Telco alliance says NBN will cost $55b

Telco alliance says NBN will cost $55b

Summary: The Alliance for Affordable Broadband has called for clarification on the NBN business case summary, saying that its calculations put the total cost of the NBN project at $55.2 billion.

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The Alliance for Affordable Broadband has called for clarification on the National Broadband Network (NBN) business case summary, saying that its calculations put the total cost of the NBN project at $55.2 billion.

Fibre

(Fiber Optic Grass 2 image by rq, CC BY-SA 2.0)

The Alliance is made up of 10 telecommunications executives from companies including AAPT, Vocus, Pipe Networks and BigAir.

In the letter released today (PDF), the Alliance called for NBN Co Mike Quigley to explain the true cost of the network outlined in the NBN business case summary released yesterday.

"In the opinion of the Alliance for Affordable Broadband, the Business Case Summary provides a disturbing insight into a substantial cost blow-out for the project of some $13 billion more than originally projected (with the build having barely got underway) with indirect admissions that NBN needs to operate as a newly installed telecoms monopoly, extracting monopoly rents from those who can least afford it," the group said.

The alliance stated that the $35.7 billion capital expenditure could not be called the total cost of the network as it didn't include the $13 billion before tax cost for getting Telstra on board or the extra $4 billion in interest repayments on the debt for the network. The alliance puts the total cost of the project at $55.2 billion.

The alliance also raised concern with parts of the document that state that prices for products on the NBN would expect to be reduced over time, except for the basic service offerings.

"This is a disturbing development. By this statement, NBN Co expects to decrease the real prices for products able to be afforded in homes with higher incomes, yet households on low incomes who can only afford the most basic service will not see any similar improvement in affordability," the letter stated. "In fact, it would appear that it is NBN Co's intention to make this product less affordable over time while at the same time removing any choice those consumers have to acquire a different cheaper alternative."

The network might not even reduce the digital divide as Conroy has often claimed, according to the letter.

"Are we to understand that NBN Co is now clearly articulating that the basic service will become less affordable for those most affected by the digital divide once customer choice is removed over time?"

The "most enlightening" aspect of the business plan, according to the alliance, is that it appeared that the only way the network is viable is if it has a monopoly on the fixed-line market, without Telstra operating its copper network parallel to NBN Co.

"We believe it is now clear that the fundamental business case for a $43 billion NBN is completely flawed," the letter stated. "If it isn't, why is NBN Co and the government proceeding on the basis that it has to create a new monopoly? Furthermore, why does NBN Co need to create a new backhaul monopoly for itself by forcing 14 [Points of Interconnect] nationally?"

Shadow Communications Minister Malcolm Turnbull welcomed the letter today, asking Prime Minister Julia Gillard in Question Time today to explain the costings in the business case summary. Gillard responded by saying that Turnbull was "making numbers up".

The Alliance for Affordable Broadband formed in August during the 2010 Federal Election backing the Coalition's proposal for a mix of technologies for a broadband network plan. Earlier this month, the group expressed support for a cost-benefit analysis of the NBN.

Topics: Telcos, Broadband, Government AU, AAPT, 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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20 comments
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  • Ah the vultures are circling preying (and praying) for a few scraps to be thrown their way, LOL...
    RS-ef540
  • BigAir... yes im sure you would like it to be all run on wiimax, 10comms companies...

    Alot of my customers enjoy the stuttering service they get from that fantastic wireless end point..
    nickaaa12
  • as people I know love the improvement when I get them to get the dongle out of the USB port and onto the end of a 3mt USB extension cable into the air... it is a line of sight radio system afterall ... a fixed antenna with less obstructions usually does wonders for performance.
    FiberLover
  • oh it's up to $55billion now? holy crap it was $50billion just this morning... meh whatever just build the damn thing already. As for the "Alliance for Affordable Broadband" please just stfu your input on this matter was neither requested or needed, when I want expensive, high latency, low bandwidth wireless Internets I'll give you a call!
    Hubert Cumberdale
  • Seem to be a lot of self entitled adolescents reading this site.

    The main thing that has held back internet investment in Australia has been Telstra's monopoly. This was most pronounced prior to the introduction of ADSL2+ by smaller ISPs... Remember when the only ADSL available was ADSL resold off Telstra, and the maximum speed was 1mbps, when ADSL can support 8mpbs?

    Labor wants to create a new monopoly.... they're using two wrongs to make a right. The result is that this is going to destroy private investment into internet service.

    There is no technical reason for decommissioning the copper network. The copper network that supports ADSL2+, and may even provide better services in the future such as VDSL is going to be destroyed. This is a productivity cost. It's the same as going to a fruit market and buying up everyone's fruit and chucking it in the bin, then selling your own fruit at an inflated price. Ok, because you make far more per piece of fruit, you can afford to sell only the freshest and highest quality.... but what about the people who were willing to buy the blemished or ripe fruit.....? What about the fruit juice business who didn't care what fruit looks like? What about the people who are actually starving to death who just need the nutrients?

    The "Alliance for Affordable Broadband" are not making things up. Watch the interview between Tony Jones and Stephen Conroy on Wednesday night's Lateline. They are buying out Telstra for 'revenue'.... or, as the AfAB say they are buying out Telstra so they can "extract monopoly rents from those who can least afford it". The only Internet in town is going to be the NBN and the baseline NBN is not going to drop in price, ever. In fact, don't be surprised if the price rises due to cost overruns. But the plan from day one is to keep fixed. And the baseline NBN will offer a comparable level of bandwidth to current ADSL2+ and cable plans... it is likely to cost more than the current competing technologies; as we know, the prices have not been announced. But remember, it's not just the price you will pay, it's the tax that you will pay. At least $43 billion. More if they make mistakes, which they will.

    @Hubert The NBN isn't going to reduce latency to the USA.
    @esqi why don't you try refuting their arguments, rather than just attacking them based on who they are?
    @RS Oh, so it's fine for the Government to do a deal with Telstra and leave the little guys, the ones who actually invested, put their own DSLAMS into the exchanges and brought ADSL2+ to the people, those guys are going to be strung out to dry, and you think this is all proper and fair.
    coolguy4
  • "Seem to be a lot of self entitled adolescents reading this site."

    And then we have people like you...

    "@Hubert The NBN isn't going to reduce latency to the USA."

    Who said anything about the USA? Did I say anything about the USA? What has the USA got to do with this? The NBN wont reduce latency to European countries (where most of MY inbound and outbound traffic comes from btw) either so your point is null and void unless you mistakenly assumed that my internet traffics is somehow bound to US only IP addresses. No really that first hop is actually important. Lower latency ftw, keep your 19th century wireless technology for the microchipped koalas and wombats.
    Hubert Cumberdale
  • Gotta love mobility :p
    apaulefont
  • No politican has credibility. Whatever Conroy says is to be taken with a good dose of salt - a techno babbler with aspirations of being of being useful.

    Can anyone tell me what prices have gone down when the policians get involved in using public money to build infrastructure so they can sell it off "publically" later ?
    Banks, electricty, and gas to name a few, Where "market forces" through price fixing are robbing us whilst the politicians reap the taxes.
    If the NBN was worthwhile then it would have already been built.

    I watched fibre being installed to a town with less than 2000 people and we cant get ADSL without 2000 dropouts amonth in suburban Melbourne with 1500 people in one street.

    This NBN needs to be built like everything we do in REAL life - to a fixed unmoving budget so the contractors cannot rip off the public funding. Penalities for not completeing on time and public execution of the overseeing Politicians who dreamed this white elephant up.
    When your children are dying from lack of hopsital care just think of the wonderful NBN and internet expenditure so people can look at rubbish websites and porn.
    Hideous62
  • Hubert, your traffic is to Europe, and you are worried about latency on the first hop....

    Most traffic is going to or through the USA... that's why I mention it. And if your traffic is going to Europe it is going through the USA, isn't it? So my assumption was correct.

    I'm sure there are applications that would benefit from lower latency, though there's no guarantee that the NBN will even reduce latency by all that much, since latency will depend on the routing equipment more than the medium of the network.... but in any case, is a mandatory low latency network really of benefit for every single Australian? Why not let people who need low latency pay for it themselves and let others use ADSL, HFC or wireless if those technologies are adequate for their purposes?

    Let me give you another analogy: you're going through life, you have a decent social life, with quite a few different friends. Now, sometimes all your friends are busy doing other things so you can't see them, but that's ok... It's also a bit of work maintaining all these friendships... Then one day, this new friend shows up, he's a bit annoying, but he has no life, so he can spend time with you whenever you want. Well, that's ok, you guess he's a worthy addition to your social group. But, actually, he NEEDS to spend time with you every day, and he actually goes out and murders all your other friends, so you have no choice but to spend time with him everyday. In fact, he even locks you in his basement, so you can't escape.
    coolguy4
  • Politicians have their own world driven by power; money and control. It’s hardly ever ‘FOR’ the people – as their no.1 priority is polishing their portfolios for the next election.
    It’s funny (NOT) at which the way Conroy and co have manipulated/are manipulating the legal environment through ‘bills’ and ‘what not’ to ensure they get what they want at the end of the day. The amount of tax-payer’s money, time and effort they spend to achieve what they want has really NOTHING to do for the benefit of the public, but rather to achieve their own agenda.
    The Telstra monopoly was a govt’ initiative – with ULL/’copper to the last mile’ the driving tool. Now the current gov’t wants to create another monopoly (NBN.Co) via ‘Fibre to the last mile’! Haven’t they learned a lesson yet? Unless, they’re there for own agenda! Is the benefit they’re advertising really ‘FOR’ the typical subscriber? Are the ‘bells’ and ‘whistles’ that NBN.Co is promising really worth the $$ that we, the tax-payers are willing to? The NBN.Co project will be tax-payers expense … and the services that NBN.Co will offer will also be the tax-payer’s expense. At the end of the day, it’s the tax-payers spending all the $$ - while the politicians get to spend OUR $$. While Hospital/Medical services are going down the drain! WTF!
    Then Gillard promises ‘not to sell NBN.Co to Telstra’ – this is not the point really because whichever company acquires NBN.Co will become the next monopoly! Either way, competition is somewhat limited to the ‘rules’ imposed by the privatised version of NBN.Co, geez, sounds familiar already. But hey, who cares coz it will be the next govt’s problem – sif!
    jzr-6bb09
  • It's pretty obvious that the government is cooking the numbers. Neglecting to include the money spent to get access to Telstra Ducts is decietful. That alon is a good enough reason to look at the numbers quite carefully.

    The POI monopoly that would be created is also very worrying. That the government claims that its own Internal Revenue Recovery (IRR) would be cut by 50 to 80 basis points without this monopoly is just plain admitting that it needs the monopoly to achieve the figures that the NBN co is claiming it will return.

    Again this isnt a business plan, but a wish list of best case secenarios. Admittedly this is all that smart government would want the public to see.

    I for one, want to see how the cost of the NBN changes if the government used non monopolistic tactics, and reported fairly. In which case, it may make the NBN less attractive on a bang for buck scale, but is likely to improve consumer confidence in the plan.

    the idea of the NBN is truly brilliant, but paying so much for it that it beggars my children is worrying. lets see the facts, then we can decide.

    PS: I hate being treated like a child by a government that wants to make all my decisions for me.
    Andrew Castle
  • "Hubert, your traffic is to Europe, and you are worried about latency on the first hop...."

    I'm worried about latency period so explain how wireless is the solution to this when fibre has solved the issues I'M TALKING about.

    "Europe it is going through the USA, isn't it?"

    Not necessarily but regardless the point still stands: The NBN wont reduce latency to European countries either so your point is null and void.

    "Let me give you another analogy: blah blah blah"

    Your analogy is retarded, your first one about fruit was just stupid... this one was just ridiculous.
    Hubert Cumberdale
  • oh wait I just realised who you are, are you still crying over how I exposed your idiocy over at iTnews? That would explain your penchant for wireless and your borderline creepy analogy... So hows that nonbn.org thing working out for you? you should get the dudes from the "Alliance for Affordable Broadband" to donate some monies I dont think $365 is enough to stop the NBN... you need like $55billion I'm told...
    Hubert Cumberdale
  • Strange. Most of the websites I visit on a daily basis are local, Australian websites. The only international websites I visit daily are Facebook, Youtube, Justin.tv, Digg and Battle.net. You people need to stop being so dependent on overseas data and start surfing local websites for a change. There are plenty of local websites to look at.
    RL-079ec
  • I'm not who you think I am. That person is one of many people who realise a new government controlled monopoly will destroy private investment and increase costs to consumers in the long run.

    Fibre has solved your issue? So are you saying you already have fibre without the NBN? And the fact that the NBN won't reduce latency to Europe was exactly my point. You don't make much sense Hubert. Tell me, what is your current latency to your first hop? I am on ADSL2+ and for me it is ~21ms. What is the claim from the NBN about latency on the first hop? Pinging a site in the USA is about ~200ms.... is it really going to make that much of a difference? What applications are you using that require the low latency? Are you a surgeon performing your operations by remote control? Are you operating the space shuttle? What's your deal Hubert?

    Was I talking about wireless specifically? Wireless is there and it has it's uses, it doesn't suit everyone, though the technology continues to advance. But Hubert, what about ADSL2+? What is your problem with that? Not everyone can have access to ADSL2+... but for the people who can, the service is quite adequate, and the prices are now quite affordable. The government are going to rip up the copper network and eliminate ADSL2+ from the marketplace. They are doing this so that there is no competition from ADSL2+. A basic NBN connection will cost more, or will have less data allowed.

    Now Hubert, why should the government destroy infrastructure that is currently of use and currently has benefit to a large number of people? What is the benefit of destroying something that has value? You build a second bridge over the river. But you destroy the original bridge? Why? Was the original bridge costing you anything? The new bridge has no footpath, it's for cars only... now nobody can cross unless they drive a car. Ahh... see... the new bridge is a toll road, and it wouldn't be viable unless it had 100% of the traffic going over it.

    I just want you to get the idea Hubert, they are destroying a network that is currently being used, that has value now and will do so into the future... and they are doing this purely so that they can increase the revenue for the NBN, so that they can make it more 'viable'.

    @RL ... there are lots of good Australian websites... no doubt about that. But hopefully the point of the NBN isn't so people can enjoy a slightly faster web surfing experience limited to Australia. As I expected, you're just a kid. You play on battle.net , you watch justin.tv ... You see, what you have to realise is there are people in this world who earn their own money... they more they can do with their money, the better the world becomes. It's called 'productivity'. Killing the copper network is a productivity cost. A network that is useful, will be lost; the productivity it supported will be gone. Believe or not, there are people who do business on the internet... they don't just consume media... they need decent bandwidth.... ADSL2+ is adequate for their needs. But, another point for you, what do you think happens when the NBN is rolled out, everyone, for better or worse, is connected, then everyone goes to watch videos on Youtube, or check Facebook, or do other activities with overseas sites. Do you think the international bandwidth is going to be able to cope? It will require new investment in new undersea cables... but who's going to pay for that? The government will be the only player in town at that point, so it will be entirely up to them.
    coolguy4
  • Well said Andrew and jzr... but I'm saddened by all the 'thumbs down' you receive.... a lot of children on this site who think that the Government is going to perform miracles.

    Governments have no wealth... they have no power... everything they have they take from somebody else. If someone doesn't pay their tax, they go to jail. If they try to escape from jail, they get shot. Is the NBN worth killing people over? Cancel the NBN, and let private companies invest in fibre and provide it to the people who are willing to pay for fibre. This is the equitable way.
    coolguy4
  • "I'm not who you think I am."

    I really dont care who you are. You know him that's good enough for me.


    "That person is one of many people who realise a new government controlled monopoly will destroy private investment and increase costs to consumers in the long run."

    Unsubstantiated claim.


    "Fibre has solved your issue? So are you saying you already have fibre without the NBN? "

    I'm still waiting for NBNco to get on with the job like every other forward thinking Australian...


    "You don't make much sense Hubert."

    Actually I'm the only one making ANY sense...


    "Tell me, what is your current latency to your first hop?"

    My current latency is irrelevant what I do not want is for that latency to increase due to outdated wireless technologies, bring on the fibre.

    "blah blah blah Are you a surgeon performing your operations by remote control?"

    Nope, but you've come up with an interesting point, would you really trust a surgeon performing your operations by remote control over a wireless connection? yeah that's what I thought...


    "But Hubert, what about ADSL2+?"

    What about it?

    "What is your problem with that?"

    It's too slow, less than 1mbit upload. Are you even aware off the limitations? Do some research.

    "Not everyone can have access to ADSL2+..."

    Maybe we should get on with this FTTH network then?


    "but for the people who can, the service is quite adequate"

    LOL

    "why should the government destroy infrastructure that is currently of use and currently has benefit to a large number of people?"

    Because that network is rapidly decaying and will need to be replaced eventually, once again bring on the fibre.

    "You build a second bridge over the river. But you destroy the original bridge? blah blah blah"

    Another retarded analogy... well at least this one was not psychotic...


    "they are destroying a network that is currently being used,"

    Oh boo hoo, this isn't some heritage listed site dummy, it's a wholesale network infrastructure that needs to be upgraded... really why do you even care... unless you have some interest in some other competing technologies, would you even be complaining had Telstra decided to do this on their own years ago?

    "so that they can make it more 'viable'. "

    This is just a stupid statement.
    Hubert Cumberdale
  • I bet fixed wireless has better performance than mobile fibre ;)
    FiberLover
  • The trouble with letting only the private companies invest in fibre is they don't necessarily implement them in the "right" place or do it at too slow pace as areas develop, to meet their priorities and profit objectives. Telstra and to a lesser extent Optus have had ample time to develop rural and regional areas and only in the last year or so have we had some real competition developing in 3G. Accordingly it is right in many circumstances for the governments (Federal, state and local) to subsidise the building of APPROPRIATE network capability that can be utilised by the 'retail' operators.

    We also know that Telstra had the SOL factor that held this country back for 2-4 years... now we have this stupid 'pi$$ing contest' that the Cowboy has to win at all costs, damn the national interest and the cost to the taxpayer.

    Take heart though... good product development is painfully slow in a telco, NBNCo hopefully focuses on the fibre backbone and when there is a change of government next time around common sense will prevail and the great White Elephant To The Home will be scrapped or slowed to areas that actually NEED it (new estates and those that supposedly have poor copper runs that cant by fixed economically).

    Oh and don't be saddened, I suspect most don't give a 'rats' about the thumbs downs.
    FiberLover
  • I agree (with some of your thoughts) PhillIT, this is the main reason an NBN is required, private companies aren't interested in unprofitable areas and that's understandable.

    So the options... build with taxpayer money so that the nation owns the network with revenue returning to the nations coffers. More upfront tax payer monies used but with a distinct ROI and an asset to later sell (if need be). Short term pain, long term gain!

    Or

    Subsidise private companies to build and then own the network, with revenue going to the private companies and no resale option for tax payers. Lesser upfront $'s required (less short term pain), but no long term gain for the taxpayer.

    As for Conroy, yes he is on a mission, but isn't it good (whether you agree or not with the NBN) that a Politician is at least committed to his job, not just skimming the cream as some appear to.

    Let's not forget too, the opposition is also on a mission, in direct contrast to Conroy and frankly, I'd prefer the positive Conroy mission to the always negative opposition's mission.

    As for change of government, what you have done is simply highlighted why the coalition are hellbent on putting the brakes on... because if they can stall, BS, throw up as many hurdles as they can and hold back progress, by the next election they can then blame all their sneaky handy work on the government and then claim white elephant...nice!

    And the thumbs, yeah... some people here already have reputations and are perhaps being categorised as pro or anti-NBN and not on content. As soon as my name comes up, I bet all the anti-NBN people vote thumbs down and proabaly don't even read what I wrote (I await a colourful reponse as to why they don't read, from one of them, about now...LOL) and vice versa, with the usual suspects from the other camp, perhaps receiving thumbs down, for the same reason.

    In saying that, it's interestng that those with predominantly thumbs down, seem to disregard the thumbs and just blame everyone else (I had one contradictory foe, accuse me of logging off and on, posting thumbs down for him and up for me...LOL). Instead of him/her thinking (and heaven forbid even considering it)...hmm, could all these thumbs down mean that I may actually be wrong here?
    RS-ef540