NBN Co warns Turnbull broadband policy may cost more

NBN Co warns Turnbull broadband policy may cost more

Summary: NBN Co chairman Harrison Young has said that many of the aspects of the Coalition's broadband alternative to the NBN might end up costing taxpayers more money in the long term.

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TOPICS: NBN
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NBN Co chairman Harrison Young has warned that the long-term costs of running a fibre-to-the-node (FttN) network instead of the current fibre-to-the-premises (FttP) National Broadband Network (NBN) may ultimately end up costing more.

Young made the comments today in a speech to the Committee for Economic Development Australia (CEDA) in Sydney. While he was careful not to address the policies detailed by Shadow Communications Minister Malcolm Turnbull specifically, he said that many of the elements that can be found in Turnbull's policy, such as FttN and utilising existing hybrid-fibre coaxial (HFC) networks, could be costly.

He said that an FttN network would require leasing or otherwise obtaining Telstra's copper network from the node to each premises, which could have unseen complications.

"You might find that negotiating such an arrangement slowed the project down more than you were willing to accept. You might find you were still tangled up in Telstra's legacy IT, which could only be navigated with Telstra's help, turning code into bottleneck infrastructure, and giving Telstra ineradicable advantages," he said.

"When you set the engineers to work on the subject, you might discover both problems and solutions you hadn't imagined. I'm just recommending you bear in mind that an engineering solution does not automatically provide a market structure solution."

Maintaining the copper would also be expensive, Young said, and while the FttN roll-out would save costs on the construction component of the network, it could end up being expensive further down the track.

"Maintaining the copper that connects node to premises is expensive. Coping with legacy IT is expensive. The total system cost of fibre to the node is higher than its front-end cost," he said. "The same is true of fibre to the premises, but less so. The apparent cost advantage of fibre to the node decreases as you lengthen the time frame you look at."

Turnbull has previously suggested that the HFC networks that Telstra and Optus have in place in Sydney, Brisbane, and Melbourne should be kept and opened up to wholesale competition instead of laying out new fibre. Young said that the wealthy residents of those suburbs would end up with worse broadband than the rest of the country, if fibre is rolled out everywhere else.

And if NBN Co did buy the HFC networks, the result could be that another company, or even Telstra or Optus, could then roll out fibre to those wealthy areas and undercut NBN Co's pricing.

"If the National Broadband Network — even if entirely owned and operated by NBN Co — is a patchwork of fibre to the premises, fibre to the node, and upgraded HFC, with different end users getting different levels of service, avoiding cherry picking could become much harder," he said. "This in turn could drive NBN Co to pricing its services with more reference to the cost to serve particular geographies. That would represent a major policy change, which could make it impossible to serve the most expensive geographies on a price-equivalent basis without making the subsidies explicit and transparent."

Turnbull has yet to detail the costs of his policy, stating that it will be announced closer to the 2013 federal election. In a blog post published this afternoon, Turnbull said the coalition's approach wasn't "FttN — good; FttP — bad" but rather whatever technology was most cost-effective.

He said the coalition supported subsidising the "most expensive geographies" and said those subsidies should be completely transparent so the public is aware of how much it costs.

Turnbull was also accused of hypocrisy again today from Communications Minister Stephen Conroy, who said that Turnbull is investing in Spanish telecommunications giant Telefonica, which is rolling out an FttP network.

"If Australians want to know what Malcolm Turnbull really thinks about investing in fibre to the home, they need to follow his money, not his mouth," Conroy said.

"Alongside his investment in France Telecom, which plans to connect 15 million homes with fibre by 2020, Mr Turnbull has also bought bonds in Telefonica. These bonds are helping build a fibre-to-the-home network in Spain's major cities, including Madrid and Barcelona."

Conroy said that if Turnbull believes FttP is good enough for France and Spain, he should support it in Australia, too.

Topic: NBN

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Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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34 comments
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  • And...

    Not to mention, FttP "will"be required (arguably) sooner, or later, anyway.

    The opposition like to (well used to like to, until Malcolm actually fessed up only last week, that the NBN "is" being costed correctly) that the cost of FttP is being hidden off budget.

    Well saying FttN is cheaper (even not taking into account, everything Mr. Young says above) is a classic example of cooking the books, with future FttP costs simply being ignored.
    RS-ef540
    • As you know alex it's what I've been saying all along so this news doesn't surprise me at all. FttN is a dead end solution that will end up costing more than it should, if the coalition clowns win the next election and insist on heading down this obsolete path it will be hilarious... In the meantime you can expect the Turnbull apologists to start foaming at the mouth now though.
      Hubert Cumberdale
      • They already are HC...

        Refer 4 or 5 comments down :/
        RS-ef540
        • I see...
          Hubert Cumberdale
  • Scams

    "He said the coalition supported subsidising the "most expensive geographies" and said those subsidies should be completely transparent so the public is aware of how much it costs."

    Typical Libs, absolutely love having the private sector and the rural sector permanently sucking off the taxpayer teat.
    "Transparent Subsidies", Bull, the major component will be hidden in Healthcare and Education funding other special subsidies ticketed as regional assistance of some form, but Not identified as Communications or broadband subsidies. along with Council Rates with a token direct to provider component exhibited for public scrutiny.
    Lib/NP specialty

    Precisely what would be the cost of upgrading the HFC. No excuses, it is existing and in Situ, To be useable for business, and installed to business premises and MDU's able to provide the option of Business grade services to all 1.4 Million premises not just the 450,000 subscribers and ALL the occupants (Commercial Buildings and MDU's ). I would suggest that including Backhaul, operating sytems etc it would be far more than the original install cost.
    That info should be readily available
    Abel Adamski
  • the NBN vote.

    the idea is sound extending the NBN to all homes, even difficult geographies. however the Fttn technology will not keep pace with fibre's ability to increase in speed, NBN quoted the possibility of Terrabytes per sec in the foreseeable future. Arguments about the costs just highlight the minimal understanding and vision our political leaders have. Carrying on about the economics is utter distraction and not relevant. Fibre everywhere there is copper, is the ONLY option, regional Australia will make it a political issue at every level of government, already communities up and down the east coast are rallying to stop the towers, (why, because once a tower goes in there is no longer an option for fibre installation EVER. The full implementation of the governments promise will see this nation jump into the 21c with running shoes on. Installation of patchwork system of old technology wireless and satellite will destroy regional Australia's ability to compete and offer services to the global marketplace, Already property prices are being affected, people in towns on the east coast are unable to sell homes because they are not marked for NBN fibre connections. People moving from the metro areas want nothing less than fibre, let's be quite clear about this! The NBN will be a deciding factor in the next election, regional communities across the country are forming lobby groups and mobilising to demand equity and NOTHING less.
    mysocialface
  • Infrastructure Competition

    Precisely why did Telstra and Optus give up on HFC
    The chorus is Telstra followed Optus down the street and overbuilt them.
    DUHHH
    That is called infrastructure competition, precisely what Malcolm and the conservatives and News Ltd tell is is the best solution and will deliver cheaper prices and better services and the Best National Broadband platform, the very important utility infrastructure
    Abel Adamski
    • they didn't; they sold it for the govt for $20 billion

      Does anyone really believe fttn is more expensive to ftth? surely this speach is a joke? apply the same arguement to any other form of governement or private sector spending and people would roll around laughing. e.g all roads should be 4 lanes necause it would be more expensive to upgrade to 4 lanes in the future; universities should only offer PHDs, less wasteful than returning a few times; houses should all have 7 bedrooms, igamine the cost of adding them after a smaller house is built.


      NBNCo bought the hybrid fibre networks to retire them so they couldnt undercut the NBN pricing model. If they were more expensive then why did they buy them? They could have let the uncompetitive products fail and svaed the money!

      The arguement for the ducts used for acquisition of the copper network don't apply (poor argument in the first place).

      No analysis or descenting opinion offered in the article. Just a reprint of a speech given by an individual with a massive personal interest in the project, arguing an unbelievably indefensible position.

      Perfect example of the economically illiterate thinking dominating this current govt.
      Richard Flude
      • "Does anyone really believe fttn is more expensive to ftth?"

        FttN is a waste of money no matter how you try and cut it. Hope that helps.



        "NBNCo bought the hybrid fibre networks to retire them so they couldnt undercut the NBN pricing model."

        False. NBNco did not buy the "hybrid fibre networks" they made deals with Telstra and Optus and they are choosing to "retire them" (good) so if you have an issue with this (perhaps you are emotionally attached to these networks and believe they should be heritage listed despite their redundancy?) then maybe you should take it up with Telstra and/or Optus. The rest of us won’t miss them...




        "If they were more expensive then why did they buy them?"

        Customers are more valuable than obsolete networks.
        Hubert Cumberdale
      • Facts Richard Facts

        Telstra still owns their HFC and will be using it for Pay TV - you Know those media products they share with Murdoch, + Their own streaming service. So Telstra HFC has NOT been Retired. It was a better product with less contention and had had some minimal upgrades..
        The Dollars are to Migrate their BROADBAND customers.
        Optus also still owns their HFC, guess they could use it for Foxtel, but as only resellers not worth maintaining for the return, they after all are developing their own media product ideally suited to NBN and 4G.

        So simply NBN has NOT purchased the HFC networks, just the BROADBAND customers.

        Guess if Hoyts wished to buy Optus HFC for Pay TV from OPTUS, why not
        Abel Adamski
      • Even Telstra doesn't agree with you

        Even before the NBN was announced Telstra was starting to replace the copper system with FttH....

        fibretosouthbrisbane.com.au
        Tinman_au
        • Link please

          To my knowledge Telstra had no plans to retire either it's HFC nor copper networks. Before the NBN killed all comms investment they were upgrading the data capabilities of both.

          When Conroy budgeted his $4.7 (no a cent more) NBN solution Telstra retorted it would be a minimum of $25 billion (an amount Telstra had no intention of committing). Conroy's NBN is how north of $50 billion and climbing.

          The question is not whether fibre is superior to copper or HFC for data but at what cost compared to benefit (analysis ruled out by Labor).
          Richard Flude
          • More figures plucked from one's hat...

            Zero cost, it will repay itself...and will be a valuable asset...

            You being a self confessed economic guru (ahem) would understand, businesses utilise debt to build wealth, by building a profitable business and repaying that debt via their profitable business... it's not rocket science.

            After all YOU just told us NBNCo bought out all the competition so how can it not be profitable...?

            Analysis ruled out by everyone but Libs and blind bean counters. So where Mal's CBA for his plan?

            BTW, $4.70 for the original NBN...LOL! (yes, yes typo, but the FUD irony ;)
            RS-ef540
          • Are you really Malcolm in disguise Richard????

            I had the "pleasure" of speaking to Malcolm last Wednesday in Champion Lakes, where he came to address broadband concerns to a group of 60 of us and you sound like him word for word. He's even worse now though - he always glances over figures, but he even mentioned $100b cost. What a joke, as the opposition just last week said the quoted figure of $37.4b was budgeted correctly. Can we PLEASE stop crapping on about $50b or $100b or other such FUD. The revised figure is $37.4b. Period. If it is adjusted we will know, but don't pluck figures out of the air based on your obviously extremely limited knowledge on the subject.

            He also glanced over the benefits of FttP, instead of addressing. He knows damn well Australia will be far better or with it, not did he address my question of the $700m per year projected copper maintenance cost should FttN go through, instead of FttP.

            Not to mention him holding shares in France Telecom and Spanish Telefonica, both of which are rolling out FttP.

            About the ONLY thing I agreed with is it's taking FAR too long for NBN to wire up greenfield developments.

            Truth. Building this NBN will be huge initial outlay (not COST, OUTLAY). The projected earnings are just on broadband connections, nobody has factored in $700m of cost that will not have to be paid any more. Nobody seems to factor in that the customer will not have to pay the stupid $30 per month line rental any more should they choose not to just because they want they broadband. It's a ridiculous system at best right now.

            Just leave it alone Richard, when you get your NBN your family if not you will be thankful.
            Ramrunner-5dd3e
          • Ramrunner-5dd3e has spoken - criticism of the NBN project not allowed.

            $37.4B figure to be reported, despite everyone knowing the costs are far more than that. Problems with rollout, failing to meet previous forecasts and risks (financial and technical) are not to be discussed.

            Govt projects of much smaller scale never have issues.

            Welcome to delusional land.

            I'm not surprised Malcom and I sound alike; we've similar financial knowledge (Conroys? ;-). We understand the budgets and what the figures mean.
            Richard Flude
          • Umm, what?

            Criticism is most welcome Richard. And when warranted (think CVC), NBNCo will be, and has been criticised, even by those of us who support the NBN.

            Funny though, on the flip side, I'm yet to see even one kind word about NBNCo from you Richard and realistically, the NBN can't possibly be 100% bad or wrong! So rather telling that...

            And risks are to be "rationally discussed". However rational discussion is not possible with people like you Richard. Just look at your last comment for example -

            "Everyone knowing the costs are far more"

            "Welcome to delusional land"

            "We (Richard and Malcolm Turnbull) understand budgets".

            Ooh, just to digress for a moment, last week MT acknowledged the NBN IS being costed correctly, so you'd have to agree then???

            Back on topic...

            So how is it possible to discuss anything rationally, with anyone who has such an unmovable position of ideological hatred and brings nothing to the table but narcissistic bigotry (time to sob personal attack or troll again...sigh).

            Sob all you want but you just claimed Richard, that NBNCo are wrong, you right. You claimed those who disagree with you, delusional, and then said that you and the Coalitions Shadow Comms Minister are the beacons of all wisdom... I physically laugh out loud at such absolute rubbish.

            That was of course, after having previously claimed the very highly regarded (in financial circles) - Harrison Young - as being economically illiterate... GOLD.

            Cards meet table - FFS, the only people who say the FttP is no good are -

            1. Coalition politicians (but yet, they they want it now for their electorates and even their own comms minister ((your twin)) has investments in two OS FttP companies)
            2. The Coalition's trusty yes-men supporters/far right lunatics/bean counters
            3. Those in particular business sectors who rather than seeing the NBN as an opportunity can only see it as a threat.
            4. Those in both categories 2 and 3
            RS-ef540
          • Great post alex, well said. +100
            Hubert Cumberdale
          • :-)

            Thanks HC, unfortunately even the facts cannot pierce the impenetrable force field of radcon FUD, which some live their live by ;-)
            RS-ef540
          • I've never said the NBN is 100% bad

            My complaint has been about the cost v benefit; particularly the exposure of taxpayers and the failure to perform any cost benefit analysis for $50+b expenditure.

            You guys argue with strawmen constructed to defend your position; typically using ad hominem attacks or appeals to authority. Debating techniques popular in certain circles but not rational.

            RS-ef540's post is again full of untruths:

            The NBN cost is greater than $37.4B - how is this even arguable. Even this figure maybe inaccurate (underestimated); the last corporate plan was invalidated in under 2 years.

            MT didn't say "NBN IS being costed correctly", he said the way it is handled by the budget was correct. To look at only one area of expenditure; ignoring operational expenditure and interest is not the "cost" of the project.

            Harrison Young was not called "as being economically illiterate" by me.

            You mock people as uneducated, when shown to be educated you mock them for being educated. Same with experience. You and your fellow NBN groupies have dismissed the following sources of information as biased: the age, the australian , the afr, and the NBNCo corporate plan.

            The NBN is a massive amount of taxpayer money gambled for very little return. Unbelievably retiring billions of dollars of infrastructure that could be used to provide competitive offering without the risk to taxpayers. Which of your simplistic categories do I fit into?;-)
            Richard Flude
          • Blah, blah, blah

            Yes we heard you Richard. But when asked questions about your position previously, you hid...they still remain unanswered to this day, now some 4-5 weeks later.

            So this latest smokescreen of hypocrisy, doesn't make your unfounded claims any more justifiable. Hypocrisy because you scream personal attack/ad hominem - yet you are the one who referred to me as a troll? Rest assured I will never need to go so low.

            Also you have also accused us of being delusional and are now screaming straw man, yet you have the hide to suggest we debate irrationally :/

            You say my comment is full of untruths but offer nothing but you own baseless opinions to supposedly prove me wrong :/

            Firstly Richard (since we are playing he said/she said) I never said that you said the NBN was 100% bad. I said and take note, that you have "never said one kind word about NBNCo" (and then "I suggested" it can't be 100% bad)!

            Perhaps a quick trip back to Uni (ahem) to undertake a degree in English, majoring in comprehending the bleedin' obvious may be prudent?

            Don't put words in my mouth then argue over your words Richard.

            Q. Have you ever said a kind word about NBNCo?
            A. NO.
            So truth from me/untruth from you.

            Q. What is the documented cost of CapEx for the NBN?
            A. $37.4B (Pg 44 August 2012 Corporate Plan).
            So truth from me/untruth from you.

            Now you want to argue over semantics and a few words, about what MT actually agreed to? LOL, getting desperate.

            This is apparently what he said - “Under the accounting rules the expenditure on the NBN does not count towards the budget outcome – so much deficit or surplus – but it is cash – real money – nonetheless and it does add to the debt burden of Australians.”

            Yes, it is taxpayer risk via debt, not taxpayer funded (as I have said all along) but again YOU told us Richard that NBNCo has bought out the competition, so debt repayment shouldn't be a problem, should it? Also as I have said, the NBN is being (I'll be careful to not let you slip in another, pedantic, but, but) accounted for correctly.

            So truth from me/untruth from you.

            As for Harrison Young... you said ... "a speech given by an individual (HY) with a massive personal interest in the project, arguing an unbelievably indefensible position... Perfect example of the economically illiterate thinking dominating this current govt."

            So truth from me/untruth from you.

            I mock educated/uneducated you say. You tell us you are this or that, then make ridiculous comments (which you cannot prove)...seriously. You come here to argue about FttN vs. FttP and you had never even heard of the Panel of Experts..FFS?

            You also totally ignore proof. The Australian, Age, Tele are NOT always biased GOT IT NOW. But they were in instances, and particularly the Tele, which was found to have intentionally mislead relating to the NBN on 3 occasions.

            Q. Do you accept the Print Council verdict that the Tele mislead on 3 occasions?
            A. No you have not so far.
            So truth from me/untruth from you.

            The NBN is nation building infrastructure, much like the copper/PSTN you now cling to. Had visionless people like you been in charge back when, we wouldn't even have that (ironic eh?).
            RS-ef540