Monday, May 17, 2010

The NBN Implementation Study - Part 1

You know, I haven't really read it yet - but I've read a lot about it, including this "thoughtful" piece from Jock Given.

But I do have my quibbles - at one point Jock writes;

What they show is how much of a particular kind of FTTP network you can build for everyone who already gets ADSL and still have enough change out of $43 billion to get the promised 12 Mbps to the rest. The new cost estimate is actually $42.8 billion, a sure sign that the quick-and-dirty $43 billion that started out on the back of an envelope a year ago became one of the policy bedrocks.

There are two errors in this. The first is that nowhere near all of the 90% originally quoted as the FTTH footprint already get ADSL - and most of those who do are struggling to get about 4 Mbps out of it. The second is that the methodology that the study seems to have used is to increase the fibre footprint to 93% because the cost envelope of $43B permitted it. The last 3% of houses cost more per house to connect to fibre than they would wireless. So $3B isn't a bedrock - but it might well be a cieling.

Jock also notes that the study claims that for wireless users 12 Mbps won't be an average but only a peak speed. Given the performance of vividwireless's 4G network I think the stud has got this wrong. By definition the base stations at the 93-97% level are incredibly lightly loaded and WiMAX or LTE in their current version will deliver 12 Mbps....average.

He also notes the debate about cost of capital. There is no doubt that using the Government bond rate does not make it a commercial investment. It does mean that it should not ever be a drain on the taxpayer. More importantly from a full investment case the return to Government in higher taxation levels from higher growth isn't included - which it would be i you were doing a more traditional "business case" for the Government investment.

He also makes a somewhat stupid analysis relating the size of reports to relative effects on industry and suggests that report size doesn't correlate to impact. He should reflect on my post comparing the Henry Tax Review and the Garnaut report. In the particular circumstance he should reflect that the Beazley statement in 1990 (and the Evans one in 1988) may have been short - but they ultimately drew on the longer Davidson report. And I would note that the Vernon report of 1974 was longer than Davidson and almost everything (except merging Telecom and OTC) was implemented within eighteen months.

It is also a pity that Jock doesn't mention that Optus sued Telstra for anti-competitive conduct in the HFC over-build matter. The case was settled but the terms were never disclosed (though Bill Scales did call it a pittance in a Senate committee). It has long been my belief that the matter was settled in conjunction with a renegotiation of interconnect rates - as Optus withdrew from the competition tribunal re-arbitration of the first PSTN interconnect dispute at the same time.

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