare
capacity versus building, but the clever corporate types also know the
replacement cost and will push the valuation of their assets closer to
replacement.  In fact some may even push it to the replacement cost as
there may be a premium for the certainty of the asset being in place and
implied timing benefits. By way of example, do you think PIPE would
simply vend in assets for equity because of our civic duty and not
expect a return (even if not guaranteed, but implied?)  I was
dumbfounded when I heard an interview the other evening when on the ABC
Lateline the interviewer asked Sen Conroy "how do you get a return on
$43B".  The answer was along the lines of "it's not that much it's only
$22B we expect the rest to come in via network assets being vended in
for equity and debt".  I'm sorry, but I respectfully disagree.  The
amount you need a return on is $43B whether it be debt or shareholder
equity (government or those who have vended in assets).

Let's hope there is much, much, much more disclosure on the business
case on how to get a return on the $43B.  We were promised it last time,
but were dreadfully let down and dare I say mislead (or even worse).  My
calculator says "No straight out commercial business case", but I am
hopeful that there is another game afoot here and that new backhaul
network can at least come into life.  I am also aware that there are
broader social implications/benefits which could also be included in the
business case for justification.  At this point I am just saying I
cannot see anyway you can build this today and expect a purely
commercial return.  No way possible.

Cheers

[b]

 

-- 
Matthew Moyle-Croft 

Networks, Internode/Agile
Level 5, 162 Grenfell Street, Adelaide, SA 5000 Australia
Email: mmc at internode.com.au    Web: http://www.on.net <http://www.on.net/> 
Direct: +61-8-8228-2909                        Mobile: +61-419-900-366
Reception: +61-8-8228-2999        Fax: +61-8-8235-6909

 

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