NBN Co cancels FTTN rollout for HFC areas

234

news NBN Co’s Strategic Review has found that it will not be possible to deliver the Coalition’s stated policy goal of delivering broadband speeds of 25Mbps to all Australians by the end of 2016 or at the projected cost, and has recommended that up to a third of Australian premises theoretically already covered by HFC cable networks effectively receive no upgrade at all under a drastically revised deployment scheme.

When the Coalition released its rival NBN policy in April, it based the policy on the core pledge that the party would deliver download speeds of between 25Mbps and 100Mbps by the end of 2016 — effectively the end of its first term in power — and 50Mbps to 100Mbps by the end of 2019, effectively the end of its second term. According to the Coalition’s statement, the 25Mbps to 100Mbps pledge applied to “all premises”, while the higher pledge by 2019 applies to “90 percent of fixed line users”.

The detailed policy document disclosed that these speeds would predominantly be delivered over the long-term with fibre to the node technology through upgrading Telstra’s existing copper network, focusing on areas where “the poorest broadband” services are currently suffered by residents and businesses. By the end of 2019, some 71 percent of premises were slated to be covered with fibre to the node infrastructure.

In some other areas — such as greenfields housing estates, and “wherever copper has to be replaced” — such as areas where Telstra’s copper has degraded — fibre to the premise technology, as under Labor’s current NBN plan, would be deployed. The Coalition estimated that some 22 percent of premises would be covered by FTTP under its plan. The remainder of premises, as under Labor’s NBN plan, would be covered by satellite and fixed wireless technologies.

However, in its landmark Strategic Review document published today, and available online in PDF format, NBN Co instead recommended a drastically reduced rollout schema, which it dubbed an “Optimised Multi-Technology Mix”).

In this mix, FTTP-style broadband would be deployed to some 24 percent of Australian premises located in metropolitan areas by the end of 2020, with another 32 percent to receive FTTN infrastructure, 12 percent to receive Fibre to the Basement or similar and a large 30 percent to receive effectively no upgrade, considering that percentage is already covered by the HFC cable networks operated by Telstra and Optus. This rollout in total would cover 93 percent of the population.

In remote areas (the remaining seven percent of Australia), 10 percent of those areas would be covered by FTTN, 53 percent by fixed wireless, and 37 percent by satellite.

nbn

In a statement, NBN Co claimed this this “new look NBN” would “resemble the architecture of similar broadband rollouts in other advanced economies, embracing a range of technologies including Fibre to the Node and HFC alongside Fibre to the Premises, fixed wireless, satellite as well as future advances in telecommunications technology.”

The company said this approach should be able to deliver access to wholesale speeds of up to 50 Mbps to 90 percent of Australia’s fixed-line footprint and wholesale speeds of up to 100 Mbps to 65 percent to 75 percent by 2019. The company also claimed it would reduce costs and bring forward revenues for the company, reducing peak funding from what NBN Co has newly estimated at $73 billion under Labor’s NBN plan to $41 billion under its revised outlook. This figure is $11.5 billion more than the Coalition promised in April.

“… the accumulated delays and state of NBN Co mean the Government’s aim of ensuring nationwide access to fast broadband by 2016 cannot be achieved,” said Communications Minister Malcolm Turnbull in a statement this morning. “The Government will work with NBN to search for ways to accelerate the rollout in its early years.”

NBN Co’s new executive chairman Ziggy Switkowski claimed in a statement that the approach that NBN Co had recommended to the Government would delivery “very fast broadband to homes more quickly and at less cost”.

“We will do this by investing taxpayers’ money appropriately on the right technologies at the right time, by translating a long term milestone into a rolling series of realistic and actionable near term plans, and by being alert to upgrades in technology and shifts in consumer needs,” wrote Switkowski.

“By 2019 more people will be able to access higher speed broadband than would have been the case had the previous plan continued on its current trajectory. What’s more, viable economically attractive upgrade paths currently being trialled internationally are capable of providing speeds well beyond 100 Mbps and can be deployed as consumer demand increases over time.”

However, it does not appear as though NBN Co’s new ‘Optimised MTM mix’ is currently possible to deliver, based on the company’s current commercial relationships and the state of Australia’s technology sector.

A large number of premises currently covered by the HFC cable footprint, which NBN Co is planning to use to provide broadband to some 30 percent of metropolitan Australian premises, cannot connect to the HFC cable networks, as they live in so-called multi-dwelling units such as apartment blocks, or work in office environments where multiple offices are in the same facility.

Neither Telstra nor Optus are currently willing to connect such facilities to HFC cable unless the whole building is connected; something most landlords are currently unwilling to pay for. This will mean residents and business users in those areas will likely remain using ADSL2+ technology, which typically only delivers speeds of up to 16Mbps. Theoretically it can go a little higher — up to 25Mbps, but few Australian users see such speeds in practice, even if they are close to their local telephone exchange. The overwhelming of Australians in the HFC cable footprint are not using the technology, due to its inflexibility and cost, and the inability of many to get it connected.

Secondly, the HFC cable networks operated by Telstra and Optus are not open to wholesale access and are not regulated for price. NBN Co cannot currently provide Internet services over such networks unless the ACCC or the Parliament forces Telstra and Optus to open their HFC networks, or to sell that infrastructure to NBN Co. Neither Communications Minister Malcolm Turnbull nor Switkowski were able to answer questions this morning on how NBN Co would gain and control access to such networks, or how it would force Telstra and Optus to offer certain prices on the networks.

The NBN Strategic Review also found significant problems with Labor’s existing NBN policy. It estimated that Labor’s all-fibre NBN will cost $73 billion and take until 2024 to complete, and increase average broadband bills by up to 80 per cent to meet the rate of return targeted by the former Government. NBN Co’s persistent inability to meet its targets reflected “a lack of deep internal experience in complex infrastructure, construction projects and project management”,” the report found.

Key decisions were taken “without appropriate commercial rigour and oversight”, it added, and NBN Co’s previous leadership clung to unachievable Corporate Plan forecasts “notwithstanding clear factual evidence to the contrary”.

However, compared with NBN Co’s new ‘Optimised MTM’-style rollout, it appears clear that Australians, and the telecommunications industry as well, would still be significantly better off under Labor’s original NBN policy, even if it was delivered four years late and at a cost around $30 billion more than originally planned.

This is because the construction of the NBN would result in all Australians achieving significantly upgraded broadband services, with 93 percent of the population having access to gigabit speeds under the planned FTTP rollout. Under NBN Co’s new plan, a significant percentage of the population would receive little to no upgrade compared to their current access. In addition, unlike FTTP and FTTN, HFC cable infrastructure is a shared medium at the local network level, meaning it will likely suffer from congestion issues as additional users are added to the network.

The extra $30 billion NBN Co now estimates Labor’s original NBN policy will cost, and the extra four years it estimates it will take to complete the project, are not viewed as statistically significant factors by most technical commentators, due to the long-term nature of the NBN project, in that it will deliver infrastructure that will provide services over the next 50-100 years.

NBN Co’s new model would likely see demand for upgrades starting from when it was slated to be completed in 2020, whereas Labor’s original NBN model would not need to see its fibre upgraded in the foreseeable future.

NBN Co’s new rollout plan is not the first time that allegations have arisen that the Coalition is planning to ignore Australia’s areas ‘covered’ by existing HFC cable areas. In February 2013, then-Communications Minister Stephen Conroy challenged then-Shadow Minister Malcolm Turnbull to confirm his rival broadband policy would not see fibre to the node technology immediately deployed to areas already covered by the HFC cable networks operated by Telstra and Optus, despite the fact that few used the ageing HFC networks.

Subsequently, Turnbull confirmed that metropolitan areas of Australia in the HFC cable footprint of Telstra and Optus would not immediately receive the Coalition’s planned fibre to the node upgrade if the Coalition won Government and did not commit to deploying FTTN infrastructure in those areas in the long-term.

Image credit: Office of Malcolm Turnbull

234 COMMENTS

    • Actually they will do something for HFC areas. Its in the review, feel free to have a look. Its small but an upgrade apparently is in there for HFC areas.

      I dont believe any of the figures contained in this review, key percentage and $ values are missing that have nothing to do with commercial in confidence and Malcolm purely did that to hide the truth.

      Also note the draft was completed 2/12 with this final release of 12/12, why 10 days difference?

      • “Also note the draft was completed 2/12 with this final release of 12/12, why 10 days difference?”

        Page 9: “The Strategic Review was undertaken by NBN Co over a period of five weeks from 28 October 2013, concluding with the submission of a draft report on 2 December 2013 and, following Board approval, this final report to the Minister for Communications and Minster for Finance on 12 December 2013.”

        • Hmmm… 2/12 – 12/12, doesn’t matter, they missed their target?

          What was the reason?

          Asbestos, Contractors or other such “excuses” we can just ignore? No, there was no reason, it’s just quite ok isn’t it?

          Perhaps their non-NBN internet speeds were so woeful they just couldn’t get the info to each other in a timely fashion.

          :/ Amazing

  1. They cut 1/3 of the houses because based on their number FttN to 100% would cost $60 Billion compared to optimised FttP $64 Billion to 100%

    • Why was FttP + HFC not priced?

      If you remove ~20-30% from FttP cost you get ~$45 billion basically the same as the mix but far superior!

    • Scratch that Scenario 4 in the Strategic Review

      FttP 63%
      FttN 5%
      HFC 32%

      COST $51 Billion Slightly more than mix
      Cash Flow positive FY22 Same year as mix but less upgrades needed and more profitable after FY22

      Why is this not the option chosen?

      It is more profitable and the asset will be worth far more

      • You are spot on.

        Why aren’t they choosing Scenario 4? for ~$10bn you cover 37% of premises with FTTP instead of FTTN.
        The upgrade cost of that 37% would surely be greater than $10bn for that many premises.

        This is the point I tried and failed to make below…

      • For the same reason FTTH to 93% isn’t chosen, even though that network would cost the least in the long run; the more important point however is that the concept of “cost” is utterly irrelevant since the network will pay for itself and actually return money to the government. No self-respecting financial analyst would worry about initial outlay for a revenue generating project backed by a sovereign government with the ability to issue as many bonds as required to ensure the project is seen to completion.

        • “For the same reason FTTH to 93% isn’t chosen, even though that network would cost the least in the long run;”

          How is that?

          “the more important point however is that the concept of “cost” is utterly irrelevant since the network will pay for itself and actually return money to the government.”

          In all scenarios the network will pay for itself, but the other scenarios need lower funding, need to raise and service less debt, have a higher IRR. and will pay for themselves decades earlier.

          “No self-respecting financial analyst would worry about initial outlay for a revenue generating project backed by a sovereign government with the ability to issue as many bonds as required to ensure the project is seen to completion.”

          The report was written by some of the most respected financial analysts and consulting firms in the world.

          • “For the same reason FTTH to 93% isn’t chosen, even though that network would cost the least in the long run;”
            How is that?

            You don’t ever need to upgrade to FTTH, it uses less electricity. Less technologies and systems required to support different endpoints. You need less contractors because you can train and keep contractors knowledgable in a single technology; instead of needing to know both technologies.

            It has higher earning potential because it can sell higher capacity services.

            It has and will have less faults because it doesn’t use the many-years-old copper network for any part of the communication.

            In the long term, it is cheaper.

          • “You don’t ever need to upgrade to FTTH, it uses less electricity. Less technologies and systems required to support different endpoints. You need less contractors because you can train and keep contractors knowledgable in a single technology; instead of needing to know both technologies.
            It has higher earning potential because it can sell higher capacity services.
            It has and will have less faults because it doesn’t use the many-years-old copper network for any part of the communication.”

            The strategic review takes each of the above into account and shows that in both the short and long term FTTH is more expensive, requires $32bn (78%) more funding, takes 4 years (80%) longer to deploy, its IRR is 114% less and that a possible future upgrade to FTTH would be cheaper than building it now. It also shows that majority user demand now and for the foreseeable future does not indicate a pressing need for the higher bandwidth. However majority user demand shows a need for 25Mbps now and 50Mbps in the foreseeable future.

          • Hi steve

            I see you endlessly bagged the previous govt. and NBNCo for changing their minds pre/post election re: network topology and missing roll out targets (and never said well done for what actually was achieved)…

            Being so, I find it odd that you “curiously” don’t appear to be using the same rules/logic in relation to the new govt.

            Are you going to ever bag the new govt./NBNCo (as you did the last mob) for missing their review target, changing topology ratios pre/post election and blowing the budget?

            And unlike the last mob who did achieve a lot if you actually want to see it, the new kids in town have achieved absolutely diddly, zilch, nothing, SFA and already failed…!

            Apparently that’s all just fine is it?

            :/ Amazing

      • “COST $51 Billion Slightly more than mix”

        $10bn additional peak funding

        “Cash Flow positive FY22 Same year as mix but less upgrades needed”

        Deferring upgrades saves money due to the time value of money.See table 4-4. Less upgrades needed isn’t a good thing.

        “It is more profitable”

        No. 12% less IRR, so less profitable

        “and the asset will be worth far more”

        assets begin depreciating immediately and technology becomes obsolete quickly. Deferring technology expenditure until necessary is better financial management because of the time value of money, because you save on depreciation, because the upgrade path is cheaper than building now and because it gives you the flexibility to respond to changes in demand, changes in competition, changes in technology and changes in the market.

        Since the government has put a ceiling of $29.5bn on government equity, the remaining will need to be funded by debt raised. This is not an easy proposition. Raising an additional $10bn is not easy.

        • So basically you are saying that FttN can make more profit once it is cash flow positive this is not based on facts.

          The second statement not based on facts is you suggest that fibre will be obsolete in the near future that is not correct fibre has been the backbone of telecommunications since the 70’s but All of a sudden it will be obsolete.

          They can change the cap if they want so not an issue really.

          I am disappointed in your comment you have moved from rubbery facts to fantasy.

          • “So basically you are saying that FttN can make more profit once it is cash flow positive this is not based on facts.”

            The fact is that Scenario 6 has an IRR that is higher than any of the other scenarios and 112% more than the FTTP Scenario 1. You said this is not based on facts. Can you explain.

            “The second statement not based on facts is you suggest that fibre will be obsolete in the near future that is not correct fibre has been the backbone of telecommunications since the 70′s but All of a sudden it will be obsolete.”

            Please point out where I suggest :that “fibre will be obsolete in the near future… All of a sudden it will be obsolete.”

            “I am disappointed in your comment you have moved from rubbery facts to fantasy.”

            Rubbery facts like…”“COST $51 Billion Slightly more than mix” when the cost is $10bn more?
            or fantasy like ““It is more profitable” when its IRR is 12% less?

          • Are you suggesting the figure I provided is incorrect?

            It is my opinion that in the scheme of things it is slightly more there is a difference between opinion and facts.

            You are arguing with my opinion not the fact

            Secondly Revenue ≠ Profit

            I suggest you look up the difference

            Based on the evidence
            scenario 4 has less revenue but more profit
            scenario 6 has more revenue but less profit

          • “Based on the evidence
            scenario 4 has less revenue but more profit
            scenario 6 has more revenue but less profit”

            Can you specify the evidence substantiating those statements?

          • 1. Revenues are inaccurate as they should give a level playing field to all options like revenues for the 10 years after completion instead they include years where the Mix option has a larger customer base giving that option more revenue.

            The most customers are added to any network in the last year as you are top speed of rollout if this was a linear rollout that would give the Mix option ~$2 billion extra in revenues and Scenario 4 ~$2 Billion less.

            But they are not linear so it is likely to far more than that.

            If we add to that the $1 billion in opex cheaper that Scenario 4 is we end up with ~$3 billion which means if the playing field is level then based solely on the figures provided Scenario 4 is more profitable.

            Please note that this is very very conservative if we base it on a polynomial -> exponential progression which is the real case it will be much more.

          • “Revenues are inaccurate as they should give a level playing field to all options”

            In options analysis IRR is used to level the playing field among various investment options with widely varying parameters. You should seriously read up on basic financial analysis and business analysis metrics 101 like NPV, IRR, ROI and Payback. After all, you’re second-guessing analysis put together and reviewed by some of the world’s most respected forensic financial analysts. Until you have a basic understanding of financial investment analysis, this discussion is moot.

          • Oh I see don’t like the answer so attack the person.

            I am done speaking with you until you actually answer a question rather than try and ridicule.

            Also 0.6% IRR difference for a network that does not need an upgrade 5 years later.

          • “Please point out where I suggest that “fibre will be obsolete in the near future… All of a sudden it will be obsolete.””

            “technology becomes obsolete quickly.” (steve, Posted 13/12/2013 at 2:09 am)

          • “technology becomes obsolete quickly.” (steve, Posted 13/12/2013 at 2:09 am)

            Nothing about fibre then? “fibre will be obsolete in the near future… All of a sudden it will be obsolete.””

          • Ah, so you agree that FTTN will be largely obsolete by the time the NBN is finished, meaning that while it’s cheaper for the initial rollout, you’ll then have to spend another $20+ billion upgrading it to FTTP within the decade after ‘completion’, thus completely negating any shorter term cost advantage? Of course, you’ll just hand-wave that away by saying “it’ll be cheaper to build FTTP in the future”…

          • “Ah, so you agree that FTTN will be largely obsolete by the time the NBN is finished”

            No. I don’t agree that FTTN will be largely obsolete by the time the NBN is finished. By definition, obsolete means no longer produced or used; out of date. The NBN Co. review finds (Section 3.1.1) that the median UK household today requires a maximum download speed of 8Mbps and that only a handful of applications generate the greatest demand for bandwidth per person viz. SDTV streaming (2Mbps), HDTV streaming (5Mbps), streamed gaming (5Mbps) and 4K TV (30Mbps). It finds that taking into account improvements in compression of 9% compounded per year, even with over-the-top video and cloud computing applications, the median max. download speed requirements in 2023 will be 19Mbps and that even four-adult households with a 4K TV and three HD TVs (the top 1% of households by bandwidth demanded) would need less than 40 Mbps for all but the most intense four minutes of each month. This is consistent with just 11% of consumers in 2012 taking up plans >50Mbps. Industry feedback to the Strategic Review was sceptical of widespread mass adoption of 4K TV in Australia.
            All this data, evidence and analysis indicates that NBN does not believe that 50-100Mbps FTTN will be obsolete by the time the NBN is finished, nor for upto a decade thereafter.

            “meaning that while it’s cheaper for the initial rollout, you’ll then have to spend another $20+ billion upgrading it to FTTP within the decade after ‘completion’, thus completely negating any shorter term cost advantage? Of course, you’ll just hand-wave that away by saying “it’ll be cheaper to build FTTP in the future”…”

            Yes. It will be cheaper to build FTTP in the future for two reasons:
            1. The time value of money, which makes deferring a possible FTTP build 15 years to 2030 is $6bn cheaper at 8% discount rate or more if the discount rate is higher.
            2. The value of options

            There seems to be much scepticism here about whether deferring an expenditure can make it cheaper. Consider this example. You want to upgrade your car this year but don’t have the money. You have two options:
            1. defer the upgrade 2 years while you save the money, or
            2. take a personal loan and buy it now.
            The second option is the more expensive because you have to service the loan for 2 years and pay interest on the loan in addition to the cost of the upgrade. So your decision will be determined by the degree of your need. If you really need to upgrade now, you will have to bear the additional cost, but if you know that you don’t really it right away and if you’re not sure that you will even need the upgrade after 2 years and if the price of the upgrade is trending downwards due to technology improvements and competition, you’d be better off deferring the upgrade.

          • Steve,

            Median speed is not a good measure of speed. Many hundreds of thousands of UK residents would have very slow ADSL still. Yet businesses would need hundreds of megabits. That would set the median substantially lower than just looking at just those who have access to speeds, but don’t use them. The average speed is what is important and that is substantially higher in the UK- up around 12Mbps if I’m not mistaken, or about 35% higher. And that includes those still on dodgy DSL and satellite too. Remove them and you’d be talking closer to 20Mbps most likely. That’s the problem with statistics- you can use it to prove anything you like.

            Secondly, 4K at 30Mbps??? There’s not a single consumer device that can do that yet. Let alone a single broadcast. Netflix is looking at 25Mbps 4K using H.265, but it will be FROM 25Mbps up. Sure, compression processing increases and bandwidth required for the same thing decreases….that explains perfectly why we’ve not increased from dial-up speeds….oh wait….Technology is not static and bandwidth growth has outstripped things like compression for decades. Why does the review choose that one report to decide what we’re likely to need in 2023, as compared to the other half dozen which range from slightly higher to about 10 times higher, depending on which you choose? Why be conservative in data needs when it’s been proven time and again that’s foolish?

            4K TV adoption will be driven by bandwidth availability. It’s no wonder the review is sceptical of it- if the network restricts bandwidth, 4K won’t grow. People were sceptical of HDTV being mainstream too….

            On your point about buying a new car or deferring it- you missed the largest unknown factor- repairs. My parents have my old car. I upgraded to a brand new one just over 3 years ago, with half loan finance, for $34K when I needed to drive 1200km a week. I worked out a few months ago, if I had kept that car, I would not only have spent $2000 more on fuel, per year (so $6k all up) but also about $5000 more on repairs compared to even the relatively high cost of servicing (European car) of my new car, thanks to a muffler replacement a radiator replacement and a new set of injectors my parents needed. That’s $11K. I’ve paid $18500 for my loan. Yep, that’s $7.5K I could’ve saved….except that doesn’t take into account the inconvenience of the several weeks overall my parents car was out of service, the twice is broke down on them and the constant stress of being worried if it would start. Not to mention it being uncomfortable and much less safe. Is that worth $7.5K? It’d be pretty close.

            See, when you work on purchase cost alone, you can easily make the brand new network look very expensive. When you add in loss of opportunity costs, productivity costs and general reliability, all of a sudden, that brand new network isn’t looking so bad….that’s what the CBA is for. No doubt Ergas will attempt to minimise those positives with “overseas precedence” as much as possible.

          • No of course you don’t think FttN will be obsolete, it’s your policy after all…… and copper isn’t out of date?

            ROFL

            Also by definition (since you again cherry-pick to suit the outcome)…

            verb: to become obsolete by replacing it with something new.

            You don’t think fibre has superseded/replaced copper making copper obsolete…? Yes just look at all that new copper being rolled out everywhere… *rolls eyes*

            Anyway back to reality instead of your tedious deflection…

            Having seen you bag the real NBN for missing targets, incorrect estimations, so called budget blowouts and then providing us with a lovely link…

            http://management.simplicable.com/management/new/5-definitions-of-project-failure

            Now use you own link and weigh it up against the governments broadband policy April 2013…

            I’d suggest using “your own gauge” the real NBNCo/FttP having done a helluva lot of ground work, is infinitely more successful than a policy which (once the “overdue” review was finally received) is a complete fuck-up beyond compare…!

            And it seems pretty much everyone (even your previous FttN mates who post here) except your self and the rest of the Coalition cylopic agree…

        • Based on the number in the review how do you explain that a $51 Billion network takes the same time to become Cash Flow positive as a $41 Billion network.

          The revenue figures provided are put in a way that give the Mix option the advantage they do not take into account the extra Opex of Copper remediation and the period of time is short to maximise the advantage of the shorter rollout.

          • “they do not take into account the extra Opex of Copper remediation and the period of time is short to maximise the advantage of the shorter rollout.”

            Copper remediation is taken into account. See pg 88.

            “The revenue figures provided are put in a way that give the Mix option the advantage”

            Do you have facts rather than suppositions and speculation to support that claim? You previously claimed ”“COST $51 Billion Slightly more than mix” when the cost is $10bn more and ““It is more profitable” when its IRR is 12% less

          • SIGH

            You did not answer the question asked do I need to ask it again? well here you go

            Based on the number in the review how do you explain that a $51 Billion network takes the same time to become Cash Flow positive as a $41 Billion network.??????????????????

            Please explain!

          • “Based on the number in the review how do you explain that a $51 Billion network takes the same time to become Cash Flow positive as a $41 Billion network.??????????????????
            Please explain!”

            No problem. I’ll explain this after you explain your previous statements that:
            Scenario 4 “COST $51 Billion Slightly more than mix”
            and
            Scenario 4 “It is more profitable”

          • Answered both in a previous comment you have ignored that to try and avoid the question.

            The fact that you refuse to answer pretty much says it all though.

          • Still faithfully trying to polish the now even duller FttN turd steve…?

            :/ Amazing

        • Deferring upgrades saves cash now, but also deferrs improvements in productivity.

          If your productivity gains are deferred, you get less money in the long term!

          The same excuse you give for spending money now; can be used to argue we should upgrade sooner because we can gain efficiency and save spending dollars now!

          • “Deferring upgrades saves cash now, but also deferrs improvements in productivity.
            If your productivity gains are deferred, you get less money in the long term!”

            Okay. Please quantify with evidence the improvements in household productivity, the number of households and how this will translate into a return on the $32bn additional funding.

            “The same excuse you give for spending money now; can be used to argue we should upgrade sooner because we can gain efficiency and save spending dollars now!”:

            Table 4-4 shows otherwise.

          • And the 50% (now $20.5B) FttN investment you admitted is wasted/can’t be used for the inevitable FttP upgrade?

            Shh…!

          • Business will save significant amounts of money being able to use FTTP

            My work could save thousands of dollars per month on an NBN plan. By Thousands; I mean hundreds of thousands over the next 10 years.

          • Steve, it’s now quite clear the numbers produced by Malcolm’s Yachting mate JBR are 100% fudged – I suggest you read this analysis;

            http://www.sortius-is-a-geek.com/fudged-numbers-abound-review/

            “So essentially an independent assessment is stating that NBN Co’s books were fine, so why ignore the 2013-2016 Corporate Plan in favour of the 2012-2015 plan?

            Simple, to fudge the numbers.”

  2. HFC for business?

    Well if you are a really small player…

    Ever try to get a static IP on HFC?
    Ever try to get a /24 on HFC?
    Ever try to get a large document up through HFC in the kiddie time slot?

    But one thing it will do well: It will thoroughly piss off anyone who is trying to get some serious work done in an HFC area where ADSL runs best with the modem set for G-dmt.

    Make the bastards who impose this crap live in such an area before inflicting it on honest people.

  3. Not only cancelled in HFC areas, it will be a grand total of 5% FTTN by the end of calendar year 2016.

    Hilarious stuff. Hang on, you live in an HFC area, right, Renai?

    Looks like an upgrade from 64QAM to 256QAM is one of the best things you can hope for.

    Except that Telstra has apparently already done that, so…

    > In relation to the Telstra HFC network, should Foxtel agree at some point in time to move off HFC, this would free up another ~30 8MHz channels.

    > Building out the network from 750MHz to 1 GHz

    Wow, this is just so desperate it’s almost beautiful.

    > leading to a peak contribution per subscriber of 4-7Mbps downstream by 2019

    I am in tears. I really am. BWAHAHAHAHAAAA.

    “Our NBN, if we push it really hard, if Telstra cooperates and all, if we manage to free up space and upgrade it to the technical limit, will do, in the most urban areas, 4 Mbps per user guaranteed”

    • The increase of capital expenditure by $18 billion is apparently due to higher costs of deployment. Last I heard, in the Senate Estimates, it was apparently between $1400 and $1500, when NBN Co had been expecting $1200 this financial year. That does not account for anywhere near $18 billion.

      The ‘revised outlook’ has 64,000 premises being passed between July and September 2013, yet only 130,000 between October 2013 and June 2014. Excuse me?

      In FSAMs active before December 2012, the share of 100 Mbps speeds exceeds that expected by 2016 in the last corporate plan.

      “Industry feedback to the Strategic Review was sceptical of widespread mass adoption of 4K TV in Australia.” There has been a $520 4k TV, delivered by Amazon, on OzBargain recently. 39 inch. Without delivery it’s barely over $400. Somehow, I think widespread mass adoption might only be a few more happenstances like this away.

      “While FTTN has generally overtaken FTTP in recent years, both are losing ground relative to super-fast HFC networks, which have grown rapidly to take a 33 percent share of superfast broadband premises passed”. No, upgrading to DOCSIS 3.1 doesn’t count as new premises being passed. According to Point Topic, FTTx has surpassed HFC in Q3 2012 all up. Not only is HFC (if you look at it properly) not growing faster than FTTx, it’s actually been surpassed in absolute numbers.

      I love how they’re already talking about the need to upgrade FTTN to FTTdp by 2020 too. FTTN won’t even be finished by then. Hilarious stuff.

      • “…the Strategic Review was sceptical of widespread mass adoption of 4K TV in Australia…” — side issue here, but I wonder if they realise how widespread the adoption of 3D TV’s has been in Australia.

        Not because people want the technology, but because it comes as a default feature. In the years to come you will have the same thing happen with 4K. People may not conciously purchase them, but they will have them because they come by default.

        Personally, thats no more than 5 years away, and mostly because its going to take that long for most people to get to the point they will want/need to upgrade.

        Adoption of technology doesnt have to be a concious effort.

        For me, whether 4K takes off or not is in the hands of the entertainment industry. You will need shows and movies available at that level for it to be relevant. As all movies are filmed at that standard or higher, its definitely out there.

        As a side note, we dont actually get 1080p standard on TV anyway (best you see is 1080i, FTA or PayTV), so its going to be a hard sell to show that the 4K standard is going to be adopted locally anyway.

        • It doesn’t even need to take 4k TV, what about a 4k or 8k Oculus Rift? Also blows their claims about energy consumption out of the water, you can power those almost on a USB port.

          I also love the bit about moving Foxtel out of the spectrum. And what’s going to happen then? You provide Foxtel over VDSL instead? That’s not a saving, that’s just reshuffling to meet a pointless number with, actually, a worse result all up.

          • Yup. To me, I think it can be summarised quite simply. They are trying, conciously or not, to shape our future potential, rather than overbuild and allow whatever is to come, to flourish to the best of its capabilities.

            Every obstacle put in the way of the next Facebook, or blu ray, or whatever technology you care to mention, is one more obstacle stopping it from working to our benefit.

            Which can never be a good thing.

          • And the Liberals are supposed to be the free-market “get out of the way of progress” party. Instead they wish to hinder it. Sigh. My coming down hard on the Libs looks like it’s bias, but it’s just the conclusion of thought and evidence.

          • Look at the entire history of the Liberals and this idea of them being about free-markets is a nonsense. Their history is one of using government to benefit the party faithful. Selective property deals have been going on for 150 years. Follow the names involved and it goes right to current members of parliament (this happens on the state level). Privatisation programs that make a fortune for consultants and advisors and have been of questionable benefit to the community. Telstra is very well connected and they are being setup for the next few decades courtesy of Malcolm.

            Now we get paid parenting, restoration of the subsidy on luxury cars, abolition of the carbon tax. Everything about this government is to do with concentrating wealth in a self-entitled ruling class. Hell, Alexander Downer was using our intelligence services to perform surveillance for the interests of a private company for which he now works. In China if he was caught doing that he would be up for execution. Australia is surely open for business – selling out so some brain dead silver-spooners get to live a life of luxury while sabotaging education and ubiquitous public infrastructure that would lift everybody up.

            Sorry for the rant – bloody politicians of all description have gotten to me lately.

          • The worse part about that quink?

            1GHz HFC has been trialled in Japan and other countries. Its’ reach is limited due to having twice the attenuation loss of lower HFC frequencies. Not to mention the huge amounts of EMI produced in the Coax cable as a result, interfering with mobile & other frequencies, depending on cable shielding and construction.

            Yes, it’s possible to take our HFC to 1GHz and even beyond….does that mean it’ll be easy or cheap? Nope.

            For the life of me I don’t know why (well, I do- political gagging) technical experts at NBNCo. aren’t jumping up & down about Scenario 4 saying how much better it is and HFC can be upgraded as a matter of course once FTTP construction is finished. Sure, we still get nothing in HFC areas for a while….but at least the network would be uniform FTTP after 2025, instead of this ridiculous hodge-podge we’ll have for 15 years.

    • so you can only really guarantee what people are largely already getting on DSL? and if you are lucky you will get unguaranteed speed somewhere above that, if few enough locals are using it? this is getting past joke territory bloody quickly……

  4. So, let’s see the assumptions and numbers behind this new “$73billion” costing. Is it like the time Malcolm Turnbull stated that FTTP would cost $94billion, by assuming the absolute worst case for everything?

    I do like the point AJ made above, though – they achieve their number by effectively thumbing their noses at a third of Australia and saying “No high-speed broadband for you!”

    FYI: I’m on Telstra cable at the moment due to lack of options. While I’ve seen speeds as high as 32Mbps, that was at 6am on a Sunday morning, a time when just about nobody is using the network. Early evening, especially during school holidays, it’s less than 10Mbps, and the lowest I’ve seen was just 1.5Mbps.

    But, I guess 1.5Mbps still falls under “up to 50Mbps”, so they’ll call it good.

    I should add:
    Did anyone really expect any other outcome from this review by Malcolm’s mates?

    • Renai did. As someone mentioned earlier though he’s in an HFC area, so he gets nothing. Only fair IMO.

      • No, I thought Renai was saying “Let’s wait & see what the review says before jumping to conclusions”, which is, IMHO, a reasonable outlook. I’m guessing he probably still expected this result, though. :-)

        • He actually said multiple times in various comment sections that “turnbull said he would deliver” blah blah blah, always referring to rollouts in the UK or some such location and ignoring everyone else’s points about the massive differences between the rollouts there and in Australia.

    • Renai did. As someone mentioned earlier though he’s in an HFC area, so he gets nothing. Maybe he can pay for a special extension of fiber to his home, as he said he would be willing to do if it cost under $5000. Oh wait, you can’t extend fiber from an HFC system. Oh well.

  5. Jesus. How much are our Internet bills going to be under the FTTN plan. With reduced income due to it being impossible to deliver a service anywhere near as capable as FTTP, I can only imagine that we’re going to be paying through the nose for our 25Mbps.

    This is ridiculous. To be honest I thought the original $29bn for FTTN was ridiculous and I’ll say it again: I would rather they cancelled the NBN altogether than waste money on FTTN.

    Also, I bet they haven’t accounted for the councils taking forever to approve the locations of the nodes either. FTTN is going to take longer to rollout than FTTP and cost more. The only way to justify it is to lie about how much FTTP would have cost and how long it would have taken.

    • Yep, Dave, that has my vote too. Cancel the bloody thing. We don’t want this ABSOLUTE shambles.
      Telstra must be laughing their arses off.

    • Yep bin it; too much cash for too little benefit, especially when you factor in the monopoly powers of the NBN Co. Recipe for disaster!

      I was never a fan of the ALP policy, but this is significantly worse.

      The only place the government has any business rolling out infrastructure like this is in regional and remote areas where there are NO commercial offerings. Everywhere else demand will eventually lead to supply.

      Remember the NBN was envisaged as a solution to a problem which by 2007 had already been solved, i.e. Telstras reluctance to allow competitors access to their pits. Once that happened we got ADSL 2+ at reasonable prices. NBN is a solution to a problem which existed in the early 2000’s and then it became a vote winning white elephant.

      Either go FTTP or just bin it.

      • Demand never leads to enough supply in an infrastructure market, even in urban areas. The barrier to entry is just too high for more than 1 or 2 competitors.

      • “Everywhere else demand will eventually lead to supply.”

        This is not true. A more correct statement is:

        Everywhere else demand, combined with strong competition and with sufficient capital available, will lead to supply.

        1) demand, in terms of raw numbers (especially vs deployment cost) is small in Australia due to our small population and the large spread of our population

        2) there is little to no competition in telecommunications in Australia, due to the presence of the vertically-integrated behemoth Telstra, no one can compete with Telstra and without competition Telstra has no compulsion to advance technology rather than continuing to sweat its existing assets

        3) only Telstra has enough capital in Australia, but see (2)

        The simplistic statement that demand leads to supply shows that you have at best a skin-deep understanding of economics. Did you perhaps quit after year 11 high school economics?

  6. Some simple maths:

    Coalition NBN, covers 70% of premises with some sort of upgrade, costs $41bn
    Original NBN, covers 100% of premises with FTTP or wireless, costs $73bn

    $41bn / $73bn = 56%

    So for 56% of the cost you cover 70% of the premises, 32% of which are FTTN needing upgrading by approx 2025.

    So, for this to be worth it, the upgrade cost from FTTN to FTTP for 32% of the premises needs to be no more than the difference for covering 70% of the premises with FTTN instead of FTTP

    70% of $73bn = $51.1bn
    $51.1bn – $41bn = ~$10bn

    Who here believes that it will be possible to upgrade 32% of premises from FTTN to FTTP for $10bn?

    This is of course a very simplistic analysis. It would be much easier if I knew the cost of covering the 7% of the population with Fixed wireless or Satellite. Also note that this is based on the “reviews” new total of $73bn. Who knows what the assumptions are for that.

    edit – love the edit function :-)

    • Your calculations assume the government will be deriving revenue and profit from all these different connections. Under labor’s plan the network would pay for itself. This new plan… Well who knows where the money will come from.

    • It’s not really “cost”, though, it’s “peak funding”…

      If we break down one the earlier 2012-2015 corporate plan dated 6 August 2012 {page 71}, it’s:
      Peak Funding date (rollout completion): FY2021
      CapEx (FY2021) = +37.4b
      Revenue (FY2021) = -23.1b
      OpEx (FY2021) = +26.4b
      EBITDA (FY2021) = +3.3b
      Peak Funding (FY2021) = 37.4 -23.1 +26.4 +3.3 = ~44b (44.1b, accounting for rounding errors)

      We need that break-down of costs and revenues in order to really make a valid comparison.

      For comparison, the strategic review found that the numbers were {Exhibit 0-1; Page 12}:
      Peak Funding date (rollout completion): FY2024
      CapEx (FY2024) = +37.4 +18.5 = +55.9b
      Revenue (FY2021) = -23.1b +13~14b = 10.1~9.1b [I include this only because, for some reason, it was the number selected in the executive summary {Page 11}; compare it to the FY2024 number below. Clearly they did everything they could to put it in a bad light.]
      Revenue (FY2024) = -23.1b -1.9b = -25b
      OpEx (FY2024) = +26.4b +5.4b = +31.8b
      EBITDA (FY2024) = +3.3b +7.5b = +10.8b
      Other = -0.8b
      Peak Funding (FY2024) = 55.9b -25b +31.8b +10.8b -0.8b = ~72.7 (72.6b, accounting for rounding errors)

      These numbers are dependent on the following assumptions:
      – Delays in deployment
      – Delays in take-up
      – Lower average revenue per user (ARPU)
      – Higher levels of non-subscription

      These two sets of numbers are what needs to be compared.

      • Page 14:

        Based on overseas experience, it is possible to radically redesign the NBN Co FTTP deployment to reduce the Cost Per Premises. The changes to deployment include changes in the delivery model, which in turn result in labour productivity improvements, different and more cost-efficient architecture and materials, and cost-efficient construction techniques. This radically redesigned FTTP deployment is estimated to cost [REDACTED] build Capital Expenditure[6][Reference REDACTED] per brownfield premises passed, representing savings of [REDACTED] per premises passed versus the Revised Outlook.

        Construction costs for an FTTN network in Australia would be in the order of [REDACTED] per premises, including the proactive copper remediation of up to [REDACTED] percent of lines in the FTTN footprint. Upgrade paths to fibre-to-the-distribution point (FTTdp) or FTTP are possible at lower cost than building FTTP now (based on estimated present value), provided that upgrades take place five or more years in the future.

        [REDACTED] HFC networks could provide high-speed broadband to ~3.4 million premises in the future by adapting and extending existing HFC infrastructure. Configuration and construction capital expenditure is estimated at [REDACTED] per premises (averaged over the entire HFC footprint) to pass and connect the HFC footprint, including capacity expansion to offer at least 50Mbps service through 2019, with 1:3 relation between upstream and downstream speed.

        In the Fixed Wireless and Satellite footprint, customers are taking up NBN Co’s services faster than planned. If the current trend in take-up continues, NBN Co will need to add [REDACTED] base stations and possibly an additional satellite. Initial very high-level estimates indicate that allocating ~100,000 premises to FTTN rather than Fixed Wireless and Satellite may partly avoid the cost of these capacity expansions estimated at between $0.6 – 1.1 billion. More work is required to explore this option further.

        Can someone please, please explain to me why these numbers are redacted? Just to make FTTN and HFC look good?

  7. If I wasn’t affected by this I’d laugh and say “Told You So”, and “Quit complaining, you voted for it”, but that would only apply to 5 readers of this website.

    That readers (and indeed the publisher) of Delimiter are fully aware, there was never any chance the Liberal pre-election pledge would ever work out mathematically or technically. Today’s report just proves that.

    I’d like to know more about why they are abandoning full FTTP though. It still seems highly political rather than mathematical or technical.

    • Of course it’s a political decision.

      Tony told Malcolm to destroy the NBN, so that he’d (a) please Uncle Rupert, and (b) make his biggest competitor for leader of the Noalition into the most unpopular man in Australia.

    • If the carbon price and minority government wasn’t enough this wont even come close; you’re dreaming.

      • Pretty much. This is a small issue in the minds of voters, and worse, it’s a small issue that’s been dragged out over a long period of time. Most people who expressed interest in the NBN but weren’t interested in technology/politics in general, don’t know how the NBN has changed over time. In fact, for most people, whoever’s in government doesn’t mean a thing to them. One of my friends didn’t even know whether Abbott or Rudd were Liberal or Labor (I’ll forgive him, though, since he may be a resident, but he’s technically a NZ citizen). More fool them.

  8. Once this thread settles down into the usual FttN v FttH debate, we should go back and count the number of “told you so” posts :)

    Told you so!

    Waiting for the ridiculous justifications for this from the usual yes-men.

  9. Turnbull promised that those people who wanted to pay for fibre from the node to the premise would be able to under the FTTN model. Now these people will not be able to get fibre at all. What a disgraceful man he is.

    • Yep, particularly galling for those of us who were in the 1-year FTTP rollout plan.

      “Breaking News: politicians go back on pre-election promises”

      How about “Turnbull lied about having a fully-costed plan, lied about providing 25Mbps to 90% of Australians by 2016, and lied about having an independent review into the NBN”

        • steve, you claimed you weren’t partisan. Why would you say “Labor lied” instead of “NBN Co lied” about the state of the project? Doesn’t that suggest that you are being partisan?

          And what are these lies? Do tell.

          • steve 5/12/2013…

            …”Labor are lousy at keeping promises, lousy at delivery, lousy at management, lousy at budgeting and lousy at economics i.e. lousy at government.”…

          • “Why would you say “Labor lied” instead of “NBN Co lied” about the state of the project?
            NBN Co. is 100% government-owned. The government has ultimate power and ultimate responsibility for NBN Co. Instead it ignored and kept secret its 2011 Lazard review and conducted no reviews between 2011 and 2013, even as NBN Co. continually failed to deliver to its own KPI metrics.

            “Doesn’t that suggest that you are being partisan?”
            No. I expect the new government to wield ultimate power and take ultimate responsibility for NBN Co.’s failures and successes.

            “And what are these lies? Do tell.”
            Where do we begin? You will note that coalition policy was developed on NBN Co’s 2012 forecasts, the opposition has no power over NBN CO.

            In 2010 NBN Co.forecast IRR of 7%, in Aug 2012 the forecast was 7.1%, in 2013 NBN Co. has forecast negative IRR.

            In 2010 NBN Co.forecast peak funding requirements of $40.9bn, in Aug 2012 the forecast was $44.1bn, in 2013 NBN Co. has forecast $73bn.

            In 2010 NBN Co.forecast revenue to FY2021 of $23.6bn, in Aug 2012 the forecast was $23.1bn, in 2013 NBN Co. has forecast $10bn.

            In 2010 NBN Co.forecast construction capex of $36bn, in Aug 2012 the forecast was $36bn, in 2013 NBN Co. has forecast $56bn.

            In 2010 NBN Co. released its coprorate plan to 2013. In 2012 it released an amended plan for 2013. In 2013 it failed on all KPIs in both the 2010 plan and the 2012 amended plan.

          • Nice copy/paste steve.

            Yes, we’ve seen it all before (still no OPEL figures, since you love nostalgia though?)… I didn’t bother reading it “a g a i n” as you seem to regularly have differing conclusions/figures? Anyway…

            So, now to what “embarrassingly is” (the bit you like to try to deflect from) and not what was…

            You told us the new govt’s plan was superior, using BT in the UK’s apparently passing of 10m homes (which magically jumped to 16m, just two days later…lol) in 2.5 years.

            It is now apparent that the UK have infinitely better management there (using your very own gauge – than the complete mismanagement we currently have in power in Canberra and at the helm of NBNCo here)… because our mismanaging mob can not achieve anything like you claimed was achievable…

            So is the comparison still one you’d like to emphasise or perhaps it’s time to man-up and say you were wrong, as another “man” recently did?

            Oh that’s right, you won’t correspond with me will you…. now wonder!

            You will note I use the term mismanagement… it’s only because people such as yourself set the ground rules. Funny you refuse to apply the same rules now though?

            :/ Amazing

          • “NBN Co. is 100% government-owned. The government has ultimate power and ultimate responsibility for NBN Co.

            No. I expect the new government to wield ultimate power and take ultimate responsibility for NBN Co.’s failures and successes.”

            What, like, Australia Post? I don’t think you really understand the role or position of a GBE. GBEs report to Government, Government is not involved in directly managing them. I would never trust a politician to run a GBE.

            “Instead it ignored and kept secret its 2011 Lazard review and conducted no reviews between 2011 and 2013, even as NBN Co. continually failed to deliver to its own KPI metrics.”

            Did it ignore them, or did it just accept the outcomes of all of the other reviews?

            “Where do we begin? You will note that coalition policy was developed on NBN Co’s 2012 forecasts, the opposition has no power over NBN CO.

            In 2010 NBN Co.forecast IRR of 7%, in Aug 2012 the forecast was 7.1%, in 2013 NBN Co. has forecast negative IRR.

            In 2010 NBN Co.forecast peak funding requirements of $40.9bn, in Aug 2012 the forecast was $44.1bn, in 2013 NBN Co. has forecast $73bn.

            In 2010 NBN Co.forecast revenue to FY2021 of $23.6bn, in Aug 2012 the forecast was $23.1bn, in 2013 NBN Co. has forecast $10bn.

            In 2010 NBN Co.forecast construction capex of $36bn, in Aug 2012 the forecast was $36bn, in 2013 NBN Co. has forecast $56bn.

            In 2010 NBN Co. released its coprorate plan to 2013. In 2012 it released an amended plan for 2013. In 2013 it failed on all KPIs in both the 2010 plan and the 2012 amended plan.”

            So which of these are “lies” rather than forecasts?

            And which of these are “Labor” rather than NBN Co?

            And which of these aren’t the strategic review’s “lies”? There’s demonstrably strong bias in favour of Turnbull’s result in much of the document: it presents the previous plan in the worst possible light, it uses language that heavily echoes Turnbull statements or Coalition policy, and it uses unusual assumptions that are provided. It’s not unusual that the outcome of the review makes the previous plan look terrible and Coalition policy (with a small change in costing and delivery timeframe) look great – it was to be expected from a politically influenced review.

            It’s okay to just admit that you meant to say “NBN Co” rather than “Labor”, I’m not sure why you’re pushing it so hard. Does even the strategic review talk about Labor or the Coalition? Of course it doesn’t.

            For the record, I don’t consider Turnbull’s statement that everyone would have 25+Mbps by 2016 a lie – because I think he genuinely believed that it was possible due to his incompetence (if he knew that it was impossible to achieve, then it would have been another lie, though), but his other commitments are lies: a fully-costed plan which did not exist, a review that is performed by and “owned” by NBN Co, and an independent review that is very far from independent. We knew these for the lies that they were, so it’s not like we’re shocked, but all it has done is confirm what we knew. I would have liked to be wrong.

          • “For the record, I don’t consider Turnbull’s statement that everyone would have 25+Mbps by 2016 a lie – because I think he genuinely believed that it was possible due to his incompetence…”

            +1

            I think people are assuming because of Malcolm’s credentials that he is (comms) intelligent/competent.

            Well being generally intelligent/competent/sly and politically manipulative and comms intelligent/competent, especially when given a clear comms direction which is anything but intelligent are completely different animals IMO…

          • You’re right. The lies were from NBN Co. and they were forecasts. I got carried away in the hysteria.

            However forecasts of IRR that goes from 7.1% to negative in a few months, funding requirements that double, capex that almost doubles, debt that triples indicate more than simple mis-forecasting. It’s a pattern similar to the federal budget that went from a forecast surplus to $40bn deficit within 6 months .

            “There’s demonstrably strong bias in favour of Turnbull’s result in much of the document:”
            How can there be strong bias in favour of Turnbull’s result when Turnbull’s policy wasn’t even considered among the 6 scenarios? Please demonstrate.

            “it presents the previous plan in the worst possible light”
            The previous plan needs no help. It presents itself in the worst possible light relative to actual outcomes and relative to evidence from other countries.

            “it uses language that heavily echoes Turnbull statements or Coalition policy, and it uses unusual assumptions that are provided.”
            Examples of heavily echoing Turnbull statements or Coalition policy?

            “Coalition policy (with a small change in costing and delivery timeframe) look great – it was to be expected from a politically influenced review.”
            Relim, you’re getting carried away here, the coalition policy was left at the gate, it’s not even considered in the review. Since it was based on the NBN plan, it was blown away along with that plan.

            “It’s okay to just admit that you meant to say “NBN Co” rather than “Labor”, I’m not sure why you’re pushing it so hard.
            “You’re right. It was NBN Co. under labor’s watch.

            “a fully-costed plan which did not exist”
            There was a fully-costed policy (not a plan) that was based on NBN Co’s 2012 corporate plan. NBN Co. has blown apart it 2012 corporate plan, taking the coalition’s fully-costed policy with it.

            “a review that is performed by and “owned” by NBN Co,”
            Says so on Pg 2 under the heading Legal Notice. If this is false, it is legally actionable.

            “and an independent review that is very far from independent.”
            Any review that didn’t come up with the pre-determined FTTP answer would be far from independent. No evidence necessary.

          • I’m not going to get involved except to say steve, the Coalition plan I almost precisely scenario 6. If you can’t see beyond a few % difference in technologies between the review & their original plan, then you’ve plainly lost objectivity

          • IMO there was never any objectivity to start with…therein lies the problem

            :/ amazing

          • “the Coalition plan I almost precisely scenario 6. If you can’t see beyond a few % difference in technologies between the review & their original plan, then you’ve plainly lost objectivity”

            Let’s objectively compare MTM vs CP (coalition policy):
            FTTP: MTM 26%, CP 22% Difference 4%
            FTTN/dp/B: MTM 44%, CP 71% Difference 27%
            HFC: MTM 30%, CP 0% Difference 30%

            There is a 61% difference between MTM and CP. MTM introduces a technology that wasn’t in the CP.
            The only few % difference in technologies is the 4% difference in FTTP.

            Relim: “Coalition policy (with a small change in costing and delivery timeframe) look great”

            Let’s objectively compare costing and delivery timeframes:
            Peak Funding: MTM $41bn, CP $29.5bn Difference 39%
            Capex: MTM $33bn, CP $22bn Difference 50%
            Opex: MTM $27bn, CP $22bn Difference 23%
            Revenue: MTM $18bn, CP $16bn Difference 13%
            IRR: MTM 5.3% CP n/a Difference n/a
            Construction: MTM 2014-20 CP 2014-19 Difference 17%
            25-100Mbps 2016 MTM 43%, CP 100% Difference 56%
            50-100Mbps 2019 MTM 91%, CP100% Difference 9%

  10. So, let me get this straight for those of us in the HFC zone:

    1. We won’t get FTTH

    2. We won’t get FTTN, which means also we won’t be able to “upgrade” from FTTN -> FTTH.

    3. We won’t get HFC, at least for those of us who don’t ALREADY have an HFC physical connection, in apartment blocks and other places that Telstra and Optus wouldn’t or didn’t connect years ago.

    4. So… we get NOTHING and no hope of anything.

    Well that just made my day.

    • I would be betting that Optus would sell its HFC to NBN Co for a few hundred million + the $800 million they are already getting. NBN Co can then continue HFC rollout into premises that never received it initially. Telstra will not want to negogiate on this and will use its HFC + Foxtel to compete with NBN. Turnbull always wanted competition.

      • But then they would have to add the cost of HFC extension to their already ballooning funding numbers. Buying the networks would add billions. Keep in mind they still haven’t considered the cost of copper remediation and maintenance. There’s absolutely no way they would make themselves look even worse than they already do.

        • “But then they would have to add the cost of HFC extension”
          They have.

          “to their already ballooning funding numbers.”
          … referring to the NBN’s $44bn to $73bn ballooning of course.

          “Buying the networks would add billions. ”
          Really?

          Keep in mind they still haven’t considered the cost of copper remediation and maintenance.
          They have.

          • “referring to the NBN’s $44bn to $73bn ballooning” — with the two numbers, what is the Government commitment within each one?

            Apart from that, I’m going to be taking both numbers with a grain of salt. Both sides of this are naturally going to be presenting their own position in the best possible light, so personally I’m dubious of the $44b still.

            It wont surprise me for that number to go up as time goes by. And when the Liberal review was done, its naturally going to put the Labor plan in the worst possible light, in this case making it $73b. Is there enough detail to show how they got to that number? I havent looked through closely enough to tell, but I expect they have ticked a few of the worst case scenario options they used when they came up with the $94b figure earlier in the year. Then didnt apply the same conditions to the FttN plan.

            But back to the first question. What is the Government commitment in both scenarios?

          • “Is there enough detail to show how they got to that number? I havent looked through closely enough to tell, but I expect they have ticked a few of the worst case scenario options they used when they came up with the $94b figure earlier in the year.”

            Well for starters Malcolm’s band of hired goons has ignored the 4.billion in construction savings that where identified in the now MIA version 13 of the Corporate plan – obviously they where just too inconvenient which is why it took a Herculean effort on Conroy’s part to extract admissions from TurnBull’s goons at the senate committee hearing the other day!

            Frankly the depth of Turnbull’s deceit is simply breathtaking, as is his audacity to stack every major nbn position with one of his mates (including one he co-owns an expensive yacht with)!!!!!

          • “referring to the NBN’s $44bn to $73bn ballooning” — with the two numbers, what is the Government commitment within each one?”

            As a fully-owned government entity, the government’s commitment is 100%.

            “Both sides of this are naturally going to be presenting their own position in the best possible light,”

            Both sides? Page 2:”The Report has been prepared by NBN Co with the benefit of expert input as follows:
             Deloitte Touche Tohmatsu (Deloitte) (ABN 74 490 121 060)
             The Boston Consulting Group Pty Ltd (The Boston Consulting Group) (ABN 70 007 347 131)
             KordaMentha Pty Ltd”

            “And when the Liberal review was done”

            Liberal review? Can you substantiate your defamatory allegation that NBN Co., Deloitte, Boston Consulting and KordaMentha are organs of the Liberal party? Would you like to defend that claim in court by putting that allegation under your real name and address?

            “its naturally going to put the Labor plan in the worst possible light, in this case making it $73b. Is there enough detail to show how they got to that number?”

            Yes there is. Pg 35-73.

            “I havent looked through closely enough to tell, but I expect they have ticked a few of the worst case scenario options they used when they came up with the $94b figure earlier in the year. Then didnt apply the same conditions to the FttN plan.”

            Ah. No need to let the facts get in the way then.

            “But back to the first question. What is the Government commitment in both scenarios?”

            As a fully-owned government entity, the government’s commitment is 100%, it owns 100% of the company and is responsible for 100% of the funding, 100% of the risk and 100% of the blow-outs.

          • Actually steve, I’m not sure if you’ve read the report all the way through, but the Government is quite clear. They are only putting in $29.5 billion, regardless of the scenario. Any of the scenarios costs significantly more than that. The rest comes from private debt (not equity). Sure, the government still owns 100% of the equity, but the private debt significantly increases funding costs and risk.

            On the point about consultants- Turnbull was very very specific that he was going to make this strategic review “NBNCo’s own- no consultants as the previous Government loved to spend money on”. That clearly is not the case. And there’s only one reason to bring in consultants after saying you wouldn’t- you don’t trust in or want to have the information as provided by the company direct. Either because you believe they are corrupt or hiding something or because that information doesn’t suit your agenda.

            It’s up to you to sort out which reason you think is more likely for a Government who’s made it clear they don’t want this NBN, but now have to do it because it’s gone too far….

          • “Actually steve, I’m not sure if you’ve read the report all the way through, but the Government is quite clear. They are only putting in $29.5 billion, regardless of the scenario. Any of the scenarios costs significantly more than that. The rest comes from private debt (not equity). Sure, the government still owns 100% of the equity, but the private debt significantly increases funding costs and risk.”

            I have read the report all the way through. The government is putting in $29.5 billion regardless of the scenario, which makes it more imperative that the chosen scenario must have the least requirement for additional private debt. For example, it will be hard enough to secure to secure $12bn private debt with a 5.3% IRR business case, let alone $22bn with 4.7% in the business case.

            “On the point about consultants- Turnbull was very very specific that he was going to make this strategic review “NBNCo’s own- no consultants as the previous Government loved to spend money on”.

            Can you link to evidence that shows MT being very very specific that he was going to make this strategic review “NBNCo’s own- no consultants as the previous Government loved to spend money on”.?

            “And there’s only one reason to bring in consultants after saying you wouldn’t- you don’t trust in or want to have the information as provided by the company direct. Either because you believe they are corrupt or hiding something or because that information doesn’t suit your agenda. It’s up to you to sort out which reason you think is more likely for a Government who’s made it clear they don’t want this NBN, but now have to do it because it’s gone too far….”

            It is very common, almost mandatory business management practice for the executives/owners of a company to bring in external independent consultants when a large project fails to meet its deliverables and shows any signs of deep financial stress and out-of-control expenditure. If the project was on track, there would be no reason to.

          • My point about the Coalition capping their contribution is that it’s out of ideology, not out of sensibility to a project & its’ impact on our economy. Why $29.5 billion? Do they have advice that is the perfect ratio of spending to benefit? As far as i can see, they chose that number off a calculator during their campaign to be re-elected. Why?

            On the issue of consultanats, visit Turnbull’s blog below and look at the answer to this question:

            In terms of the strategic review, why have the NBN Co priced the cost of Labor’s former plan, which you put it to around $94 billion, Labor, I think, estimated it as low as $37 billion. Why have the company look at that plan given that your policy’s very clear about fibre to the node. Is there some chance that you could review some elements…

            http://www.malcolmturnbull.com.au/media/announcement-of-new-nbn-board-and-launch-of-nbn-strategic-review

            Then later, Turmbull announces these firms will “assist” with the strategic review. I’ve read the review- 75% of the information and 90% of the predictions are from the consultants. Not NBNCo. Particularly that surrounding needed speeds in years to come. That is in direct contrast to NBNCo’s own Corporate Plan which stated they expect 45Mbps to be the average speed by 2021. The only info that isn’t is direct numbers from the rollout or NBNCo’s finances.

            This review was done by the consultants in direct opposition to Turnbull’s insistence it would be NBNCo’s own. Exactly as many of us thought it would. Pay a consultant & they’ll give you any context you like to make the info you have reinforce your agenda.

          • “My point about the Coalition capping their contribution is that it’s out of ideology, not out of sensibility to a project & its’ impact on our economy. Why $29.5 billion? Do they have advice that is the perfect ratio of spending to benefit?”

            Thanks seven_tech for another calm, sober response. $29.5 billion is $0.9m less than the $30.4 billion committed by Labor. Was Labor’s capping their contribution out of ideology, without regard to sensibility and its impact on the economy? After all, the project was costed as needing $44.1bn in funding. Given $29.5bn is $0.9bn short of Labor’s $30.4bn commitment, it is likely that the liberals were simply matching Labor’s commitment while delivering more quickly and without requiring NBN Co. to rely on securing private debt, which was always unlikely.

            “On the issue of consultanats, visit Turnbull’s blog below and look at the answer to this question:..”
            http://www.malcolmturnbull.com.au/media/announcement-of-new-nbn-board-and-launch-of-nbn-strategic-review.

            The link has nothing that is “very very specific that he was going to make this strategic review “NBNCo’s own- no consultants as the previous Government loved to spend money on”. ”

            He said he wanted NBN Co to own the strategic review while engaging as many experts from inside and outside the company as NBN Co. saw fit.

            From the link:
            “It’s really important that the directors and the management own this. They should get advice from experts, you know, inside the company, outside the company – sure. But they have got to, at the end of the day, be able to say to the Government, as shareholder, this is where we honestly, genuinely, objectively, soberly believe this project is right now. This is where it was going to go, under the previous policy, and here are some options to have a more cost-effective outcome.”

            “75% of the information and 90% of the predictions are from the consultants. Not NBNCo.”

            Perhaps. But NBN Co. owns the review, selected the consultants, oversaw and reviewed their work and prepared the report with their input. As it says on Pg 2 “The Report has been prepared by NBN Co with the benefit of expert input”

            “This review was done by the consultants in direct opposition to Turnbull’s insistence it would be NBNCo’s own. ”

            Yet to see evidence of Turnbull’s insistence that NBN Co. not engage consultants. The link you cited has him saying “They should get advice from experts, you know, inside the company, outside the company – sure. But they have got to, at the end of the day, be able to say to the Government, as shareholder, this is where we honestly, genuinely, objectively, soberly believe this project is right now. This is where it was going to go, under the previous policy, and here are some options to have a more cost-effective outcome.”
            This is reflected on Page 2 of the report “The Report has been prepared by NBN Co with the benefit of expert input”

          • “Buying the networks would add billions. ”

            This needs further discussion as it has been mentioned often. I believe it is a misconception but happy to be corrected. So here is the situation as I understand it:

            1. Telstra has already signed a deal with NBN Co. with $11 billion of “net present value” i.e. $15 billion actual cost to retire its copper network, lease its ducts and transfer its customers to the NBN.
            2. The government has already declared Telstra’s network and has the legal power to appropriate it for third-party access. Legislation is in place that allows the government broad discretion to structurally separate and otherwise punish Telstra if it doesn’t co-operate with the NBN.
            3. NBN Co. only needs access to the last-mile copper outside of the FTTP, FTTB and HFC footprints.i.e. last-mile copper to ~30% premises, which is a small fraction of the total copper network
            4. Under the current deal Telstra can’t get full earning potential from leasing to the NBN until the next decade. A new deal allows them to bring these earnings forward.
            5. This combination of legal powers, already agreed upon expropriation of the copper network by NBN and earlier earnings incentives means there is very little commercial value left for Telstra in the copper network, puts NBN Co. in a strong negotiating position and makes a no-to-low-cost deal more likely than not.

            Similar situation applies to the HFC networks.

          • Steve,

            The HFC networks are not declared. Therefore, money must change hands for the Government to gain control of them. Telstra have indicated they will not accept less value for what they already negotiated (losing the copper CAN use, but retaining PayTV use of the HFC). They are unlikely to accept losing access to the HFC entirely (including PayTV) for free as “same value”. I can’t comment for Optus and their $800 million, but I believe if the Telstra agreement changes, the Optus one has to (it’s in the contract). That would suggest at least a renegotiation, if not more money to actually purchase the HFC from them (which in my eyes would be foolish- Optus’ HFC is in such a bad state in some areas they’ve simply switched it off & left it in the footprint many hundreds of thousands of premises).

            HFC negotiations are not going to be simply. Neither are the upgrades. HFC in this country is nothing like the USA or Europe, but this review treats them as such. HFC here was designed for PayTV only and as such would need significant time and CAPEX to bring them to CSG data standards for business.

          • seven_tech, thanks for the information. I wasn’t familiar with the HFC situation as you described. The NBN cost-benefit analysis and re-negotiations will be interesting to see how this is addressed.

    • Add to that the fact you will only be connecting to the Telco that installed it in your area – so Telstra or Optus. I guess thats competition…

    • not quite no hope, but the govt leaving MDU folk flapping in the wind for TPG or other FTTB vendors to take up is pretty insulting. you are stuck with that, if they come, or DSL. ‘Better’, Malcolm? Really?

  11. I’d encourage people read the report. Or at least skim through it.

    This is an incredibly important point in the history of NBNco and the politics that now overpower it.

    The redacted red pen (black in this instance) has made it’s appearance, but there is more than enough data to understand what has been reported.

    As predicted, however, the state of Telstra’s copper network has not been considered, as data was not available – thus costs to remediate don’t step beyond discussion of bridge taps (and other technology ‘blockers’).

    Any estimated cost for remediation (or lease/ acquisition of Telstra and Optus assets) has been redacted.

    Vastly reduced ROI, with mobile growth now an active threat; given 4G is well exceeding the ~50mbit quoted, this is hardly surprising.

    We’re now shooting for ~50mbit (yes that is approximately, as in up-to) over VDSL; with no upgrade likely to be considered prior to 2023. Minor mention of Vectoring, given it’s barely been tested it’s hard to see that being in the short-medium term roadmap.

    ~400 meters has been claimed for line length; with remediation terms and such redacted. It appears FTTH upgrade options are MIA. I can’t find much mention (yet) but I probably need to re-read.

    2016 was always a ridiculous target and it’s been officially dropped. This also echoes the recently leaked report; there are a lot of parallels here.

    Not sure what Renai thinks, but this isn’t really what Turnbull was hoping to see – indeed he’s gone on the immediate offensive to blame everyone; but the numbers (that aren’t redacted) and general risks identified don’t really lie.

    It’s not all good. It’s going to be expensive. There’s a big question mark over the remediation/ network acquisition costs, is very very reliant on HFC to hit coverage percentages, is reliant on cherry picking legislation basically remaining in place (report actually states overbuild is a huge risk and cost vector).

    And it’s going to be some time before an upgrade is considered. It’s better than nothing. However Turnbull’s grandiose claims are really in tatters at this point.

    Again – encourage people to read. It’s actually pretty well formatted and laid out.

    • You, sir, get awarded 1 Internet for actually doing your homework, getting informed and not joining in with the line of assholes who’s only priority is making sure everyone knows they “told him so”… =)

      Although I think Renai can actually relax now. Turnbull has turned out to be the bogeyman and now Renai can continue to objectively report on what’s happening without having to deal with all the mouthbreathers bitching every article… X D

      • Meh, for those that have had their collective heads shoved up Turnbulls arse for so long, I’m happily saying I told you so. If that makes me an arsehole, I can live with that. They were happy to dish out the same for every small negative before Sep 14, I’m only giving it back.

        As for the report, theres a lot in it. Not all of us can read and absorb 132 page documents in 5 minutes…

        Theres plenty of interesting stuff in there though, I expect its going to generate plenty of media with stories from across the documents, and not just this sort of summary about the plan being scuppered inside the first 100 days.

        Personally, with what Turnbulls being saying since he first opened his mouth with his claim of a “fully costed plan”, and the number of backflips and broken proises made since, well… its not polite to say what I think of him right now.

        • With respect I mentioned more than once that this will take some digesting.

          I skimmed over some of the content and focused on key points. Yes it’s 120 odd pages. It’s also going to form the vast bulk of the blueprint going forward. So giving it more than five minutes is time well spent.

          This is a pivotal piece of documentation – it’s a review, of the NBN, explaining the risks and options available as part of massive, massive overhaul that Turnbull has called for.

          It’s very easy to say “I told you so”, I supposed. But it’s just a bit of blasé arrogance to do so. And undersells the mammoth task ahead.

          Turnbull has chosen a difficult road with complex challenges. This isn’t some “we’re right you’re wrong” political clap-trap. It pulls no punches.

          This will be, frankly, bloody hard to sell to the electorate and Australia.

  12. I wonder what the “off the record” thoughts that Bill Morrow and Simon Hackett are now thinking?

    For Bill, I bet he is now thinking “Out of the Pan into Fire”, And the backlash will be worse than “Vodafail”.

  13. Hang on, that table states that Labor’s NBN is 100% FTTP. So does that mean the “revised” figures are for 100% FTTP, not the actual 93% in the original plan??? What we appear to have here is an exercise in industrial-scale turd polishing. They appear to have grossly inflated the cost of completing Labor’s NBN by deliberately making the aforementioned plan more expensive (remember the reason why FTTP was limited to 93%), while casually sneaking in that their plan will not only cost significantly more than they initially thought (and will be highly prone to cost blowouts), but will cover substantially fewer premises.

  14. So, the Libs say it’s $32b extra to give FTTH to ~7m homes that would instead get FTTN. How much is it going to cost to install FTTH in 2020 or 2024 or whenever, replacing FTTN anyway? Sounds like the extra ~$4500 per household is worth it!

    But if they’re really not going to give FTTH to most of us, then I’ve got a better idea: Scrap FTTN completely. It’ll save us lots of money.

    Then, in a couple of years people will start getting desperate for real speeds and FTTH kit is even cheaper, private consortiums can roll out FTTH without fear of competition from VDSL. Of course, anyone who lives in areas that the consortiums deem unprofitable is screwed. Though the govt could subsidise some areas, using all the money they saved by not putting in NBNCo FTTN in the first place.

    Maybe Telstra will start installing FTTH (ignoring point cook, south bris, etc!) and ACCC can strike a deal for it to be wholesaled.

    • “So, the Libs say it’s $32b extra to give FTTH to ~7m homes that would instead get FTTN. ”

      This is advice to the minister from NBN Co. and 3 independent consulting firms, it is not the libs saying.
      In the OMTM scenario, the FTTN footprint is 3.9m premises. the remaining 4.4m are FTTB/FTTdp and HFC.

      “How much is it going to cost to install FTTH in 2020 or 2024 or whenever, replacing FTTN anyway? Sounds like the extra ~$4500 per household is worth it!”

      Exhibit 4-4 says it will cost ~4bn less to upgrade in 2030.

    • But then people would continue paying money to private companies that earn profits for basically being monopolies, instead of the FTTH system where the money goes back to government, is used to pay off the lines, and after a 7% return is earned is used to lower prices.

      • “instead of the FTTH system where the money goes back to government, is used to pay off the lines, ”
        Isn’t that the same for all 6 scenarios?

    • Statistics dont lie. They just lend themselves to being massaged, so the truth better represents what you’re trying to get across.

  15. the ‘multi-technology mix’ NBN costing in that list needs to come with an asterisk * – as it assumes that cost on the basis that Telstra will hand over its copper for free. any charge there will affect those numbers. i also note it lists capex, id be interested in the differences in opex as well. if opex is larger for FTTN (if it turns out there really are more truck rolls required, higher maintenance costs etc) then again, the right hand column comes up in costs to the left hand one.

    if they want the HFC vendors to open wholesale those lines, you can pretty much guarantee the vendors will be asking for the money to make it happen, which you can tack on too… 3 or 4 years ago the idea of HFC wholesaling was brought up and both of the vendors said it would take some – i think it was hundreds of millions to do, and iirc, hinted that they would be asking the Govt for that if it was forced on them.

    yes the headline figure is more for FTTP, there. but given you are GETTING significantly more for the money, i again suggest all this kerfluffle because the Libs refuse to work with the Labor plan is hurting our future telcoms outcomes. its a rube goldberg machine, to make what we can already do with certain effort harder and with more work expended than needed for the same outcome. (look up the back scratcher machine, and so forth).

    • “yes the headline figure is more for FTTP, there.
      but given you are GETTING significantly more for the money,”

      Who is “you” and how much is “you” getting for whose money?

  16. I’m nearly 40. I guess my retirement present will be 25Mbps…What a fckn joke Turbull is.
    Where is Simon Hackett and his flappin white node pony now lol….
    Hope Malcolm trips on an unsafe pit and his tibia and fibia come up through his a-hole!

  17. “NBN Co’s Strategic Review has found that it will not be possible to deliver the Coalition’s stated policy goal of delivering broadband speeds of 25Mbps to all Australians by the end of 2016 or at the projected cost, “

    Told you so, told you so, told you so!

    Maybe next time you will listen when the ICT professionals in your audience tell you a politicians claims are pure BS as everything MT has said to date is being proven!!!

    PS, shock me be publishing this comment, I dare you!

  18. Nothing really needs to be said about this, it’s all there exactly as we have been saying… the initial NBN wasn’t perfect but it was, is and will continue to be, far and away the best option…

    So now we wait…

    I’m sure once the damage control spiel is delivered we will be blessed with the regrouped usual suspects and their lovely new list of highly plausible (ahem) reasons to keep justifying the cause/FttN.

    It will probably begin with…”well they”…

    :/ Amazing

  19. Looking at the PDF linked, particularly Table 0-1 (pg 17), I note the following comparing FTTP to the mix suggested:

    * Scenario 1 & 2, where we continue with FTTP have a CapEx of $43bn & $35bn, compared to $30bn for scenario 6. Not much difference in build cost there for a vastly different outcome.

    * Scenario 1 & 2 have been given estimated revenue of $10bn, while scenario 6 is given $18bn. I contend that this is nuts. Looking at what scenario 6 offers, I expect uptake to be less than 10% (which is all the UK got) since FTTN/HFC offer minimal benefit for those that can get ADSL. FTTP is such a huge upgrade from what people have (especially upload speeds) that I expect many more people will choose it (especially since they wouldn’t have many options really once the copper is disconnected). Looking at the premises passed by ’21 they are saying half as many passed, so FTTP would only need to be twice as popular to generate the same revenue if the prices are the same. Given that they (hopefully) can’t charge as much for slower access over FTTN/HFC then revenue should be even higher.

    Highlighting “Peak funding” here seems disingenuous, and however they came up with the revenue is highly questionable. I will keep reading, but expecting roughly twice as much revenue from a service that is vastly inferior doesn’t sound reasonable to me!

    • In a years time we’ll get another Strategic Review. It will feature a seventh scenario and it will look like this:

      Technology: Existing Technology
      Cost: $0
      Timeframe of delivery: Now

      And the new government ‘NBN’ policy will be, “And you get nothing, and YOU get nothing! Everybody gets NOTHING!” Oprah-style.

    • I presume you mean Table 0-2 on page 17. There’s a clever caveat there, Tim. The revenue is for FY2021, NOT total revenue to CY (completion year) which is FY2024 for Scenario 1. Using Exhibit 0-1 on page 12 of the Strategic Review (which compares NBN Co Corporate Plan 2012-15 to the Revised Outlook), plus the NBN Co Corporate Plan 2012-15 (page 71), and simple maths, the revenue in Scenario 1 (Revised Outlook) is $25b in FY2024.

      I haven’t had the time to look through the rest of the document to see if there are any such cost/revenue breakdowns for all of the scenarios, but Table 0-2 appears designed to be deliberately disingenuous.

    • “* Scenario 1 & 2, where we continue with FTTP have a CapEx of $43bn & $35bn, compared to $30bn for scenario 6. Not much difference in build cost there for a vastly different outcome.”

      The $43bn is capex to FY2021. Scenario 1 doesn;t complete until FY2025, at which time capex is $56bn.

      “* Scenario 1 & 2 have been given estimated revenue of $10bn, while scenario 6 is given $18bn. I contend that this is nuts. ”

      Again $10bn is revenue to FY2021 when scenario 1 has 4 more years to complete.
      Scenario 6 completes in FY2021.

      IRR and Date of first positive free cashflow are the direct comparisons. Scenario 6 has a 5.3% IRR, Scenario 1 is 2.5%. Scenario 6 goes cash flow positive in FY2022, Scenario 1 between FY2025 and FY2040.

  20. MT – Today we have provided our staged… strategic review. It’s not quite the $100b and 20 years to complete for FTTP so we adjusted our strategy in our staged review.

    Citizen – Ah Malcom a question. I live in an MDU in a HFC area. When will I get an upgrade…….
    …..

    MT – Next question.

  21. Keeping Rupert happy is proving to be a very expensive exercise.

    Would it be cheaper to keep Holden and chuck out Foxtel?

      • Correct. The revenue is cumulative revenue figures for FY2010-2021 – three years before the completion in the rollout of Scenario 1 (FY2024), and one year after the completion in the rollout of Scenario 6 (FY2020).

        It’s interesting to note the following though:
        The reported revenue for Scenario 1 -FY2021 is $10b. Based on simple maths, the revenue for Scenario 1 in -FY2024 is $25b. That means that in the 3 years it takes to complete the remainder of the rollout, the cumulative revenue is an additional $15b, compared to the initial $10b.
        MEANWHILE, revenues for Scenario 6 are a total of $18b, even to a year after its completion. In the final 3 years of its construction, Scenario 1 gets almost as much revenue as Scenario 6 does to a year after its completion.

        • “The reported revenue for Scenario 1 -FY2021 is $10b. Based on simple maths, the revenue for Scenario 1 in -FY2024 is $25b.”

          How did you work out $25b? NB: CY is Calendar Year. Scenario 1 completes in FY2025. Scenario 6 completes in FY2021

          “MEANWHILE, revenues for Scenario 6 are a total of $18b, even to a year after its completion. In the final 3 years of its construction, Scenario 1 gets almost as much revenue as Scenario 6 does to a year after its completion.”

          Yes. But on completion in FY2025, Scenario 1 has been going 14 years. Scenario 6 starts in FY2014 and completes in 5 years with $18bn cumulative revenue to FY2021 and $32bn less funding.

          More important than the revenue is the date of first positive free cashflow

          • Alternatively, simply see Exhibit 2-21 on page 56. Revenues for FY22-24 are 4.2, 5.0, 5.8 respectively.

            Exhibit 4-6 on page 102 suggests that steady state financial performances are incredibly similar between Scenarios 1 and 6: $6.6-7.5bn and $6.3-7.2bn. That the difference between the two is so small is highly questionable especially in light of the advice given by NBN Co to the incoming government on its policy (in short, because of competition, reduced CVC charges, and because higher value services are not available), and arguably self-inconsistent. How, with 30% of premises (in the HFC footprint) not directly serviced by NBN Co, can the difference in steady state revenues be so small? Is NBN Co planning to move to purchase or lease the HFC network? Is this considered in the Opex and Capex figures for Scenario 6? In fact, is the purchase or lease of the Telstra CAN (for FTTN) considered in the Opex and Capex figures for Scenario 6?

          • So I found the answer to my questions:

            Page 110:

            For FTTN/dp, potentially:
             Renegotiation of the Telstra DAs to include access to Telstra’s copper network, and the use of less Telstra pit, duct and other infrastructure by NBN Co (as well as for other changes discussed above). NBN Co might also consider pursuing an interim agreement with Telstra to allow an earlier start to FTTN construction activity, with the ACCC approval;

            For HFC, potentially:
             Renegotiation of both the Telstra DAs and Optus HFC Agreement to provide for access to the Telstra and/or Optus HFC network infrastructure (as determined by NBN Co after further consideration), and obtaining the ACCC approval for these changes;

            In other words, NBN Co assumes that they will have ownership/access to both Telstra CAN and Telstra/Optus HFC at no additional cost.

            The problem with this assumption is (as illustrated by Sortius):
            If this argument was to be tested for validity it would be as follows:

            If FTTP is being deployed, Telstra/Optus don’t need the CAN/HFC
            FTTN is being deployed
            / HFC is being used
            Therefore Telstra
            /Optus don’t need the CAN/HFC

            Or:

            If A then B
            C
            Therefore B

            The small differences in steady-state revenue appears to be based on the unrealistically conservative idea of:
            Reduced uptake of any services [higher levels of non-subscription].
            – Reduced uptake of higher-value services (e.g. few to no uptake of 100Mbps or higher services) [lower ARPU].
            This for ALL scenarios, such that the revenue is not limited by the service offerings (which would be limited by the technology that was rolled out). In other words, the Strategic Review assumes that very few or none would use the NBN differently under Scenario 1 or 2 than they would under Scenarios 3, 4, 5, or 6.

          • “The small differences in steady-state revenue appears to be based on the unrealistically conservative idea of:
            – Reduced uptake of any services [higher levels of non-subscription].
            – Reduced uptake of higher-value services (e.g. few to no uptake of 100Mbps or higher services) [lower ARPU]. This for ALL scenarios, such that the revenue is not limited by the service offerings (which would be limited by the technology that was rolled out). In other words, the Strategic Review assumes that very few or none would use the NBN differently under Scenario 1 or 2 than they would under Scenarios 3, 4, 5, or 6.”

            This is explained at length on Pg. 78, Section 3.1.1 and elsewhere. The section cites references, data and the combined experience and expertise of NBN Co. and 3 leading international consulting firms. You may have a different opinion but without substantiating data, references, reputation or experience, your anonymous opinion is just your anonymous opinion, whereas NBN Co. and the 3 leading consulting firms have international reputations and credibility and have backed up their conclusions with cited references and data. And their conclusions echo warnings in the Lazard and McKinley reports from 2010-2011.

          • So basically they assume that there will be no extra revenue from Pay TV
            No revenue from business paying for better speeds.
            No revenue due to other OTT services
            No more revenue as people on Fibre download more data based on real world data.

            You think that assuming that there is no difference is correct?

          • “So basically they assume that there will be no extra revenue from Pay TV
            No revenue from business paying for better speeds.
            No revenue due to other OTT services
            No more revenue as people on Fibre download more data based on real world data.
            You think that assuming that there is no difference is correct?”

            If you have better data and references than these consultants, please do put it up.

          • The references on that page are quite selective.

            “This is consistent with the fact that only a small proportion of consumers in Western countries have so far taken up plans offering greater than 50Mbps (11 percent or less in 2012), and penetration of greater than 50Mbps plans is expected to remain less than 20 percent by 2017 in most Western countries.[73]”

            It’s very easy to look for evidence to meet a certain conclusion, you just need to pick and choose.

            Critical analysis involves looking at the evidence, and looking at alternative evidence, and testing the assumptions. It does not involve assuming the author has done their due diligence or that they are not trying to manipulate the facts. There is strong reason to suspect that the review is designed to lead to a certain outcome or tell a certain story (and there is evidence within the document and not just without), which means that a critical evaluation of the strategic review (if you will, a review of the strategic review) is necessary. Of course, I and others will continue to search for evidence for and against that suspicion.

            Unfortunately, much of the rigour that has been applied towards taking apart the last Corporate Plan and the previous government’s policy is not evident in what is shown of Optimised MTM, at least in this strategic review. The strategic review is at best a high-level evaluation, and cannot credibly be taken as pure fact. Of course, we will have to wait for the new Corporate Plan.

          • “we will have to wait for the new Corporate Plan”

            Absolutely. The latter part of the review is essentially an options analysis and recommendation prepared by NBN Co. with expert input. The review analysed 6 scenarios and the recommended scenario is at odds with both coalition and labor policy. The government now has the choice of either ignoring the recommendation or heeding the advice. Either way, the early part of the review shows in excruciating and forensic detail the deep financial, scheduling and other problems with the current strategy. It also shows that deferring a potential upgrade to FTTP will cost less in NPV than rolling out FTTP now, which gives NBN Co the flexibility to adapt over time and to adjust its technology mix dynamically to leverage future technological improvements to reflect changes in customer demands.and behaviour.

            “It’s very easy to look for evidence to meet a certain conclusion, you just need to pick and choose.
            Critical analysis involves looking at the evidence, and looking at alternative evidence, and testing the assumptions. ”

            Very true.However to reach an alternative conclusion needs, as you rightly said, alternative evidence. Apparently NBN Co. and its expert inputs were unable to find alternative evidence since the evidence cited is fairly exhaustive. Perhaps it missed something or perhaps in the future alternative evidence may emerge, at which point NBN Co. will have the flexibility to adapt at lesser cost. But of course, if there is credible alternative evidence now that has not been considered, we need to bring it to the table, as there is a window until the government finally determines its policy response to NBN Co.’s recommendations.

            “Of course, I and others will continue to search for evidence for and against that suspicion.”

            Perfect. that’s the right approach. Suspicions need to be substantiated by evidence.

            “and the previous government’s policy is not evident in what is shown of Optimised MTM, at least in this strategic review.”

            I think we are looking at 2 different approaches to the same problem, The previous government’s policy specified a technology (FTTP to 93% in 10 years) and formed NBN Co. to execute this vision. The current government has specified a minimum service level (>50Mbps by 2019 with future upgrade paths) and asked NBN Co. to review and analyse the options for achieving that service level. As this is a technology site, the preference of the majority is naturally for the technology-centric approach. But we are in the minority and for most Australians this is a peripheral issue, as evidenced by the explosive growth in mobile wireless subscriptions in the last 3 years, even as fixed line growth has stagnated and fxed-line revenues have declined

          • “Absolutely. The latter part of the review is essentially an options analysis and recommendation prepared by NBN Co. with expert input. The review analysed 6 scenarios and the recommended scenario is at odds with both coalition and labor policy. The government now has the choice of either ignoring the recommendation or heeding the advice. Either way, the early part of the review shows in excruciating and forensic detail the deep financial, scheduling and other problems with the current strategy. It also shows that deferring a potential upgrade to FTTP will cost less in NPV than rolling out FTTP now, which gives NBN Co the flexibility to adapt over time and to adjust its technology mix dynamically to leverage future technological improvements to reflect changes in customer demands and behaviour.”

            Almost all of what I have read from experts suggests that FTTP is cheaper in the long run to build now. Even the report admits that when using a discount rate that is common in the Telco industry (10%+), FTTP will be cheaper in NPV; but the review instead used a lower discount rate of 8% (for a whopping saving of $2bn in NPV). Of course, it’s possible that the NBN needs no such higher discount rate, but that’s a little over my head, so you’ll have to explain that to me. I feel that the strategic review fails in that regard too, as it does not make a broad comparison of the different scenarios that includes the cost of upgrade. Taking a long-term view, like the strategic review is expected to, that needs to be included in any comparison of different rollout methods and technology mixes.

            Scenario 6 is rather unique, as well, in that it’s clear that it was designed to be the cheapest/fastest option (hence the term “optimised”), that is, they effectively worked backwards to design Scenario 6 – this is a perfectly legitimate approach, however… elsewhere in the document it is presented as compared to other scenarios and it is implied that it was chosen from among the various scenarios, rather than the scenario being deliberately designed. The presentation is inconsistent.

            Additionally, Scenario 6, with its greater number of known unknowns (use of several vastly different technologies, state of the copper, line length, degree and cost of remediation, lease/purchase cost to access copper and HFC networks, etc.), suggests that there is a far greater variance in the timeframes and financials (and greater risk) to deliver policy objectives than for Scenario 2 for example – however, this does not appear to have been acknowledged, at least in the parts of the document that I have read.

            Furthermore, Scenario 6’s financial viability appears to be based on the assurance that existing contracts with Telstra and Optus will be renegotiated for access to the copper and HFC networks at no additional cost. Excuse my scepticism, but I’ll believe that when I see it.

            “Very true. However to reach an alternative conclusion needs, as you rightly said, alternative evidence. Apparently NBN Co. and its expert inputs were unable to find alternative evidence since the evidence cited is fairly exhaustive. Perhaps it missed something or perhaps in the future alternative evidence may emerge, at which point NBN Co. will have the flexibility to adapt at lesser cost. But of course, if there is credible alternative evidence now that has not been considered, we need to bring it to the table, as there is a window until the government finally determines its policy response to NBN Co.’s recommendations.”

            I think the key word there is “Apparently”. There is evidence that this review (or at least its presentation) has a highly political influence – for instance, the redactions of build costs for various technologies in Australia, hidden behind the excuse of CIC. Another example is the unusual choice of comparing revenues and other financial performances at FY2021, a static date which is not equivalent among the different rollout scenarios. What value is such a comparison, other than to put one scenario in the most positive light?

            “Perfect. that’s the right approach. Suspicions need to be substantiated by evidence.”

            I am trying.

            ““and the previous government’s policy is not evident in what is shown of Optimised MTM, at least in this strategic review.”

            I think we are looking at 2 different approaches to the same problem, The previous government’s policy specified a technology (FTTP to 93% in 10 years) and formed NBN Co. to execute this vision. The current government has specified a minimum service level (>50Mbps by 2019 with future upgrade paths) and asked NBN Co. to review and analyse the options for achieving that service level. As this is a technology site, the preference of the majority is naturally for the technology-centric approach. But we are in the minority and for most Australians this is a peripheral issue, as evidenced by the explosive growth in mobile wireless subscriptions in the last 3 years, even as fixed line growth has stagnated and fxed-line revenues have declined”

            You misunderstood my statement. My statement was that: the same amount of rigour (as has been applied to the last corporate plan and the previous government’s policy) has not been applied to Optimised MTM. While we know all of the assumptions and failings of the former corporate plan, we don’t know a commensurate level of detail about Optimised MTM, despite a the work clearly having been done on it. I would have liked to have seen, among other things, financial figures (revenue, opex, capex) year-to-year for Optimised MTM, akin to Exhibit 2-21 on page 56. Unfortunately those details were not available in the strategic review (even though they exist), which is why we will have to wait until the new Corporate Plan, which is more likely to be more accurate anyway. But it is unfortunate it had to be this way.

            To address your comment, however, fixed-line growth and revenues have stagnated due to an inadequate supply. The fixed-line network is at its limit. There are a huge number of people who can’t get any services at all, and an even bigger number of people who can’t get the level of service they want. RIM hell, no ports at the exchange, deteriorated copper, long line lengths, can’t get HFC connected, HFC too expensive, Telstra too expensive, etc. The other thing is, I’m not sure how the NBN being a peripheral political issue has any significance on their consumer habits. The number of fixed-line connections have not fallen, instead they’ve continued to grow (albeit slowly). If there were enough supply, it will have grown much faster – unless your suggestion is that just about all new premises are going wireless-only? What mechanism would lead to such a unique consumption pattern? However, as some commentators have observed, the uncertainty around the NBN (due in large part to its partisan politicisation instead of bipartisan support) has significantly hamstrung investment in fixed-line telecommunications. It is no surprise, then, that there is an inadequate supply of fixed-line services.

            The worst part of the Coalition policy is that it doesn’t solve the primary issue that Labor’s NBN was supposed to – equitable access to world-class broadband. The poor reliability of copper connections and the poor peak speeds on HFC, not to mention upload speeds, means that those services will be significantly inferior to a fibre service. Are people on FTTN/Fttdp/FTTB/HFC going to be paying less than those on FTTP? Even if they want to pay more for a better service but can’t? Are those lucky few who are able to afford it going to have to stump up thousands of dollars for FoD, even while there are millions of others who will get FTTP connected for free? This multi-technology mix only guarantees (to an extent) better download speeds.

            And if Malcolm Turnbull goes ahead with his pre-election commitment of re-opening infrastructure competition… well, it’ll be a complete financial disaster for NBN Co, and a complete disaster for consumers. It’ll be little different to what we have today – a few big players who own the infrastructure and provide the retail service, some consumers simply luckier than others, and Australia as a whole continuing to fall behind the rest of the world.

          • “That’s a disingenuous comparison. Not even the strategic review compares them like that.”

            The strategic review Table 0-2 has Cumulative revenue FY11-21. Of course it compares them like that.
            What on earth do you think Cumulative revenue FY11-21 means, if not cumulative revenue for each scenario between the years FY2011 and FY2021.

            “Why would you even do that? Completely blows your credibility.”

            Blows your credibility like CY = completion year?
            “The revenue is for FY2021, NOT total revenue to CY (completion year) “

          • Just a few questions:

            Or you employed full time or contract?
            What are your working hours?
            Do you take a break for Christmas?
            How much are you paid to post here?

          • Nothing to say about Exhibit 2-16, Exhibit 2-17, Exhibit 2-18 or Exhibit 2.19 then?

            For example, “The Independent Assessment highlighted that the financial performance of NBN Co to 30 September 2013 varied to the Corporate Plan. These variances are largely due to the significant delays in the network deployment. …The variance in overall financial performance is significantly less than the proportionate underachievement in network deployment. The short term financial improvement will be offset by longer term expenditure in excess of the Corporate Plan.” resulting in a $32bn blow-out in funding and 4 year blow-out in schedule?

            “Just a few questions:”
            You first. What proportion of your income is derived from the taxpayer e.g. do you work or contract for the government or a GBE?

          • Out with the old FttN policy and in with the new… yet they are both now right and FttP/NBN still wrong…

            :/ Amazing

          • I admit my mistake when it comes to Calendar Year. Thank you for your correction.

            Disregarding that, your responses are clearly partisan. You are comparing 5 years to 14 years. That is a difference of 9 years. That is a disingenuous comparison, and the strategic review does not make that comparison. The difference is 4 years.

          • “Disregarding that, your responses are clearly partisan.”

            You’re right. I am partisan to evidence and I think government’s first priority should be to get the majority of Australians currently on <5Mbps to current world standards as soon as possible. I supported labor's policy to achieve this in 2007 and 2010 and switched support to coalition policy in 2013 as there was evidence that the previous policy was failing to deliver. The review provides evidence that even the coalition policy would not achieve its objective, so with regard to the extensive evidence in the review I am now partisan to its recommendation.

            "You are comparing 5 years to 14 years. That is a difference of 9 years. That is a disingenuous comparison, and the strategic review does not make that comparison. The difference is 4 years."

            You are right. It is a disingeuous comparison. Any point-in-time comparisons of revenue, or cost between projects with different start dates and durations are disingenuous and can be ignored. Given all scenarios meet the minimum service level, the only two important rows in Table 0-2 are at the top (completion date) and the bottom (IRR). IRR is used to rank several prospective projects a firm is considering – the higher a project's IRR, the more desirable it is to undertake the project. The project with the highest IRR is considered the best and undertaken first – although in this case, even the 5.3% IRR of Scenario 6 would be too low to proceed commercially, so private debt funding will be a problem.

          • “I supported labor’s policy to achieve this in 2007 and 2010 and switched support to coalition policy in 2013 as there was evidence that the previous policy was failing to deliver.”

            I’d suggest PolitiFact would rate this comment as false-to pants on fire…

          • Steve,

            IRR is a business concept. A GBE does not actually require an IRR. It is considered bad practice to maintain a GBE if it does not at least break even, but it isn’t illegal or unethical, especially if the GBE provides indirect economic growth.

            Basing the entire decision about the NBN on IRR alone is foolish and only confirms the idea that the NBN would be based on ideology, not what is best for the country.

            Take this point for example- assuming the original NBN was going to cost $73 billion (and this for some reason is because revenue drops by over 50% from the Corporate Plan, while only taking an extra 3 years to build….) and assuming the MMT would cost $41 billion (and somehow gain 80% more revenue over full FTTP only being completed 3 years earlier, but with only 40% of the capacity…), that would leave $32 billion worth of economic impact over 15 years to gain to make the original NBN a NPV gain. (assuming absolutely 0 was paid back under either plan, which is an incorrect assumption, but even so). About $2 billion a year.

            The review suggests the NPV difference between upgrading to FTTP now compared with later is $2 billion in favour of the MMT for the 3.6 million that wouldn’t get it (about 50% of premises). That is LESS than $300 million a year between when FTTP to 93% would be finished (2024) and when the MMT would likely be completely upgraded (2030). And I’m sorry, but if you believe having a uniform, ubiquitous delivery network & all its’ advantages for 6 years extra cannot possibly produce a measly $300 million a year of economic gain, I think you need to test whether your evidence review skills are truly unbiased. Saving half of all business in Australia that uses BB (about 25% of 2 million) 100 hours a year (or about 20 mins a day across the whole business) thanks to higher download/upload capability is the equivalent of $2.5 billion of saved productivity. PER YEAR. That’s just time savings for businesses.

            I am well aware indirect economic gain does not equal actual money spent by government (it’s about $1.40 per dollar I believe). But any CBA that saw that cost compared to benefit would clearly recommend in favour of upfront costs to produce several hundred % extra indirect economic gain over 15 years.

            The review, if you read it as a whole document, carefully looking at the language of each section, is clearly written to favour any approach that is not the current one. It spends 40 pages describing how badly the current rollout is failing (not that I’m suggesting it’s all roses), several pages showing overseas examples of takeup (irrelevant as none are monopolies), premises passed per month (not a fair comparison thanks to completely different rollout models) and several other variables whose point can be illustrated simply by looking at the note next to the take-up rate of BT in the table on page 77 (in other words- we know this takeup is bad and doesn’t favour our point….but here’s the excuse why!). And then only briefly mentions in passing nearly $10 billion could be saved over the life of a full FTTP approach using recommendations NBNCo. made 6 months ago (cable diameter, more aerial cable, fewer fibres per premises etc.)

            The review was controlled and largely written by the consultants, with minimal input except raw data from NBNCo. That much is very clear. And this is against Turnbull’s express promise it wouldn’t be:

            http://www.malcolmturnbull.com.au/media/announcement-of-new-nbn-board-and-launch-of-nbn-strategic-review

            So that is the first thing that we’ve got to do. That is the most urgent priority, and the reason that we’ve asked the board to do it, or the company to do it, and of course it will be substantially a new board, and there will be a lot of new management there as well no doubt, is that we want the company to own it. You see, in the past, this project has been riddled with politics, and the company has been under pressure to deliver numbers and answers and documents that met the political priority of the previous government.

            And the reason the company should undertake this is because we want them to own it. See, you can – there’s any number of consulting firms you can hire, and the NBN Co’s hired most of them over the last four years, but you can hire a consulting firm, they’ll come in and write a report. But the directors, the executives may have no sense of ownership of it. They may – it’s just something that descended from outside.

            It’s really important that the directors and the management own this. They should get advice from experts, you know, inside the company, outside the company – sure. But they have got to, at the end of the day, be able to say to the Government, as shareholder, this is where we honestly, genuinely, objectively, soberly believe this project is right now. This is where it was going to go, under the previous policy, and here are some options to have a more cost-effective outcome.

            The review is exactly what Turnbull wanted it to be. The only reason his $93 billion NBN didn’t make it in is he couldn’t even convince paid consultants to stretch that far.

          • “Take this point for example- assuming the original NBN was going to cost $73 billion (and this for some reason is because revenue drops by over 50% from the Corporate Plan, while only taking an extra 3 years to build….) ”
            Pg 58-59 explains that this drop in FY2011-21 cumulative revenue of $13.5bn consists of $11.6bn due to the 3-year delay, and the remaining $1,9bn due to lower than assumed wholesale prices for residential broadband services, higher than assumed residential wireless-only and third-party fibre substitution, lower business take-up than the 100% assumed due to third-party fibre substitution, a double-counting of government, and lower than assumed prices and take-up of multicast due to lack of content. All of these seem quite credible.

            “and assuming the MMT would cost $41 billion (and somehow gain 80% more revenue over full FTTP only being completed 3 years earlier, but with only 40% of the capacity…)”
            See my point above. (also, please explain what you mean by “with only 40% of the capacity”?)

            “The review suggests the NPV difference between upgrading to FTTP now compared with later is $2 billion in favour of the MMT for the 3.6 million that wouldn’t get it (about 50% of premises).”

            Actually the review suggests the NPV difference between upgrading to FTTP now compared with 2030 is $4bn in favour of the MMT

            ” That is LESS than $300 million a year between when FTTP to 93% would be finished (2024) and when the MMT would likely be completely upgraded (2030)”.

            Sorry. it’s actually $4bn/6 years = $667 million a year

            “Saving half of all business in Australia that uses BB (about 25% of 2 million) 100 hours a year (or about 20 mins a day across the whole business) thanks to higher download/upload capability is the equivalent of $2.5 billion of saved productivity. PER YEAR. That’s just time savings for businesses.”

            Four issues with the above argument:
            1. The 26% FTTP footprint in MMT already covers most businesses by covering all business districts, industrial and commercial precincts and parks, schools, universities, hospitals, medical centres and high revenue potential areas.
            2. Fibre-on-demand will be available on a co-payment basis and businesses that need it will be able to cost-justify it
            3. Large businesses are already served by third-party fibre and are not dependent on the NBN
            4. For the few remaining very small businesses in residential precincts not covered by the above, any potential benefits from 6 years of FTTP are cancelled by the 8-year delay in getting 25-100Mbps BB, 5-year delay in getting 50-100Mbps BB and if the 250Mbps upgrade path were followed, the difference during these six years would be 250Mbps vs 1000Mbps.

            Given the above the business productivity improvement between FTTP now vs. FTTP upgrade in 2030 would be minimal.

            So the productivity question you posed really relates to households. Given the review found that in 2023 the median UK household would require a maximum download speed of 19Mbps and the top 1% of households would need 40Mbps, and that higher-speed household demand is exclusively for streaming video/TV, the question is this: do you see household economic productivity increasing by $667m per year and reflected in GDP? Personally I can only see household productivity decreasing.

            “several pages showing overseas examples of takeup (irrelevant as none are monopolies)”
            Why are overseas examples “irrelevant as none are monopolies”? Exhibit 3-1 makes the following important points:
            1. Fixed-line broadband take-up across all BB technologies – FTTP/FTTB/FTTN/HFC is around 30%.
            2. FTTP does not increase take-up rates above other technologies, even many years after roll-out in countries like Japan and Korea
            3. Yet NBN Co. had assumed 100% business and 70% residential take-up, more than double the rate anywhere else in the world
            4. Even among this low take-up, just 11% choose plans >50Mbps

            This suggests a very poor FTTP business-case.

            “whose point can be illustrated simply by looking at the note next to the take-up rate of BT in the table on page 77 (in other words- we know this takeup is bad and doesn’t favour our point….but here’s the excuse why!).”
            Objectively it seems like the only point in the low BT take-up is that demand for fixed-line BB among the great majority of residential customers world-wide, especially in the past 3 years, is galloping west into the sunset.

            “IRR is a business concept. A GBE does not actually require an IRR. Basing the entire decision about the NBN on IRR alone is foolish”
            Basing the NBN strategy on business concepts is critical to keeping the NBN off-budget. There are several key conditions for classifying a government-owned entity as a GBE viz. it must operate as a commercial business, there must be an audited plan for the recovery of the government investment at near-commercial rates within the planned time-frame, it must earn its revenue by charging market prices, etc. NBN’s GBE status is not assured or permanent. Questions about its commercial viability could cause it to lose its GBE status, which would put the government’s investment back in-budget.

            “and only confirms the idea that the NBN would be based on ideology, not what is best for the country.”
            Okay, you tried to make the case that FTTP is best for the country on the basis of business productivity. But businesses and institutions are covered by FTTP in all scenarios. So you need to make the case that increasing household video streaming capacity from 50/100/250Mbps to 1000Mbps would increase household economic productivity to the tune of $667 million each year between 2025 to 2030. Over to you.

          • I am sorry to have lashed out like that. After the fifth comment or so dealing with what appears to be blind faith in a certain view or an irrational and disingenuous argument, I can get rather testy. I need to cut back on my commenting. ;) It’s fine if you’ve reached that conclusion, but, if your mind is actually open to alternatives, perhaps you should re-examine the basis for your conclusion.

            I believe seven_tech has addressed all of the main arguments better than I could have, so you should direct your response to him.

            The review is biased, as many suspected it would be (though significantly more restrained than many of us expected). That’s not in the raw data, but in how it’s presented; that’s not in the assumptions, but in the choice of those assumptions; that’s not in the evidence, but in the selection of that evidence.

            That the review heavily echoes Turnbull’s statements and the Coalition policy, especially in the choice of international examples, and even in much of the language that is used, must mean that Turnbull was prophetic AND somehow knew much more than NBN Co did about its own operation, or it means that the review is much less biased than you assume it is when you make your conclusion in support of its recommendation. “Never hold an inquiry unless you know what the outcome will be” – this is a piece of advice Turnbull has grasped with both hands.

    • “Why is revenue less for FTTP than for FTTN? Surely it should be equal/more for FTTP?”

      Revenue is shown for 10 years cumulative FY2011-2021. As Scenario 1 doesn’t complete rollout until FY2025 and Scenario completes in FY2024, whereas Scenario 6 completes in FY 2021. Steady state revenues are slightly higher for the FTTP scenarios.

      • The difference of $15b in the final 3 years of the rollout of Scenario 1 suggest that it is much more than “slightly higher” revenues between FTTN and FTTP.

        See Exhibit 2-21 on page 56. Revenues are 5.8b per year in FY24 and climbing.

        • “See Exhibit 2-21 on page 56. Revenues are 5.8b per year in FY24 and climbing.”

          Of course revenues are climbing in the final years of the roll-out as the roll-out rate ramps up.This surprises you?

          Exhibit 4-6 shows steady-state revenue @2028 in Scenario 1 is $300m higher than Scenario 6.

          The bottom line is that IRR for Scenario 6 is 114% Scenario 1.

          • Steve this:

            The bottom line is that IRR for Scenario 6 is 114% Scenario 1.

            Is based solely on the timing of the IRR. IRR to 2028 might be 114% of scenario 1. Take that out to 2040 and I think you’ll find Scenario 1 would eclipse Scenario 6 by a substnatial margin.

            That’s the problem with this debate- it isn’t “what is best for the country?” it is “how fast can we do this and how cheap to get it out the way?” The Internet is not going to go away. We are only going to continue to integrate it and connectivity in our lives. Believing “good enough” is ok is not the Australia I want to live in.

          • Hi seven_tech, your calm responses are welcome amongst the hysterical comments here.

            “The bottom line is that IRR for Scenario 6 is 114% Scenario 1.
            Is based solely on the timing of the IRR. IRR to 2028 might be 114% of scenario 1. Take that out to 2040 and I think you’ll find Scenario 1 would eclipse Scenario 6 by a substnatial margin.”

            Sorry seven_tech. But the review does take it out to 2040. The IRR quoted is IRR (FY10-40). The IRR FY10-40 shows that Scenario 6 is 144% higher than Scenario 1.

            “That’s the problem with this debate- it isn’t “what is best for the country?” it is “how fast can we do this and how cheap to get it out the way?” The Internet is not going to go away. We are only going to continue to integrate it and connectivity in our lives. Believing “good enough” is ok is not the Australia I want to live in.”

            I think the review systematically and in great detail makes the case that “the recommended optimised multi-technology mix approach provides NBN Co with the flexibility to adapt over time. It allows NBN Co to adjust its technology mix dynamically to leverage future technological improvements across all types of networks (copper, fibre and HFC) and to reflect changes in customer demands.” The review backs each of its conclusions with extensive references and data and of course the experience, expertise and reputations of NBN Co. and 3 respected international consulting firms. The review also makes the case that an upgrade path to FTTP is cheaper and less risky than rolling FTTP now.

          • Unfortunately the review does not appear to include the cost and timing of upgrades to the infrastructure in its comparisons of the various scenarios. I understand that the numbers and the assumptions are there deep in the text, but perhaps you might develop a comparison for us that includes the cost of infrastructure upgrades? It is, after all, only fair to include the cost of infrastructure upgrades if we are to compare the different scenarios on a long-term basis. Supposedly there is a saving in net present value at an 8% discount rate of upgrading to FTTP later, so it is curious why it has not been presented in the comparison.

          • Of course the correspondences are hysterical… because no one can actually believe the hypocrisy you are displaying…

            After all of your blind political faith in the governments broadband policy April 2013 and even having seen it all unravel before your very eyes in the last couple of days… not able to meet targets or the budget, the very things you derided without mercy the previous govt/NBNCo (unlike the current NBNCo/govt, who failed before they even started, at least did something, in facts lots and had justifiable reasons for missing targets) you still refuse to deride the current govt. as you did the previous mob.

            In fact you still talk up their FttN (Fuck-up to the Nation) plan…

            :/ Amazing

          • Why do you choose to misrepresent my position?

            What we were discussing is: the last 3 years in the Scenario 1 rollout is estimated to produce $15b in revenue. The entire rollout of Scenario 6 is estimated to produce $18b in revenue. From those numbers alone, it suggests that FTTP produces significantly more revenue than MTM.

            Of course, the steady-state revenues reach a different conclusion, but I suspect that MTM revenues are overestimated and FTTP revenues are underestimated. As far as I know (perhaps you can point me to where I might find it in the document) we don’t have a view of the modelling and the assumptions that underpin that modelling, so we can’t actually test the assumptions and their treatment of it.

            What I am curious about is how
            a) FTTN can produce almost the same revenues in MTM as FTTP, particularly how the revenue ramps up to its steady state position, and
            b) i) HFC access does not appear to adversely affect the Opex or Capex figures for MTM (assuming NBN Co lease or purchase the HFC networks and offer services over it and NBN Co earns revenue), or
            b) ii) HFC access does not appear to adversely affect the revenue figures for MTM (assuming Optus and Telstra’s networks are made open-access, and they offer services over it and Optus and Telstra earns revenue)

            As you are no doubt more familiar with the Strategic Review Report by now, perhaps you can help me answer those questions, steve?

          • “Why do you choose to misrepresent my position?”

            Because, those who have little facts to back their, ergo, baseless arguments, need to introduce the strawman Relim.

            This gives them a base to pathetically argue from, rather than trying to unsuccessfully argue against the facts.

            Note I said argue, not correspond, because they aren’t here to correspond for what is the best approach, they are here to push their agenda…

            Pitiful isn’t it…!

          • “Why do you choose to misrepresent my position?”
            Sorry. If I misrepresented your position it was a misunderstanding, my apologies.

            “What we were discussing is: the last 3 years in the Scenario 1 rollout is estimated to produce $15b in revenue.”
            You said you estimated the $15bn using simple maths. I can’t see how it is possible to estimate revenue in the last 3 years from the data in the report and without the modelling tools and parameters used in the review. The best you can do is guess.

            “The entire rollout of Scenario 6 is estimated to produce $18b in revenue.”
            Just as we don’t know the revenue during roll-out for Scenario 1, we don’t know it for Scenario 6, because Scenario 6 completes roll-out 6-18 months earlier than FY2021. We can guess it might be around $11bn after subtracting one year of steady-state revenue but again that is just a guess, not even an estimate.

            “From those numbers alone, it suggests that FTTP produces significantly more revenue than MTM”
            The FTTP number is a guess. The MTM number is another guess. All we know is that cumulative FY11-21 revenue is $10bn vs. $18bn, but MTM has had 6-18 months of steady-state revenue at this point. i.e. we don’t know enough to make any suggestions, and comparing two guesses is meaningless.

            “As far as I know (perhaps you can point me to where I might find it in the document) we don’t have a view of the modelling and the assumptions that underpin that modelling, so we can’t actually test the assumptions and their treatment of it.”
            Section 2.5.1 has the assumptions for Scenarios 1 and 2. Assumptions for Scenario 6 are in Sections 4.2, 4.3, 4.4 and 4.5.

            “What I am curious about is how a) FTTN can produce almost the same revenues in MTM as FTTP, particularly how the revenue ramps up to its steady state position, and”
            We don’t know revenue during roll-out for any scenario and we don’t know that FTTN produces the same revenues in MTM as FTTP during roll-out. This is speculation. However, pg. 103 has the following: “Scenario 6 will provide a substantially faster revenue uptake than described in section 2, leading to cumulative revenues over FY11-21 of ~$18 billion. This is ~$7-8 billion more than in the Revised Outlook scenario. As shown in the exhibit below, revenues in the outer years will be up to $400-500 million lower due to lower revenue realisation on certain products in areas with FTTN and HFC.”

            “b) i) HFC access does not appear to adversely affect the Opex or Capex figures for MTM (assuming NBN Co lease or purchase the HFC networks and offer services over it and NBN Co earns revenue), or”
            How can you know this? There is no breakdown of Capex or Opex by technology.

            “b) ii) HFC access does not appear to adversely affect the revenue figures for MTM (assuming Optus and Telstra’s networks are made open-access, and they offer services over it and Optus and Telstra earns revenue)”
            Why would it? The service plans upto 100Mbps would be the same across technologies. FTTP steady state revenue is $300 million p.a. higher, accounting for revenue from the 100Mbps+ plans.

          • Ah. Relim, I just worked out how you estimated $15bn revenue in the last 3 years rollout of FTTP. Sorry, bit slow .

            Relim: “What we were discussing is: the last 3 years in the Scenario 1 rollout is estimated to produce $15b in revenue. The entire rollout of Scenario 6 is estimated to produce $18b in revenue. From those numbers alone, it suggests that FTTP produces significantly more revenue than MTM.”

            Okay. Let me try to answer your question better.
            MTM roll-out is FY15-CY20 i.e. 6.5 years. The FTTP rollout is FY15-FY24 i.e. 10 years.
            MTM CR (Cumulative revenue) to FY2020 is $18bn. MTM Av. steady-state revenue is $6.75. So MTM CR to CY20 is 18-6.75/2 = $14.6bn

            FTTP CR to FY2024 is $25bn

            So MTM average revenue per year of roll-out is $14.6/6.5 = $2.24bn
            FTTP average revenue per year of roll-out is $25/10 = $2.5bn

            So the difference between the 2 is ~0.26bn per year, which is consistent with the ~$0.3bn per year difference in steady-state revenue.

            Of course, as stated on Pg. 103, “Scenario 6 will provide a substantially faster revenue uptake than described in section 2 (FTTP) ….revenues in the outer years will be up to $400-500 million lower due to lower revenue realisation on certain products in areas with FTTN and HFC.” i.e. MTM revenue uptake is higher in earlier years of the roll-out and lower towards the end of the roll-out. In contrast, FTTP revenue uptake is low in earlier years of the roll-out and high towards the end of the roll-out. But in the end, they cancel each other out and av. revenue per year of roll-out is consistent with the difference in steady-state revenue.

            So you can’t compare revenue during the final 3 years of the FTTP roll-out with revenue during the whole MTM roll-out because of the different revenue take-up rates.

  22. At this point I really want the Coalition to cancel their NBN. As proposed with its price tag, it is a true white elephant. At what point will these arsehats have a serious conversation about international competitiveness and the usefulness of significant increases in upload speeds……..

    Actually, what I really want is for them to stop dicking around with politics and build a useful national comms network. That’s very much in fantasy territory though.

  23. According to ITnews “FTTN deployment is expected to start in the second half of calendar year 2015, according to the review. Work will start “with a small trial and then scale up to full rollout speed by early calendar year 2018″.”

    this makes 2016 a fairly important election as the fttn roll will be in its infancy. it seems there is leeway for changes yet?

    oh, and “After that[2018], fibre will be reserved for greenfields areas and “fibre-on-demand” — which will allow users to pay for last-mile fibre connections.” despite MT saying it ultimately is the end point, its got a curiously short shelf life?

    • Lol so the full rollout won’t even start until just 3 years before FTTH was scheduled to be finished. Nice. I can only imagine what it will look like to the rest of the world when Australia embarks on a major FTTN project in 5 years. The technology will be even more outdated then.

  24. Wow. Amazing post Renai. This is the reason I come to this site. You put your heart and soul into this industry, you are fair and factual, and you give everyone the benefit of the doubt. You have given Turnbull every opportunity to come clean, provide basic answers to questions asked of him, and given him time to deliver on his promises. But let’s be honest – he has treated you, FTTP supporters, and Delimiter’s readers with nothing but contempt.

    This watered down network with total disregard for HFC areas is an utter disgrace. How dare Turnbull attempt to blame Labor for his future failure to deliver on a basic election promise!

    That’s the way the coalition has operated from day one though – Say one thing to win the election, sneakily go back on your word, keep everything as hush as possible, and then blame the broken promises on unexpected issues you’ve inherited from Labor. Really classy stuff!

    Personally I don’t think the apology was necessary Renai, as I think it was wise that you showed respect, and gave Turnbull the opportunity to deliver on the things he said. However it is awesome to see you now publicly draw the same conclusion a lot of us already had arrived at – that Turnbull was never serious on delivering the NBN. Anyone closely following the industry had a strong suspicion that the coalition’s plan was setup to fail, and that Abbott and his coalition buddies were truly intent on destroying the NBN, but up until the results of the review we really didn’t have concrete evidence that it was doomed to fail. Now everything is out, and its clear as day that the NBN was already in the process of being destroyed, the moment the coalition were sworn into office.

    Look forward to seeing how you approach Turnbull’s statements from now on.

  25. What concerns me now is that the Strategic Review is evidently designed, through its assumptions, its redactions and its use of selective information (for example, cumulative revenue figures for FY2021), to rubbish the old Corporate Plan, and put FTTN in a more favourable light.

    But it’s one thing to rubbish the old Corporate Plan, it’s quite another to rubbish the future of Australia’s telecommunications. I would rather “Optimised MTM” (read: partial rollout) not proceed, and someone less short-sighted pick up where we left off. Or give me Scenario 2! Even scenario 4! Where is the logic? Where is the logic in actually physically building something you know will be a mess that is built on unfair assumptions?

    People expected that the Strategic Review would lead to a pre-determined outcome, and it has. People expected that the Coalition would backflip on its promises, and it has.

    Page 89 is the important HFC stuff.

    Page 100 is important. It details upgrade paths for those in the FTTN, FTTdp and HFC footprints. The best part is Exhibit 4-4: Path to 100Mbps download: Upgrading the 3.6m premises on FTTN to FTTdp needs to take place in FY2020. Compare: Scenario 6 (Optimised Multi-Technology Mix, including FTTN) is completed in FY2020. “FTTN will be obsolete the moment it is built” – people have said that, and the strategic review admits that it is true.

    Actually, that’s not the best part. The best part is the following admission:
    The NPV saving of ~$2 billion is based on a discount rate of 8 percent. If a discount rate of 10% or higher were used, as is common in the telecommunications industry, the NPV of an upgrade strategy (rather than deploying FTTP now) would be higher.
    Translation: Using non-standard assumptions rather than standard assumptions, building FTTN now and upgrading to FTTP later is cheaper overall. Using standard assumptions rather than non-standard assumptions, building FTTP now is cheaper overall.

    Exhibit 4-4 shows also the following:
    – FTTN cannot provide 100Mbps, and must be upgraded to FTTdp to do so. (FY2020)
    – FTTdp/HFC can provide 250Mbps on the same basic infrastructure (using G.Fast and DOCSIS 3.1). (FY2025)
    – FTTP is the only technology available that can provide 1000Mbps. (FY2030)

    Additional point: although the upgrade path costs are considered, the Scenario comparison does not take into account the cost of these upgrades. In other words, Scenarios 1 to 6 are comparing different prices (peak funding) for vastly different outcomes (from just FTTP to “Optimised MTM”), rather than different prices for similar outcomes (the endgame, just FTTP). Including the upgrade paths is a valid and necessary thing to consider if you are going to compare different scenarios. I feel that the executive summary falls short in that regard.

    • +1

      Theres a lot of comparing ‘ALP NBN’ to ‘LIB NBN’ as though they provided the same outcome and only the costs are different.

      The LIB mailout last night was all about how ‘we are providing the NBN cheaper and faster’ without mentioning that they are providing a completely different service.

      Its like saying the LIBs can cook dinner faster than the ALP without mentioning that the ALP is cooking roast beef for dinner and the LIB’s are cooking a ham and cheese toastie!

    • Hey Relim, there appears to be some confusion in the wording of Section 4.3.2.
      “The NPV saving of ~$2 billion is based on a discount rate of 8 percent.”

      Actually, NPV saving for a full upgrade to FTTP in 2030 vs FTTP now is ~4 billion at a discount rate of 8%.
      The ~$2 billion figure is the NPV saving for a FTTN only -> FTTdp upgrade in 2020 vs FTTP now.

      “If a discount rate of 10% or higher were used, as is common in the telecommunications industry, the NPV of an upgrade strategy (rather than deploying FTTP now) would be higher.”

      NPV = Sum of CF(t)/(1+r)^(t), where t is time and r = discount rate. So there is an inverse relationship between NPV and discount rate. This means that a higher discount rate would lower the NPV of the upgrade, which would in fact increase the savings from deferring the FTTP upgrade. So the above should read “If a discount rate of 10% or higher were used, as is common in the telecommunications industry, the NPV savings of an upgrade strategy (rather than deploying FTTP now) would be higher.” There is a typo in the review report that omits the word “savings”.

      “Translation: Using non-standard assumptions rather than standard assumptions, building FTTN now and upgrading to FTTP later is cheaper overall. Using standard assumptions rather than non-standard assumptions, building FTTP now is cheaper overall.”

      Just some confusion with the wording in the review. This should read “Translation: Using non-standard assumptions rather than standard assumptions, building FTTN now and upgrading to FTTP later is cheaper overall. Using standard assumptions rather than non-standard assumptions, building FTTP later is even cheaper overall.”
      This is why commercial telcos (like BT, DK, Telecom NZ) that use a higher discount rate are more likely to defer large investments until an adequate return is assured.

      “Exhibit 4-4 shows also the following:
      – FTTN cannot provide 100Mbps, and must be upgraded to FTTdp to do so. (FY2020)
      – FTTdp/HFC can provide 250Mbps on the same basic infrastructure (using G.Fast and DOCSIS 3.1). (FY2025)
      – FTTP is the only technology available that can provide 1000Mbps. (FY2030)”

      Exhibits 4-4 and 4-5 are illustrative examples and the dates used in these examples are hypothetical for illustrative purposes only. The strategy recommends upgrading only when needed i.e. when a business case and majority demand exists. The options value of timing the upgrade only when needed is substantial.

  26. hmm MT says it’s all labours fault because it’s worse off and that is why his NBN costs so much… but if MT was saying that it was going to cost 90 Billion and it ended up at 70 billion.. surely that is a good thing… but then again he says he didn’t have any of Labours figures and that’s also why his figures are out.. but then how did he get 90 billion.. and over estimate.. but then under estimate his…. hmmm.. gross vs net.. half full half empty .. no spin.. but spin..
    Sigh.. I’m over it..massive fail. They can build the dodgy NBN. I’ll sign up for the telco that ends up running fibre right alongside it..

    • “They can build the dodgy NBN. I’ll sign up for the telco that ends up running fibre right alongside it..”

      This is what I’ll do. I will NEVER EVER EVER install an NBN FTTN connection at any house that I reside in.

  27. Well, this joke of a government promised “no surprises” and for once they’ve kept an election promise. There’s not a single person in the universe who is the least bit surprised that Turnbull’s Fraudband is a steaming pile of shit.

  28. Liberal son.. I am dissapoint. I guess they think if they do all the bad stuff early, we will forget in 3.5 years time? Oh the internet never forgets…

  29. I like this site and I particularly enjoy the comments. The main reason I like it is that the comments appear to come from people who are involved in the technology field and generally the comments are backed by facts. The unfortunate part about this site is that it is mainly read by those in the technology sector (obvious I know) so the average person in the street just gets the spin elsewhere.
    The only thing that I can see to counter this spin is an Open Letter. The letter should clearly list what’s wrong with the present proposals and in as near to layman’s terms as possible outline the preferable more long term options. The letter should be signed by as many highly skilled people in the industry (I know they won’t all fit on the letter but put the rest on a website). Signatories should list their qualifications and years in the industry. Hand the letter to the ABC and SBS and crowd fund some money to put it in some papers.
    My observations are that most of the people I meet, or that comment on line, just believe what ‘Ltd News’ tells them. Some venture over to The Age or SMH but a quick read of the comments tells me most have no real understanding.
    The question is are there people in the industry prepared to put their name to something like this.
    In most of the tech publications I’ve read there appears to be a consensus amongst those in the industry that the present proposal is a disaster. Unfortunately the rest of the populace appears to be totally unaware of that.
    My two bits worth. Rip the idea apart if you like.

  30. OK. I am in WA (Wait Awhile), there is only Telstra HFC (and not that much either) in Perth and no OPTUS. I have trouble understanding the doc but can someone clarify.
    I think areas that have access to HFC will basically get nothing new . The people who currently are close to exchanges will get VDSL or some tech like that. The rest in poorly served, distant and non existing metro areas will get what ? (FTTN) by 2016 or what (FTTP) ? As well publicised there is also SFA fibre installed in WA under the Labor plan.
    Just as a user want to know when I (not in a HFC area, ADSL, a long way from exchange , Perth metro suburb ) am likely to see any kind of decent internet (4mbs/sec is max I can get right now and that is on a good day) ??

    • Davy, you’ll get no improvement for several years. Assuming NBNCo. buy or lease the HFC and assuming they do upgrade the capacity to handle more users, you may see some upgrade by 2017-2018 or so.

      That’s the way I read it anyway. But HFC is probably the least understood part of this hodge podge LBN.

      • I agree with seven, but will add that it appears that NBNco are assuming they will be able to reach some kind of agreement with Telstra/Foxtel/Optus that they can stop using HFC to do cable TV (???) to get a bit more bandwidth out of the HFC network, and at this time they might attempt to buy it from Telstra and offer it for wholesale.

        Precisely what happens with Cable TV channels I don’t know, I guess you compete with IPTV bandwidth that has been prioritized (I would presume) as well as with the kids in the neighborhood.

      • I think you misunderstood my question. I do not have HFC available in my suburb (Perth Metro)and ADSL is available but a long way from the exchange with miserable speeds and reliability. Some in my suburb cannot get it at all because of pairgains, RIMS, distance etc.
        So what does the review say (so I can understand it as an ordinary user) about users such as myself, do we get priority or what and when ?

        • Davy, the whole thing is such a mess no one knows what they will end up with and when.

          Adleast with the Labor plan you a 93% chance of knowing what you would end up with but not when.

        • In your situation, I presume (if they don’t just cancel the whole thing) you will be getting FTTN. They will bring the fibre up from the exchange to somewhere within 400m of your house.

          The first FTTN trials are to start in the second half of 2015. Full deployment speed by 2018.

          I don’t know about priority, but I doubt you will have priority (i.e. be one of the first) in your situation. More likely it’ll be those closer to the centre of Perth who do not have HFC, are not getting FTTP, and are getting FTTN. Supposedly, you’ll have your FTTN connection that can support maybe more than 25Mbps but likely less than 50Mbps before the end of 2020.

  31. I think people are too quick to dismiss economics as a foil to the NBN rollout. Rather than look at the technology focus I’d recommend looking more on the finances going on here. The basic problem is that whatever expenditure is made it has to be recovered. We already see that even in fibred areas there is not 100% take-up (you can count that as a lost lead – but NBN has out-laid money to put that service in place). We also have connections that have been refused for whatever reason. Similarly, no matter what model is proposed the projected outlays have gone up by the looks in the order of 20%+ with the “mixed” model and more for the FTTH model. I’d suggest they will go up proportionately a similar amount (or more) before it is completed.

    The NBN need to able to recover those funds eventually through their billing model. Dovetail that with political pledges and spin that end-users will pay less than what they do with the current common copper connection and you have a wedge position going on. It won’t work. The report itself flagged significant extra end-user charges from a report I read and I would suggest, based on what we know, this would apply to ALL models with some being proportionately more than the other. As each end-user charge price point increases more will drop off the list of subscribers and put further pressure on raising the charges.

    In summary, at what point do the end-user price point increases become too expensive for remaining connected end-users to bear?

    • Northern Blue, the original economics of the NBN worked because they relied on business and government enterprise later revenue paying for significant portions of uneconomical areas of FTTP.

      Without full FTTP coverage, that isn’t possible. Even if the NBN cost $73 billion, as long as Government carried the larger portion, say $45 billion, the funding risk can stay the same and the IRR can be maintained. Sure, it might push out from 2028 repayment in full to 2035, but if the proportions are the same, its’ irrelevant.

      The problem with the mixed model is it constantly needs upgrading which removes any chance of repayment early. The Coalition are banking on it not needing as such. I wouldn’t want to be them when they find out how silly that is….

      • (The Coalition are banking on it not needing as such.)

        No the Coalition are banking on whey wont be around and wont care.

      • The government wasn’t supposed to carry any debt for the project. That is offbooks. One of the rumours going around a while back was that it NBN costs were reaching a point where it has to be pulled back on “the books” as the government could no longer hide the costs. Once onbooks then it goes up against Gonski, NDIS, every other claimaint for government money ,and of course every state government that wants to bail out their pet projects or needs compensation to adjust to life when their long subsidised pet projects inevitably going under. The deficit is stuffed – revenue has been collapsing consistently for years. So the government is also piling on interest debt now.

        Basically it is an easy formula for governments (and don’t assume the ALP wouldn’t have come to this point either) – the least cost option wins – A dollar saved is a dollar saved. And little Timmy’s education and Germaine’s disability claims do pull more strings politically. Government carrying $45B – sorry not sure that is likely to sell well to the electorate that was promised it was all self funded and indeed going to make the government loads of revenue.

        • Northern Blue, the plan was always, even now, for Government to carry “debt” for the NBN in the form of bonds. The Coalition are doing the same thing- $29.5 billion raised through bond issuing.

          The NBN only has to return above the long term bond rate (somewhere between 3.5 and 4% depending on who you ask) to have “broken even” and even if it didn’t, if the indirect economic returns are equivalent to more than the debt + interest outstanding on the bonds then it is still a net gain for the economy and government have done their job right. A GBE is not required to make a return to remain “off budget”. It is considered poor practice for it not to, but there is no requirement of government or Treasury to put it back “on budget” should it not make as much as hoped.

          If government funded the entire NBN, rather than just 2/3 of it, the rate of return would only have to be 3.5-4% over 25 years for it to be considered a successful venture. NBNCo’s worst case scenario for its’ last 3 CP’s have had it earning 5%.

          There is far too much focus on exactly what the NBN could cost upfront and therefore how it could be built to reduce that (running it as a business, not as a GBE), rather than how much it could potential save and gain us as an economy and therefore how much should be spent on it. I am not hopeful the CBA headed by Ergas will be unbiased in its’ findings, but perhaps it will shed some light on the likely outcomes. NZ’s private CBA saw its’ UFB network adding to the dairy and agriculture industries alone, $4 billion over 10 years. And their economy is 15% the size of ours.

          • “A GBE is not required to make a return to remain “off budget”.”
            Actually a GBE (PNFC) must make an IRR greater or equal to the bond rate or PNFC status would be withdrawn, which would put any funding of the NBN back on the budget books.

            “It is considered poor practice for it not to, but there is no requirement of government or Treasury to put it back “on budget” should it not make as much as hoped.”
            Finance and the ABS classified NBN as a PNFC on the basis of its 2010 business plan including its forecasts of revenue, operating expenses, ongoing capital and capital structure. Substantial failure to meet those forecasts resulting in a threat to its IRR would result in review of its status. There is an absolute requirement of Finance and Treasury to review its status ongoing.

            “There is far too much focus on exactly what the NBN could cost upfront and therefore how it could be built to reduce that (running it as a business, not as a GBE), rather than how much it could potential save and gain us as an economy and therefore how much should be spent on it.”

            Indirect or soft benefits are not relevant to NBN remaining off-budget. Nevertheless, how much could it potentially save and gain us as an economy? according to the review the benefit is limited to several 4K TV video streams i.e. to <1% of future households.

          • Incorrect…

            “Payments between the government and NBN Co (for example, dividends paid to government or adjustment of asset values) directly affect the budget statements. Such payments are indirectly affected by the success and therefore rate of return generated by NBN Co. However, this is in direct contrast to the idea that a return below a specific benchmark triggers an accounting rule where treatment of NBN Co is switched from ‘off-budget’ to ‘on-budget. There is no such accounting rule.”

        • Even if the NBN costs reached a point where the project as a whole was not going to make a positive return on investment, it still could not be placed on the Government’s profit and loss sheet. This is because the NBN is a capital investment, not an expense. If you don’t understand the difference between the two, then I would advise you to go back and do accountancy basics. I covered this in Accounting 101 in university.

          In layman’s terms, for the government, investing in the NBN is like individuals investing in shares. You haven’t lost that money. You still have it. But the way you own it is in a different form — shares, and not cash. The Government has not spent money on the NBN. It has invested it. It still owns that money. But it’s in NBN shares and not in cash.

          • Renai, you are correct as long as NBN keeps its PNFC status. NBN Co. was classified as a PNFC on the basis of its business case, including its forecasts of revenue, operating expenses, ongoing capital and capital structure. PNFC status depends on its maintaining its commerciality. That status “can be reviewed over time as circumstances change. If NBN Co. loses its PNFC status, any funding provided to NBN Co. for building the NBN will have a negative budget impact.” http://www.finance.gov.au/sites/default/files/foi_11-52_document_1.pdf

            Some key conditions of its continuing PNFC status include:
            1. Achieving an IRR above or at the bond rate in the medium-long term
            2. Not requiring substantial ongoing subsidies to support its operations
            3. Recovering its operating costs through ongoing revenue
            4. Charging at or above market prices for its services
            5. If the business no longer meets expectations of recovery of equity, the PNFC classification would be withdrawn
            5. Substantial increase in grants to build the network would result in a review of its PNFC status
            6. Government contributions can only be classified as equity injections if NBN Co is likely to achieve a rate of return that will support an eventual sale of the company

          • Steve, you should read all of that For request properly. The conditions are not exclusive. Any combination can be met & it can remain a PFNC. Including up to 50% of revenue being from subsidies. No government would lock themselves in like that.

          • “Steve, you should read all of that For request properly. The conditions are not exclusive. Any combination can be met & it can remain a PFNC. Including up to 50% of revenue being from subsidies.”

            Hey seven_tech, understand that the conditions are not exclusive i.e. breaching a single condition would not trigger an immediate withdrawal of PNFC status. However, the revised outlook (Scenario 1) and Scenario 2 compared to the 2010 NBN business case on which the status was granted breach a number of the conditions and puts the PNFC at high risk, let’s say it puts NBN on the watch-closely list.
            Among the 6 scenarios, only MMT meets the “IRR at or above bond rate” test, and even that only under Revenue Trajectory A. Under Revenue Trajectory B, all scenarios fail at least the IRR test.

            “No government would lock themselves in like that.”

            These standards are not negotiable. The standards are set by the ABS based on standards issued jointly by the IMF, World Bank, OECD and the European Union. The status is determined independently of government and the government does not have a say on whether an entity is or retains PNFC status.

          • Steve, How’s are all about risk. If there wasn’t significant risk in the finances of a GBE, private enterprise would already have the particular market cornered. It is a matter of balancing that risk. Simply saying ‘we predict it’ll never make enough money’ when the current NBN is earning above its’ predicted rate for the premises passed, is hypocritical & short sighted.

            The ANZ has the discretion to grant the PFNC status if they deem so. Simply earning 2% less on the balance sheet would be far from an immediate trigger if subsidies were involved & economic gain was plain.

          • “The ANZ has the discretion to grant the PFNC status if they deem so. Simply earning 2% less on the balance sheet would be far from an immediate trigger if subsidies were involved & economic gain was plain.”

            Okay seven_tech, we can agree to disagree. I happen to know NBN Co. was on the watch-list even before this strategic review. PNFC status was granted based on NBN’s 2010 forecasts. The strategic review is a NBN Co. prepared and board-approved document attesting to a revised outlook with IRR falling from 7.1% to 2.5% under Trajectory A or negative under Trajectory B, a more than halving of revenue, near doubling of capital expenditure and a tripling of private debt requirements.

          • From Senate Estimates 19 Nov 2013:
            Senator WONG: So presumably it is possible that, if an entity had a drastically reduced rate of return from what had previously been envisaged and it looked as if it might not, or might not for a long time, return a positive rate of return, that could ground a basis for it no longer being classified as a PNFC. Is that right?
            Mr Tune : Yes, it is possible. You would not want to make a snap decision about it; you would want to see how history turns out.
            Senator WONG: Sure.
            Mr Gibson : Yes, that is correct.
            Senator WONG: If that were the case then that entity would be accounted for, in budget terms, within the general government sector?
            Mr Gibson : It would, yes. That is correct.
            Senator WONG: Because what was previously equity investment would have to be a grant, essentially? How would it then be accounted for in the GGS?
            Mr Gibson : In the GGS all the revenue and expenses of that entity would then be taken account of in the budget. It is not a grant because it is really only transferring money from one budget to the other within the GGS. All the revenue would be revenue to the budget of whatever entity that is. All the expenses would be expenses to the budget of whatever entity that is.

            Senator Cormann: Just before the break, Senator Wong asked me a question about the classification of NBN Co. for the purposes it being a public non-financial corporation. I can confirm that I received advice from my department that with NBN Co. there is always a risk that it may have to be reclassified, whether it continues in the form that we found it in on coming in to government or moving forward and making the adjustments that we have indicated that we intend to make. I hasten to add that it is the intention of the government, through the strategic review and the work that we are doing, to put NBN on a better and more solid financial basis moving forward.

  32. AJ: “I am done speaking with you until you actually answer a question rather than try and ridicule.”

    Okay. We’ll leave it at these facts then:

    AJ said “COST $51 Billion Slightly more than mix” i.e. $10,000 million = slightly more

    AJ said “It is more profitable” i.e. lower IRR = more profitable

  33. Turnbull’s NBN not even going to start until after next election!

    “The report assumes that NBN Co will gain access to Optus’ and Telstra’s HFC in the second half of 2015, and will be worked on over the next four years. It also assumed that there will be a small fibre-to-the-node trial in the second half of 2015, with a full rollout by 2018.”

    There you have it, the “NODE” Trials aren’t till the second half of 2015. Then comes the ordering of equipment, publicising and letting contracts then commencement if we’re real lucky in January 2016 giving them 9 months to pass 43% of households (they promised over 90%).
    They have no intention at all to start construction before the next election. What will happen is a series of postponements, failed negotiations with Telstra ending of current fibre contracts as soon as they can.
    Mr Fraudband’s policy is to destroy the NBN, he was ordered to do so by “I’m no tech head Kerry”.
    Anybody that believes a politician is a fool, we need some new laws in politics like making politicians personally liable financially for failure to deliver on promises of preferably a trip to the gallows.

  34. Hi seven_tech, Relim et al,

    Seems like we’ve reached an impasse as to whether the data and references in the review are objective or selective. There are a few key planks supporting the NBN strategic review’s recommendation for the MTM vs FTTP.

    The first is the lack of user demand for higher speeds at present and for the foreseeable future. Section 3.1.1 and Exhibit 3-1 shows:
    1. Take-up is ~30% across all high-speed broadband technologies FTTP/FTTB/FTTN/HFC. Take-up rates for FTTP is similar to other technologies
    3. Just 11% of high-speed bb subscribers choose plans >50Mbps and this is forecast to remain <20% to 2017 in most Western countries
    4. The median UK household today requires a maximum download speed of 8Mbps.
    5. The median UK household is forecast to require a maximum download speed of 19Mbps by 2023, when the top 1% of UK households will need 40Mbps max
    6. The highest bandwidth application today is 4K TV streaming which needs 30Mbps

    The above statements are supported by a few studies and references. Countering these findings requires alternative evidence, if anybody could link to references, studies, surveys or data that countering the above statements, it would be useful in advancing the FTTP case.

  35. seven_tech: “Median speed is not a good measure of speed. Many hundreds of thousands of UK residents would have very slow ADSL still. That would set the median substantially lower than just looking at just those who have access to speeds, but don’t use them.”

    The cited reference is not about current network speeds but about current and future household demand or needs. please browse through the reference. Here’s the link: http://www.broadbanduk.org/wp-content/uploads/2013/11/BSG-Domestic-demand-for-bandwidth.pdf

    seven_tech: “Yet businesses would need hundreds of megabits.”
    Business are already covered by FTTP/FTTB in all scenarios. This is about household costs vs economic benefits.

    “Why does the review choose that one report to decide what we’re likely to need in 2023, as compared to the other half dozen which range from slightly higher to about 10 times higher, depending on which you choose?”
    Please link to the other half a dozen studies or reports that contain alternate evidence of current and future household demand.

    “On your point about buying a new car or deferring it- you missed the largest unknown factor- repairs.”
    Good point. I did miss this, but the review has considered repairs, operations and support in the financial comparisons and upgrade paths, as explained in section 3.2.7 OSS/BSS, 3.2.8 Network Operations, and 3.2.9 Ongoing costs, including maintenance.

  36. Relim: “Even the report admits that when using a discount rate that is common in the Telco industry (10%+), FTTP will be cheaper in NPV; but the review instead used a lower discount rate of 8% (for a whopping saving of $2bn in NPV).”
    As I explained in a previous comment a higher discount rate leads to higher savings for the upgrade. And the saving for a 8% discount rate is $4bn, not $2bn.

    Relim: “it does not make a broad comparison of the different scenarios that includes the cost of upgrade.”
    It does include the cost of the upgrade.

    Relim: “Another example is the unusual choice of comparing revenues and other financial performances at FY2021, a static date which is not equivalent among the different rollout scenarios. What value is such a comparison, other than to put one scenario in the most positive light?”
    Relim: Any point-in-time comparison would have the FTTP Scenarios 1 & 2 at a disadvantage because of the 3-4 year head-start on completion date for the other scenarios. For example, a comparison at FY2024 would still have Scenario 6 with 4 years of full revenue. The IRR, steady-state financial performance and peak funding metrics normalise these differences.

    Relim: “I am trying.”
    Can we start with evidence on median household demand for fixed-line bandwidth now and into the foreseeable future that counters the evidence provided in the report.

    Relim:”To address your comment, however, fixed-line growth and revenues have stagnated due to an inadequate supply. The fixed-line network is at its limit.”
    However in countries where high-speed broadband is widely available, take-up is ~30% across all technologies, take-up for FTTP is on par with other technologies and just 11% choose >50Mbps plans when that choice is available.

    Relim: “The number of fixed-line connections have not fallen, instead they’ve continued to grow (albeit slowly). If there were enough supply, it will have grown much faster – unless your suggestion is that just about all new premises are going wireless-only? What mechanism would lead to such a unique consumption pattern?”
    Fixed-line connections have grown at 4% the rate of new internet-connected premises. This doesn’t mean all new premises are going wireless-only, it means the proportion of wireless-only homes is growing rapidly across greenfield and brownfield areas, which is reflected in the revised outlook in the review.

    Relim: “The worst part of the Coalition policy is that it doesn’t solve the primary issue that Labor’s NBN was supposed to – equitable access to world-class broadband.”
    Sorry, you seem to equate world-class broadband to FTTP and only FTTP. The fact is that FTTP penetration is 2.5% worldwide, 6% in the OECD, and just 15 countries have >1% FTTP, with Japan the leader at 26%. The 26% FTTP in MTM would put us equal first in the world with Japan for FTTP penetration. The fact is that world-class broadband is dominated by FTTx, DSL and HFC and that is expected to continue.

    Relim: “The poor reliability of copper connections and the poor peak speeds on HFC, not to mention upload speeds, means that those services will be significantly inferior to a fibre service.”
    The majority of Australians on <5Mbps download speeds would gladly trade up to 12Mbps even with minor irritants like relatively poor reliability, poor peak and upload speeds. This is supported by the exodus to mobile wireless.

    Relim: "This multi-technology mix only guarantees (to an extent) better download speeds."
    No. The multi-technology mix guarantees meeting majority household demand now and into the foreseeable future (unless you can produce evidence of higher majority household demand than in the review)

    Relim: "Australia as a whole continuing to fall behind the rest of the world."
    Labor's 2007 promise of 12Mbps by 2012 would have put us equal second in global rankings today. Instead we are at 45th. All scenarios in the review would get us to No. 1 globally. MTM gets us there 5 years earlier.

LEAVE A REPLY