Friday, October 14, 2011

Thinking out loud

We've been told that the joint NBN Committee is going to hear from New Zealand so that;

The conversations are hoped to settle an ongoing argument from shadow communications minister Malcolm Turnbull that a fibre-to-the-node rollout would cost a quarter or a third of the $27 billion headline currently set for government contributions to the NBN.

I am a little bemused by the claim, and indeed how it relates to Turnbull's other claim that FTTN is a good interim technology, again because New Zealand has done it.

The New Zealand government has committed $1.5B to be a co-investor in delivering FTTH to 75% of premises. They are funding half and as the Government investor intend to accept a lower return than the private investors. I haven't seen the rest of the detail.

The population of New Zealand is roughly one fifth of Australia's, and the coverage of 75% is roughly 80% of our target. The $NZ3B investment for the coverage equates to about $NZ18.5B for the Australian FTTH coverage. Allowing for a 1.2 exchange rate we can tweak that back to $15.4B.

But we aren't doing apples for apples. The $26B of Government funding in Australia funds $43B investment in the NBN (P.365 of the implementation study). Not all the $43B funds the fibre build - in fact the breakdown from the implementation study is shown below.

At the simplest we can say one eighth of the total cost funds the satellite and fibre solution, so that means the Govt funding for the fibre part is seven-eighths of $26B, or $22.3.

But so far we've assumed that servicing 75% of premises would cost the same per premise as 93%. The implementation study conveniently provided a chart relating cost to penetration, below.

A generous interpretation is $2000 per premise for the first 75% and $5000 per premise for the additional 18%. That comes to the cost of the first 75% being 62.5% of the total fibre cost.

Or stated another way, if all the premises were covered at $2000 the project would cost 77.5%. If we simply use three-quarters the investment required to do 93% if it cost the same as 75% would be three quarters of 22.3 or $16.725B

So my numbers to compare are NZ $15.4B, Australia $16.7B. That variation could be potentially explained by the fact Chorus has built fibre to the node, but nothing in it deals with their lost sunk investment in nodes.

No wonder after Turnbull used the EIU report the EIU analyst pointed out that their report favoured the Australian solution over New Zealand (behind AFR paywall).

The difference is that Turnbull consistently ignores 25% of the people. I continue to ask where Fiona Nash and Barnaby Joyce are on this?

Novae Meridianae Demetae Dexter delenda est

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