Crikey



Despite delays and blowouts, NBN remains broadly on track

Given the delays and the changes to its original plan for the national broadband network, yesterday’s revised NBN Co corporate plan was always going to look significantly different to the one it released last year. Perhaps the most surprising aspect of it is that the NBN remains broadly on track.

It is behind schedule because NBN Co lost nine months between signing a definitive deal with Telstra last year and gaining Australian Competition and Consumer Commission approval for it. It also lost time because the federal government changed the scope of the rollout to include greenfields developments and the ACCC insisted on 121 points of interconnect for the network rather than NBN Co’s preferred 14.

It is also somewhat over budget, with increases in both the forecast capital and operating costs, some of which relate to the delays, the changes in the scope and nature of the network and the $800 million deal with Optus which will lead to the closure of its HFC network.

Neither the delays nor the increased costs, however, are particularly material in the context of such a large project with a decade-long construction timeline.

The delay, NBN Co’s Mike Quigley says, can be whittled back to an over-run of only six months by the time construction ends in June 2021 rather than at the end of 2020 as originally envisaged.

Capital expenditure is forecast to increase by $1.4 billion, or 3.9%, to $37.4 billion and operating costs by $3.2 billion to $26.4 billion. Some of that increase, however, relates to the Optus deal which will increase both capital and operating costs during the rollout phase but bring forward increased revenues.

NBN Co also gained access to more of Telstra’s infrastructure than it originally planned, which generates increased operating costs but lower capital expenditures while changes to the way customer connections are managed will also increase capital costs in the near term but generate longer term efficiencies.

As expected, NBN Co has also experienced some increase in construction costs but also some offsetting reductions in equipment costs.

Overall, one could conclude that in “net, net” terms, NBN Co is managing to stay more or less in line with its original game plan. Indeed, it is now forecasting a minute increase in the return it will eventually generate, from 7% to 7.1%, assuming the NBN rollout as NBN Co and the Gillard government envisage it is ever completed. Tony Abbott and Malcolm Turnbull may well determine that.

If the NBN is completed on the revised forecasts, the taxpayers’ equity commitment to the project will have risen from the original $27.5 billion to $30.4 billion because of the increased costs. The total estimated funding requirement for the NBN has been increased from $41 billion to $44 billion.

The delays mean that, as NBN Co disclosed when it released its three-year stage on rollout plans in March, the deployment of fibre is way behind the original schedule. By the end of this year it expects to have started or completed construction that passes 750,000 premises, compared with the original estimate of 1.72 million.

In fact very few premises will actually be passed or connected until the NBN starts gathering real momentum in 2014 — by the end of this financial year only 661,000 homes will have been passed and NBN Co is forecasting that only 92,000 of them will be connected with active services. By 2015, however, by which point the rollout would be running at its peak scale, it expects to pass about 3.7 million premises and have 1.6 million of them connected with active services. Today there about 13,500 premises connected to the network.

That would suggest that if the opposition wins next year’s election they would be able to halt the rollout and shift to their preferred fibre-to-the-node model, supplemented by alternate broadband technologies. By the time they would be in a position to do that, of course, there will be a lot of fibre and dollars sunk into the network.

Whatever type of network is ultimately built, there is more growth occurring in broadband generally and in fixed line broadband than NBN Co had originally assumed and its initial experience has been that customers have taken up services faster than it had expected. If those trends continue, it says they might enable it to reduce wholesale pricing earlier than it had anticipated.

The broad message from NBN Co’s updated corporate plan is that it is broadly on track despite some of the unexpected changes to the business plan. That is, it is on track unless or until it is derailed by the Coalition.

*This article was originally published at Business Spectator

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Categories: Companies, Federal, TECHNOLOGY

147 Responses

Comments page: 1 | 2 | 3 |
  1. Anybody got any ideas / first hand knowledge of why it might be hard for the LNP to derail the NBN? Contract with Telstra etc? Presuming they win of course, better throw that in.

    by floorer on Aug 9, 2012 at 10:42 am

  2. That’s a 13.8% increase in operating costs….
    Ignore the return on capital of 7.1%….its a rubbish figure, based on 30 year projections. They couldn’t even get projections right for connections a couple of years in the future so i would say this figure is rubbery at best.
    The only people who will be making money out of this thing are the vendors doing the rollout.

    by Scott on Aug 9, 2012 at 11:15 am

  3. I’ve yet to find a businessman who doesn’t want the NBN yet to get them to go on the record is impossible.

    Critics of the NBN probably would have moaned about the laying of electric and telephone cables. Criticism of the NBN is a prime example of Tony Abbott’s inability to present any positive policies and his crazy habit of opposing every and anything.

    by Oscar Jones on Aug 9, 2012 at 11:56 am

  4. Given that broadly speaking the aim of all Labor initiatives is to burn wast wads of other people’s money, I have to agree, it is broadly right on track.

    by WTF on Aug 9, 2012 at 12:01 pm

  5. The cost blow out will be tens of billions, if it completes.

    Conroy FAIL, following a plan hatched by Rudd on the back of a coaster

    by Suzanne Blake on Aug 9, 2012 at 12:02 pm

  6. A ten percent extension of services results in a four percent increase in costs and this is a “Blow Out”.
    We seem, in the midst of all this, to have reverted to a Medieval era of illiteracy and innumeracy.
    All learning of the part five centuries seems to be burning at the stake.
    With SB and company warming themselves in the heat. Ain’t that so Suzy?
    Not really Liberal is it. Have the real Liberals gone extinct?
    Leaving us all in Stooge World?

    by Hamis Hill on Aug 9, 2012 at 12:13 pm

  7. WTF, I love the way you lay vaste to Labor’s economic philosophy but I don’t get the “other people’s money” part of it. “Taxpayers’” money is paying for the NBN. Just like the Natural Heritage Trust (“burning” the Telstra sale money, a Howard era initiative), the NBN is ours and it is for us. We are the beneficiaries (well, 13,500 so far!), not some mysterious alien elite, resident who knows where. Think about the amount of money Australia will spend on Defense in the same nine years leading up to 2021. What will we have to show for it when that day comes?
    The NBN, even costing the unbelievable motza that it is, will be a fantastic renewable resource that will underpin the entire Australian economy and society. That’s nation-building isn’t it?

    by Hugh (Charlie) McColl on Aug 9, 2012 at 12:28 pm

  8. Don’t the Stooges realise that they lost the last election because of their Scheisegrupenfuhrer’s opposition to the NBN. No they don’t. What a sad lot of losers they are!

    by Hamis Hill on Aug 9, 2012 at 12:28 pm

  9. @ Hugh (Charlie) McColl

    we could get a better, cheaper outcome with wireless.

    There is no way the NBN can be rollod out to the home in rural and regional Australia

    by Suzanne Blake on Aug 9, 2012 at 12:32 pm

  10. @SB The NBN lost you the last election. It will lose you the next. Just keep opposing what the people want like the NDIS.

    by Hamis Hill on Aug 9, 2012 at 12:45 pm

  11. we could get a better, cheaper outcome with wireless.”

    You didn’t do physics in high school, did you, SB?

    by Ronson Dalby on Aug 9, 2012 at 12:48 pm

  12. we could get a better, cheaper outcome with wireless.

    There is no way the NBN can be rolled out to the home in rural and regional Australia

    Gosh we have been paying attention haven’t we?

    As any person with a clue will tell you, no, we cannot do better with wireless. We can do cheaper sure. We can do cheaper with copper too.

    And NBN Co.’s position on regional Australia is quite explicitly well known. 93% will get fibre to the home, 4% will get WiMax at 12Gbit, and 3% will get satellite. This has been public knowledge for several years.

    by wilful on Aug 9, 2012 at 1:09 pm

  13. Hugh (Charlie) McColl, “fantastic renewable resource that will underpin the entire Australian economy and society”? Nothing less!

    And there lays the biggest problem I have with the BBN and all other left wing nut-jobs, it is thought up and supported by people who are completely of their collective rockers! Stop saving the universe people and come down to earth just for a single minute to smell the roses. No such thing as a free lunch, some poor bastard will pay through the nose for this, these are real billions being burned not just monopoly money. The NBN defines not physics but basic simple economics. The OPEX of the NBN excludes all retail margins. WTF will that money come from physics geniuses, from the sick, old and disabled?????

    by WTF on Aug 9, 2012 at 1:12 pm

  14. SB might be thinking of the pedal-powered transceivers once used to call the Flying Doctor hubs

    by lykurgus on Aug 9, 2012 at 1:41 pm

  15. Despite the doom and gloom in every LNP announcement, todays SMH said it all with a report from users of the NBN in Kiama Downs, NSW. The user has been using the sytem for several months and stated it’s fantastic, relaible and constantly fast.
    The other interesting comment is that the speed is at least 10- times faster than existing broadband and it costs half as much as the user was paying before.
    Yes, it’s going to cost more. Infrastructure projects often do when they stretch over an extended period of construction.
    At least the Government is investing in future technological infrastructure which will benefit all australians.
    Of course Tony Abbott will find the carbon tax somewhere in there but that is to be expected, isn’t it.

    by MJPC on Aug 9, 2012 at 1:41 pm

  16. I think it’s worth putting this announcement in the context of another big network rollout - Telstra’s NextG network. That went way over budget, and ran late, and led to serious monstering of some contractors to get it back on the rails. Now that it’s running, it’s a huge success, and if you ask people who use it, is the only mobile network to be on.

    But it wasn’t easy to get there.

    By contrast the NBN is a lot more complex and has a much bigger remit. All large IT&T projects run over budget or over time. The NBN is - so far - doing very well on these figures.

    And Suzanne Blake, re wireless, I am reminded of Inigo Montoya’s line: “I do not think it means what you think it means.”

    by rachel612 on Aug 9, 2012 at 2:21 pm

  17. I have subscribed to optic fibre for six months now, it’s excellent. I have a bundle deal which actually works out cheaper than the old deal which incorporated broadband - and the new usage allowance is higher. A neighbour opted to stick with wireless - she has abysmal speeds and sometimes no connection between 3 - 5pm when school children are busy on Facebook.

    So the whingers should think twice about the joys of an alternative government which intends depriving them of a vastly improved communication system.

    by zut alors on Aug 9, 2012 at 2:29 pm

  18. we could get a better, cheaper outcome with wireless.

    No we couldn’t. Not now and almost certainly not ever.

    There is no way the NBN can be rollod out to the home in rural and regional Australia

    Nor is anyone saying it will be.

    by drsmithy on Aug 9, 2012 at 3:05 pm

  19. Every time someone suggests that we can do it cheaper with wireless blah blah blah I just shake my head. Honestly - if you don’t know what you are talking about then say nothing, Just because Abbott says so & you read it on the internet doesn’t make it true. If the Labor Govt had committed to a wireless strategy then Abbott would have attacked that at well. He basically disagrees with everything put up by the Government.
    Wireless needs a backbone & that backbone is optic fibre - until something better comes along. Anyone sharing wireless broadband now will know the limitations. One user of wireless is fine. Put a hundred users on and you have a problem. Optic fibre does not have that limitation.
    As for the “blowout” - it’s well within normal business risk margins. Also as already noted in earlier comments this expenditure is an investment for generations to come. With the mentality of critics like SB the railway would never have crossed America and copper wire would never have linked nearly every Australian.

    by mikeb on Aug 9, 2012 at 3:13 pm

  20. Abbott had better be careful. The word is spreading about how good the NBN is.

    I was out in the country and new customers love it, the new satellite technology is very fast, and cheap.

    by Merve on Aug 9, 2012 at 3:14 pm

  21. My local shopping center had a notice proudly telling everyone that they had stopped the installation of a new phone tower. How many towers is wireless broadband going to need again?

    by Merve on Aug 9, 2012 at 3:16 pm

  22. Zut and SB:

    My experience, having been forced by Telstra onto wireless due to failing unmaintained copper and distance from the nearest exchange, is exactly that which Zut presents.

    There is only a certain wireless bandwidth into which all users must cram. Usage peaks are bound to slow speeds back to dial-up numbers. This can’t and won’t happen with fibre.

    Unfortunately, I am probably never going to have a fibre connection , but at least I can look forward to a time when those who have fibre will leave me with adequate speed on the wireless to at least carry an audio signal. Video is entirely out of the question, even with so-called 4G at peak periods. I would, however, like to be able to speak with my daughter who has emigrated to Canada, via Skype.

    Sad to say, speeds adequate for even audio Skype are not always available on 4G, so blathering and blundering posturing by dolts such as Abbott and SB on this subject are entirely without substance.

    If only I had the choice, as Zut had, of good copper, wireless or cable. Heaven!

    One other unpublicised issue I have found with 4G wireless is the tendency to simply dump my connection when the system becomes congested. Nothing at all gets through till a re-start. Wireless is now a joke and is doomed to become worse, not better, as time goes by. By all means, criticise the NBN, but do not come to me with suggestions that an acceptable alternative is 4G. It ain’t.

    by John Bennetts on Aug 9, 2012 at 3:37 pm

  23. Analogy of wireless’s problem I read somewhere is two people in a room one each end. They can talk and hear each other okay then as the room fills up with more talking people and gets crowded it gets harder and harder to hear each other till they can hardly converse at all.

    by floorer on Aug 9, 2012 at 3:56 pm

  24. Suzanne Blake, thanks for your reply. Whilst I appreciate your opinion that “we could get a better, cheaper outcome with wireless….”, I don’t accept it as useful. In fact you could be wrong and it might not be better. I listened years ago to Commonwealth ministers explaining why some second hand helicopters and old stock American tanks would be “better and cheaper” for Australia and thought, “Fair enough; you’re the government, you can spin that to me and I’ll just have to wear it.” It was then and is now a crock but I still accept that the government can do that.
    Similarly, you will just have to accept for now that the NBN, as proposed by the Labor government in its election platform, is the system Australia is getting. In my opinion you are wrong about ‘wireless’ being “better” in a technical sense, even if it is cheaper or easier to install. But it doesn’t matter what I think. Australia is getting the NBN and you will just have to suck it up.

    by Hugh (Charlie) McColl on Aug 9, 2012 at 4:15 pm

  25. You will never get all the new the towers up for wireless. People wouldn’t stand for it, and would demand fibre instead.

    by Merve on Aug 9, 2012 at 4:34 pm

  26. Abbott is already pulling the old school of the air pedal wireless’s out of storage for all you regressives to use. There’s probably one available for Suze and Scott and the others, it’s about their speed. What a bunch of visionaries (not) and seemingly proud of it! Sad!

    by Recalcitrant.Rick on Aug 9, 2012 at 4:43 pm

  27. I object to HAMIS HILL’s sledge that ‘We seem, in the midst of all this, to have reverted to a Medieval era of illiteracy and innumeracy’. While literacy rates in the Middle Ages seem to have been modest by contemporary standards, say 30% in urban areas of prosperous European countries, people were generally not innumerate.

    by Gavin Moodie on Aug 9, 2012 at 4:45 pm

  28. Yes GAVIN MOODIE, I accept your rebuke, it was a market economy and of course people had to be able to count, and divide by ten in the case of tithes, or be severely punished, so it is indeed an insult to their memory to suggest they were the same as people who take a 4% increase in costs for a 10% extension of service as a BLOW OUT. They would probably be as contemptuous as I am of such innumeracy. My preferred neologism is “numberdunce” a characterisation certain literati wear as a proud mark of distinction from numerate “Nerds”.
    As for the literacy, private schools catering to the children of successful merchants, and usually run by successful merchants might have increased the ability to read, which was again a necessity for such people. As for the masses of people the five centuries of the Middle ages were as dark as the previous five. Peasants who were able to read routinely had their toungues cut out, so as to supress dissent.
    Don’tcha Know!

    by Hamis Hill on Aug 9, 2012 at 5:52 pm

  29. S.B , I am no Tech head but what is “Rollod ” ? I have adsl2 with UPTO 20 , but really only get around 7-8 on speedtest. I am about 2 kms from my exchange . My friend on wireless ( DoDo ) less than 1 km away , drops out all the time when ringing on Skype and has to cut video . The more people that get on the copper or wireless buses , the slower it runs. NBN will be like a Drag Bus , pulling 7 second runs with 5 trailers on the back. I am paying for a Super-bike , but are getting a Chinese scooter. This is how they should explain to the bogans and westies , what a Abbott govt. will do to the internet speeds of Australia , so slow that they cannot download Porn and not play any online games , due to copper and wireless breakdowns .

    by Lord Barry Bonkton on Aug 9, 2012 at 6:25 pm

  30. Suzanne Blake - please advise, despite what you have read and heard from clueless commentators, what single country or telecommunications company anywhere in the world is attempting to replace fixed networks with wireless in urban areas, or even planning to do so in the future.

    Wireless is a great complementary technology for deployment alongside fast fixed networks, and is also useful for delivering broadband to a small number of users in remote areas. But it is incapable of doing so in densely populated urban areas.

    South Korea, a country that already has a 100Mbps fibre-optic NBN, has already announced that they are spending $US26bn upgrading their fibre network to a speed of 1Gbps, to compliment their WiMax (4G) wireless broadband networks.

    If you want to quote DIDO, it’s currently pie in the sky. There are no technical specifications, detailed explanations or independent tests of the technology, outside a self-published and elementary report,”tested” by a mere 10 people inside and 3 outside, and the US regulator has so-far refused to grant even an experimental licence for the technology, despite the United States Federal Communications Commission chairman stating that wireless broadband is already “in peril” due to spectrum shortages, and will be in ‘crisis’ by 2013. And all these warnings are just assuming wireless broadband remains as a low volume complement to fixed broadband, not as a replacement for it. Even if additional spectrum is allocated to wireless broadband services, there simply isn’t enough radio spectrum in existence for wireless to approach fibre-optics.

    The answer to how many towers would be needed for wireless broadband - a conservative 75,000.

    All of this information is freely available to those who are interested in understanding, not just parrotting something which those with a political agenda claim.

    by Aphra on Aug 9, 2012 at 7:13 pm

  31. @ Aphra

    South Korea is tiny compared to Australia in land mass.

    No country the size of Australia or even half the size, with the sparse population we have doing it.

    its all being done as Labor have overcommitted and cannot afford another cancellation like Grocery watch, Fuel Watchm Cash for Clunkers, East Timor solution and the hundreds of others.

    No wonder Labor Federal MP are leaving the Labor logo off their flyers as reported on left ABC News tonight

    by Suzanne Blake on Aug 9, 2012 at 7:35 pm

  32. I’m sick of the NBN being referred to as an investment. There was no thorough cost-benefit anaIysis and no risk-return anaIysis. The correct description would be gambling.

    by Patriot on Aug 9, 2012 at 7:48 pm

  33. ” The correct description would be gambling.” Yeah ‘cos we all know the internet is going nowhere.

    by floorer on Aug 9, 2012 at 8:02 pm

  34. Patriot: ’ There was no thorough cost-benefit anaIysis and no risk-return anaIysis.’

    What’s that reminiscent of? Ah yes, got it - defence spending.

    by zut alors on Aug 9, 2012 at 8:04 pm

  35. There is significant uncertainty regarding both our future bandwidth requirements, and the suitability and value of various transmission mediums and schemes. Those are the issues that were not properly investigated. It is gambling, not investment.

    by Patriot on Aug 9, 2012 at 8:22 pm

  36. There is significant uncertainty regarding both our future bandwidth requirements, and the suitability and value of various transmission mediums and schemes.

    What “uncertainty” was that, exactly ?

    by drsmithy on Aug 9, 2012 at 8:30 pm

  37. There is significant uncertainty regarding both our future bandwidth requirements” Yep so lets go the whole hog and get it right from the off.

    by floorer on Aug 9, 2012 at 8:30 pm

  38. Uncertainty is precisely that, idiot. Do you know that there will be any worthwhile application or demand for the bandwidth we’re getting? No, you do not! Do you know that our needs can’t be met with less expense? No, you do not!

    by Patriot on Aug 9, 2012 at 8:38 pm

  39. Uncertainty is precisely that, idiot. Do you know that there will be any worthwhile application or demand for the bandwidth we’re getting?

    Yes.

    Do you know that our needs can’t be met with less expense? No, you do not!

    No-one has yet presented a sound case that it can.

    by drsmithy on Aug 9, 2012 at 8:49 pm

  40. Re worthwhile application,this is an article from todays AdelaideNow. WILLUNGA High drama students in Adelaide’s south work with the nation’s best acting troupes, direct from the Sydney Opera House, without leaving their classroom.

    The students were among the first to test out a program using the NBN where a workshop with the Bell Shakespeare Company was conducted via video link.

    Deputy Principal Cathy Trenouth said, as the first mainland school connected to the NBN, it was excited to take part in a range of pilot programs.

    The school is also partnered with Monash University to develop a science program for senior students linking in specialist areas such as nano technology, and holds viticulture classes where students are given pruning instructions from a vineyard while they work with a piece of vine in class, she said.

    Federal School Education, Early Childhood and Youth Minister Peter Garrett yesterday announced the government would fund 12 projects, including the Opera House’s project using the NBN to deliver classes in drama, dance and music to students living in remote and rural Australia.

    Mr Garrett said these were examples of how students would benefit from the NBN, which will provide access to digital learning through the high-speed connectivity.

    by floorer on Aug 9, 2012 at 8:58 pm

  41. No-one has yet presented a sound case that it can.

    LOL. That isn’t how public expenditure works. The case must be made in favour of expenditure. The burden of proof falls upon those with their hand out for taxpayers money.
    So please, tell me about some of these essential applications that absolutely can’t run without fibre to the premises.

    by Patriot on Aug 9, 2012 at 9:01 pm

  42. Floorer, that isn’t persuasive in the least. The NBN proposes to install fibre to the premises for over 90% of the population. You don’t need that to have an inter-school drama collaboration. Hell, you don’t even need a state funded inter-school drama collaboration in the first place.

    by Patriot on Aug 9, 2012 at 9:09 pm

  43. Hell, you don’t even need a state funded inter-school drama collaboration in the first place.

    I see discussion is pointless. Any examples offered are simply going to be dismissed with “you don’t even need [that] in the first place”.

    by drsmithy on Aug 9, 2012 at 9:13 pm

  44. The Gospel According to St. Malcolm”

    by klewso on Aug 9, 2012 at 9:15 pm

  45. Persuade you? Why do I need to do that?

    by floorer on Aug 9, 2012 at 9:15 pm

  46. Fair is fair, DrSmithy. You’re demanding $68 billion of taxpayers money for this thing. You’re going to need something better than virtual ballet classes.

    by Patriot on Aug 9, 2012 at 9:19 pm

  47. I don’t think you’re taking into account how much this will benefit you Patriot.With the NBN you’ll be able to go live face to face with DrSmithy.

    by floorer on Aug 9, 2012 at 9:29 pm

  48. You’re demanding $68 billion of taxpayers money for this thing.

    Uh, no. The majority of people in the country are doing that.

    You’re going to need something better than virtual ballet classes.

    Plenty of examples have been given over the years. Education, medical support, home businesses, collaboration. Nothing I can say here will add more.

    The need for high speed, high capacity, national telecoms infrastructure in the future is self-evident. There’s really no other way to say it. We might as well be arguing about whether or not we need an electrical grid, or roads.

    by drsmithy on Aug 9, 2012 at 9:39 pm

  49. I could do that right now on ADSL 2+. I have network attached CCTV, alarm and home automation systems at my home which I monitor and control from work and on my phone using an ADSL 2+ connection and 3G.

    by Patriot on Aug 9, 2012 at 9:41 pm

  50. I could do that right now on ADSL 2+. I have network attached CCTV, alarm and home automation systems at my home which I monitor and control from work and on my phone using an ADSL 2+ connection and 3G.

    Really ? You can put out multiple (or, heck, even one) high quality, high definition, audio-included CCTV streams over your ADSL2+ connection ?

    Or are you talking about black and white, low-res, silent CCTV ?

    by drsmithy on Aug 9, 2012 at 9:47 pm

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