blog It’s more or less an open secret in Australia’s telecommunications industry that the Coalition is planning to finally release its rival telecommunications policy this week to stack up against Labor’s National Broadband Network project. And the first round of media blitz activity around the effort has already commenced. This morning the Daily Telegraph reported that an analysis contained in the Coalition’s rival policy purported to show that the real cost of Labor’s NBN project would be up to $90 billion. The newspaper reports (click here for the full article):
“The Coalition policy claims retail prices charged to consumers would rise annually over the next nine years at double the rate of household electricity bills. Using modelling from key telcos and finance industry analysis of the NBN Co’s 2012 corporate plan, the Coalition has estimated it will take four years longer to finish and potentially cost an extra $45 billion to complete.”
To put it mildly, we’re relatively keen to get our hands on the Coalition’s modelling and policy details in this area, as we’re sure quite a few readers are as well. It is fascinating that the Coalition has chosen to release portions of its policy early through the Daily Telegraph; as with Malcolm Turnbull’s interview with radio shockjock Alan Jones last week, it speaks of an attempt to sway the opinion of the masses with the Coalition’s NBN rhetoric, rather than taking its message to the more informed end of town. And of course, the Daily Telegraph hasn’t precisely gone into detail to check the Coalition’s figures in this area; playing right into the Coalition’s hands. Stay tuned for further news as the alternative government spends this week detailing just what the future of the NBN would look like under an Abbott Government.
Umm how can prices rise when the accc has locked them in at nothing for the next few years and then half of inflation there after
I have no idea …
If the final price to consumers is locked-in and the costs are to rise, I’m guessing they’d argue that the government is “wasting” more money and fiddling with the books to make it more appealing.
He probably means the retail prices charged by the RSPs, rather than the wholesale price NBN Co sells to the RSPs for…
…but there’s no evidence that will happen…they just need to make it sound like it will happen…
It’s the average revenue per user that rises. Which, if you have users on 1 Gbps paying big dollars for that, is only natural. Prices don’t actually increase at all for quite a while and less than CPI after that until 2040. That’s the only increase for end-user prices on the NBN wholesale side, and it’s driven by increased usage. It’s a lie, simple as that. Average revenue per user NBN is projecting to increase quite a bit, but mostly only for cost recovery.
Why would they do that the NBN has added many players to the market Skymesh Vodafone and a number of others this competition will keep prices low.
The NBN is designed deliberately to level the wholesale playing field, so that end user prices are a direct competitive market ISP vs ISP – the market will settle the price, regardless of how many ISPs there are…unless it gets to a ridiculously low number of ISPs.
As you point out, the numbers are increasing, so the risk is low.
There are situations where prices will skyrocket, and the agreement doesnt address them.
For the bog standard 12/25/50/100 Mbps connections, it wont happen, there are subsidies in place to reduce the wholesale costs, and bring them down to acceptable levels. But when you get beyond those connections, prices go through the roof.
When we’re seeing 1 Gbps connections or better, as far as I’m aware those subsidies and protections are no longer in place so when an ISP connects you to a 100 Mbps line, the prices stay relatively stable, but when you get that next tier up (200 Mbps for example) they wont.
Then take into account the basic theory of speeds doubling every 2 years, and by 2019 you could see people having 200 Mbps, or 500 Mbps connections just to stay that little ahead of the game, and the protections no longer being there.
End result being a jump in cost that doesnt necessarily match the jump in speed.
Have a look at what happens with a 200 Mbps connection. You may find there will be enough doubt to make The Turnbulls story viable. I hope I’m wrong, trust me, but when I looked last time there was a disturbing lack of protection after 100 Mbps.
There’s a big difference between “I have decided to upgrade my plan to a more expensive one which costs twice as much” and “the cost of my current plan has doubled while the speed & quota have stayed the same”…
Very much so, and at the moment the NBN plans listed are incredibly comparable to what we currently enjoy, which is all that has ever been promised. Too many people have assumed that the 100Mbps plans will be comparable, when really its only the 25 Mbps plans that need to be similar.
If you compare 25 Mbps plans with what most people currently have, they are on par with each other. If you compare 50 Mbps and 100 Mbps plans, they are relatively cheap upgrades. if you jump beyond them though, the price can potentially skyrocket.
The $23/connection cap doesnt apply if I read it right, which is the basis for my statement. If NBNCo charges $100/connection for a 1 Gbps plan, what are the ISP’s going to add on top? At that point, costs might be prohibitive, and we really arent all that many years away from 100 Mbps plans being the norm.
Again, I hope I’m wrong, I really do. But its something many people havent considered, and very little checking done – what guarantees are there on pricing when FttH can deliver over 100Mbps speeds?.
Which is part of the reason the for the SAU and is one area highlighted in by the ACCC in the negotiations.
Ultimately it is going to be the ACCC who set the the wholesale pricing and they will have a lot more information to do it and a lot more pressure from the ISPs than they do now.
Basically it is Lies leaked to a favorable media who will write whatever the Liberals say
Basically Propaganda so much for freedom of the press
http://www.nbnco.com.au/assets/documents/nbn-co-corporate-plan-6-aug-2012.pdf
Page 69 Average Revenue Per End User shows that people will be paying more every year.
Though admittedly this is probably due a prediction that users will go onto higher priced plans. I did find it interesting however that on Page 67 it’s predicting prices for it’s top tier 1Gb/s plan to reduce to well under $100 a month as more people take up the fastest service, yet the ARPU goes above $100 a month.
More kindergarten maths from the NBN
Yes, totally ignore that a large part of that ARPU is from services that cannot currently be offered by ADSL2. Business connections, pay tv, video monitoring. Just ignore that and pretend that the average home users connection cost sky rockets, even though as you say, it doesn’t. How about thinking outside the Liberal talking points?
It’s a lie.
It’s the ARPU that’s projected to rise, but if there’s one thing we’ve learned from the coalition it’s that things like this don’t matter. What’s funny is that the ARPU rises because of increased usage. Telstra’s modelling, which they’ve previously cited, has a 30% annual increase in usage driving the increase in ARPU. Which FTTN can’t keep up with for long at all. So, they’re saying that the NBN will be expensive for users but fail to neglect that with FTTN it will be far far more expensive to get the same speeds that growth projections are showing we’ll need to have.
So, it’s a lie and when you look at it you actually look at the one element of truth in this, you see that they’re hypocritical too and take up a scary sounding fact that, if applied to their plan, would be very much scarier indeed.
But that doesn’t matter at The Daily Telegraph and 2GB end of town.
It’s a lie and no one cares.
It’s hilarious, really.
On the one hand there’s a fact that they’re using to show that the NBN will have higher ARPU over time, but the same fact also says that usage will increase like crazy. They are happy to talk about the former, but on the latter they are completely quiet.
By acknowledging that NBN “prices” or ARPU or whatever will increase they are also saying that their own plan is utterly utterly insufficient for this infrastructure in the long term. The more the ARPU in NBN projections is going up (although they can turn it all the way down to almost cost recovery only), the more usage there is, the less sufficient FTTN will be.
Leaving aside the capital expenditure, every time they say ARPU is going up, they’re saying that we need the NBN more and more. When Turnbull says that Telstra has shown the NBN to have a cost in the thousands per month in some forward projection, that’s not because of capital expenditure, that’s because of the growth in usage, a growth that FTTN or HFC could never ever ever support. But that’s an inconvenient thing to say.
you completely miss the point: Malcolm, Coalition, Venture Consulting, Deutsche Bank, etc argue that the projected rise in ARPU in NBNco plan is NOT SUSTAINABLE.
also, NBNco plan says by 2025, average downloads are 600GB/mth…. I know people who download 2TB/mth on ADSL! The last mile will not be a bottleneck for many decades to come in terms of raw data throughput.
> The last mile will not be a bottleneck for many decades to come in terms of raw data throughput.
389,130 TB fixed line downloads in three month period to June 2012 = 129,710 TB per month. Divided by 5.631 million ADSL/HFC/Fixed Wireless/Fibre subscribers.
23 GB average. Which has been growing at about 50% CAGR every year for the past six years in the same set of statistics as well. That’s 10 TB in 15 years. Or 1.2 TB at 30% in 15 years. Either way, the average person wanting to suck anywhere near 1.2 TB over an average ADSL (or even VDSL) connection in a month in a way useful for them is going to be a gigantic mess.
And if you say that Internet traffic won’t grow at 30% CAGR over that kind of time period, then you should know that that’s in Telstra’s ACCC submission which Malcolm Turnbull himself has cited. Also, high speeds at 2am don’t serve much of a purpose other than for torrenting or transferring backups – for which you’d really also want higher uploads. Which you completely fail to talk about at all.
Yes, it’s possible for some people to suck 2TB over ADSL over the course of a month. But jumping to the conclusion that that’s proof that the NBN is too expensive is severely lacking in logic.
ARPU is much harder to increase with FttN as auxiliary services such as IPTV IP-PC can not work properly this is where the ARPU increases basically people change from Foxtel to IPTV NBN makes more money people don’t spend more money overall Because they replace foxtel with something else for ~ the same price or less but a much better service.
In any case Malcolm knows this but he is Lying to the people who don’t know any better
That’s funny… BT spend hundreds of millions bidding for UK soccer rights specifically to broadcast as IPTV over their FTTN network.
Also, NBNco’s projected ARPU we’re talking about is WHOLESALE ARPU…. anything else you need in terms of retail products, end product content costs SIT ON TOP of this inflated wholesale cost layer. The money ISPs pay to NBNco for wholesale access certainly do not include retail value added components.
So are you saying I could setup a VMware system and stream my local content to the server using FttN there is no way you could do that upload speed is way too slow.
Also some people may be able to use a monopoly providers IPTV service if they have good enough copper but many do not also it does not allow for competition in the multicast space as the Liberals will just let Foxtel take over.
What scares me is I have mildly intelligent friends who are believing what Turnbull and Abbot are saying. Conroy has a chance to really stick it to the Libs when they release there policy. Unless it’s something different from what they have been dribbling I think we can all agree it will get universal disapproval …… except from Allan Jones!
Malcolm promised that his NBN model would cost less than 1/4 to 1/3 as much as the actual NBN.
So he develops an NBN model that costs around 20bn (at a guess), which is 50% of $37bn – which would make him a liar.
So, rather than admitting that he underestimated how expensive it is to build a nationwide telecommunications network, he simply jacks up the price of the NBN so that his $20bn model costs – in an amazing coincidence – less than 1/4 of the cost of Labor’s NBN!
Amazing!
I think the $90 Billion and price rises are for the LNP Plan for Australia. NBN will always be dearer under a IPA Govt.
I bet you’re not even a real Lord…
The bottom line here is that the higher the opposition spin the cost of the current model, their “kinder, gentler” policy will seem all warm and squishy when Malcolm announces it tomorrow.
This is a planted piece to create the narrative for tomorrow’s announcement of the coalition policy.
The policy that Malcolm said couldn’t possibly be costed until they got into power and could see the books:
http://www.zdnet.com/au/turnbulls-nbn-policy-will-not-be-fully-costed-7000004677/
“Shadow Communications Minister Malcolm Turnbull has conceded that the Coalition will not reveal a fully-costed National Broadband Network (NBN) policy prior to the next Australian Federal election, because NBN Co has not disclosed the full cost of the existing contracts.”
The policy Malcolm also said was costed and ready to go in August last year:
http://www.afr.com/p/technology/turnbull_cut_price_broadband_plan_cyno2UoMeEYk6G1E5KrCDM
Zero credibility.
“This is a planted piece to create the narrative for tomorrow’s announcement of the coalition policy.”
The Telegraph piece, that is… :o)
The “Coalition Policy” seems to claim a lot of FUD about the current NBN, but the details of their policy seem to be missing. Did the Daily Telegraph just ignore them? Or is the “Coalition policy” just one big FUD document with “We will do it cheaper and faster using a mix of technologies” tacked on the end?
It’s a prep piece for Malcolm’s sermon tomorrow. Treat it as such.
I have the pleasure of MT sermon coming to my area on April 15th at Greenbank Sports Club in QLD at 3pm – 5pm . To talk about Black spots , i have a friend less than 1km away and his wireless cannot even do Skype , as it keeps dropping out . No hills or mountains . I am on a fixed adsl2 plan with UP TO 20 Mbps and are lucky to get 6-8 Mbps. At least with NBN ,you are getting what you pay for , all the time .
http://www.twitter.com/OakeyMP/status/321044529358708738
“@OakeyMP: If todays Daily Telegraph was true on NBN costing $90 billion, the INDEPENDENT Treasury/Finance boffins would have it on-budget.They don’t.”
I would suggest Macquarie Bank and Deutsche Bank investment banking analysts who get paid hundreds of thousands of dollars (not to mention million dollar bonuses) to focus/research/analyse specifically the telco scene and advise big institutions how to invest hundreds of billions of dollars of money would have more clue about NBN economics than public servant generalists at Treasury and Finance in Canberra.
Oakeshott is just embarrassed he backed what is probably Labor’s worst policy of all.
Like the mob the coalition paid last time to do their costings they were accurate weren’t they.
Coalition did not pay Macquarie or Deutsche to produce these reports. These two investment banks produce regular brokerage reports on the telco scene on a regular basis… not too shocking since they employ highly-paid telco specialists to specifically research this area to market in-house intelligence to institutional investors around the world.
On the other hand, Kevin Rudd paid McKinsey millions to produce the NBN Implementation Report (effectively reverse engineer the ALP’s predetermined policy financial outcomes) which subsequently formed the basis of NBNco’s Corporate Plan.
Which is more objective?
Link to report please?
I will tell you what the report will say NBN could be on track if everything goes as planned but it is possible if many things go wrong that it could cost up to $90 Billion in a worst case scenario.
The exact same thing could be said of any plans for anything yet you take a long shot possibility of what is a possibility as a fact of what will happen?
So the FTTN will cost more than you expected Turnbull and to get your 1/4th cost correct you have to add more zeros to the Labor cost? Genius!
Yup…
Of course everyone who objectively ran the number got ~$20-$30 billion and so the Liberals have Fudged the NBN numbers to achieve the 1/4 to 1/3 cost and watch it go unchallenged in the Mainstream Media.
This country lost its free press many years ago unfortunately.
Libs say its liekly to cost $90 Bil, i say its likely the libs are making up numbers for politcial reasons.
If it really is going to cost $90bn, then it really is something private industry is incapable of doing, and something only government has the capability to do.
And as long as the NBN intends to repay the money then the actually number shouldnt be a big deal, the problem is only with people who lack long term vision.
I wonder if the libs considered the long term savings on maintenance, copper corrodes, fibre doesnt.
It doesnt matter what the cost is if they get a reasonable return on it.
No they don’t just like they did not consider potential profits from telstra when they sold it we would have made more than the sale price by now if it was not sold.
Can we please have an INDEPENDENT investigation of costs? Not from the labor party, not from the liberals, and certainly not from NBN Co.
Care to nominate someone that both parties would agree to? As nice an idea as it is, I just cant think of anybody that is truly neutral to the point both sides will just accept the outcome.
Just look at when it was done after 2007 elections. Independent investigation into whether Labor’s FttN model was worth doing, the result being that no it wasnt and the much bigger FttH model was actually more beneficial.
Fast forward to today, and its fuel for the ridiculous cost claims of the Liberals who take every opportunity to state that the original plan was $4b, and has increased 1000%, probably 2000%. And that was a report that very few people disagreed with, outside of those with an agenda.
Who would be truly neutral, and still be skilled enough to provide an independent result nobody would argue with? Even a large accounting firm would have conflicts of interest because of other clients they represent.
The question is, what would this achieve?
The current NBN is based on recommendations and input that occurred over the better part of a year; and Telstra had been propositioning the government over the course of many years for one scheme or another.
FTTH is the preferred solution for a new network build. There’s zero advantage rolling new copper. FTTN would only work in a Telstra lead build. The cost of co-opting the CAN from Telstra would be enormous; we know how much it cost just to access infrastructure – how much more would it cost to buy it as a going concern?
Which means the only two options are NBNco built fibre, or Telstra build FTTN.
The problem isn’t NBNco. It’s not really even cost (lets not forget how much LNP have spent on the armed services over the years).
It’s ideology.
LNP are allergic to the NBN simply because they didn’t invent it. Further, as NBNco are building and not a commercial enterprise (free market economy; drink!) it’s against party ideals.
Effectively, it wouldn’t matter what the outcome of any independent review was. This is the ridiculous nature of the situation.
It appears Coalition claims based on analysis by investment banking analysts at Macquarie Bank and Deutshe Bank:
http://www.dailytelegraph.com.au/business/the-ninety-billion-nightmare-the-real-cost-of-the-nbn-rollout/story-fn7ki14e-1226614471419
not independent enough for you?
Do you have the documents put up or shut up
Tomorrow should be interesting. In that one of two things will happen.
– Turnbull will concede they haven’t been able to produce policy because of < insert reason here > — meaning NBN will be in limbo post election (despite policy apparently existing since August of 2012), or
– Turnbull will spin the narrative that his plan (that now costs almost as much as the original figures for NBN, seems to leverage NBNco, despite Telstra owning the CAN) is better than the < insert current many billions cost of NBN here > for delivery of an (inferior) network hat will be “heaps good, heaps sooner”.
Neither will so much as register in MSM.
“Neither will so much as register in MSM.”
Oh no, it will register…it will be another “Labor Waste” story…they’ll be right onto that…
The story will be something like “Its been shown so many times that Labors NBN will cost $eleventy trillion that we dont need to go into it again”…
I think when the colation claim that the NBN will cost $90 billion they are being honest and they are actually right. Think about it, if they win in September they will implement their FttN patchwork plan which will cost about $30 billion + about another $1 billion for maintenance each year over 10 years + the cost of cleaning up their mess and building the proper FttH network $45 billion (they said $45 billion to complete) = $85 billion.
The four years longer claim sounds accurate too if it is added to the time to complete FttH after rolling out the FttN patchwork.
It’s oozing out !
http://www.perthnow.com.au/business/nbn-costs-could-top-90-billion-report/story-fnhohdoh-1226614710571
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