"Unknown" quality Telstra copper 4-6x costlier than FTTP: NBN Co

"Unknown" quality Telstra copper 4-6x costlier than FTTP: NBN Co

Summary: NBN Co has warned the government against acquiring Telstra's copper access network (CAN) or footing the bill for its maintenance, arguing that the "unknown" state of its network made it preferable to lease copper access from Telstra as a managed service. Here's why.

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Of all the revelations to emerge from the leaking of NBN Co's confidential assessment of the Coalition's fibre-to-the-node (FttN) based alternative national broadband network (NBN) policy, one of the most problematic for the new government is the warning that any future NBN should avoid taking ownership of Telstra's copper access network (CAN) and the “significant network remediation” it requires.

The warning – prepared by NBN Co to form part of the Department of Communications' Incoming Government Brief ('blue book') for now communications minister Malcolm Turnbull – lays bare the massive risk that would accompany any decision by the government to renegotiate its $11 billion contract with Telstra so that the government would take over ownership or control of the network.

Copper wire. http://commons.wikimedia.org/wiki/File:Treccia_di_rame_-_Foto_di_Giovanni_Dall'Orto.jpg
NBN Co doesn't want any responsibility for managing Telstra's "unknown" copper access network. Image: CC BY-SA 3.0 Giovanni Dall'Orto

“The deployment of an FTTN Network will require NBN Co to access the Telstra CAN in addition to the civil and telecommunications infrastructure it is accessing through the Telstra Definitive Agreements today,” the report warns.

“The quality of the Telstra CAN is at present unknown, which will substantially impact the complexity and operating costs (as well as capital costs) of deploying, operating and maintaining the FTTN network.”

NBN Co estimated the costs to maintain Telstra's CAN as being four to six times as high as those for an FTTP network – “in the order of <2% for FTTP vs in the range of 8%-12% for copper (network faults),” noting that “in this context the costs to maintain the copper network... are likely to rise over time as the copper network further degrades and maintenance/replacement requirements increase.”

While it readily agreed that the VDSL2 technology proposed for use on the Coalition's NBN is “proven and commercially available today”, NBN Co warned that the level of remediation required – both of the problematic presence of asbestos, and of a copper network that has been called “dilapidated” and an “absolute disgrace” – “is expected to be significant but cannot be accurately determined until NBN Co gains access to Telstra's copper plant records and commences VDSL2 trials.”

NBN Co estimated the costs to maintain Telstra's CAN as being four to six times as high as those for an FTTP network – “in the order of <2% for FTTP vs in the range of 8%-12% for copper (network faults),” noting that “in this context the costs to maintain the copper network... are likely to rise over time as the copper network further degrades and maintenance/replacement requirements increase.”

Some such trials were recently conducted – in laboratory settings, not in the real world – with some success by NBN Co.

However, the company's executives conceded in Senate Estimates yesterday that there has been no real-world testing of FttN since the change of government. They also admitted they still have not received detailed information about the state of Telstra's CAN.

Without any clear indication of the extent or cost of translating that performance onto Telstra's copper network, any promise from those results is far outweighed by the known unknowns of Telstra's copper – that is, the things NBN Co knows that it doesn't know about it.

NBN Co was explicit in its assessment of those risks, noting “practical considerations on the difficulty to acquire/separate/operate and maintain/and provision services on the Telstra CAN.”

“It is difficult to quantify the copper network remediation costs required to achieve the speed objectives of the Coalition's Plan,” the report continues.

“These will likely only be known post-network completion or after a trial....NBN Co has not completed detailed network design or financial modelling on the potential impacts of different outcomes from renegotiating the Telstra [contract].”

NBN Co warned the incoming government away from assuming the risks inherent in the Telstra CAN by purchasing or otherwise assuming responsibility for the network – a possibility that has been repeatedly floated by Turnbull, who contended through much of the year that the Coalition is “not proposing to pay [Telstra] anything” for a network that he said “is of no economic value”.

Instead of allowing itself to take responsibility for the unknown costs and effort in remediating Telstra's CAN, NBN Co advised the government to negotiate for access to the copper on a managed service basis.

This approach – revealed by the Australian Financial Review and explained in more detail in the NBN Co report – would see the government enter into a long-term commitment to pay a regular leasing fee in exchange for Telstra continuing to maintain the CAN and its associated management infrastructure, long term.

One justification for this is the added complexity that would be involved in redeveloping the extensive operational support systems and business support systems (OSS/BSS) systems required to manage the network's performance, subscribers and maintenance.

Former CEO Mike Quigley was well aware of the cost of OSS/BSS development, with NBN Co contracting IBM in 2011 to deliver its OSS/BSS capabilities in a $200 million deal designed to run through 2014.

Because of its intrinsic complexity and ever-expanding scope, Quigley warned in his recent speech to telecommunications organisation TelSoc, developing a “major OSS/BSS capability can be the stuff of nightmares.”

Former NBN Co CEO Mike Quigley warned in his recent speech to telecommunications organisation TelSoc [that] developing a “major OSS/BSS capability can be the stuff of nightmares....It was these large IT systems that I most feared would be the bottleneck in rolling out services on the NBN."

“It was these large IT systems that I most feared would be the bottleneck in rolling out services on the NBN. Large public IT systems such as these have caused their fair share of grief... [but] these systems has been developed and have been tested at scale. They are another major asset that NBN Co now has in place.”

Telstra has developed its own OSS/BSS systems over the years, but these are not available to NBN Co – which, it warned, would face a “high risk to deployment timeframes” in redeveloping its own OSS/BSS systems to accommodate the CAN.

“International experience indicates that existing legacy systems for the management and operations of the copper network can only be maintained and operated by the incumbent,” the report notes.

“NBN Co believes it would be very challenging to separate and transition the IT systems that operate and maintain the Telstra CAN.”

As a consequence, NBN Co advised that buying a managed service from Telstra “is considered the best option for NBN Co today due to the significant complexity and cost associated with transitioning and integrating the workforce and management systems to operate and maintain the Telstra CAN as an NBN Co asset.”

Such costs, however, would constitute a significant operating expense – already estimated to be more than $1 billion per year – that would need to be accounted for as a budget line-item.

The NBN Co report had separately warned that the ability for the government to keep the NBN's funding off budget could be threatened under a lower-revenue FttN model, and would depend on the government publishing further detailed costings that clearly outlined FttN's projected revenues.

Turnbull has previously dismissed the report as "totally political" and out of date — despite subsequent evidence to the contrary — and has promised that details of his network's cost and technological models will be revealed soon.

Turnbull recently received the findings of the strategic review, but has delayed its release and defied calls by the Senate to make the document public. The report is now expected to be released later today.

NBN Co has not responded to requests for comment.

Topics: NBN, Broadband, Fiber, Government AU, Telstra

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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7 comments
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  • That blows the economic argument

    Turnbull's whole premise for reviving the old copper network was to save money.

    But $1 billion maintenance fee per year?

    Short term it might be cheaper, but long term use of copper will cost the nation more than if everyone got fiber to the home.

    It's a sad situation that there are politicians dancing around like this, trying to sell a corroded copper telephone network to the public by pretending it's a Lamborghini.

    Sorry Turnbull, but you're like a used-car salesman trying to sell us a rust bucket.
    Vbitrate
    • Only Half Right

      You are only half right. In order to adjust the cost base to suit political bean counters I suggest we techies and the consumers downgrade our expectations. In other words let us aim to bring back the 56K modems so that the copper network could be here for another generation.
      sundar22
  • Beware the OSS

    The thing that needs to be clear is that NBN "got away" with only a $200mill project for BSS/OSS as it was a complete greenfields project.
    The Telstra systems are a nightmare already with 30 years of hacks and addons. To hand this over the NBN might easily cost billions.
    gr1f
  • Cheaper faster

    Remember oz email was one of the last ISP to provide adsl
    SierraMan
  • PERSPECTIVE

    Remember Commodore/the Amiga. Apple Sans Steve Jobs. The bean counters got their way in Technology enterprises and demonstrated that their ignorance of the core business and the necessity of staying at the forefront of the pack means sink or swim.
    Google allocates a tiny percentage of it's profit (Still huge dollars) into pure research and some into R&D, which is why they are where they are. Yet the bean counter investors are wanting that money paid in dividends .

    M.T is a Merchant Banker first and Foremost, spent time where as an intelligent man he learnt the methodology from those who packed the almost worhless junk loans/bonds as AAA securities along with assistance from the experts (Ratings agencies) and supportive media and their financial and economic Guru's

    We have been dudded by a smooth operator and the ideological fanatics and or ignorant gullible journalists and commentators.

    As ex Telecom I agree their OSS and BSS systems are largely a nightmare cobbled on legacy systems.I remember TRACS, actually had to cteate our own database using at that time Smart
    Abel Adamski
  • Turnbull will kill the NBN

    It's been pretty obvious to me that he has been trying to kill the NBN and it now looks like he's finally starting to do it.
    rossco4434
  • corrections

    CAN = Customer Access Network

    The 4-6x is for faults, not costs.
    Andrew Hargrave