Citi prices Turnbull broadband plan at $17b

Citi prices Turnbull broadband plan at $17b

Summary: Although Shadow Communications Minister Malcolm Turnbull has been mum on definite costs, Citigroup Global Markets estimates that the coalition's broadband plan would set Australian taxpayers back approximately $16.7 billion, and could be completed by the end of 2018.

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Although Shadow Communications Minister Malcolm Turnbull has been mum on definite costs, Citigroup Global Markets estimates that the coalition's broadband plan would set Australian taxpayers back approximately $16.7 billion, and could be completed by the end of 2018.

In August, Turnbull revealed that should the coalition form government, it would halt construction of the National Broadband Network (NBN) and conduct a cost-benefit analysis to determine the best broadband model for Australia. This would likely lead to a policy of fibre to the node (FTTN) in many areas; fibre to the home in Greenfields sites, utilising Telstra and Optus' hybrid fibre-coaxial cables; and subsidising the costs of broadband in rural and remote areas. Telstra's wholesale and retail arms would also be structurally separated, creating a new "Network Co" that would be the wholesaler for FTTN network.

Since the announcement, Turnbull has yet to disclose how much he expects this policy would cost by comparison to the Federal Government's $35.9 billion NBN project. However, international financial organisation Citigroup has this week released an equity analyst report on Telstra, assessing merits of the coalition policy and the likely financial impact on Telstra, and putting the cost at $16.7 billion.

The report, provided to ZDNet Australia, explains that based on the coalition estimation that the urban FTTN roll-out and HFC upgrades would cost $10 billion, the costs of deploying adequate broadband to regional areas would bring the total cost of the project to $16.7 billion, $19 billion less in capital expenditure than the NBN.

This was broken down into $6.1 billion for FTTN, $3.3 billion for fixed wireless in regional areas, $4.7 billion for greenfields FTTH and $2.7 billion in overheads. Following the six-month cost-benefit analysis after the 2013 election, Citigroup estimates that it would take two years to the end of 2015 for the coalition to renegotiate the definitive agreement with Telstra, negotiate a new separation deal and renegotiate the HFC deals with both Telstra and Optus. After this, it expects that the structural separation of Telstra would take three years, to the end of 2018.

While Turnbull could just contact NBN Co CEO Mike Quigley "and then just turn off the funding", there would be a number of hurdles to overcome to "shut down the NBN", Citigroup said, including:

  • Terminating contracts and facing the associated penalties
  • Selling the NBN fibre assets that are fragmented across the country
  • Cancelling planned roll-out locations and facing the potential backlash from residents in those areas
  • Re-writing Telstra structural separation legislation so that it is no longer tied to the NBN
  • Dealing with a hostile Senate controlled by the Greens.

The policy would also return the industry to tiered fixed-broadband pricing between regional areas and metropolitan areas of Australia, with companies favouring metro infrastructure roll-outs over regional roll-outs in order to make a return on investment. While Citi acknowledged that the coalition policy provided for subsidies for regional areas, it said it is concerned that the private sector would "continue to limit broadband development in regional areas".

The office for the shadow communications minister told ZDNet Australia that Citigroup had not consulted the coalition at all in the production of the report, and declined to comment.

Topics: NBN, Broadband, Telcos, Telstra

About

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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112 comments
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  • This is quite fascinating - a few quick thoughts at first glance (will read more closely):

    - The Nationals aren't going to like this. The bush gets shafted, again.
    - "It's Quick and Dirty" - this leaps out from the front page. Quite true, of course.
    - The timeline is interesting: from the 2013 election until end of 2015, exactly NOTHING gets rolled out. There's six months allowed for a Cost Benefit Analysis, and two years to negotiate new terms with Telstra and Optus. Aside from being optimistic, that's over two years while no rollout takes place, all while people know they've had their NBN snatched away from under their noses.
    - the FTTN and upgraded HFC rollout then takes place from beginning 2016 to end 2018. A total time saving of only two years - and that is based on the optimistic assumption that the Coalition can negotiate past the Greens and the ALP in the Senate.
    - Here's the kicker in the fine print: 28% of premises continue to get only ADSL2+. No soup for you!
    Gwyntaglaw
    • The Citigroup report is not Coalition policy and is not the Coalition timetable of what will happen post 2013 election assuming a Coalition win and was not commissioned by the Coalition party nor did they consult with the Coalition on any aspect of the report.

      Your 'quite fascinating' comments is nearly right but the correct term is fantasy.
      advocate-d95d7
      • Of course the Citigroup report is not "Coalition policy". If it were an official statement of policy, then it would not be independent and would be of no assistance at all in evaluating the foreseeable costs consequences of the policy.

        I know Malcolm Turnbull has complained (via Twitter) that Citigroup did not consult with the Coalition - but that statement is misleading. What Citigroup most certainly did consult is the corpus of public statements and descriptions made by the Coalition (mostly by Turnbull himself). They are merely assessing the Coalition by its own statements.

        The assumptions made by the report are clearly stated, and they are reasonable: such as the assumption that the Coalition will assume power in late 2013. No one can predict with certainty if that will be the case, but it accords with the views of many independent political analysts.
        Gwyntaglaw
        • The point is your individual interpretation of the report, which of course adds you own biased flavour as a long time pro-NBN and anti-Coalition one -eyed supporter.

          As such your glib analysis headed a 'few quick thought at first glance' is as I stated pure non objective fantasy.
          advocate-d95d7
          • Gywns step by step analysis vs your pedantically ridiculous, baseless, NBN = end of the world stupidity...

            Gee who should we listen to?
            Beta-9f71a
          • Well certainly not you, banned from so many websites you have to invent a new name every 24 hours.
            advocate-d95d7
          • My follow up thoughts were posted shortly after the above. I have read nothing in the report since then that contradicts what I have already written. Sorry to disappoint if you've been waiting for more!
            Gwyntaglaw
          • INCORRECT LIAR...

            I am banned from DELIMITER ONLY...where I have done nothing worse than you (in fact I just told the truth, perhaps that's where I went wrong).

            But you being the bad troll and in the minority you are protected there. Good for you!

            Where as YOU are banned from Whirlpool of course... LOL!

            Funny too, you who uses many names points the finger at me! hypocrite...
            Beta-9f71a
  • Couple more points:

    - Figure 2 on page 6 shows the coverage broken down by technology choice (HFC, FTTN, Fixed wireless etc). The brownfields figure for FTTH is 0% covered, which is simply incorrect: according to the assumptions in the report (that the Coalition gains power in late 2013), the FTTH rollout will be already 9% complete by that date. This is acknowledged elsewhere, on page 8.
    - The summary of implications (here: problems) for the industry on pages 9 & 10 covers some pretty significant territory. First up, on page 8, there is discussion of the likelihood of bringing back tiered wholesale pricing, which is disastrous for regional access.
    - And the final kicker is the section on page 10 under the heading "Future-Proofing: Is it Fast Enough?" This deserves quoting at length.

    "Unlike the NBN, the mix of access technologies used in the Coalition Policy makes the upgrade path difficult. In other words, if the Coalition Policy is implemented, it could simply delay an eventual national FTTH build. Note: FTTN is not an upgrade path for FTTP and the Coalition Policy still incurs $17bn of infrastructure spending."

    That paragraph is an absolute killer.
    Gwyntaglaw
    • HFC is pretty much end-of-life. Its only brought in as an expediency to make the NBNCo numbers work. Including it will only create operating and upkeep costs.

      FTTN will upgrade all the metro city networks to 12-24Mbps, Telstra estimated it at $4Bn, given the economy of scales of the known and previously deployed technology, that number would be under control.

      IMO the bush should not get anything more than a copper line (no FTTN), and LTE/4G wireless. Any rational and knowledgable person would consider install fibre to these areas stupidity.
      Avatar1aaa
      • The "bush", if defined as broadacre properties and those premises outside the surburban density areas of a town, then LTE wireless (and satellite) is indeed what they will be getting under the existing NBN, and it is likely under the Coalition proposal.

        Neither side of politics has proposed running fibre to these premises as standard.
        Gwyntaglaw
        • Regional AU should NOT get FTTP, its pointlessly stupid, and is a result of the hung parliament. After the next one, these three idiots will be gone, good riddance.

          Anywhere that is behind a RIM, CMUX will either get Wireless or get an ISAM. There will be NO BROWNFIELDS FIBRE upgrades. There will also be NO FTTP to greenfields unless it is in the metro areas, with some exceptions.

          doing this will save you 60% easily, that 60% is just the removal of 'stupidity.'
          Avatar1aaa
          • "Regional AU should NOT get FTTP, its pointlessly stupid, and is a result of the hung parliament."

            False. Regional areas getting FTTH was planned long before the hung parliament result at the last election.



            "After the next one, these three idiots will be gone, good riddance."

            Do you hate democracy?



            "that 60% is just the removal of 'stupidity.'"

            False. You will always be 100% stupid.
            Hubert Cumberdale
          • "False. Regional areas getting FTTH was planned long before the hung parliament result at the last election."

            It's just as easy to write "false" as for him to claim it's true - whilst neither of you give any supporting evidence.

            "Do you hate democracy?"
            That's a leading question. He said he'll be glad when "three idiots will be gone". Assuming he means three members of parliament will be voted out then he is exercising his democratic right to not like some candidates/currently serving members and to hope they don't get elected/reelected.

            user000000000000000000000001 might as well ask a leading question back and write "Do you have a fascist ideology?".

            "You will always be 100% stupid."
            And you can't get much more presumptuous, ignorant and rude than that.
            harlequinn-bd150
          • Oh come on, harlequinn. There is a wealth of "supporting evidence" to refute the claim that regional Australia is getting FTTP only as a result of the hung parliament. A simple search of media releases on the NBN Co site prior to the 2010 election will give many references. The plans to roll out fibre to 93% of residences (a number which necessarily includes regional Australia) was clear in the report for the year ending June 2010. Other public statements prior to the election are myriad.

            To claim that there is no evidence when it is all around is wilful ignorance. There is none so blind as one who will not see.
            Gwyntaglaw
          • @Gwyntaglaw

            "There is none so blind as one who will not see."

            The blatant hypocrisy in that statement coming from you is one of the best examples of the art of hypocrisy you will see in a long time.

            Priceless!
            advocate-d95d7
          • Go away child, the adults are corresponding...!
            Beta-9f71a
          • "To claim that there is no evidence when it is all around is wilful ignorance. There is none so blind as one who will not see."

            You must be talking about yourself because I did not claim or infer there was no evidence.

            I wrote "whilst neither of you give any supporting evidence".

            The "neither of you" bit gives it away - I'm clearly saying that the two authors I'm referring to didn't give any evidence, and that's a fact.

            The point is that it is their responsibility to support their claims if they want to be taken seriously.
            harlequinn-bd150
          • Just to clarify:

            "I did not claim or infer there was no evidence" meaning I didn't claim there was no evidence in existence in the world at large.

            "whilst neither of you give any supporting evidence" meaning I do claim that they didn't supply any, which is an inference that there is evidence that can be supplied.
            harlequinn-bd150
          • "It's just as easy to write "false" as for him to claim it's true - whilst neither of you give any supporting evidence."

            My statement: "Regional areas getting FTTH was planned long before the hung parliament result at the last election." is true. Are you disputing this fact? If so you are flat out wrong. Saying "Regional areas getting FTTP as the result of the hung parliament" is wrong. It is a "False" statement.


            "That's a leading question."

            It's a valid question considering the history of his comments here.


            "And you can't get much more presumptuous, ignorant and rude than that."

            Just calling it how I see it, keep in mind you are trying to defend someone who called people in regional areas "idiots"
            Hubert Cumberdale