This article is by Michael Berry, an IT consultant currently working in the financial services industry. He’s also the director of the Progressive Democratic Party, which launched in January this year, with the principles of collaboration, honesty and duty. This article first appeared on the website of the PDP and is re-published here with permission.
opinion/analysis I’ve been an advocate of Labor’s plan for a National Broadband Network ever since it was announced in 2009. Four years later, some of the realities of creating a National Broadband Network have set in. There’s been a long negotiation with Telstra to get access to their infrastructure, setbacks with various network contractors and plenty of rework and re-planning as other issues occur along the way.
These delays have given the Shadow Communications Minister, Malcolm Turnbull, no end of material with which to claim that the NBN rollout is an expensive failure. You’d expect to hear plenty of anti-NBN bluster and rhetoric from the Opposition, but the Member for Wentworth has done far more than just loudly complain about the NBN Co’s failings. He’s spent the last few years researching in order to create the Coalition’s own alternative broadband policy.
At the Press Club in January Tony Abbott announced that the Coalition’s broadband plan would “… deliver superfast broadband for a fraction of the price and in a fraction of the time …”. This was a typical policy announcement, a few nice ideas, but no actual information on how this would be achieved. All we knew was the Coalition would be using fibre to the node to reduce the rollout costs.
When the Coalition launched its broadband policy in April I was pleasantly surprised to find that not only did they have an informative 18 page policy document but they also had prepared a further 36 pages of policy “background information”. After reading the full plan and accompanying information I can now say that the Coalition’s node-based solution is a well-researched plan which could be a viable alternative to Labor’s NBN. And as such it deserves some further scrutiny to see how it measures up against the already-under-way NBN build.
Many have criticised the Coalition’s plan simply on the basis that fibre is better than copper and therefore any plan that doesn’t involve connecting every household with fibre is bad. Just repeatedly chanting “fibre is the best, chuck out the rest” may be catchy, but it hardly justifies spending the tens of billions of government dollars the NBN will require for the next 8 or more years.
The competing NBN plans shouldn’t be measured on the merits of each technology but instead on how well the needs of the community will be met, how much the government will need to invest and what future benefits will be derived from that investment.
In looking to the future, some have asked why would we spend so much deploying fibre if it’s going to take 10 years to complete? Surely after that long fibre will be superseded by a cheaper, faster technology? Unlike much of consumer technology which has a yearly update cycle, telecommunications infrastructure has a much longer lifecycle. We’ve been using copper lines to communicate since the late 1800’s, likewise we can expect fibre to be used and improved for many decades to come.
In fact optical fibre was already being used to transfer data in the 70’s. In Australia, Telstra and Optus spent the mid 90’s laying hybrid fibre-coaxial networks so they could offer pay TV and high speed broadband services. Optical fibre now forms the backbone of telecommunications networks in countries all across the world. Just this year researchers at the University of Southampton have achieved a throughput of 73.7 terabits per second over fibre. That’s fast enough to download the full contents of Wikipedia in less than a second.
So yes, technology is changing and improving at a rapid pace. That doesn’t change the fact that fibre is the high-speed, high bandwidth transmission medium of choice. The Coalition has acknowledged the importance of fibre and will be replacing much of the current copper network with fibre. They won’t be connecting fibre to your home though, only as far as the node for the “brownfields” established suburbs. New “greenfields” suburbs will have fibre installed under either future government.
So now we must ask what exactly is a node and why does Malcolm Turnbull want to build 60,000 of them around the suburbs and towns of Australia?
In essence, a node is a miniature telephone exchange crammed into a powered street cabinet. Today if you happen to be lucky enough to live next door to a telephone exchange you should already get very good ADSL2+ speeds. Once the signal travels further down the copper phone lines, it becomes weaker and the connection speed slower. Hence the creation of the node which brings a mini-exchange closer to your home, thus resulting in a strong signal and faster broadband speeds.
Another technology, VDSL2, (Very fast DSL) can also be used to increase your connection speed. VDSL2 uses a mixture of techniques to both increase the signal and reduce the noise to allow connections up to 100mbps. The maximum speeds will only be for those within 500m of of the node, as you can see in the image below from BT which has capped it’s VDSL at 76mbps. Further improvements will soon increase this limit up beyond 100mbps, but only for those close enough to the node. That’s why the Coalition needs to build 60,000 nodes; otherwise their promise of a minimum 25mbps connection wouldn’t be possible.
This is where we begin to see the limitations of continuing to use copper wires for broadband. Even using the very latest high-speed transmission techniques, the highest speeds over copper are limited to short distances. Beyond the first 50-100m speeds drop drastically. So while placing a node near your home will make a significant improvement to almost any broadband connection, it’s a technology that will ultimately be replaced or limited to apartment buildings and other short distance applications.
The Coalition understands that ultimately our fixed telecommunications network will be almost all fibre with some wireless/satellite in remote regional areas. Their plan offers fibre to all greenfield suburbs and also offers older suburbs a “fibre on demand” model where the user pays for fibre connection to their premises. This appears to be a good compromise which allows only those that want a much faster connection to pay the extra cost. Unfortunately it’s an idea that’s unlikely to ever work in practice (paywalled link) and even if it did, the connection fee would be in the thousands for a fibre connection that would eventually need to be replaced in a future fibre-to-the-premises rollout.
So the question remains, if the future of telecommunication is almost certainly going to involve fibre all the way to your home, why bother building all these nodes? The answer is a combination of cost, timelines and utility.
High-speed broadband deployed via fibre-to-the-node technology is cheaper than fibre-to-the-premises in the majority of established suburbs. Based on construction costs for broadband deployments overseas the Coalition expects that FTTN will be 3 to 4 times cheaper than an FTTP solution. Not only is FTTN less expensive it’s also faster to deploy. Around 140 premises will be activated each time you build and connect a node.
While the current FTTP rollout remains (mostly) within budget it’s also drastically behind schedule with the current corporate plan being updated with substantially reduced targets compared to 2 years ago. The project was expected to start slowly, refine the rollout methods and then eventually ramp up to 6000 homes a day. Right now though it’s hard to see how the project will meet its target date of 2021.
So you can see why the Coalition would claim to be able deliver high speed broadband both cheaper and sooner, FTTN qualifies on both counts. So then what about utility? Make no mistake that while the Coalition plan is cheaper it still requires an estimated $29.5 billion in funding to complete. That’s a very significant investment for which you’d expect to have infrastructure that will be fit for purpose for many years to come.
Do we really need the 100/40 Mbps (and soon 1000/400 Mbps) connections the NBN fibre can offer? Or will broadband delivered through nodes be sufficient? At the end of 2012 the average Internet connection in Australia was 4.2 Mbps. That puts Australia at 41st place in the world. The Coalition’s promise of a minimum 25 Mbps would easily push us into the top 10 or even top 5 countries in the world. But how long can we expect to keep pushing copper lines in the search for faster broadband?
Even when armed with the knowledge of past and future broadband trends this is a difficult question. The Coalition doesn’t have an answer to this but they do hint at the possibility of future upgrade paths. On page 14 of the Coalition’s “Background Papers” we see the table below which suggests that a FTTN rollout would generate saving that could easily pay for a future fibre upgrade.
Net present cost, as demonstrated here is a method of comparing alternative investments. Typically you’d also include expected revenue, but from the basic cash flow model presented here you can see the concept.
It’s an intriguing idea that we could use FTTN in order to save for a future FTTP upgrade/replacement. The background papers go so far to suggest that after 10 years the savings accumulated could easily amount to $12.7 billion. While the timeframe of 10 years seems appropriate the model presented here is flawed.
Most of the arguments against using nodes seem to be centered around the idea that the copper network will soon degrade to a point where it will be rendered completely unusable. Telstra CEO David Thodey has already spoken out against the copper doomsayers indicating that Telstra’s copper network could last another 100 years. While that comment should be expected from someone that would like to sell its copper network to a future Coalition government, there can be no doubt that with enough maintenance the network will continue to remain fully operational.
The downside is that maintaining 60,000 nodes and connected copper lines requires significantly more “truck roll” (on site work) than a passive fibre network would. So the Coalition’s figure of $30 opex/year extra for FTTN is far too low. Indeed Verizon (USA) estimates that copper maintenance cost them $110 USD per year more than fibre. There are a number of reasons why a FTTN solution would cost more to maintain. Simon Hackett covers some of these reasons in his presentation at CommsDay Sydney 2013.
In addition to using a low FTTN opex cost, the Coalition’s model also uses a high fibre capex cost too. NBNCo expects the fibre connection cost per premises to be $2400 not the $3600 figure the Coalition is using. Now if we go back to the model and add an extra $110 for copper maintenance costs (ignoring the exchange rate and higher labour costs in Australia) and then we also lower the NBN fibre cost to $2400. The savings from delaying the fibre rollout vanish. In fact the FTTN and FTTP rollout now costs an additional $2 billion ($160 per household).
So we’ve established that a fibre-to-the-node solution would have slower download/upload speeds, it would need to be replaced after 10 or so years and it would ultimately be the more expensive option. So knowing that would I recommend using FTTN? Actually yes, I would.
While the Coalition views FTTN as a cheaper way to get out of their commitment to provide universal high-speed broadband, it can be put to much better use. Fibre is very expensive to deploy in some areas, as found in the New Zealand where Chorus is rolling out a national fibre network. They are experiencing costs up to $8000 NZD per premises in busy urban areas which make up around 10% of their expected coverage area. Likewise installing nodes in some areas will be a more costly proposition due to lack of suitable powered cabinet locations or copper wiring in need of remediation.
The solution to both these issues is to create a hybrid network. Part of the reason as to why BT have been so successful with FTTN in the UK is because they have developed very good models to make sure they first deploy FTTN to the areas where they stand to make the greatest ARPU (average revenue per user). Using similar logic we should be using a cost/benefit model in our network rollout. If it’s done right we could have the best of both worlds.
The overall cost would be cheaper because we could used targeted FTTN deployment to the most expensive 10%-30% of the network. Other simple changes like connecting apartments to the network using a fibre-to-the-basement deployment would save time and money. Further savings would result from the now reduced capex demands in what would have been the most expensive fibre rollout areas.
The overall number of NBN-connected premises would be much higher earlier in the project giving more Australians access to high-speed broadband. With that comes the added benefit of more customers on the NBN sooner. And more NBN Co customers means more revenue and a quicker return to profitability.
It’s well within reason to believe this could all be accomplished by 2020 leaving Australians with a now debt free NBN Co that’s able to produce a modest profit each year. It’s at this point where we can now return to the 10%-30% of the network still running FTTN and replace the nodes with FTTP. With contractors that now have a decade of experience laying fibre and funding that can come from the NBN Co we could knock over the remaining fibre rollout over the next 5 years.
No doubt this still won’t please the almost dogmatic fibre supporters or satisfy the cost cutting Coalition supporters, but the future of telecommunications networks is hybrid. So if Australians want a high-speed network of the future with a pricetag that we can afford today, then we need to make a choice. Not a choice between copper or fibre; but the choice to use both.
Image credit: Various
This seems quite sensible. FttN just isn’t cheap enough to make it worthwhile rolling out everywhere, but it does make sense to use it where FttP is difficult (apartment buildings/small communities).
If the Coalition came to the Election with that sort of pragmatic plan in place, I think there would be a lot less arguments that could be brought against it.
The current Coalition plan of FttP for greenfields and as a last resort only is just not sensible or cost effective.
Well that is the actual policy, rollout FTTN where it is more cost effective. The assumption is that ~70% of areas will make sense to roll out FTTN to. Of course those who hate the policy assume that the coalition will force NBNco to rollout FTTN in areas where it doesn’t make sense.
It wouldn’t be the first time that an assumption in a poltical policy was wrong but from the FTTN areas researched and considering how small an area 70% of australia’s population lives in its a reasonable call.
I’d suggest rolling out to 70% of the population would not be sensible at all. Once you add up the communities served by wireless, greenfields and those already hooked up to the NBN or those in areas with contracts in place, that’s probably close to 30%. Which means the 70% is everyone else.
But from (I’m guessing you’re the author) the 10 – 30% being served by FttN seems much more reasonable. It wouldn’t suprise me if that was close to the number of people living in MDUs and regional communities best server by FttN for now.
Just to clarify im *not* the author.
The wireless etc is only 3-4%, in terms of contracted premises outside that no one currently knows but I doubt it would be anywhere near 30%.
Thanks for the clarification. And to clarify my 30% guestimate “Once you add up the communities served by wireless, greenfields and those already hooked up to the NBN or those in areas with contracts in place, that’s probably close to 30%”.
So your comment stating that this is the Coalition’s policy is incorrect. Unless MT comes out and says otherwise. Because the rhetoric repeated over and over is that FttP is too expensive, FttN is cheaper is infact not the case.
In the policy they assume ~10% of brownfields getting FTTH on top of the assumed 500k already on fibre from existing NBN contracts. If NBNco were to meet their rollout target for mid 2014 then that would be 1m on fibre.
But yes pretty minimal fibre in brownfields is whats planned.
While it’s true that the Coalition policy is about using FTTN where it’s cost effective they aren’t including the cost of a future FTTP upgrade. If they were there is no way they’d be targeting the 71% or so of brownfields, it would be much smaller.
The other issue is that they have no timeline or plan for a future fibre upgrade. Malcolm Turnbull has only made references to the fact that “they’ll design the network with that in mind”. He’s sticking to the line that future upgrades like G.Fast will continue to make copper faster. The fact is the we are reaching the limit of copper and we should be planning a path to full FTTP today, even if it needs to be a long term plan.
Oh, and just to clarify I’m the author, not Michael B.
And that sums up my problem with the Coalition policy and why I cannot in good conscience vote for them (does not necessarily mean Labour are getting my vote either).
+1
I dont have many problems rolling out FttN in areas where its more beneficial, but in most cases, where it is there are yet other options that arent considered.
You mention MDU’s as an example. If FttH isnt the answer, but FttN is, why? What makes one workable and the other not? In this case, its access to the properties for the wiring. So why wouldnt FttB be the better option? It gets FttH speeds thanks to the much shorter copper loop, without the redundant technology issues with the nodes.
My biggest issue by far with FttN is that its already redundant technology. For too many years, The Turnbull points to countries that have FttN as their basic HSB option, but what will THEY be like in 2021?
Does The Turnbull really suggest that all these countries will still be on the FttN bandwagon? Its this that drives me to frustration with the Liberal plan. They are looking for the ‘now’ option, and not willing to consider bypassing whats already a near decade old technology and move to the ‘next’ option.
As others have said more than once, if FttN had started when it should have, there wouldnt be an issue to discuss. But it didnt, so the lifespan of what should have been started a decade ago needs to be questioned.
It would have been started a decade ago if the Coalition had separated Telstra when they sold it. Now it looks like their getting a second chance to stuff it up after Labor had straightened their mess out.
I suspect it wouldnt have been that easy even then MikeK. Any separation would have still seen some influence between the new branches for some time, notably at the exec level who would still rely on each others experience in areas that cross over.
Not saying there would have been concious influence, but I suspect there would be grey areas that people would point at and accuse one side or the other of playing favorites. And something like a FttN rollout, relying on what the integrated Telstra shared would have been ripe for that.
And what happens if we need significantly more than 60,000 nodes. Didn’t Deutsche Telekom require somewhere in the vicinity of 300,000 node cabinets?
Also you’re approaching this from a business only perspective whereas this is also a social project. Equality in service and provision. Only the most outlying areas get a ‘degraded’ service (wireless and satellite) which is still a significant upgrade on what they might have now.
I actually strongly agree about the social benefits of high speed broadband that’s available to all. The issue with Labor’s current approach is that it’s both too expensive and too slow.
For my own house I would be happy to have a FTTN solution in the next 2-3 years and then be upgraded in 10 years to FTTH. Fibre at 100mbit sounds cool, but really my connection right now is ~2mb. And under the current plan it will still be ~2mb for the next 8 or more years (depending on how lucky I am).
If it takes 10 more years to upgrade 100% of homes to faster broadband then for 10 years that’s a pretty big “digital divide”. My argument is use FTTN and close that divide we are creating from the slow roll out. It should also save us some money too.
@Michael Berry
The problem with this is that there is NO guarantee it will be 2-3 years.
If the Coalition turned around to you and said “You can have FTTN within 6 years or FTTP in 8” what would you do then? That’s what they’re saying to those in HFC areas that can’t get/aren’t allowed HFC. Even if they DO open HFC to competitors, I seriously doubt it would be required to provide 12/25/50/100 tiers, in which case it would be pointless as many couldn’t afford the 100Mbps, but want more than the 2Mbps such as you get on ADSL.
And even THEN it’s unlikely to be within 6 years. While the Coalition’s plan is less susceptible to civil works, it is still far from easy as they must enter every home to guarantee the speeds they are talking about AND the number of nodes is yet to be determined.
If the Coalition had a design and business plan, I could agree with you. Having a well-fleshed policy against another well fleshed policy is one thing. Having a working, on-the-ground project vs a well-fleshed policy is another entirely. NBNCo. have the worst of the delays behind them now and the costs tied up fairly close as well after 4 years of hard slog. Changing the entire pace of the rollout is NOT going to happen in the time that Turnbull wants it to. If it isn’t going to happen in that time, then it’s BARELY faster than FTTP and if it isn’t going to cost any significant amount less than FTTP…..what’s actually the point of their policy??
This!
“NBNCo. have the worst of the delays behind them now”
Apologies, but there really is no evidence for this claim. We’ve seen continual new problems with NBN Co’s contractors and the asbestos handling over the past several months.
The delays are probably moot in this debate. In reality the same struggles are going to apply to both sides of the fence.
@Renai
What NBNCo. have been facing are structural issues in the rollout they should have foreseen and taken into account in the first place- partially I believe due to the hard core policy of Labor in insisting everything be fibre and no other. The Telstra remediation delay was Telstra’s fault and yes, there’s no guarantee that external influences like that won’t cause more delays. But the STRUCTURAL delays of the rollout- mainly attributed to contractor labour force and labour rates, are even now being reported as being overcome. There is a growing body of evidence that NBNCo. have taken steps to avoid further contractor delays.
So no, there’s no evidence they won’t face more delays at the hands of external influences unseen. But there IS evidence they are now rectifying the structural delays associated with the rollout most severe to date. The ramp up is still occurring, albeit slower over the next 2 months thanks to these delays. Evidence for further structural issues would be a REVERSE of the ramp up. We are not seeing that.
Yes we are 7tech.
In July the rollout was 3 months behind. If they dont hit the September target of 286k (which is extremely likely) the rollout is now more than 3 months behind.
Of course the run rate should be increasing, NBNco are working through a backlog of areas that were meant to be online months ago!
That doesnt mean they have fixed the structural issues.
@Michael B
The delay thanks to Telstra/Syntheo has not been reflected in the new RFS yet. They have admitted that. It’s estimated they’re now 6 months behind thanks to both these issues added in to the late start.
Unless the rollout/day begins to go backwards in a few months time, there is no reason to believe they have any further structural issues with the rollout. These contra tor issues started with Syntheo. Syntheo are now being replaced and further contracts have been signed to up the rates of labour AND premises passed/day. Does that mean there will be no further issues? Of course not. But the long running delays we have seen are unlikely to eventuate again. Unless you truly believe the board are incapable of learning from mistakes.
Your good with numbers Seven, what do you think of the August ones?
http://www.nbnco.com.au/content/dam/nbnco/documents/rollout-info-monthly-august-2013.zip
If I read it right, they added 21,600ish in the last month?
@Tinman_AU
Yeah, that’s about right. They expect to catch some of that up this month and some next month for an estimates ~250 000 passed by End September. That’ll get them pretty close to their stated aim of catching up on the ORIGINAL 286 000 for June 30 by End September (original 3 month delay) and indicate they are now between 5 and 6 months behind overall.
IF the NBN continues apace with the rollout (I won’t make any political assumptions about who that happens under) I can see them catching up about half that delay by end of next year by the looks of the numbers and the rest by end 2015. It only adds a few dozen extra premises per day overall.
That assumes they bring on labour to replace Syntheo in WA (which they’re already talking to Downer EDI about) and contracts with Visionstream and other major contractors are renewed shortly after the election. Otherwise, if the rollout is “paused” we could see that delay start to blow out quickly past 9 months by the end of this year.
Apologies, but there really is no evidence for this claim. We’ve seen continual new problems with NBN Co’s contractors and the asbestos handling over the past several months.
You think there will be more bad news on these things (Contractors going bust and asbestos) Renai?
” Didn’t Deutsche Telekom require somewhere in the vicinity of 300,000 node cabinets?”
Deutsche Telekom now survey areas before roll-out. If 80% are interested in FTTP and 10% are prepared to sign up in advance, they roll-out FTTP instead because it is cheaper to roll-out FTTP under these circumstances than FTTN then FTTP.
Polls in Australia consistently show more than 80% want FTTP and take-up rates for FTTP are well above 10% with 100% guaranteed after copper is shut down.
Why is it Deutsche Telekom, with all it’s experience with FTTN think it is crazy to do FTTN then FTTP but we still have people arguing for it here?
From “Is it cheaper to build …” table
Where does the 50% Capex reused come from? Most (nearly all) of the expense of FTTH comes from laying the fiber.
The FTTH cost of $3600 was refuted by Quigley. Changing this changes everything.
Does the $900 cost/guess of FTTN include all the costs to the end user (hint, it does not)? It is all included in FTTH, so why are we comparing apples with oranges?
This is more or less what i have been thinking recently. Though i was thinking more along the lines of using the HFC network instead of FTTN. So fixing and upgrading the HFC network so every house it passes gets access. Should be even less construction.
Then there’s places like where i live where i get ~11mbps with ADSL2 (~2km from exchange) due to the estates age (~10yo), so the copper is in very good condition. There’s no need to put FTTN in. There’s no copper stability issues and the speed is adequate for now. I would rather wait a few more years, save the money and get FTTP. The main problem i have is congestion at the exchange, and thats not really an infrastructure issue.
This probably wont be admitted by either party until after the election. Political parties are just too prideful and it hurts australia. I wish both parties for once would stop putting their fingers in their ears, closing their eye’s and shouting “tick tock tick tock i’m not listening”, like my little sister used to do.
$5000 for FTTP extension on FTTN probably on the low side:
http://www.brisbanetimes.com.au/digital-life/digital-life-news/telstra-in-dispute-with-customer-over-costly-landline-installation-20130815-2rxx6.html
thankyou, i was going to post that. Thats Malcolms’ preferred contractor too, it would seem. i have to ask – how much different would the work have been had it been fibre on demand? jointing methods would be different and i have no idea whether its faster to joint a connection in fibre than do an equivalent joint in copper…?
what im working to is that over all the reportage ive read i have the strong impression the labour for the two is about the same and the materials cost also – and we arent even talking a 500m run here; this is essentially 30cm from the front door of that business.
im interested in arguments why i should NOT consider this indicative of FoD/hybrid costs? where is this differing? where does one find the discount to the rates that make an LBN connection that at average is somewhere around the 500m mark – Malcolms own call – 2.9 grand odd less than this?
“The overall cost would be cheaper because we could used targeted FTTN deployment to the most expensive 10%-30% of the network.”
i also have issue with this quote for similar reasons – i suspect a large portion of that 10-30% is the most expensive *because* of the length of lines for service – lengths that arent suitable for a cheaper FTTN run. it doesnt matter how much money you tip in as maintenance; maintenance doesnt trump physics. i regard with great skepticism the suggestion you can reduce capex demands for the most expensive lines like this.
that trade may be there for some lines, and i am one who feels the MDU segment actually might be valid for that trade, doing maintenance and running FTTN instead and trimming network cost that way. but there are many lines out there where i dont think that substitution can be made – or more correctly i suspect its quite a lot fewer lines than suggested here.
alternately theres the possibility that 10-30% is the lowest connection quality lines therefore most expensive to rectify to get to the point of useful FTTN – and in chasing that the savings are swallowed.
and for me, if the figure is closer to the lower bound – 10% – i’d also be careful that the extra work to make it a hybrid network over the entirety of the concern doesnt swallow the savings. if its clearly 30% and the lines are definitely in serviceable Fttn range that would obviate my concern – a primary FTTH net with targeted FTTN is an acceptable proposition to me, done right. but with a promised costing ganked and lots promised to come ‘after the election’ let alone the 60 days down tools for CBA business (werent they the ones bitching about how hard done by the subbies etc are these days? wtf do they think that will do for those blokes?) i have to really really query if that proposition is ‘done right’, and if the changes will be worth it.
again, i dont have an issue with a hybrid net per se, just the way its laid out as here.
“Fibre is very expensive to deploy in some areas, as found in the New Zealand where Chorus is rolling out a national fibre network.”
The only areas where fibre is that expensive is where there is no existing copper infrastructure.
In other words, it will cost the same to connect copper as fibre, but the copper will still need replacing when the support network for it is gone.
Sorry, a ‘cost saving’ argument doesn’t hold up as justification for crippling the FTTH NBN with nodes. The difference in CAPEX between the two approaches is marginal (0.9bn in government investment, a tiny proportion of the overall build cost). The Liberal plan doesn’t even take the cost of purchasing the copper from Telstra into account.
Then you’re talking about a network that introduces wholesale competition, leading automatically to reduced market share resulting in lower income, reducing your ROI. With the costs of powering nodes you have higher OPEX. With the costs of maintaining copper you have increased OPEX. With increased OPEX you have greater ongoing costs, so reduced ROI.
With reduced speeds you have fewer tiers upon which to base your products, and lower ‘quality’ products because you can’t hope to match the performance of FTTH NBN options. With a lower quality product you will necessarily have less demand – certainly the premium revenue products offered over the fibre network simply won’t exist on FTTN, completely eliminating the possibility of those revenue streams. With lower demand you have lower ROI.
So, quite apart from any ancillary benefits of a full speed fibre network, the dramatically improved reliability, lower maintenance, future upgradeability or ‘fitness for current needs’ arguments, we’re talking about a change that will deliver a network with lower demand and higher operating costs that will be lucky to make a positive return at all, and in all likelihood will be a costly annual expense to the government, that will be significantly slower, and all for a saving of $0.9bn. 0.9bn which under the FTTH NBN isn’t a cost to the tax payer anyway, but under a FTTN build may end up being a drop in the ocean if the whole build becomes an ‘on budget’ 30bn cost, with ongoing annual unrecoverable costs.
Now, tell me again how FTTN has any kind of rational justification? It’s fiscal irresponsibility based on lies, misinformation and the gullibility of those swallowing LNP statements as though they are incapable of deliberately misleading the public for the purposes of attaining office. But this isn’t just about an expensive money pit – it will affect Australians, the economy, education, the cost of the aging population, innovation, creativity and the very future of this country for decades to come, if not indefinitely.
In another 3 years this won’t even be a debate – the FTTH NBN will be too far gone to dismantle if it is allowed to continue (unless there are ridiculous cost blowouts or delays, buy the current ramp up seems to be putting paid to those arguments even now). Crippling the NBN right now is a mistake with little justification and no benefits that stand up to rational, informed scrutiny.
Trevor,
The difference in capex is not marginal in certain areas as proven in the example from Chorus. The NBNCo have had and average cost of $5000 per household in the first NBN site. Now this is much lower right now, but a small percentage of the network (my guesstimate is 10+%) will be very expensive to roll out.
As for wholesale competition that won’t exist under my plan. That’s just a Coalition idea where they want to keep HFC networks alive and in competition.
I agree on the higher opex cost hence the extra $110 per household on copper. Electricity is already included in my cost as that equates to ~$2 extra per year.
I’m going to disagree on the cheaper product idea. The real money maker is actually services, hence the marketing term triple play (TV, Internet & phone). Any node connected household will still be able to use those services. I don’t see speed of connection being the big factor in the revenue generated.
I don’t think we need to be so anti-FTTN? It’s a good technology that just needs to be used correctly. If you use it in a select few of the most cost effective areas and put in a plan for a future upgrade it’s great. It’s only the Liberal plan to put it almost everywhere with no real upgrade strategy that’s an issue.
The Chorus example is (according to the link in the article) due to having to build pits and ducts in dense areas. Isn’t this covered by the agreement to use Telstra’s pits and ducts?
Telstra doesn’t have pits and ducts in all suburbs, so some areas still need trenching or other similar work done. The $8000 was just an example, but I doubt it would be hard to find some areas that would be over $5000 per household.
Michael,
In areas where pits, ducts and overhead lines aren’t available, what is the cost of using the big trench cutters that were bought to deploy the NBN fibre prior to the agreement with Telstra being negotiated? From memory at least two of those were purchased and could cut an trench right down the middle of any existing road. Surely that’s a viable and relatively inexpensive solution to the problem for the majority of premises that you’re talking about?
I can concede that using your scenario FTTN could be a useful stopgap in certain circumstances. The problem is, this isn’t a solution that was designed into the NBN, so you’re talking about pretty significant changes to the plan being made on the run – never a good idea for any project unless absolutely necessary. Variations even in small projects like a residential house can cause tremendous cost and time blowouts – what will it take to negotiate copper access/purchase from Telstra, electricity grid connection, equipment procurement (will cabinets and comms be purchased as needed, or in bulk once the extent of the work has been fully scoped?) etc etc? What sort of reskilling will be required and what size will your workforce be? How will operating costs for node residents be recovered ongoing?
I do appreciate where you’re coming from, I just think it’s a stop gap measure that will introduce a great deal of complexity foe the sake of not much time saved, not much money saved and not much inconvenience (and lower quality services) avoided for those residents affected by the scenario you propose.
Trevor, where do you get your $0.9b difference in CAPEX from? I think it’s closer to $9b.
@Rich
The difference of $900 mil is in government spending, not CAPEX. FTTN might have less $9b CAPEX. But it’s lower Revenues and higher OPEX mean total government funding is essentially the same.
Damn!
I have nothing to significantly disagree with in this article!
Renai, what’s your game here? Are you trying to discourage comments by deliberately posting sensible analyses!? ;P
You should disagree with the theory that costs are higher due to the NZ example.
From his own article the reason for the increased cost are:
“Chief executive Mark Ratcliffe said this was due to the much higher costs of digging up busy urban areas such as Ponsonby and central Wellington to lay the ducts carrying the fibre network, with some costs as high as $8000 per premise.”
We are paying Telstra for pits and ducts access for a reason.
Most of the article is fantastic, and I agree whole-heartedly than FTTB for MDU’s (VDSL from there) is probably the absolute best solution to the MDU issue. I disagree that rollout speed, as long as we are talking differences in the order of years (and not tens of years) can be completely ignored.
Neither do I
If the Coalition had actually taken this approach rather than only FttN nobody would have a problem but they could not do that no having a significant portion of the network as FttP was too much like Labor.
Turnbull throws out the line Technologically agnostic yet refuses to use FttP in Brownfield sites even if the cost is similar to FttN that is not agnostic.
You don’t have trouble with reuse being 50%, seems that should be looked at. 8% discount rate is very high when the bond rates used to fund it are so low. Either way, it just means say $6B costlier to get FTTH in 2024 (10 years). Then X years of rollout. Does FTTN last 10 years. If, and lets be generous, FTTH upgrade takes 6 years. That’s 2030 to get a solution to speeds that may be obsolete in 2017. 13 years. That seems like we are putting ourselves into a position to be where we are now by 2020. Way behind the curve on broadband.
The problem with your argument is you are pulling it out of your a#&@ – you are simply making up a fantasy scenario and using that as justification against a real world issue. What basis do you have for any of that drivel? Wild speculation and baseless conjecture do not an argument make.
Thank you for you very rude reply. As haven’t seen to point to which part you consider “drivel” I have “pulled out my arse”.
The $6 billion is gained by using a more realistic 30% reusability on FTTN, the only bit of the FTTN portion, the per house cost is the fibre to the node.
FTTN maybe not lasting 10 years is based on all major network companies predicting speeds in excess of 100Mb will be needed by 2018-19.
50Mb obsolete after 2017. The graphs from cisco, alcatel lucent, etc, have been shown many times.
If the predictions are true, we will be way behind if we don’t start a FTTH rollout until FTTN has had a 10 year life, the predictions are multi Gb will be needed by then.
Thank you, please feel free to abuse me and others in future.
Sorry, I was confused by your original comment – I read it as speculation that FTTH was going to take X number of years extra to deploy and you were calculating the cost blowout. On a reread I see you were trying to say FTTH would cost more if delayed by FTTN and deployed later, which is true, but not the biggest problem when FTTN will result in a costly liability to the country ($30bn plus copper purchase plus OPEX).
I apologise for misunderstanding.
Yes, Malcolm’s calculations would be great and I’d be all for a FTTN solution followed by a FTTH upgrade.
BUT, if you adjust his figures from the contrived ones he has, to something more realistic. Which is what he really must have done, the ones he publish are for political reasons, it’s obvious FTTN as an interum doesn’t save money as he claims but wastes it. A probably more costly mistake than the wasted money on implementation is that introduces delays in getting FTTH. FTTH, based on expected speeds, is need around 2020 give or take a couple of years. Trying to get 10 years life out of FTTN delays it a decade.
The problem is that by the time people start complaining that the current speeds are limiting services available to other countries on FTTH, there will still be a long rollout period to correct it.
The FoD argument is good for those who need speed for some reason. But no one is going to release a service in Australia that needs FoD because of the limited market.
Sorry, I was confused by your original comment – I read it as speculation that FTTH was going to take X number of years extra to deploy and you were calculating the cost blowout. On a reread I see you were trying to say FTTH would cost more if delayed by FTTN and deployed later, which is true, but not the biggest problem when FTTN will result in a costly liability to the country ($30bn plus copper purchase plus OPEX).
I apologise for misunderstanding.
“The overall number of NBN-connected premises would be much higher earlier in the project giving more Australians access to high-speed broadband.”
Actually, this is untrue also.
FTTP roll-out has most of the bugs sorted now and the pace of roll-out is picking up.
A change to FTTN will involve first off a complete halt to the NBN roll-out while the CBA is done and negotiations with Telstra for copper access/acquisition is negotiated. Based on past experience, I would expect this to take until around the end of the next term of government. You then have to negotiate new contracts for supply of different equipment and new contracts to get it installed.
That means all those who would have gotten FTTP over the next 2 years will get nothing until then, after which they will get FTTN. If you are currently on the NBNco map, this means you.
Even if (and I have severe doubts) the FTTN roll-out can be undertaken faster, to the point it is completed earlier, this will mean more people waiting longer for inferior service.
The reason is that the roll-out will approximate a bell curve (as in most things in the real world) with slow progress at the start and slow progress at the ends.
FTTP roll-out would be at it’s peak 2 years from now where-as FTTN will only just be starting.
Overlay a tall thin bell over a shorter, more squat one and shift the skinny one to start as the squatter one peaks and the effect is obvious. Even though the thinner curve finishes sooner, the gain is made mostly from the post peak tailoring off of the squatter (FTTP) curve.
If the Coalition win government they have stated they will NOT be doing a CBA, nor are they doing a costing of FTTN for the election because they say its too complex.
They have also stated that they will be doing a CBA. Which is it?
I like this idea Michael (I was already on board the FTTB thing anyway :o)). Seems like a good, workable and financially responsible, solution all round…
Maybe Malcolm can make this “LBN mk III”, I got the feeling that Labor wouldn’t move from “Full Fibre” (though I’d hoped that that may change with Albo replacing Conroy).
How have I only just stumbled upon this site?!
I think I’m board with the idea of a FTTB, mainly as it’s a financial viable option. However at the same time, does the NBN guarantee those kinds of Internet speeds?
FttB is an interesting one as there are 2 competing forces.
Yes it is faster to rollout and is cheaper BUT
Apartments often offer the best bang for your buck FttH as they have service risers are more dense and being inside removes weather as an obstacle.
The biggest downsides to FTTP in MDU’s is time and effort. It takes a lot of time and effort to completely re-cable apartments and unit blocks.
It makes more sense to just “get it done” with FTTB, and sort out access issues etc for FTTP at a later date. That wouldn’t apply to MDU’s that actively want to assist with getting full FTTP service, or those later built MDU’s that have been designed with FTTP.
“The Coalition’s promise of a minimum 25 Mbps would easily push us into the top 10 or even top 5 countries in the world. But how long can we expect to keep pushing copper lines in the search for faster broadband?”
The biggest question for me is whether the Coalition’s promises are technically feasible. From what I’ve read, they simply aren’t., and no amount of bluster from Malcolm Turnbull can change this. Furthermore, the above statement appears to be operating on the assumption that the average speeds of all the other ranked nations will remain the same, and this simply will not be the case.
The thing is; they *are* technically feasible.
They may not be cost effectively technically feasible, but it is categorically possible to build an FTTN network in Australia with a minimum download rate of 25 megabits in 3 years time, followed by 50 megabits in 6 years time.
The 50 megabits, might require you to dig up every node and build them marginally closer to every house, (since there is no technology in existence that can take a VDSLx network at 25 megabits, and make it 50 megabits without more copper, or changing the distance of the runs).
The thing is; its obviously not cost effective to shorten the distance for the 6 year target. And while it may be possible to hit all of these numbers in the timeframes specified, the cost is less certain.
It is disingenuous to state that it isn’t possible to promise 25 or 50 megabits using copper based technologies. But luckily the coalition haven’t provided any figures that they can be held to account for this. No hard-distance figures, no hard node-counts, just 25/50 megabits, and 29.5 billion dollars, everything else is “average distance” and “likely pricing”.
Michael,
(but it hardly justifies spending the tens of billions of government dollars the NBN will require for the next 8 or more years.)
This part of your article is incorrect, the Labor FTTP system is payed by investors who buy government bonds and the pond price and interest is payed back to them by us users.
Money is being spent and it’s the government that’s doing the spending. The fact the the money used comes from government bonds doesn’t change this.
Just because it’s not our tax dollars at work doesn’t mean we should be interested in how this money is spent. For instance if the NBN required less investment this money could be moved to other worthy infrastructure projects.
The other issues as you pointed out is that the return on investment comes from the customers. So if this project isn’t managed well the price of broadband in Australia goes up and we all pay more.
@Michael Berry
For instance if the NBN required less investment this money could be moved to other worthy infrastructure projects.
I don’t see any evidence for this? NAB and several other analysts are calling for MORE debt to be issued and spent on infrastructure. NOT spending it on the NBN will not materially change either main party’s infrastructure policies as far as I can see.
“The money saved could be invested in other projects”
But how many of those other potential projects have a similar eventual value & return or impact on our future?
Another of my concerns is Turnbull’s apparent disregard of the likely costs of copper purchase.
Does he intend to lease it instead? Or do a deal where Telstra continues to own & maintain it while charging the users additional line rental?
I’m of the view that while FTTN may be both “Cheaper & Faster” from the Government’s perspective, it’s going to be both slower in performance & considerably more expensive per plan/month for it’s users than FTTH.
Also going by Turnbull’s recent claims regarding the cost of a 1GB service/household, if the POI isn’t servicing profitable greenfields to spread the cost areas then those wanting his fibre on demand are up for “up to $5K”, +$20K/month at least?
“But how many of those other potential projects have a similar eventual value & return or impact on our future?’
Absolutely…
+1
They wouldn’t have to spend it on other projects, they could just decide to pocket the savings and reduce the overall cost of the project.
Overall this is a good article.
One point
” Indeed Verizon (USA) estimates that copper maintenance cost them $110 USD per year more than fibre.”
Thats in a situation similar to our current ADSL setup, with copper runs of 3-4km. Replacing the long run with mostly fibre will reduce the OPEX cost. It will still be somewhere above fibre but not that far above.
It is not the long run where most of the faults occur.
Larger cables are pressurized with dry air to keep out water, the pits are in good condition.
The greatest problem area for faults is the last pillar to the premises.
FTTN effectively replaces the good copper and keeps the bad.
Okay, I think I understand your point, but it’s one that should be obvious, and one that NBNCo already seems to be discussing with talk of FTTB in MDUs. Hopefully they actually commit to to doing this rather than continuing this, ultimately pointless, idealogical debate.
You see, the problem is the approach angle. The approach angle used by both parties seems to be “We’re going to install this technology.”
The approach should be “We are going to install the most appropriate technology”. An “agnostic” approach. Something Turnbull claims to have in his plan, by by virtue of actually picking a winner he doesn’t. Now, by in large, the most appropriate technology will probably be FTTH. But there are cases where it won’t.
I am willing to accept that some apartments and housing estates will be better off given a FTTN/FTTN solution due to (lack of) foresight by the property developers and CBs. Unfortunately the debate has gotten so ingrained into “This solution, or that solution” that to even suggest FTTB in some circles is considered blasphemy.
I like this article, at first glance I was worried it was going to poke to many fires without even attempting to rationalise itself, which I have seen all to often in the NBN debate.
The biggest problem with this article I think is that it only looked at the cost side. Even then it came to the conclusion that after ten years the two proposals would come out to about the same cost. If you take the benefit and revenue side of it into account it would surely favor FTTH more. Right?
So how many areas are there where it’s actually better to do FTTN first and then FTTH if all of this is true? Even then why build two networks over a couple of decades if the main problem with building one is the timeline and difficulty in construction? Isn’t that just doubling the problem?
Welcome to Australia !!!
We like to talk alot and take no action and if we do manage to do something we’ll find a way to sabotage and destroy it!
– High speed trains. no.
– Expanded central Airports. no.
– Imported inferior foods grown in polluted countries stopped that destroy jobs and health. no
– Support for newly discovered technology?. no
– Our laws steadfast in the face of religious/racial minorities ? no.
– Clean energy, cheap homes, no no no no no no nooooooooooooo !
– High speed internet, FTTH. yes/no (if the Liberals get in rest assured it’ll be ‘no’)
I have yet to see anyone comment on the fact that there is nothing in the coalitions policy empirically stating what the minimum / maximum distance to the node should be or how many nodes should be deployed.
On malcolm turnbulls own blog it states 50,000
http://www.malcolmturnbull.com.au/policy-faqs/coalition-broadband-policy-frequently-asked-questions#nodes
Nice policy aye, it fails to address any specifics and if the node count is only 50, 000 how does he intend to get within the 500m range for every premises
(yes the above graph is wrong as it paints a picture of speeds on 24 AWG when australia uses 26 AWG by telstra’s own admission to the ACCC)
http://savethenbn.com/political.php#p3
If the node count increases so does fibre backhaul therefore cost in total. Also the policy doesnt take into account when it talks about total cost, the cost of the fibre backhaul that has already been laid / cancellation of contracts and many others.
http://savethenbn.com/economic.php
That’s because it is essentially a different debate. This one is about using FTTN technology where appropriate to provide improved broadband to those living in locations where there are no readily accessible pits and ducts for running cable and overhead lines aren’t appropriate – in short, where connection is vastly more complicated, costly and time consuming. It is a thought bubble proposing a middle ground where approptiate. It is not a discussion of the Coalition’s policy as it exists.
Malcolm made it a part of the debate by offering “guaranteed” minimum speeds. Node distance is critical to that. He’s only made it even more relevant by bringing in in to the debate systems like vectoring (requiring node distances not greater than 400m) and G.fast (node distance of 100m as optimal), which both require shorter runs.
Just something I noticed in that Akamai stats. How come NZ with their FTTN network is still doing worse than us?
NZ has two concurrent Broadband programs and one previous program.
The first was an FTTN line length reduction with an optional (assuming your line was short enough) VDSL2 upgrade. This is now complete. Their goal was to fix black spots in cities.
Then it was decided that instead of building more cabinets to reduce the line length further the next step would be to install FTTH in cities as an optional upgrade. This is called UFB and is underway.
In Rural areas they decided that they couldn’t afford to continue UFB so they are doing the RBI which provides improved mobile coverage and FTTN upgrades in towns.
This means that while badly affected areas currently have better service, most people are still on present Chorus speeds, because the rollouts of the two programs have both only covered a small percentage of the country.
@Michael Berry
First, thanks for the article…very well presented.
One of the questions I have is the use of the Coalition’s “Background Papers”…
I am quite dubious about the Opex comparison between FTTN and FTTP listed there. Do you believe $60 for FTTP vs $90 for FTTN is truly accurate? If we include maintenance, power used, distance to travel for switching a customer, etc…, I find it very hard to believe those numbers.
I also am very dubious because they have not costed anything, and they are already making rather massive assumptions that make no sense to me (i.e. Telstra will agree to this for free and immediately).
JMHO
To quote myself “…the Coalition’s figure of $30 opex/year extra for FTTN is far too low.” $30 being the difference between the two opex figures.
There is no way that this is correct, which puts a big dent in the Coalition argument that we’ll save money by putting in FTTN in up to 70% of premise. I still think that in some cases FTTN will still be much cheaper than FTTP, but only in 10-30% of premises.
The Coalition need to adjusted their model to include the real cost of FTTN opex and FTTP capex. Once they do that I think we’d have a much more sound solution, that will require minimum rework & replacement in ~10 years.
While the idea of a hybrid network has merit, it will perpetuate the digital divide – where Person A in one suburb can have up to 1Gbps but Person B in another suburb can only have 25Mbps because they’re stuck on FTTN. While 25Mbps doesn’t seem bad now, imagine this divide in 5 or 10 years time – even the guaranteed 100Mbps in a few years time. And then there’s the unreliability of the copper network!
Now let’s look at price. Currently a person getting 3Mbps is paying the same as someone getting 20Mbps. The NBN (in whatever form) should fix that, right? So someone on a 25Mbps FTTN connection should pay the same as someone on a 25Mbps FTTH connection, right? But what about UPLOAD speeds? If the upload speed of a FTTN connection will be slower than FTTH – prices SHOULD be cheaper. But will they?
The ONLY way to end the digital divide is to give everyone access to the same technology. Unfortunately with Australia being such a large country, there will always be the city/country divide – but let’s not divide suburbs!
Australia is a nation of whingers, I can’t wait for the complaints that will flow when people find out they’re getting a node infront of their house.
Who pays for the eventual upgrade that you assume will come in 10 years when we need it? The answer is the homeowner. So because we don’t have lump sums of cash burning a hole in our pocket we get further behind due to a fractured and fragmented data network.
Of course we could ask the ISP to offer loans that get put on the monthly fee, how is this any different to what we’re going to do with NBN except debt is issued by the Government as opposed to private enterprise? And how many ISPs will be comfortable with this level of debt?
I really don’t see a convincing argument for crippling our network until we ‘need’ it. If nothing is built to take advantage of a uniform, high speed network then we won’t need anything more than what we have now.
And now for something completely different, Taiwan isn’t a province of China.
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