NBN cost-benefit analysis sides with Turnbull approach

NBN cost-benefit analysis sides with Turnbull approach

Summary: The long-awaited cost-benefit analysis put together by a government panel including critics of the fibre-to-the-premises NBN project has concluded that a mixture of fibre-to-the-premises, fibre-to-the-node, and HFC technologies represents the better option for Australia.

TOPICS: NBN, Australia

Adopting the Coalition's fibre-to-the-node (FttN) and hybrid fibre-coaxial (HFC) technologies in the National Broadband Network (NBN) will leave Australia better off, according to the government-commissioned cost-benefit analysis, but will also leave the option of upgrading all the way to fibre in the future.

The long-awaited, 196-page report is the fifth of six reports commissioned by Communications Minister Malcolm Turnbull, and was compiled by a panel of four, including chair Michael Vertigan, economist and Labor critic Henry Ergas, former eBay Australia MD Alison Deans, and former Australian Communications Authority chairman Tony Shaw.

The cost-benefit analysis placed potential broadband rollouts into four scenarios:

  • No further investment in high-speed broadband, and no change in speeds available today
  • Rolling out fibre to the node and HFC to 93 percent of the population
  • The multi-technology mix (MTM) model, including fibre to the premises (FttP) to 15 percent of the population, with fibre to the node, HFC, and fixed wireless and satellite servicing the rest of the population
  • The Labor model of fibre to the premises to 93 percent of the population, with the remaining serviced by fixed wireless and satellite.

Of the four scenarios, the report said the second, unsubsidised rollout offers the highest net benefit of AU$24 billion, because it drops the subsidisation of the rollout to regional areas, but the multi-technology mix offered the best result with AU$6.1 billion in net cost due to the regional subsidisation.

(Image: Screenshot by Josh Taylor/ZDNet)

Fibre to the premises came out at AU$22.2 billion in net cost, largely due to the higher cost of the rollout of the NBN and the delay in getting fibre to each premises.

The study assumed that, as in the strategic review, that NBN Co would not finish rolling out FttP until 2024, but would finish the multi-technology mix rollout by 2020.

As a result, MtM offed users a chance to get faster speeds sooner, with the benefits arriving with those moderate speed upgrades, rather than waiting for very high fibre speeds, the report stated.

"Users of broadband would prefer an increase to their current speeds quickly, rather than to wait longer to gain a higher level of speed. This means consumers place a greater value on the early deployment of high speeds rather than on the slower deployment of very high speeds using FttP."

The cost of maintaining the copper network was included, though not explicitly outlined in the report, and was said to have been based on information in the strategic review, as well as local and international sources, but the panel would not confirm today whether Telstra had been asked for information on the state of its copper network.

Conversely, the report increased the strategic review's estimated cost for remedying faults in fibre to the premises, and reduced the cost of providing electricity for fibre to the node on the assumption that NBN Co would be paying a bulk, rather than retail, rate for electricity supply.

On the benefits side, all benefits of rolling out fibre to the premises were weighed against both the likelihood of customers taking up faster speeds, versus their willingness to pay for those speeds.

The report relies heavily on a study by Communications Chambers of the different applications, which states that by 2023, the median household requires a bandwidth of 15Mbps, while the top 5 percent of households require 43Mbps or more.

The analysis also looked at bandwidth demand modelled using forecasting from Communications Chambers' Robert Kenny, who had in the past criticised former Communications Minister Stephen Conroy for overstating the benefits of FttP.

Benefits on offer for fibre to the premises, including e-health, teleworking, productivity, and other such improvements, would also be covered by the speeds available on fibre to the node and HFC, Vertigan told journalists today.

(Image: Screenshot by Josh Taylor/ZDNet)

"When you look at those applications, certainly those applications are currently readily addressed by the speeds that are provided by MTM. We're not saying that those applications are insignificant or insubstantial. We have very large estimated benefits from access to high-speed broadband," he said.

"If you compare the net benefits of having high-speed broadband available ... we have AU$24 billion in net present value.

"The real question is whether there are applications that have very high social value, but you can only get with 120Mbps but you cannot get at 60, 70, or 80Mbps. Those applications are very few and far between, and certainly couldn't justify the very large cost differential between MTM and FttP."

However, Vertigan flagged that if the applications do eventually require higher bandwidth, the MTM approach would allow fibre to the node and HFC to be ultimately surpassed by fibre.

"It may be in 10 or 15 years' time, those applications will develop, and if they do develop, then you can upgrade from MTM to FttP. Because you can do that upgrade then, and you can do it to the areas and the types of premises where those applications would have the greatest value, then you can do it in a very cost-effective way whilst still ensuring that society catches the full benefits of those applications."

The report itself states that MTM is more "future proof" than FttP, because it leaves the options open for different potential scenarios in the future, and Vertigan said that locking Australia into FttP would mean the country would need to bear the cost of the network if those benefits never arrived, Vertigan said.

"You're stuck with those very high costs. There's no way in the world of unsinking the costs that are involved in the FttP scenario once they've been incurred. What makes sense is to have an incremental approach that allows you to catch benefits as and when they occur and as and when they have the high social value," he said.

One Alcatel-Lucent report, often cited by fibre advocates, which stated that e-health and other benefits would help pay for the New Zealand fibre-to-the-premises NBN, was dismissed by the cost-benefit analysis because most of the benefits in the report are for businesses rather than households.

Vertigan today defended the analysis, stating that it had been reviewed by a number of experts from international organisations, including the University of Texas, Brookings Institute, University of Adelaide, and Conservatoire National des Arts et Metiers.

The final of the six reports — the panel's telecommunications regulatory review — is due to be released soon.

Turnbull has previously indicated that the findings of the cost-benefit analysis will be used by NBN Co as part of its rollout plan.

Topics: NBN, Australia


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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  • Congratulations coalition clowns on being a government that truly redefines the meaning of the word "retarded".
    Hubert Cumberdale
    • They cooked the requirements

      I dunno about anyone else but when I was on 3mbs I couldnt watch streaming video.... Youtube had issues buffering at 360p.
      • It goes beyond cooking the requirements...

        They have apparently ignored all of the studies done to calculate what future revenue from increased bandwidth would be.
        For instance, the Chalmers University study that came out just a few years ago...took 3 years across 33 OECD countries to perform and is by far the most comprehensive to date.
        It shows that doubling broadband speeds for a country increase the GDP for that country by 0.3%...for Oz this year, that would be US$4.575 Billion/year...

        That might also cover FTTN at current speeds, but it also states that doubling again will ALSO increase it more. FTTN has no headroom at all for increased bandwidth, so it will severely limit demand and revenue from all communications related fields.
    • Seriously retarded!

      Yep, and very short sighted!
    • Not just retarded

      But dishonest as well.

      Did you notice they redacted the cost to upgrade from FttN to FttP? They did that because Malcolms plan will actually cost Australia more in the long run (don't forget NBN Co is on record as saying they'll need to upgrade the network within 5 years of finishing Malcolms folly part).
  • Link?

    Where is the link to the report? Why wasn't it provided?
    • Re: Link?

      Not sure if it was there before, but first line, second paragraph.
  • Gee, what a shock

    Turnbull's lackeys turned in a report that completely agrees with him. How unexpected! Oh and they conveniently ignored the cost of the inevitable upgrade from FTTN to FTTP! How fortunate for Malcolm!

    Bunch of arrogant, corrupt tossers.
  • Totally ignoring the DSL reality

    It's not what you can get on copper under ideal conditions.

    It's what you won't get for a large number of people. Just like DSL now.

    The mix of households by demand profile does not by any means align with the mix of lower quality copper.

    If this report made sense then there would be no issue now for those trying to get 24Mbps. You simply can't get decent DSL due to copper quality (and yes in some cases line length).

    Copper is a lottery in Australia.

    The UK has serious issues with it's rollout using this approach and the network has been declared "not fit for purpose".

    Yes you can make copper network acceptable - but the work to actually do this is the same as rolling fiber. The cost is the same also. The result is inferior.

    We will need to run past the nodes with fiber eventually, and in the short term it will be better to run past the nodes with fiber for anyone who has line issues. So those with DSL issues now are in many cases in need of FTTP. In which case why/how are they going to get service sooner? Or cheaper?
    • They wont replace the copper

      NBNco has stated that if you have bad copper and no one around has bad copper considering they only need to supply "upto"25mbpsyou will only get copper not fibre. As its got to be the whole area to be bad before they replace it with fibre.
  • Shuffling deck chairs

    So we have PV of the cost of the different solutions - and grand terms such as better for the country. Just not looking at the expense to the country of excluding private sector and long term damage to the sector of continued government involvement. The current soliton is still fundamentally the same approach with some tinkering with the technology. Be great to get a proper report.
  • Toot toot!

    All aboard the LNP circlejerk! Next stop(s), the HQ of Dial-up Tony's supporters!
  • As someone on Reddit wrote...

    "In a shocking surprise, the $2 million cost-benefit analysis commissioned by Malcolm Turnbull, written by former staff of Malcolm Turnbull and former advisers to Malcolm Turnbull has concluded...that Malcolm Turnbull is right!"

    And the average Joe will belive that crap. What a world we are living in....
    • Turnbull lies, may he rot is shame for what he has done!

      I think the a new definition of evil might be Malcolm Turnbull.
  • Estimates Very Questionable

    "By 2023 the typical household will need just 15 megabits per second, according to the review's bottom-up analysis. The top 5 per cent of households will need at least 43 Mbps. The top 1 per cent will need 48 Mbps. The NBN was going to deliver 100, upgrading later to 1000."

    Let's see ... right now I have a 24Mbs connection that I actually get 8-9Mbs off. My computer, my Pad, my phone and my cable TV are connected to same over a WiFi link - and I constantly have problems with the slower than optimum speed stalling performance on my various devices. Telstra wants me to 'share' my WiFi with passers by and neighbours, but understandably I'm reluctant.

    Ten years ago in 2004 I had just gotten a 1.5Mbs connection in Moonee Ponds, after years on a 56K connection because of some hassle at the local exchange. Given my distance from the exchange I only got about 800Kbs - but I thought it was the bees knees. Others had faster connections, but I finally had 'broadband'.

    Now the eestimates by this 'expert committee' are that in 10 years time I will only need a 15Mbs service (less than now), or maybe a 1.7 increase in speed to 43Mbs if I'm a power user. Can anyone see the problem with the estimates here? How well do they tally with the trends?

    Finally, Kazakhstan has just finished installing their fibre to the premises network, to everyone in the country, which starts off at speeds of 100/100 Mbs, and scales upwards if users want to pay for more than a basic connection.

    Right ... this cost-benefit analysis with its associated estimates is right on the money. 'Mr Broadbands' experts are the best experts in the world.

    In a pig's eye.
    Frank O'Connor
  • Here's my cost benefit analysis

    Cost: Billions will be spent over the coming years.
    Benefit: In six years time I may see the NBN come past my home.

    How about a proper Life Cycle Cost (LCC) Analysis, afterall that's what government requires everyone else to do before a decision is made on expenditure? Not an estimated cost (which is already blowing out) with a wild guess at the benefits the community will see.
    Scott W-ef9ad
  • Fibre is definately seen as an advantage

    In less developed countries. It seems only first world countries with a government with alternative motives don't see the actual social benefits to providing a ubiquitous access model. Coalition supporters will say whay should I have to subsidise your fibre connection, but I can also say, why should I get a substandard connection while others get fibre because of where they live, especially when I pay taxes and I earn enough that I don't get any government handouts. I'm willing to pay more taxes if the government builds infrastructure. Not if its funneled into tax breaks for big business who refuse to alter their business models because they have it good now.
    Justin Watson
  • We're all consumers

    Just as well no one actually makes content under all this modelling because then we would have to think about uploading.
    I can currently upload an 8 minute HD clip to youtube in less than 3 hours
  • Err, why was upload performance utterly ignored?

    Was it because it is politically inconvenient? Dear Mr Turnbull's office and the Vertican review, have you heard of the global move towards cloud technologies and services? Do you know that, as a result of the unflagging campaign from Microsoft over the past two years pushing Azure, and the publicity around Amazon Web Services, SMBs are trying to figure out how to move their on-premise infrastructure to cloud services to improve reliability, scale and reduce costs and complexity, but they are having to be told time and time again that without fibre broadband they lack the requisite performance for such services to operate reliably? Even those looking to implement secure, remote disaster recovery options have to give up on the idea because a couple of GBs of changes a day would require their servers transferring backups flat out 24/7, leaving zero bandwidth for anything else, and they'd still never catch up with daily backup changes.

    Saying nothing about the possibilities for Cloud VDI services, which literally cannot get off the ground without fibre. Sure, remote desktop sessions are possible over ADSL, but that's not a rich user experience - it works fine for admins who spend more time in console sessions than anything else, but users expect to be able to have a desktop picture and view Web pages that don't look like a slideshow constructed of jigsaw puzzle pieces, at the very least. You can do this on a LAN, but VDI ends at the edge of the local network. Cloud VDI only works for large enterprise who can afford dedicated fibre backhaul into a data centre.

    And here's the problem - the inability for all but the largest firms to have access to fibre broadband is a form of discrimination against smaller organisations - high speed broadband has a democratising effect because it levels the playing field between large established business and SMBs. The result of these decisions will be further protection and entrenchment of large businesses and penalties placed on those with more limited budgets.

    But this effect is a geographical limitation. So an agile SMB with a good technology or business plan that finds themselves butting their head against the artificial limitations of Australian infrastructure will simply go elsewhere. We've been talking about 'brain drain' of local talent overseas for decades, because there's more money and opportunities for science and technology people internationally. We've even been talking about the movement of Australian startups overseas for a while. This situation is only going to get worse - a hell of a lot worse.

    No possibility of fibre until 2030? Yea, good luck with that, Australia. We'll come back and buy what's left of your poverty stricken assets before then. Oh wait, by then China will have done that first to turn the whole country into a giant farm to feed four billion people. In that case, the LNP are right - a giant farm doesn't need fibre communications infrastructure everywhere...
    • Correct - it's about the UPLOAD Speeds!

      Trevor you nailed the problem - CLOUD - SaaS PaaS and IaaS = collaboration and necessitates upload! Sadly the facts are - Australia's existing upload speeds are the worst of any developed nation on the planet - with ADSL2 achieving about 0.80 Mbps - UP. The catastrophic impact to Australia's 2.1 million SMB's through no fault if there's means - we are falling further behind and becoming less relevant as an effective player in the global digital economy.