NBN CBA fetes Feds' fickle, flagging fibre faith

Summary:The Vertigan cost-benefit analysis has further downgraded the role of fibre in the multi technology mix (MTM) model for the NBN - even though it also suggests that fibre isn't as relatively expensive as it used to be. What are we to make of this?

One of the most interesting things about the Coalition's long-awaited cost-benefit analysis (CBA) is how it differs from the previous NBN Strategic Review (NBNSR) on a number of rather significant points.

Foremost among those is the CBA's conclusion that continuing with Labor's fibre-to-the-premises (FTTP) rollout, in the 'radically revised FTTP' form first described in the NBNSR, is now considered to represent a premium of just $10 billion over the government's preferred multi technology mix (MTM) model.

Fibreoptic
The cost gap between FTTP and MTM is smaller than ever – so why did the CBA downgrade it even more than the Strategic Review? Image CC BY-SA 3.0 BigRiz

This is far less than the tens of billions that Malcolm Turnbull, spruiking hard for a pre-election win with policy costings that would later turn out to be $12 billion too conservative, warned the country we would face if we continued what he dismissed as Labor's FTTP pipe dream.

Remember this is the same man that somehow convinced a not-insignificant portion of the Australian public – or its media, at least – that Labor's version would cost up to $94 billion  while the Coalition could get the job done for total funding of $29.5 billion.

Even that figure represented upwards movement on the Coalition's pricing: those with even moderately good memories will recall that Labor was going to roll out FTTN for $4.7 billion , and that the Coalition went to the 2010 election promising to fix Australia’s broadband with a spend of around $6 billion .

It wasn't too long ago that the Coalition was arguing that the FTTN upgrade should only have costed around $15 billion , with the NBNSR pushing it even further upwards to the point where we are now committing to a $41 billion MTM rollout that even Turnbull STILL won't guarantee  is going to work.

The mostly-FTTP model, by contrast (adding, necessarily, fixed wireless and satellite services to the last few percent), has become cheaper with every passing report – even those commissioned by Turnbull. The NBNSR cut his claimed savings of $64.5 billion to just $23 billion, and the CBA – upon further reflection of a cost model that has been intrinsically structured to favour the Coalition's NBN policy – now says the gap between the existing FTTP and planned MTM model is just $10 billion.

If this keeps up, we won't even need unicorns to build an all-fibre network, as telecoms luminary and NBN Co board member Simon Hackett so colourfully suggested in a speech to the Australian Network Operators Group this week.

“It’s not ideal,” he was quoted in industry journal Commsday as saying, “in the sense that I’d much prefer the thing was built with fibre; I’d personally prefer we spent A$60 billion, or whatever it cost, to build it all with fibre. The world would be great, unicorns would jump through the fields and we’d all be happy ever after.”

“The problem is it’s not my money, directly... it’s all of our money, indirectly, and the government of today is not prepared to spend the money to build the network that would be the perfect world.” But would it be prepared to spend that money if the quantity of that money was not so much – for example, if NBN Co could figure out a less expensive way to roll out FTTP?

Now that Vertigan's CBA suggests the difference between the models could be as little as $1 billion per year for the next decade – is there a case for spending that little extra to do an all-fibre infrastructure right?

Herein lies one of Turnbull's weak spots: he has not, outwardly at least, done anything to optimise the Labor rollout he has criticised so resoundingly; he has only been focused on moving away from it, even though the NBNSR suggested the radically revised strategy had a much more reasonable price tag. Now that Vertigan's CBA suggests the difference between the models could be as little as $1 billion per year for the next decade – is there a case for spending that little extra to do an all-fibre infrastructure right?

This may be optimistic thinking, however: the second significant difference between the NBNSR and the CBA is that the CBA seems to have rather significantly reduced the amount of FTTP that will be rolled out in the network.

The NBNSR, in constructing the MTM for the first time, proposed that on the completed network around 26 percent of customers – around 3 million based on a total of 12 million premises to be connected – would get FTTP services.

Other NBNSR scenarios, remember, were predicated on other penetration rates for FTTP services: 19 percent in Scenario 5 (FTTN & HFC), 63 percent in Scenario 4 (exclusive use of HFC in HFC areas) and 87 percent in Scenario 3 (where FTTN is only used on the shortest length services to ensure high levels of performance).

Despite its other procedural flaws the NBN Strategic Review was correct in actively considering the role that FTTP would play in a true multi-technology solution, and some of its options explored quite generous penetration of the technology.

The CBA, however, was designed from the get-go to malign FTTP – and has reduced its role to unprecedented low levels as a result. It's right there on page 11: even though the MTM scenario included 26 percent fibre services when the NBNSR was handed down, that percentage has now been reduced to 15 percent.

This is a significant and fatal departure from the terms of engagement and even the government's own proposed architecture, as set down in the NBNSR. In other words, in assessing the net benefit of additional bandwidth to Australia, the authors of the CBA have actually handicapped the FTTP model by minimising its penetration – and, therefore, minimising the potential economic benefits (including both subscription revenues and onflow benefits) of fibre in its modelling.

Even though the MTM scenario included 26 percent fibre services when the NBNSR was handed down, that percentage has now been reduced to 15 percent. This is a significant and fatal departure from the terms of engagement and even the government's own proposed architecture.

No wonder the FTTP solution compared so poorly against the MTM option in the CBA's analysis: in Vertigan's vision of Australia's broadband future, fully 1.3 million fewer homes will get fibre broadband. This omission has likely distorted the projections about realisation of benefits, as well as marginalising the increase service profile and reduced maintenance a fibre infrastructure offers.

The CBA may well justify this omission based on its premise that economic benefits will flow sooner and better if those premises can be serviced using FTTN rather than FTTP – but these discrepancies suggest, more broadly, that the Coalition's actual broadband policy is still as vague, confused and indifferent to technological reality as ever.

Does this mean Turnbull is continuing on his perceived mission to eradicate fibre – and, in the process, any memories of Labor's NBN architecture – from his own? Is it a subtle adjustment made for the purposes of bolstering the CBA's case for the MTM model? Or is it just a continuing indictment of fibre's perceived high cost and longer rollout times, which are outlined in the CBA in ways that inaccurately suggest an all-fibre network would cost 2.71 times as much as a MTM model?

What do you think? Is Turnbull squeezing out FTTP with each successive report? Is Vertigan doing that job for him? And, is it better to have FTTN now than FTTP later?

 

Topics: NBN, Broadband, Fiber, Government : AU

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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