The business case for upgrading the copper NBN to fixed line full fibre - FTTP
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
The business case for upgrading the
copper NBN to fixed line full fibre – FTTP
5th Submission
Response to copper NBN 2021-2024 Corporate Plan
Inquiry into the business case for the NBN and the
experiences of small businesses
Peter Savio
29th September 2020 - Updated
1|Page
1. The copper NBN claims the CAPEX for FTTN/B is $2,330 and for FTTP
Brownfield $4,395 per premise for FY 2020 as per the copper NBN 2021-2024
Corporate Plan.
2. It is proposing to pass 2 Million premises on the copper FTTN Footprint with deep
street fibre and 400,000 FTTP lead-ins on demand and spend $2.9 Billion in
CAPEX doing it, and then $50 million internal wiring fixes to FY 2024 on the
FTTN/B RTC footprint.
3. So on that 2 Million FTTN footprint that is an additional CAPEX of $1,150 per
premise for deep street fibre, and $10 added for home wiring fixes in the
remaining FTTN footprint.
$300 has to be added to that as a total over 3 years extra Operating and
Maintenance costs (steady state) average per premise above that of a FTTP
NBN FY 2021 to FY 2023 when they claim FTTN Revenues, in 2023, then cover
the cost to implement and Maintain FTTN.
$258 has to be added to that as a total over 5 years extra Operating and
Maintenance costs per premise average between FY 2016 to FY 2020 above that
of a FTTP NBN during rollout of FTTN vs. a FTTP rollout scenario.
So the effective CAPEX of getting fibre to the street, close to a premise,
using the copper so called Multi Technology Mix method of FTTN first with
Nodes, then deep street fibre, BUT NO LEAD IN is:
$2,330 + $1,160 + $300 +$258 = $4,048 per premise BUT NO LEAD IN.
A FTTP lead-in the Minister announced on 23rd September 2020 would be $1,500
and the copper NBN would pay for that upfront.
So the effective CAPEX of getting full fibre FTTP to a premise using the
copper so called Multi Technology Mix method of FTTN first with a FTTN
Node, then deep street fibre, then FTTP lead-in is:
$2,330 + $1,160 + $300 +$258 + $1,500 = $5,548 per premise
Lets see – remind me again what a FTTP rollout CAPEX cost would be per
premise had the FTTP rollout continued from Sept 2013?
$3,900 - Copper NBN CEO Mr Rue claim at Senate Estimates 2018 including
lead-ins.
2|Page$3,872 - My FTTP Capex Estimate including lead-ins as per my previous
submissions.
Even their own claimed $4,395 FTTP CAPEX cost would be vastly cheaper had
the FTTP rollout continued from September 2013.
It would have been much cheaper to simply do full fibre to the premise (FTTP) in
the first place.
That's what happens when you do something once, twice and then three times
and who knows how many more times in the future, instead of just doing it right,
doing it once and doing it with fibre FTTP.
4. G.fast
No one anywhere in the World, either Country or company, is implementing
G.fast on any sort of scale.
The UK (Openreach) has paused (I suggest stopped) it’s rollout of G.fast as it is
implementing FTTP.
https://www.ispreview.co.uk/index.php/2020/06/openreach-confirm-g-fast-
broadband-rollout-paused-until-2021.html
“Openreach (BT) has confirmed…..they do not intend to build their G.fast based
“ultrafast broadband” (100Mbps+) ISP network to any more UK homes until April
2021. The service has been on pause since last year, when the operator re-
focused toward gigabit-capable Fibre-to-the-Premises (FTTP) technology.”
“Suffice to say that few were surprised when Openreach announced, in
September 2019, that they would review the plans for G.fast build beyond March
2020”
If the copper NBN allocated another $260 Million on top of the $100 million it has
allocated for G.fast implementation it would be able to do the same 20% uplift to
fibre lead-ins based on FTTC activations for FY 2022-2024 and implement FTTP
instead of G.fast, reducing the complexity of the network and reducing support
and maintenance costs of yet another copper “technology”.
5. I also note that the copper NBN in its 2021-2024 Corporate Plan has not
published the RTC per technology type, actual and forecasts, that has been
reported in all other previous copper NBN Corporate Plans since 2016.
3|PageThis is required to calculate take up rates per technology (ie FTTP, FTTN,
FTTC/B, HFC and FTTC) and hence the revenue losses of copper “technologies”
in comparison to the FTTP part of the copper NBN as per my previous
submissions.
6. I also note that copper NBN in its 2021-2024 Corporate Plan forecasts lower
revenues in comparison to the 2020-2023 Corporate Plan only 12 months earlier
for:
FY 2021 - $400 million less revenue
FY 2022 - $300 million less revenue
FY 2023 - $100 million less revenue
A total of $800 million less revenue over 3 financial years between the 2020-2023
and 2021-2024 Copper NBN Corporate Plans !
What is the cause of this additional lost revenue?
Is this due to further predicted reductions in take-up rates on copper
“technologies”, especially ancient copper FTTN, which is clearly now under
further direct threat from 5G Broadband, since the forecasts in the 2020-2023
copper NBN Corporate Plan?
Telstra has just announced a 5G specific broadband product
https://www.smh.com.au/business/companies/telstra-lays-down-5g-gauntlet-for-
nbn-co-with-fixed-wireless-product-20200928-p56013.html
“Telstra is about to launch a 5G fixed-wireless product to directly compete against
the NBN, getting the ball rolling on selectively using its 5G mobile network to try
and steal customers away from the $57 billion fixed-line network.
The 5G service, to be launched on Wednesday, is priced at $85 a month and will
offer 500GB of data to eligible customers. Telstra said it expects customers to
achieve typical download speeds between 50Mbps and 300Mbps.”
7. There was also a loss of $2.1 Billion dollars in total forecast revenue between the
2017 copper NBN Corporate Plan and actual revenue reported in the 2021-2024
copper NBN Corporate Plan for FY 2020 and 2020-2023 copper NBN Corporate
Plan for FY 2019.
4|PageTable 1. Revenue forecasts vs. actuals for 2020 and 2019
2017 Corporate Plan
Forecast Actuals Fin
($ Billions) ($ Billions) Year Variance
5.0 3.8 2020 -24.00%
3.7 2.8 2019 -24.32%
8. So that makes it a total of $2.1 Billion + $0.8 Billion = $2.9 Billion in lost forecast
revenue between 2017 and 2024.
Is this why the copper NBN had to borrow exactly the same amount of $2.9
Billion to do this upgrade to (only part of) the copper FTTN footprint because of
the revenue shortfall?
The copper NBN and Government told Australia in late 2013 and 2014 in
particular, the copper NBN would be rolled out faster and cheaper and generate
higher revenues quicker to upgrade the network faster through positive cash
flows, yet all the actual revenues are much lower than forecasts and the copper
NBN has had to borrow money to actually start the upgrade process to full FTTP
and then only on a very limited scale.
The private debt market wouldn’t lend the copper NBN a cent back in late 2016
when its revenue forecasts were much better.
It is only because of interest rates being at historic record lows that the copper
NBN is in any sort of position to borrow money on the private debt market.
9. I also note that the copper NBN in its 2021-2024 Corporate Plan has not
indicated when it will be cash flow positive whereas it had in previous years
plans, which had already been changed (delayed) 3 times with 3 previous
Corporate Plans between 2018 and 2020.
The copper NBN was supposed to be cash flow positive in 2021, then 2022, then
2023 and now it’s not reported? Maybe 2040 perhaps?
10. I also note that the copper NBN in its 2021-2024 Corporate Plan has not
published operating costs for each year both actual for FY 2020 and forecast
years FY 2021-2024 whereas it had in previous recent Corporate Plans.
11. Minister Fletcher recently said during a press conference that under the original
full fibre NBN Plan the HFC network was to be “trashed” and it would have been
a scandalous waste of money, yet under the copper NBN model the Optus HFC
network was trashed after Malcolm Turnbull said it would be fine (Quigley actually
warned Turnbull the Optus HFC network wasn’t usable), and it wasn't, and then it
had to replaced with deep fibre FTTC. The Minister once worked for Optus in a
senior position. Will the Minister take any responsibility for this “trashing” of the
Optus HFC network?
5|PageWho advised Malcolm Turnbull that the Optus HFC network was usable?
12. Under the copper so called MTM model the remaining Telstra HFC network has
been patched up at considerable cost, then the copper NBN HFC rollout had to
be paused for "Customer experience" because it was in such poor shape, losing
$900 Million in revenue and additional capital cost to patch it up, the copper NBN
pay Telstra an extreme amount to maintain it, a $Billion dollar+ contract, and now
the copper NBN and the Government are spending another almost half a $Billion
of borrowed money to do further patch up remediation work, and there has been
a 152% blowout in the CAPEX cost per premise of HFC as point 11 below.
When will this Government, and the Minister, admit that using up to 25 year old
HFC coax cable was a huge mistake and an actual scandalous waste of money?
13. The copper NBN claims the per premise CAPEX for HFC for FY 2020 is $2,752
as per 2021 Corporate Plan, which has risen almost $1,000 from the 2016 copper
NBN Corporate Plan of $1,800, a massive capital cost blowout.
Another $400 Million of borrowed money is now planned to be spent on yet
another HFC remediation upgrade. That equates to an average additional $200 in
effective HFC CAPEX per premise costs on the predicted activations.
The $700 Million lost in HFC revenue during the "customer experience” rollout
pause equates to an additional cost per premise of $350 on the predicted
activations.
The total over 4 years of extra Operating and Maintenance costs of HFC (steady
state) average per premise above that of a FTTP NBN FY 2021 to FY 2024
equates to an additional cost of $305.
The total over 4 years extra Operating and Maintenance costs of HFC per
premise average between FY 2017 to FY 2020 above that of a FTTP NBN during
rollout equates to an additional cost of $152
The actual effective CAPEX of HFC to 2024 per premise is:
$2,752 + $200 + $350 + $305 + $152 = $3,759
Lets see – remind me again what a FTTP rollout CAPEX cost would be per
premise?
$3,900 - Copper NBN CEO Mr Rue claim at Senate Estimates 2018 including
lead-ins
$3,872 - My FTTP Capex Estimate including lead-ins as per my previous
submissions.
6|PageThe effective CAPEX cost of HFC is virtually the same as the actual CAPEX of
FTTP. It would have been more cost effective to rollout FTTP once one considers
the lost take-up rate revenue on HFC vs. FTTP to date and the lost Gigabit speed
plan revenue to date.
14. This now planned upgrade by the copper NBN and this Government most of the
money is actually spent on rolling out fibre.
The copper NBN CEO and Minister claims the IRR of the copper NBN will
increase from 3.2% to 3.7%.....so doesn't that prove that fibre is a much superior
financial and economic proposition to copper?
15. Doesn't rolling out deeper fibre into the Streets mean digging up every street in
Australia, and in some cases digging up pensioner’s garden beds and their
Tulips, as Tony Abbott warned Australia a fibre rollout would cause? Are
Coalition and copper NBN back hoes somehow better?
16. Consultant who gave advice given to Malcolm Turnbull
This from the consultant who was one of the adviser's who pushed Turnbull to go
copper instead of full fibre.
Nov 2019
http://www.broadbanduk.org/wp-
content/uploads/2019/11/BSG_Insight_AustraliaNBN_UKBroadband_November2
019.pdf
“NBN under the Coalition, 2013 onwards
In 2013 the Labour government was replaced by a Coalition government. The
Coalition’s NBN policy was based on a multi-technology approach – that is, NBN
should make use of FTTC, cable, FTTP and other technologies according to local
circumstances. This was expected to be cheaper, quicker to deploy and sufficient
for user requirements. Since 2013, NBN has been using this approach, though
the change in strategy did lead to further delays and costs for this revised
strategy also exceeded expectations.”
He fails to mention FTTN in that paragraph for starters and I thought the whole
point of using copper was it would be faster and cheaper to deploy?
7|Page“Politicisation of the technology plan.
Whether the NBN should be based on FTTP (higher capacity) or FTTN and cable
(cheaper, quicker to deploy) became a highly contentious topic, strongly debated
by politicians. As discussed above, when a Coalition government replaced
Labour, NBN’s FTTP approach was reversed leading to further delay.”
The Copper NBN hasn't been cheaper nor quicker to deploy than FTTP as per
my submissions and is costing this Country up to $1.7 Billion a year in lost NBN
revenues and higher OpEx and ongoing CAPEX and is costing this Country up to
$52.5 Billion a year in lost GDP.
“NBN has also not met expectations for uptake of faster broadband. For instance,
while there are 1.8m premises passed with FTTP, just sixty-four (64) in total have
taken a gigabit service. Thus its revenue per user has been well below
expectations. This, combined with cost overruns, mean that NBN’s financials are
far worse than expected. (For instance, it was expected to achieve EBTIDA
breakeven in 2018. Instead it made a loss of £1.1bn. This has led to speculation
that the value of NBN’s assets may need to be written down by as much as
£13bn.”
The much lower revenue is actually caused by the lower take up rate on copper
vs. FTTP, in particular FTTN and the inability of FTTN in particular to do gigabit
speed and the revenue loss associated, and the lack of affordable Gigabit plans
on those parts of the copper NBN (ie FTTP) that could do those speeds, and he
also fails to mention the much higher operating costs and higher ongoing capital
costs of copper vs. fibre.
“Further, UK deployment of FTTP is proceeding at pace, with announced
deployments totalling over 30m homes passed”
....and his recommendation was for Australia go down the copper road for
broadband....meanwhile his own Country, the UK, is now rolling out full fibre
FTTP.
“It is for good reason that the NBN approach has not inspired imitation”.
No – It’s for good reason that the COPPER NBN approach this consultant
RECOMMENDED TO TURNBULL who accepted that advice has not inspired
imitation.
...and back in 2014 what did he say?
8|Pagehttps://www.afr.com/companies/telecommunications/telco-expert-stands-by-
controversial-broadband-projections-20141027-11cl44
“The British telecommunications expert whose work helped form projections in
the national broadband network cost-benefit analysis has stood by his
controversial conclusions that Australia needs only low-speed broadband, saying
they were the best prediction of the country’s needs.
Rob Kenny of Communications Chambers said his claims that half of Australian
households will need only 15 megabits per second by 2023 took into account that
advances in video compression would result in users requiring less bandwidth”.
Netflix recommends a minimum of 25 Mbps for 4K streaming.
https://help.netflix.com/en/node/306
“25 Megabits per second - Recommended for Ultra HD quality”
How does one watch 4K video on only 15 Mbps?
The 2021 Olympic Games in Japan are to be broadcast in 8K and 8K TV’s are
now being sold in Australia.
The minimum for 8K is 50 Mbps.
https://www.howtogeek.com/397365/8k-tv-has-arrived.-heres-what-you-need-to-
know/
“Early tests have shown that a single 8K stream will require a minimum of a 50
Mbps connection”
How does one watch 8K video on only 15 Mbps?
17. This copper NBN 2021-2024 Corporate Plan and the copper NBN Board in no
significant way addresses the CVC crisis, with poor returns for RSPs, and higher
charges for users, and there is no real scope to significantly lower CVC charging
because the revenues will always be lower with copper than fibre and operating
costs, in particular, will always be much higher with copper than fibre.
9|Page18. CVC Revenue Modelling
I've modelled based on actual NBN data and evidence ( as per my 4th
submission – see link below) the lower revenue and higher operating costs of the
copper NBN vs a FTTP NBN to determine a FTTP NBN would have ~$1.7 Billion
a year in higher revenues (Take up rate on FTTN is much lower than FTTP parts
of the network and Gig speed revenue lost because FTTN can't do Gig speed)
and lower operating and lower ongoing capital costs of FTTP which then allows
the NBN to drop CVC charges.
https://www.aph.gov.au/DocumentStore.ashx?id=2776362e-c3ff-43bf-b361-
e4de7698da08&subId=673915
Based on the copper NBN CEO's comments recently about the 40% CVC
reduction costing the NBN about $80 million in forgone revenues over about 3 ½
months:
https://www.arnnet.com.au/article/682067/nbn-co-shrinks-its-losses-revenue-
climbs/
“As the impact of the COVID-19 crisis became apparent in March, NBN Co
offered pricing relief for up to 40 per cent additional CVC capacity to participating
internet retailers, which has seen the organisation forgo revenue of more than
$80 million in CVC capacity charges, Rue said.”
That works out to about $729 Million a year in CVC revenue for the copper NBN
(pre 40% CVC reduction) and adjusted to a completed NBN project about $792
Million CVC revenue per year .
Aussie Broadband CEO evidence to the Joint Standing Committee Friday 18th
Sept 2020 has confirmed the copper NBN CEO's comments what the copper
NBN is likely earning in CVC revenue per year when CEO Phil Britt said that they
have saved about $5.5 Million in CVC payments over a period of ~6 months with
the 40% reduction by the copper NBN of CVC charging and Aussie Broadband
are about 3.5% of the market, that works out to about $786 Million a year the
copper NBN is earning form CVC charging.
So if you have $1.7 Billion in higher revenues and lower operating costs with a
FTTP NBN vs. copper NBN (as per my 4th submission) then you could afford to
forgo all CVC charging and forgo the revenue from it, which lowers users NBN
costs, improves the slim margins RSPs are making on selling copper NBN Plans,
and eliminates CVC congestion.
10 | P a g eTable 2: What can the $1.7 BILLION a year better off on FTTP NBN be used
for?
1,700,000,000 Starting point after upgrade - higher revenues and lower OpEx/CapEX
-270,000,000 Interest cost on loan of $18 Billion @1.5% P.A. to upgrade to FTTP
-866,423,671 Scrap CVC (calculated for a FTTP NBN based on a 82% take up rate)
-200,000,000 Further pay down debt faster
-100,000,000 Fixed Wireless (FW) upgrades to FTTP in more accessible FW areas
-150,000,000 AVC charge reductions
-113,576,329 Bank for future - contingency
0 Residual
19. The copper NBN has now allocated $50 million for home wiring remediation in
the FTTN footprint – clearly 7 years too late.
Australia was assured by the copper NBN Chairman in late 2013 that the copper
wire was “robust”, yet here we are in 2020 and it’s suddenly not robust at all. Who
would have thought…..
Based on a copper FTTN activation of up to 3.1 million premises, and an average
$150 per premise remediation cost, that means the copper NBN estimates
there’s over 330,000, or more than 1 in 10 homes and businesses on active
FTTN copper NBN connections with copper NBN wiring faults !
20. The 2021-2024 copper NBN Corporate Plan in no significant way addresses the
very high operating costs of a copper based fixed line broadband network vs. a
FTTP fixed line broadband network.
21. The 2021-2024 copper NBN Corporate Plan in no significant way addresses the
multitude of issues with fixed wireless network.
22. The 2021-2024 copper NBN Corporate Plan in no way addresses any of the poor
speed performance and inability for Gigabit speed plans for the remaining users
on the other half of the FTTN footprint.
23. The 2021-2024 copper NBN Corporate Plan in no way addresses any of the poor
speeds and inability for Gigabit speed plans on the FTTB part of the copper NBN
network.
11 | P a g e24. https://www.skynews.com.au/details/_6193715835001
"The federal government’s reversal of its NBN policy reveals that because of
Malcolm Turnbull’s “vanity we’ve wasted” $20 billion of Australian taxpayer
money, according to former Labor minister Stephen Conroy."
and from my 4th submission:
“This Government has wasted at least $22 Billion dollars of tax payer’s money to
year 2022 with its failed technical, failed financial, failed economic and failed
policy decisions in choosing a copper based so called Multi Technology Mix NBN.
That $22 Billion dollars will never be recovered.”
25. https://www.afr.com/companies/telecommunications/upgraded-nbn-a-more-
attractive-takeover-target-20200925-p55zcc
"I think any upgrading of the NBN is a fantastic thing for the country,
unequivocally. The faster we move to fibre to the premise, the better for
everyone. It is better for users and the industry. A single-purpose network will
always outperform a multi-technology mix. It will be easier to maintain than
the mix we have at the moment," Mr Mullen said.” (Telstra Chairman)
26. Update on my unreliable FTTN copper NBN:
Costs to date:
- Purchase of 4G Router and plan as copper FTTN NBN simply unreliable (as
per my submissions and correspondence to the Chairman and CEO of the
copper NBN).
- Extra data allowance on 4G mobile phone.
- Registered Cabler costs to inspect copper NBN owned cable under house.
- Time wasted on the phone with copper NBN service provider.
- Time wasted writing letters (copper NBN retail service provider and copper
NBN) trying to get issues resolved.
That would easily top over $1,000 to date.
12 | P a g e27. Since my mobile broadband RSP Telstra has implemented 5G at Blackheath,
which it did on Monday 7th August 2020, my 4G Mobile broadband speed has
increased as a consequence of the 5G implementation, and is now at least as
fast as my copper FTTN 100/40 plan and often faster, up to 140 Mbps down, and
unlike my 3.5 years of unreliable copper FTTN NBN my 4G mobile
broadband has never dropped out or failed.
Telstra 4G Mobile Broadband speed test at my home in Blackheath
Yours Sincerely
Peter Savio
Blackheath NSW 2785
Please note: I have no connection or association now or in the past with the NBN,
any of its contractors, any Telecommunications company, or any of its
contractors, any service provider or any of its contractors, any political party or
any vested interest group, or any media organisation, nor am I privy to any
confidential information from the NBN or Government, or any other source.
I worked in Information Technology for 18 years from 1989 to 2007, the first 5
years in various systems administrator roles and 13 years in several
management roles including IT project management, IT project development and
costing, IT customer service, project management of the rollout of fibre optic
networks and IT Management.
13 | P a g eYou can also read
