{"id":4030,"date":"2013-04-29T21:34:26","date_gmt":"2013-04-29T11:34:26","guid":{"rendered":"http:\/\/australiansforhonestpolitics.wordpress.com\/?p=3445"},"modified":"2019-04-13T23:24:15","modified_gmt":"2019-04-13T13:24:15","slug":"coalitions-10-nbn-cost-save-locks-us-out-of-massive-upside","status":"publish","type":"post","link":"https:\/\/archive.nofibs.com.au\/coalitions-10-nbn-cost-save-locks-us-out-of-massive-upside\/","title":{"rendered":"Coalition’s 10% NBN cost save locks us out of massive upside"},"content":{"rendered":"
\"Taken

Taken at the Coalition Bikeshed – Created by The Geek<\/p><\/div>\n

Editor’s note:<\/span> Steve Jenkin is a geek who wants to make the NBN tech stuff accessible to all. He has agreed to be a @NoFibs contributor.\u00a0so feel free to ask your NBN questions as a comment.<\/strong><\/p>\n

By Steve Jenkin<\/a><\/p>\n

Source:\u00a0http:\/\/stevej-on-it.blogspot.com.au\/<\/a><\/p>\n

April 29, 2013<\/p>\n

The volume of words written and spoken about the NBN must startle many, producing far more heat than light. Is this a case of the \u201cBike Shed Effect<\/a>\u201d where trivial decisions dominate the discussion and the biggest decisions seems like an after-thought?<\/p>\n

It\u2019s complex, but we shouldn\u2019t be having this debate at all: Frank Blount, Telstra CEO 1992-1999, forecast the customer network would be all Fibre by 2010. What happened on the way to the Future?<\/p>\n

What should\u2019ve been a Commercial decision, balancing technical and financial issues, has become political. We can\u2019t unring that bell. As a nation, we now have to figure a path through the combined political, technical and financial\/funding maze that will be good value and politically possible.<\/p>\n

This three-way tussle is at the heart of the problem: Telecommunications is highly regulated in Australia because it has to be with single large player, Telstra, that can commercially block anyone else, as we saw with cable TV. For the ALP to pursue its broadband policy, it had to first deal with Telstra, deal fairly with its shareholders and create an environment where Telstra was happy and unable to block the new initiative.<\/p>\n

There is a huge irony in this debate, each side of politics feels like the other is setting the agenda and dictating terms of debate while the commentariat vigorously defends their personal favourites from the sidelines.<\/p>\n

Labor has defined the technical needs debate, \u201cFibre or not?\u201d forcing the Coalition to respond on those terms with its policy.<\/p>\n

The Conservatives have defined the use debate, \u201cWhat is the real consumer demand?\u201d, usually translated to \u201cHow much speed is enough?\u201d, forcing Labor to respond on those terms.<\/p>\n

The NBN as a topic is a BBQ conversation stopper for these reasons. Instead of people discussing \u201cWhat exciting new things can be done in health, education and shopping?\u201d or \u201cCan I get real cable TV?\u201d or \u201cWhat extra cool things can the kids do with it?\u201d, we get the policy that dare not speak its name. Everyone has an opinion, even if its \u201cDon\u2019t talk to me about that!\u201d.<\/p>\n

Why neither side can get cut-through is that both customer demand and need are unknown. Will most premises need 100Mbps or better in 10-15 years time? No idea.
\nWill most paying customers pay the extra to get Fibre? No idea.<\/p>\n

When the experts don\u2019t agree on the technical issues (Is fibre the one true future network?) then how can politicians and the public be expected to make sense of the arguments? I think its because the wrong questions have been asked and different issues conflated or confused.<\/p>\n

Nobody disagrees with the proposition that Fibre is the only commercially viable solution to higher speeds, longer distances and hostile environments that degrade copper. That\u2019s only a proportion of the market, at most 25%. What to do?<\/p>\n

One way to cut this gordian knot is to not focus on the technical\/demand issues that have us so mired in unproductive debate, but just look at the deals on the table from each side.<\/p>\n

Here are the headline costs of the deals. Even \u201cpremises\u201d is hard to define. Is it the number of single & multiple dwelling units in all \u201cService Addresses\u201d passed, the number of premises connected or the number of services in active use, collecting rent? Premises can be new, or \u201cGreenfield\u201d versus existing buildings or \u201cBrownfields\u201d. Both sides intend all new estates of 100 \u00a0or more premises will be connected with fibre.<\/p>\n

I\u2019m using 12.2 million, the total premises passed, in these calculations. Around 70% of premises are expected to eventually connect to the fixed-line network, DSL (copper) or fibre.<\/p>\n

$20.5 billion or $1,680 per premise: The capital cost the Coalition claims.<\/p>\n

$29.5 billion or $2,418 per premise: The full investment the Coalition claims.<\/p>\n

$34.5 billion or $2,828 per premise: An apples-n-apples estimate of CapEx of Coalition plan.<\/p>\n

$37.5 billion or $3,074 per premise: The capital cost of the NBN Co 2012 Corporate Plan.<\/p>\n

$44.3 billion or $3,631 per premise: The \u00a0full investment of the NBN Co 2012 Corporate Plan.<\/p>\n

$94 billion or $7,705 per premise: The worst-case scenario for NBN Co claimed by the Coalition.<\/p>\n

There is a difference between \u201cCapital Expenditure\u201d (CapEx, also OpEx, or Operational Expenditure) and the total cash injection required. (The Coalition uses \u201cFunding\u201d).<\/p>\n

The CapEx is the value written in the books for the long-term investments that can be depreciated: what the income producing asset cost to buy and install.<\/p>\n

Because the network can\u2019t be built & attain full-revenue in one year, it incurs losses until it reaches break-even, when revenues exceed expenses. The full investment is the CapEx plus losses incurred until \u00a0break-even.<\/p>\n

The Coalition deal, based on CapEx, seems to be \u201cwe\u2019ll do it for $250 less, $2800 not $3050\u201d.<\/p>\n

Only that\u2019s not the whole story:<\/p>\n