NBN leak reveals copper repair cost blowout to AU$640m

Another leaked NBN document has revealed that the cost to replace or repair the copper network will be around AU$640 million.
Written by Corinne Reichert, Contributor

The company rolling out Australia's National Broadband Network (NBN) has had another internal draft leaked, this time revealing that the cost to replace or repair the legacy copper network will amount to AU$641 million.

"State of copper network considerably worse than expected, leading to extensive work beyond the node," the document dated February 26, 2015, first uncovered by The Australian, says.

NBN ranked this risk as "almost certain", with "major" consequences.

"Decision to minimise remediation during build could reduce speeds available, create additional burden on connect, and hamper timely migration."

With NBN building 24,544 nodes by FY19 -- with 178 premises connected per node -- at AU$26,115 per node, the cost for copper remediation totals AU$640.97 million.

This figure is a significant increase from the AU$2,685 per node estimated in the December 2013 Strategic Review, which would have totalled AU$90.4 million.

The document says that the copper remediation costs are "based on Goldman Sachs estimates and awaiting E&DS modelling update".

Shadow Minister for Communications Jason Clare slammed the Coalition over the news, saying it proves again that the government's NBN model is not ideal.

"The latest leak is damning for Malcolm Turnbull's second-rate version of the NBN because it reveals that the cost of fixing the copper that makes Malcolm Turnbull's second-rate version of the NBN work has blown out by almost 900 percent," Clare said in a statement.

"This blowout has happened because Malcolm Turnbull's assumptions about how much it would cost to repair and remediate the old copper network were massively wrong.

"The December 2013 Strategic Review assumed these costs would be AU$2,685 per node; by March 2015, this had blown out to AU$26,115 per node."

An NBN spokesperson pointed out that the document is an unendorsed draft from March, and has no bearing on the current state of the network, the cost of which is accounted for under its Corporate Plan.

"Based on our experience in the field, which for FttN now extends to more than 550,000 homes in construction and more than 40,000 homes ready for service, our cost per premises for FttN as outlined in the Corporate Plan in August is proving accurate," the spokesperson told ZDNet.

"Any costs related to the FttN network are accounted for in the corporate plan released in August, which included the increase in peak funding ... Risks and mitigation plans for the network are outlined in the Corporate Plan, and the revised peak funding figure takes these scenarios into account. We have produced a peak funding range and provided a contingency, as prudent measures to manage a project of this size and complexity."

NBN moved away from a full fibre-to-the-premises (FttP) rollout following the Coalition's election to the present so-called multi-technology mix (MTM). The MTM angles to provide 38 percent of the population with FttN and fibre to the basement (FttB), making use of the existing copper lines; 34 percent with hybrid fibre-coaxial (HFC); 20 percent with FttP; 5 percent with fixed wireless; and 3 percent with satellite services.

The wide-scale rollout of FttN was approved by the Australian Competition and Consumer Commission (ACCC) in June, with a revised AU$11 billion deal allowing NBN to take ownership of Telstra's HFC and copper assets.

The FttN network was switched on in September, with NBN claiming that customers will be able to achieve download speeds of up to 100Mbps through the existing copper lines.

The MTM NBN is expected to cost up to AU$56 billion in peak funding, and is due to be completed in 2020, with the Construction Plan revealing that it aims to cover 9.5 million premises by September 2018.

There have long been criticisms that FttN would be a slower-speed network than FttP, with Clare recently saying the copper being used for the network is so old that it is having to be replaced.

"I have been talking to some contractors in the field recently to get a feel for how good the copper network is, and how much of it needs work or needs to be replaced. They have told me that NBN's working assumption is that 10 percent of copper pairs in fibre-to-the-node areas will need remediation," Clare said at the CommsDay Summit in October.

"But in places like Newcastle and the Central Coast, closer to 90 percent of the copper pairs have needed work. In some places, the copper is so bad it has to be replaced. One contractor told me in Newcastle and the Central Coast 10 to 15 percent of the copper lines are having lengths replaced.

"And this is not just happening in Newcastle or the Central Coast; another contractor told me in Campbelltown in Sydney that NBN has had to recently replace almost 3 kilometres of old copper with new copper."

ISP consumer group Internet Australia added its voice to this, saying that the government -- both under the Labor or Liberal party -- has been too secretive over the costs associated with rolling out an FttP network.

"Our expert members have serious concerns about the long-term viability of using the old and ageing Telstra copper network to provide a 21st century service," CEO Laurie Patton said.

Despite these criticisms, NBN revealed that it has been running trials of FttB networks using G.fast technology to deliver throughput speeds of up to 800Mbps over 20-year-old copper cable.

NBN had recently revealed that while copper lines between the node and the home will not need to be replaced, the company will, however, need to add or replace copper between the node and the pillar where necessary in rolling out its FttN network.

"We have to put new copper in to run to the pillar that serves all of our homes from our node to that pillar. And that could range in distance between right next to each other ... it is a short section, but it is new copper that has to go in the ground that doesn't exist today," NBN CEO Bill Morrow told Senate Estimates in October.

According to Morrow, copper has to be used rather than fibre-optic cable in certain cases depending on the distances being covered. He added that defective cabling could also be replaced, with more copper also added where there is not enough to service homes.

"The other area to where we could be putting copper... is that if there are defective joints that are out there that have a trouble rate that's too high, we'll need to go ahead and make that investment to replace that joint as it stands," the chief executive said.

"And then in the other case that I mentioned, if it turns out that there's not enough pairs going down the street to be able to serve all the homes that are there, then we may actually have to add pairs in that path to be able to get to each one of the homes."

Morrow's comments came just a week after claims made by NBN that it has not had to replace any of the legacy copper between node and home in installing its FttN network, with end users able to achieve high speeds while relying on existing infrastructure.

"So far, in our FttN deployment, we have not had to replace any copper or perform any substantial remediation work to the copper running from our street cabinets to end-user premises," Tony Brown, the public affairs manager at NBN, said in a blog post.

NBN's spate of leaks began when documents released two weeks ago to media revealed that Optus' HFC network is also "not fully fit for purpose", with 470,000 premises in the footprint needing to be overbuilt by either Telstra HFC or fibre services.

A leaked document, called HFC Plan B: Overbuilding Optus, dated November 2015, states that the necessary work of overbuilding Optus' HFC network with FttN, FttB, or fibre to the distribution point (FttDP) will lead to a peak funding increase of between AU$150 million and AU$375 million, with NBN to miss its FY17 ready-for-service target by 300,000 premises, and its FY18 target by 333,000.

"Overbuilding the Optus HFC network with either Telstra HFC or FttX could deliver higher probability of success given the current state of the network [and] significant operational simplicity," the document says.

"Optus' network is not fully fit for purpose. Optus nodes are oversubscribed compared with Telstra, and will require node splits. Existing Optus CMTS don't have sufficient capacity to support NBN services. Noise (ingress) [is] causing interference and degrading end users speeds."

Labor Senator Stephen Conroy laid the blame squarely at the Coalition's feet, telling the Senate that it had been common knowledge Optus' HFC assets were not fit for purpose, but that the government had insisted NBN purchase them for the MTM NBN.

"Today, we've seen a document from the National Broadband Network company, which demonstrates, once again, the folly and the lies of those who've been peddling the NBN MTM," Conroy said.

"What we've seen today is a document that shows that this government are so inept, so incompetent, and so ideologically driven that they are prepared to buy a network from Optus which the minister said today in Question Time were going to use the Optus network, but what NBN Co have found after being made to buy it by Prime Minister Turnbull is, I quote: 'It's not fit for use'.

"There's a reason that we were going to close it down: Because it wasn't fit for use. We knew it, Optus knew it, the whole country knew it, but not Prime Minister Turnbull. He decided he knew better than all of the engineers, all of the experts in the country, and Optus today are laughing all the way to the bank."

Communications Minister Mitch Fifield argued that the leaked HFC documents were merely fool's gold, however.

"The document which became available yesterday was representing the sort of planning that commercial organisations do, the sort of wargaming that they do, the sort of scenario guessing that they do -- which is entirely appropriate for an organisation that they do this to look at worst case scenarios, best case scenarios, and those in between. That's what that document represented," Fifield said during Question Time in the Senate.

Fifield rebuked Labor for allowing NBN to enter a previous arrangement with Optus that would see the telco shut down its HFC network. That deal was revised in December last year, allowing NBN to take ownership of the Optus HFC network for the same monetary figure.

"I think only those opposite could come up with the sort of genius and brilliance that would see millions of dollars spent to shut down a network, only to then have to spend billions more overbuilding it," Fifield said.

"What we thought was entirely reasonable was, for no extra money, to make sure we had these networks available to us."

Further NBN documents leaked last week to CommsDay also revealed more positive news: That it will be conducting a two-year trial of discounted connectivity virtual circuit (CVC) wholesale pricing, rewarding telcos offering customers high-usage plans across high-speed services with a lower levy.

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