In a presentation to the Commsday Summit in April, Bevan Slattery, CEO of Pipe Networks, slammed the government over its tender document, the tendering process and costing of their NBN policy. While I do have issues with the requirements of the RFP

In a release to the ASX yesterday, Slattery states "Our analysis of the real cost to deliver on the government's FTTN requirements has consistently been far higher than the $8.7billion figure bandied about by government and prospective bidders. Add to this regulatory uncertainty risk to the business process and we see no benefit to our shareholders in terms of reasonable long term returns on investment."

In support of his claim, he points to Australia's demographics as driving the cost of deployment much higher than the proposed $8.7billion dollars; a price that he further claims was "prepared by a 23 year old university student." In the presentation 50 percent of Australia's population live in less than 1 percent of the land mass, but to cover the full 98%, as requested by the RFP, more than one million square kilometres will need coverage.

Even with conservative estimates on the length of copper required from each node he claimed that, to deliver 12Mbps to this coverage area would require some 350,000 nodes and 700,000kms of fibre for backhaul; costing in excess of $20 billion.

Lets look at some of these claims:

  1. Coverage area: Slattery bases his calculation on population, but the correct value to use is the number of homes. A person does not receive a broadband connection a house does. Currently there are about 8million homes in Australia, and 98% would represent 7.8million. The top 15 cities in Australia cover 75% of all households which is only ~10,000 sq km, less than half of the coverage area estimated in the presentation for the same percentage of households. I suspect the source of the coverage area in the presentation was based figures from Telstra's NextG network.

  2. Number of nodes: If the coverage area is significantly less than claimed, the number of nodes is also reduced. Thus the 350,000 nodes is likely to be more around the 150,000 and using Slattery's figures this would cost about $8.8b in backhaul costs.

  3. Backhaul costs: There is already a significant amount of fibre based backhaul capacity throughout the metropolitan areas thanks to the likes of Pipe, Silk, Amcom, Powertel, UEcomm and others. The amount of additional backhaul Slattery proposes is significantly more that I would estimate. And the $30 per metre for laying of the fibre, in regional areas you would certainly achieve this figure, even less with direct buried fibre cable (try $10-$15 per metre). In the metropolitan area using overhead deployment (perhaps using or replacing the existing HFC networks) techniques, microtrenching, and sub ducting would be very achievable.

Slattery further claims Labour will water down the RFP (and therefore break an election promise) by allowing other technology in the last mile reticulation and permitting "up to asymmetrical 12Mbps" VDSL2+. These speeds would of course will be "unrealistic" and only if "magic direct thick copper" is used.

Sorry but I must of missed something, FTTN means Fibre to the Node, correct? It does not mean Fibre to the Node then Copper to the home. The RFP is for a "National Broadband Network" not a national hybrid fibre copper network. It has been rightly assumed by many others that a mix of technology will be used; FTTH in greenfields, FTTB in business areas; FTTN in urbanised areas; and a mix of copper and wireless in regional areas. Looking at some of the responses by DBCDE to questions asked by the respondents, part of the evaluation process will be to determine how much wireless will be used in the network. It is impractical to think even Telstra would deliver a broadband network to 98% by using only FTTN with last mile copper connections. Technologies such as HSDPA and WiMax will deliver effective broadband performance for a small number of users.

Also what is this "magic direct thick copper", I haven't come across this. At the suggested 4km seperation between nodes (a loop length of 2000m) VDSL2 using 26AWG can easily deliver 12Mbps in the downstream. While I dont agree with FTTN and we should be going straight to FTTH, Slattery again is distorting the facts to suit his own argument (much like Telstra does).

I think the sentiment of the presentation can be summed up by this one line "No disclosure on how this will effect existing infrastructure of competing carriers". If the NBN goes ahead and it is won by Telstra or TERRiA, all the exchanged based infrastructure carriers (iiNet, Internode, Adam, TPG, Powertel, etc) will have stranded assets. Who supplies much of the backhaul for those carriers - Pipe Networks.

A word of advice, like it or hate it, the NBN is here to stay. So you might as well get on board with one of the bidders or the perhaps the loss of business from the exchange based infrastructure carriers will have an impact on your business.


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