Weasel maths won't fix coalition's NBN case

Weasel maths won't fix coalition's NBN case

Summary: For a party that's been beating the drum about transparency in government seemingly forever, the Coalition's election platform is sure looking pretty opaque — and its maths skills are seriously wanting.

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Time after time, Malcolm Turnbull fronts mainstream media outlets to push the merits of his plans, but he cannot produce a single number substantiating his claims that fibre to the node (FttN) will be cheaper and roll out faster than Labor's fibre-to-the-premises (FttP) network.

Witness his recent appearance on the ABC's Lateline (transcript or video), in which he evaded Tony Jones' every attempt to pin him down on some costing or another, saying only that his FttN plan will cost "about a quarter of the cost and a quarter of the time to provide an upgraded broadband service".

Dispense with the Coalition's costing fantasies ... and your back-of-the-napkin price suddenly rockets to AU$38bn. Throw in some portion of the AU$1.8bn-plus to cancel existing contracts if necessary, and a coalition FttN isn't going to deliver much change out of AU$40 billion.

I know these advanced new maths methods are filled with ambiguity that may be evading my small mind, but in my understanding, a quarter of AU$37 billion — the current estimated cost of Labor's NBN — is just north of AU$9 billion.

That's all well and grand — but in another Lateline appearance late last year, Turnbull said that the Coalition's base NBN would cost around AU$15 billion.

In other words, months later and in the face of constant calls to justify his numbers, Turnbull is actually downgrading his cost estimates. Remember that an independent Citigroup analysis pegged it at approximately AU$16.7 billion, and it appears that Turnbull's numbers are driven more by wishful thinking than by actual reality.

Who is he kidding? Everyone, he seems to believe.

Lateline host Tony Jones tried fruitlessly to get the putative minister for Communications to concede that it will take more than bubblegum and dental floss to build even an FttN network. But Turnbull, who has built up a sizeable arsenal of weasel words and weasel maths to avoid coming straight with the Australian public, predictably shifted the blame onto Labor, arguing that its existing contracts — which Turnbull recently conceded would remain intact if the Coalition is elected — impose unknown costs that prevent the Coalition from offering real numbers on its liabilities.

It's really not that hard to estimate these costs; since the would-be government of this country apparently doesn't have staff that knows how to use the internet or add, I've undertaken the difficult, extensive, labour-intensive, gruelling process of doing this analysis for them. You're welcome, future coalition overlords; my invoice is in the mail.

ProviderDate signedAreaValueProportion left after Sep 2013 (months)Cost to Abbott government
Downer (build) Feb 14, 2013 Northern NSW AU$94m 17/24 AU$66.6m
Downer (build) Dec 21, 2012 MDUs (NSW, Vic, ACT) AU$66m 15/24 AU$41.25m
Universal Communications Group (build) Dec 21, 2012 MDUs (Tas, Sydney) AU$21m 15/24 AU$13.13m
Visionstream (build) Mar 25, 2012 Tasmania — Complete AU$300m 30/48 AU$187.5m
Syntheo (build) Sep 6, 2011 NT, SA AU$141m (through Sep 2013); AU$341m (with two-year extension) 24/24 AU$200m
Syntheo (build) Sep 6, 2011 WA AU$174m (through Sep 2013); AU$484m (with two-year extension) 24/24 AU$310m
Transfield (build) Sep 6, 2011 Victoria AU$133m (through Sep 2013); AU$395m (with two-year extension) 24/24 AU$262m
        Build costs AU$1,080.48m
Silcar (maintenance) Sep 6, 2012 NSW, Qld, ACT AU$78m 12/24 AU$39m
Service Stream (maintenance) Sep 6, 2012 Vic, WA, NT, SA AU$64m 12/24 AU$32m
        Maintenance AU$72m
Perkins/Cockram Oct 26, 2012 Satellite ground stations AU$180m 25/36 AU$125m
ViaSat July 12, 2012 Satellite ground stations AU$280m 27/42 AU$180m
Space Systems/Loral Feb 2012 Satellites AU$620m 27/48 AU$348.75m
        Satellite AU$653.75m

Admittedly, this is not a complete analysis; I have not, for example, included the cost of NBN Co's coffee-supply contracts, or even, for that matter, its predicted expenditure on light bulbs, pens, staples, copy paper, or water for flushing NBN Co office toilets.

In the main, however, I'd say these figures make it quite clear that the government's existing NBN contracts will cost the Coalition around AU$1 billion through the rest of their lives (assuming that Labor extends its Syntheo and Transfield contracts, which are due for review in September, for a further two years; it also obviously doesn't include any further contracts that Labor might sign between now and the election).

NBN Co's satellite program, which Turnbull hates with a passion, would represent around AU$654 million of amortised forward expenditure for a coalition government.

There, Turnbull: Was that really so hard? Now, just tell us how much your extensive and detailed estimates have suggested your network will cost to build, and add AU$1 billion to it.

Oh, and the cost of getting Telstra to not only retain its hybrid fibre-coaxial (HFC) network, but to also open it to competition for the first time ever. And the cost of getting government control over Telstra's copper network; we know it costs AU$11 billion to guarantee access to Telstra's ducts, so we can only assume that it will cost far more to actually take control of that copper network. Turnbull seems to believe that this process will be as simple as giving David Thodey half of a BFFL necklace, but we know it won't be that easy. Call it AU$15 billion on the conservative side.

The lack of real information around the Coalition's policy makes it impossible to seriously evaluate as an NBN alternative. If it wants to be taken seriously, it should demonstrate to the country that it's capable of doing accurate financial modelling on a real, ongoing project with a cut-and-dry scope and future.

Add this all up, and even if you are going to accept Turnbull's latest weasel maths (in which he claims FttN costs a quarter as much as FttP), you've got AU$9 billion +AU$15 billion +AU$1 billion, for a minimum cost of AU$25 billion. Suddenly, FttN is not so cheap.

Dispense with the Coalition's costing fantasies, and factor in something more approximating reality — say, Citigroup's AU$17 billion estimate plus AU$20 billion to Telstra for its network, plus AU$1 billion in forward contracts — and your back-of-the-napkin price suddenly rockets to AU$38 billion. Throw in some portion of the AU$1.8 billion-plus to cancel existing contracts if necessary (although Turnbull recently said he would not rush to cancel contracts), and a coalition FttN isn't going to deliver much change out of AU$40 billion.

This figure, of course, assumes a complete FttN build, which won't be entirely accurate, since existing NBN fibre (and Telstra HFC) will have covered a certain number of premises that won't need to be serviced by FttN. Yet, we must use figures for the whole project for the purposes of comparison — or be equally willing to consider the future NBN based on forward costing rather than costs to date.

However you look at it, is anybody else having trouble following the bouncing ball here? Of course not. Turnbull has surely done these maths, too — which is probably why he's willing to cop a hailstorm of criticism after conceding that the Coalition actually has no intention of costing its NBN policy before the election.

Instead, even with loads of evidence and his own words out there for all to inspect, Turnbull still continues to try to promote his party's plan with financial figures that simply do not add up. He will not do the industry the courtesy of providing a real ballpark figure as to what the Coalition's policy will actually cost, in the presence of these contracts. He speaks in vagaries and conducts evasive interviews riddled with weasel words and weasel maths that simply do not stand up to even the slightest scrutiny.

Even in pointing out the potential savings in interest from his policy, he doesn't mention how much interest Labor's current policy will incur. Turnbull told Jones that a cost-benefit analysis (CBA) would take "not very long", but cannot or will not even say how long it would take.

In other words, Turnbull's NBN world is completely devoid of numbers, except the ones that he likes the sound of.

The lack of real information around the Coalition's policy makes it impossible to seriously evaluate as an NBN alternative. Yet, behind all the politicking, there is a significant lost opportunity here: If the country's alternative government wants to be taken seriously, it really should demonstrate to the country that it's capable of doing accurate financial modelling on a real, ongoing project with a cut-and-dry scope and future.

The NBN is an excellent opportunity to show its nous, since the costs of the existing NBN plan are well known and understood — as distinct from entirely speculative planned coalition investments, such as the putative AU$30 billion dam build. If the Coalition really is all about running a "transparent, business-like" government, as Turnbull recently claimed, it should start by getting honest about its NBN policy.

What do you think? Are my figures as fanciful as Turnbull's, or am I missing something? What will the real cost of FttN be? Is there really a valid financial argument to be made in favour of FttN? And is Turnbull really winning as much political capital as he thinks he is, by being utterly opaque about FttN costs?

Topics: NBN, Government AU, Australia

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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Talkback

42 comments
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  • Good article. I think even if the Turnbull patchwork plan were to cost a quarter it would still be a colossal waste of time and money. The NBN isn’t expensive; paying for garbage is. If we could step back 10 years and debate the NBN FttN might make a great temporary solution. At this stage given what we know and the fact the proper NBN build is in motion inserting an unnecessary delay (or "pause") isn't going to help anyone... but I suspect the coalition plan and rhetoric has never been about helping anyone except themselves.


    As for FttN costing almost as much as FttH, that is an unfortunate possibility. It is rather sad that this could happen when for a just a few dollars more you can get something far more superior and future proof. But that’s ok, it’s more important to protect fragile conservative political egos than doing what is best for the country. Voters in 2013 may thank them. However I doubt the ones in 2022 will...
    Hubert Cumberdale
    • Hubert my old mate

      I'll bet it will a super dooper thing to have have your income tax jacked up to pay for the NBN. You see you will pay for it one way or another. The problem with the iPOD generation is that you think you can have everything now.

      This might come as a shock but nothing is free, in fact your labor pals have even tried to tax the air we breath.

      Here is challenge, turn off your computer, dont touch face book or twitter for 48hours. You will be amazed to see that the world has just ticked on and didnt miss your inane contribution one tiny little bit.
      Sultanabran
      • FFS

        "I'll bet it will a super dooper thing to have have your income tax jacked up to pay for the NBN."

        Wow where did you pluck this gem from? Any evidence to back your claim?
        RS-ef540
        • RS

          It's a metaphor.

          You see when governments overspend they either borrow money or increase tax.

          As you grow and one day move out of home you will discover that you have to live within your means.

          No argument that fast is good. Just not at any cost.
          Sultanabran
          • No...

            It's unsubstantiated BS.
            RS-ef540
      • "This might come as a shock but nothing is free"

        Yep and since I'm not expecting it for free I am quite happy and willing to pay my $100 per month for a 100/40mbps service. Hope that helps.





        "Here is challenge, turn off your computer"

        I have a better challenge. Turn off your computer for a week and try to come up with a better challenge.





        "dont touch face book or twitter for 48hours. "

        LOL. How cute, he thinks everyone is on facebook, what’s wrong sulty? feeling left out? I'm sure there are plenty of other ill-informed types like you on facebook. You should join them. Sign up. I'm sure you'll feel right at home, it's clear you are way out of your depth on Zdnet.





        "You will be amazed to see that the world has just ticked on and didnt miss your inane contribution one tiny little bit."

        Oh I'm sure no one would miss my contributions. I won’t however accept your challenge because I would miss getting all the religious anti-NBN zealots like you riled up with my comments. Look at the one you simply couldn’t help replying to. Yep, I know facts are hard to swallow. I bet it tastes like acid in your mouth. That's why I'm here :-)
        Hubert Cumberdale
  • Here is maths...

    X = Length of fibre to node
    Y = Length of fibre to home

    Which would be bigger?

    Would the cost be cheaper with the longer cable or shorter cable? And that's just one variable.
    Kunal Nanda
    • Here is some more maths...

      X = Total cost of rolling out FttH
      Y = Total cost of rolling out FttN then upgrading to FttH

      Which would be "bigger"?
      Hubert Cumberdale
    • here is some real maths

      X = price of fibre to the home + price of maintaining fibre
      Y = price of fibre to the node + price of maintaining fibre + price of fixing copper from node to the home* + price of maintaining copper + price of the node + price of upgrading fibre to the home later + price of electricity to run the node indefinitely**

      * every single copper line will need inspection and repair. given that VDSL requires 2 pairs in good quality and most homes don't even have 1 pair in good quality, this threatens to be an extremely expensive exercise - effectively laying all new copper, instead of fibre.
      ** because when you upgrade from VDSL to FttH, the node has to stay in place in the new network. the node uses electricity and is vulnerable to weather and vandalism. sounds cheap right?

      So yes, keep simplifying things, that's exactly what the Turnbull wants. He knows that every time somebody starts considering the true complexity of the situation they realise just how untenable his thought bubbles are.
      karl_w_w
    • You missed something kinda important in your "maths"

      FTTN needs a lot more nodes, which are a lot more expensive than the actual fibre.

      With FTTN there will be around 70,000-100,000 cabinets dotted all over Australian streets.
      Tinman_au
  • Nice one Kunal

    ... Z = opportunity cost of forever being locked into a 'competitive' environment of utilizing Telstra's HFC network
    ... W= Opportunity cost to those not covered under HFC/ADSL footprint of being stuck on 'alternative' technologies for the next 15 years
    astro2100
    • Indeed...

      +1 astro2100

      But as usual the FttN proponents only want to see the bits that help their lost cause and ignore the bigger picture...

      I note too ... the truth must hurt, as your comment was flagged...LOL.
      RS-ef540
      • @RS:

        I think they use the flag as a negative vote. We could ask ZD to introduce a more discriminating vote system, then they wouldn't do that.
        meski.oz@...
        • Yeah exactly my point...

          astro2100 made a very pertinent comment indeed and instead of whoever (ahem) accepting it, he flagged it...
          RS-ef540
  • Excellent Article.

    Only wish there was more people like you out there to hold the deceitful lying dog Turnbull to account.

    If you want the NBN please vote Labor to guarantee a decent telecommunication future not only for the current generation but for the future generations of this great country.

    Coalition want to send us all back to the dark ages.

    Cheers and thanks again for the article David.
    GENIII
  • Thank you.

    Thank you for being one of the few journalists to hold Turbull accountable. I have been disgusted by the LNP continued lies about the NBN and their inability to advise the Australian public of any solid information re their plan. The fact of the matter I imagine is that the FTTN plan numbers that he has come up with, obviously aren't that appeal. Once compared against the current NBN the Australian public would see that they are going to receive an inferior product for almost as much money, plus it will be on budget and will be worth far less. It will not make anywhere near the returns the current NBN will due to the patchwork of technologies and the fact they are renting infrastructure from Telstra. We will be stuck with a very similar monopoly to what we currently have. It really frustrates you.
    davidhes
    • It's a different scheme every month from Turdbull.

      Eventually he'll get around to proposing FTTH.
      meski.oz@...
  • Need to consider all the facts

    This article needs a lot of work to present a factual, coherent argument. I agree that Turnbull's lack of costing needs the blow torch applied but it needs to be done so in a much more professional manner.

    Neither party (in my opinion) has the correct answer, one swings too far to waste and delay (Labor), the other too light on detail (Liberal) to even consider properly yet.

    In regards to the contractual obligations, what termination clauses exist? Have they been fully investigated? Even under a coalition, their NBN rollout will still require significant fibre rollout and this would be a strong negotiation point with existing contractors. Having had many years experience working with government contracts, there's always room to negotiate (on both sides) after the contact is in place. Both will want an amicable outcome as it never works trying to "screw" the other party.

    The full cost of the NBN satellites will be 2 billion, money which would be far more effectively spent on alternate infrastructure (such as increased wireless coverage / more fibre). High latency connections (regardless of increased bandwidth) are always going to be problematic and sub-standard. We already have two commercial entities in this space and although they're filling capacity fast, their customer base will drop back as the wireless rollout is available.

    The key issue to me is priority (or there lack of). The biggest problems with internet access in Australia are the backhaul costs and coverage blackspots (ie no DSLAM ports). This should be the priority for rollout, which will provide a much quicker (pardon the pun) solution for those who need it most. NBN Co's current "plan" is for a 10 year rollout, we're only a small fraction of the way into it and already there have been delays on top of delays.

    We're creating another large monopoly that will drive away many wholesale providers, at some point NBN Co will be privatised and we'll face all of the same problems as we did with Telstra. If the NBN Co is owned by shareholders, they'll want greater ROI, which means higher costs, less service and starving of any competition where-ever they can. Anyone who's dealt with the customer service from Optus or Telstra recently will be well aware of the drop in customer service.

    A better broadband network in Australia is necessary. Government investment and ownership of wholesale assets (in my opinion) is also necessary. Making mistakes or missing the mark is going to do more damage than doing nothing, so we must absolutely ensure the government (regardless or party) gets it right.
    Tim AU
    • 

      "This article needs a lot of work to present a factual, coherent argument. I agree that Turnbull's lack of costing needs the blow torch applied but it needs to be done so in a much more professional manner."
      Usually it takes a wide range of media outlets to do the kind of thorough deconstruction you're looking for, but seeing as News Limited are pro-Liberal and anti-NBN none of them would come near such a thing. So you need to start looking around down the sides of the proverbial sofa for the less known but specialised commenters like Delimiter, ZDNet, ABC, Michael Wyres.
      Trying to find one article that examines every aspect of an issue and judges them all on merit is basically impossible, especially on an issue as complex as this, and ESPECIALLY when one side of the debate won't present any details or facts.

      "swings too far to waste and delay (Labor)"
      All the numbers, industry analysts and common sense say that the NBN is pretty much the most economical design possible, and certainly far and away better than anything the LNP has mentioned.
      As for delay... what? There were delays in the planning phase to be fair, a 9 month delay there causing a 6 month set-back to the end of the project in 2021. Since the end of the planning they have hit all their targets, so there have been no delays at all in the largest and most troublesome part - the actual build itself.

      "The full cost of the NBN satellites will be 2 billion, money which would be far more effectively spent on alternate infrastructure"
      You want to leave people in the most rural areas, those who arguably gain the most from improved communications, with nothing at all? Nice.

      "We already have two commercial entities in this space and although they're filling capacity fast"
      Very expensive commercial entities, who has no intention of covering the most rural people who are to be served by NBN satellite.

      "we're only a small fraction of the way into it and already there have been delays on top of delays"
      No, there haven't. There have been the delays in planning that I mentioned (the largest contributing factor being the length of time taken to reach an agreement with Telstra for use of their ducts and so on), and that's it. Every other 'delay' has been fabricated by a Liberal politician or a lazy journalist looking for cheap page hits. If you'd like to provide examples of these for me to knock down, go right ahead. I have plenty of evidence ready to go.

      "We're creating another large monopoly that will drive away many wholesale providers"
      What wholesale providers? We only have one! And it's the prices and business practices of that on that have put us in the position of having to take on this monumental task! You have to remember that infrastructure is a natural monopoly. It's simply not cost effective to hook up a premises with more than one connection to anything - water, sewerage, gas, electricity, you name it.

      "at some point NBN Co will be privatised and we'll face all of the same problems as we did with Telstra"
      No we won't, because NBN Co will be locked in to strict regulation through the special access undertaking, and because NBN Co is not a retailer like Telstra are.

      I feel like I rambled. But hey, you seem like a guy who would benefit from having some of this stuff pointed out, it's quite easy to get swept up by LNP misinformation.
      karl_w_w
      • "You want to leave people in the most rural areas, those who arguably gain the most from improved communications, with nothing at all?"

        karl I think what he is saying is that satellite should be dumped in favor of fixed wireless and more fibre in these areas. Which really is at odds with the "one swings too far to waste and delay" line. You can't reason with people like this.
        Hubert Cumberdale