NBN Rollout Scrapped

[medicowallet]

It's yet to be seen how much Telstra will charge for their copper now in order for the Coalition's plan to go ahead.

I hope it is prohibitive, so that they just continue with the NBN as it stood.

I prefer a cheaper option, but to change it now would be difficult.

MW

 

[drsmith]

You demonstrate a lack of understanding of the cost and funding for the NBN.

A hot Milo and a lie down might help with the bile.

Cost:
Firstly, the cost is not "unknown". It was first estimated at $43bn by KPMG, which was assessed by Greenhill-Caliburn and being found to be reasonable. The capex forecast was then reduced to $37bn, and later back up slightly after some rollout changes that resulted from the Opts and Telstra deals being signed off.

Since then, the actual cost of the rollout has begun coming in, and is broadly on budget. The AFR reported last week from a leaked draft report that peak funding required had increased slightly (by $1.6bn or ~5%), although that is not public so the accuracy is unknown, and there was no mention of a capex increase.
.

On the substance of updates, each and every setback with the rollout simply makes the final targets more fanciful.

Funding:
The NBN is funded as an asset on the budget, from the issue of bonds. The bonds are to be repaid from user revenue, not tax/consolidated revenue. So spending on the NBN has absolutely no effect on the spending for the other things you mentioned.

That aside, the NBN will be a benefit to health and education, with many identified uses and huge support amongst the healthcare and education communities.

And, for argument's sake, even if you assume that the NBN was an expense to the budget, it pales into insignificance alongside the health and education budgets. Over the 10-year build of the $40bn NBN, the Govt will spend $1.2 trillion on health, and $500bn on education.

It doesn't matter how the money is sourced or the spend relative to other areas. It's fundamentally a question of the most productive use of that money.

It's yet to be seen how much Telstra will charge for their copper now in order for the Coalition's plan to go ahead.

One of the advantages of the Coalition plan is the underlying flexibility in relation to the copper network.

 

[NBNMyths]

A hot Milo and a lie down might help with the bile.

On the substance of updates, each and every setback with the rollout simply makes the final targets more fanciful.

Since the Telstra deal was done, the delays in the rollout have become much, much smaller. They met their last target. Now while that was a revised-down target, it was still met.

It doesn't matter how the money is sourced or the spend relative to other areas. It's fundamentally a question of the most productive use of that money.

I disagree. That money is only being borrowed to build the NBN, and the NBN will earn revenue to pay it back. If you instead borrowed the money to build a hospital or a school, how would it be repaid? Unless you started charging people to use the hospital or the school, then the repayments would have to come out of the budget. Completely different to the NBN.

One of the advantages of the Coalition plan is the underlying flexibility in relation to the copper network.

I don't know where you get that statement from. If Telstra play hard-ball like they did in 2007, there's no flexibility to be had. They'll have to bite the bullet and go with FTTP, or do nothing. That's not flexibility, it's a complete change in policy either way.

 

[drsmith]

Since the Telstra deal was done, the delays in the rollout have become much, much smaller. They met their last target. Now while that was a revised-down target, it was still met.

That was ultimately a very short range twice downward revised target in the context of an imminent election.

What about the June 2014 target ?

I disagree. That money is only being borrowed to build the NBN, and the NBN will earn revenue to pay it back.

If all goes well which it is not.

I don't know where you get that statement from. If Telstra play hard-ball like they did in 2007, there's no flexibility to be had. They'll have to bite the bullet and go with FTTP, or do nothing. That's not flexibility, it's a complete change in policy either way.

With the current NBN, the setbacks aren't ifs, their facts and it will be interesting to see what else comes to light with a new government.

My point though was in relation to the copper under the Coalition's plan where it can't effectively be remediated.

 

[drsmith]

There are plenty of things we should have but don't get. We must have priorities. We deserve better internet speeds and we will get them

From this point forward, it may well be a combination Labor's vision and the Coalition's priorities in government that delivers a practical outcome.

 

[sydboy007]

From this point forward, it may well be a combination Labor's vision and the Coalition's priorities in government that delivers a practical outcome.

The major issue I have with changing to an FTTN is the fact that you throw hundreds of thousands of man hours down the drain because you have to do a massive investment in designing a new network.

You can see all the little issues that add up to bigger issues and lost time for the rollout.

Now the Coalition want to wipe out most of what has been learned over the current rollout and pretty much start the learning process again because there wont be too much cross over due to the vastly different kind of rollout.

The hubris of the Coalition is going to cost them dearly at the next election. Whether FTTP / FTTN the NBN is one of the largest projects undertaken in the world. To think they can do a full network redesign, Telstra renegotiation along with ACCC stamp of approval and Telstra shareholder vote while getting 35-40K worth of nodes installed, though from most of what I've read even 50K worth of nodes may not acheive their inital 25Mbs target, talk about pressure. It wont surprise me to see key NBN staff leave due to the workload and unrealistic targets. When that kindof high level knowledge walks out the door it's very hard to recover.

But it has the Tony Bullet proof money back guarantee

 

[drsmith]

It wont surprise me to see key NBN staff leave due to the workload and unrealistic targets.

If the Coalition can deliver something better than a Déjà vu of Labor's rollout, it will help them at the next election, not hinder them.

The thrust of the points you and Myths go back to have been argued somewhat to death already in this thread, regardless of whether it includes analysis from Michael Wyres dodgy numbers or not.

What I'll be most interested in is more actual detail on the current rollout once the new government assumes office and of course, their response.

 

[NBNMyths]

That was ultimately a very short range twice downward revised target in the context of an imminent election.

What about the June 2014 target ?


If all goes well which it is not.

With the current NBN, the setbacks aren't ifs, their facts and it will be interesting to see what else comes to light with a new government.

My point though was in relation to the copper under the Coalition's plan where it can't effectively be remediated.

We'll know about the June 2014 target in June 2014, but I seriously doubt it will be met now. If you were SIlcar et al, would you be ramping up your staff and training them in FTTP rollouts knowing that it's coming to an end (as opposed to the ramp-up phase of a 10-year build)? I wouldn't.

Even if it doesn't "go well", it will still earn income. It's already earning income, with takeup higher than forecast and ARPU higher than forecast. The worst that can happen is a delay in revenue, leading to an increase in peak funding required and a delay in providing the return. But the return will still occur.

It will be interesting to see what happens if the Coalition find that bigs parts of the copper is in worse condition than they expect. Now that will be a budget blowout to be seen.....at least if their claims about the 'rea' cost of the NBN are true.

On the upside (for me at least), I was chatting to a Telstra tech the other day as he fixed my neighbour's line. He told me that the most likely spot for a node in my street is the pillar located almost across the road from me. Perhaps only 40m copper loop, and my copper is only a few years old to boot. I'll be very interested to see what speed I can get over FTTN, given that it doesn't get much better than that. On the downside, my neighbour won't be happy about the "fridge" in his front garden.

 

[moXJO]

We'll know about the June 2014 target in June 2014, but I seriously doubt it will be met now. If you were SIlcar et al, would you be ramping up your staff and training them in FTTP rollouts knowing that it's coming to an end (as opposed to the ramp-up phase of a 10-year build)? I wouldn't.

Even if it doesn't "go well", it will still earn income. It's already earning income, with takeup higher than forecast and ARPU higher than forecast. The worst that can happen is a delay in revenue, leading to an increase in peak funding required and a delay in providing the return. But the return will still occur.

It will be interesting to see what happens if the Coalition find that bigs parts of the copper is in worse condition than they expect. Now that will be a budget blowout to be seen.....at least if their claims about the 'rea' cost of the NBN are true.

On the upside (for me at least), I was chatting to a Telstra tech the other day as he fixed my neighbour's line. He told me that the most likely spot for a node in my street is the pillar located almost across the road from me. Perhaps only 40m copper loop, and my copper is only a few years old to boot. I'll be very interested to see what speed I can get over FTTN, given that it doesn't get much better than that. On the downside, my neighbour won't be happy about the "fridge" in his front garden.

So you wouldnt pay the 5k to get it hooked up?
Whats the story with tpg rolling out fiber?

 

[PinguPingu]

If anyone's wondering: TPG plans to expand their own Fibre to the building service: http://www.abc.net.au/news/2013-09-1...-lifts/4962454

A concern here is that ISP/Telco's may now be in a race to effectively 'lock in' apartments or flats to their service, meaning they could potentially build local monopolies depending on how/where they lay out their Fibre. It's all really up in the air at the moment. Hopefully some government regulation should prevent uncompetitive monopolies, but a positive is that it shows ISPs know fibre is the future and are willing to lay it down, but on the negative does not seem to bode well for those in unprofitable non-population dense rural areas.

 

[sydboy007]

So you wouldnt pay the 5k to get it hooked up?
Whats the story with tpg rolling out fiber?

They're not rolling out fibre. The fibre is already there.

What they are proposing to do is connect that fibre to some of their own equipment in the basement of an apartment building then use the internal copper to connect to each apartment.

The main problems of this will be they wont want to provide open access so if MT allows this to go ahead I can see the situation where:

* Telcos cherry pick the profitable areas to connect MDUs

* You will likely only have the option of 1 service provider in the apartment block

* The massive loss of revenue to the NBN will mean they have to service the least profitable areas so it will require a constant tax payer subsidy for them to run.

I suppose it does fit within the Liberal National philosophy of privatising the profits and soacialising the loses.

 

[drsmith]

We'll know about the June 2014 target in June 2014, but I seriously doubt it will be met now. If you were SIlcar et al, would you be ramping up your staff and training them in FTTP rollouts knowing that it's coming to an end (as opposed to the ramp-up phase of a 10-year build)? I wouldn't.

Regarding ramp-up, Syd to some extent at least appears to contradict that view,

My understanding is pretty much all the contracts for the initial 3 year rollout have been signed.

https://www.aussiestockforums.com/f...21778&page=134&p=793488&viewfull=1#post793488

Even if it doesn't "go well", it will still earn income. It's already earning income, with takeup higher than forecast and ARPU higher than forecast. The worst that can happen is a delay in revenue, leading to an increase in peak funding required and a delay in providing the return. But the return will still occur.

Is that expectation still based on completing the rollout on due date in 2021 ?
NBN Co has so far has demonstrated that it can't keep to rollout targets on a year to year basis let alone over the life of the rollout.

Depending on the level of delay and consequent cost blowouts, revenue may never recover the cost of the project.

Let me put it this way. If a project with the same history was seeking $1.6bn in private equity for the same reasons, would you invest ?

It will be interesting to see what happens if the Coalition find that bigs parts of the copper is in worse condition than they expect. Now that will be a budget blowout to be seen.....at least if their claims about the 'rea' cost of the NBN are true.

If FTTP costs as much as the Coalition says, it costs that much regardless of who is in office.

On the upside (for me at least), I was chatting to a Telstra tech the other day as he fixed my neighbour's line. He told me that the most likely spot for a node in my street is the pillar located almost across the road from me. Perhaps only 40m copper loop, and my copper is only a few years old to boot. I'll be very interested to see what speed I can get over FTTN, given that it doesn't get much better than that. On the downside, my neighbour won't be happy about the "fridge" in his front garden.

Where are you and your neighbour on the current rollout schedule and how confident are you of it being done in accordance with that schedule ?

You might me one of the many that gets faster fixed line broadband sooner under the Coalition.

On another aspect, I'm curious as to how the rollout going into MDU's and whether NBN Co has switched from fibre to the premise to fibre to the basement.

 

[sydboy007]

Regarding ramp-up, Syd to some extent at least appears to contradict that view,



https://www.aussiestockforums.com/f...21778&page=134&p=793488&viewfull=1#post793488

I think it's fairly obvious that myths means that there is no growth over what the current rollout contracts require.

I'd say over the next 12 months there will be a wind down in the rate of FTTP connections simply because a lot of those workers will have to be retasked to FTTN - the Coalition will probably dishonestly try to use the slower rate as further proof that FTTP is not the right way to go. They are physically different locations so there's no way to avoid this. There's not a limitless workforce out there, and the skill sets required will be a bit different as well. How much overlap I'm not too sure. Telstra has enough issues doing repair work in a timely manner, so I can't see them being able to help too much with the rollout unless we see an increase in repair times.

Since MT has already admitted it will take a year to start the FTTN rollout, I'd argue that at least for the next 18-24 months the number of people who get an upgrade would be lower than if the current rollout was allowed to continue at full speed. Beyond that, it all depends on MTs ability to meet his 25Mbs minimum target by late 2016.

TPG and other companies looking to cherry pick MDUs in the capital cities next to fibre cables will further complicate MTs task. MT might be starting to rethink his opposition to the anti cherry picking laws introduced by the ALP. How good these FTTB setups is another question. I've already read some pots from people who say they are living at the Sydney Park Village and they are already seeing a fall in speeds, so it sounds like backhaul contention is going to be a big issue.

 

[drsmith]

I think it's fairly obvious that myths means that there is no growth over what the current rollout contracts require.

Perhaps you could clarify the specific period you refer to when you say pretty much all the contracts for the initial 3 year rollout have been signed.

Myths was referring to the rollout to the end of 2014 which is now less than 12-months away.

 

[NBNMyths]

Regarding ramp-up, Syd to some extent at least appears to contradict that view,

https://www.aussiestockforums.com/f...21778&page=134&p=793488&viewfull=1#post793488

Is that expectation still based on completing the rollout on due date in 2021 ?
NBN Co has so far has demonstrated that it can't keep to rollout targets on a year to year basis let alone over the life of the rollout.

Depending on the level of delay and consequent cost blowouts, revenue may never recover the cost of the project.

Let me put it this way. If a project with the same history was seeking $1.6bn in private equity for the same reasons, would you invest ?


If FTTP costs as much as the Coalition says, it costs that much regardless of who is in office.


Where are you and your neighbour on the current rollout schedule and how confident are you of it being done in accordance with that schedule ?

You might me one of the many that gets faster fixed line broadband sooner under the Coalition.

On another aspect, I'm curious as to how the rollout going into MDU's and whether NBN Co has switched from fibre to the premise to fibre to the basement.

I think you're mis-interpreting. Yes, the contracts for the next 3 years are signed (with options to extend). But the contractors are still ramping up their workforce and will be until 2015 (according to the corp plan). While there is some risk of there not being a renewal, if you were a contractor you would be considering that it's likely that rollout contracts will continue for ~10 years, not just the 3 you are currently contracted for. You would therefore be more willing to wear the expense of training a workforce for that 10 years. However if you KNOW that the work will end in three, then you'll train up the minimum possible number of people for the next 3 years, and perhaps even wear a penalty for being late, or use the excuse that it was too hard to recruit people etc etc.

Yes, I would invest in the NBN personally, if it were guaranteed by both sides of politics to continue on the current technology/regulatory basis.

FTTP would be substantially more expensive under the coalition's policy than under the ALPs due to economies of scale in design, equipment and construction.

My area is on the NBN 3-year rollout schedule, scheduled to commence in 2015. That means I'm not covered by the current FTTP rollout contracts. I would be covered by a 12-month extension of them though. I'm also in a liberal-held marginal seat, so I'm pretty confident of being done soon-ish either way.

 

[drsmith]

I think you're mis-interpreting. Yes, the contracts for the next 3 years are signed (with options to extend). But the contractors are still ramping up their workforce and will be until 2015 (according to the corp plan). While there is some risk of there not being a renewal, if you were a contractor you would be considering that it's likely that rollout contracts will continue for ~10 years, not just the 3 you are currently contracted for. You would therefore be more willing to wear the expense of training a workforce for that 10 years. However if you KNOW that the work will end in three, then you'll train up the minimum possible number of people for the next 3 years, and perhaps even wear a penalty for being late, or use the excuse that it was too hard to recruit people etc etc.

How then does this impact negatively on the rollout schedule to June 30 2014 and if it does, why wouldn't that be reflected in NBN Co's rollout forecasts bearing in mind our 3-year electoral cycle ?

That appeared to be the context of your statement.

Yes, I would invest in the NBN personally, if it were guaranteed by both sides of politics to continue on the current technology/regulatory basis.

I know it's very much a hypothetical question, but would you personally invest specifically on Labor's plan from where it currently stands, rollout delays and all ?

 

[sydboy007]

I know it's very much a hypothetical question, but would you personally invest specifically on Labor's plan from where it currently stands, rollout delays and all ?

I would be tempted to invest because:

* Having worked wth large projects I know the learning curve is step at the begining, but once you hit full speed things happen pretty quickly.

* The current migration by choice to the NBN is running at far higher rates than forecast

* ARPU is higher than forecast because it seems peole want the speed - already the majority of subscribers are on speeds FTTN will not be providing till 2017+

I'm very much looking forward to the copper audit and seeing what the estimate of how much will need to be replaced. With a minimum 10M copper pairs to be resued for the FTTN I wonder what they will consider as a representative sample size? Will they audit every FTTN area? Surely they have to with such variability of copper age and climatic conditions. IIRC MT has budged for 10% replacement. Not sure what that turns out to be in $, but I'd say the real rate will be ~20% based on my experience at work with the amount of line faults that turn out to be from the pillar to premises, and generally we are talking about lower speed use so the cut off mark for dud copper is going to be a lot higher than presently seen.

I'm also looking forward to the outcry of Fridge Nodes appearing out front of people's homes and how likely local councils are to play ball with granting permits for the work that is required. Will councils try to get some form of "rent" for use of public land? The 6.30pm trash news shows will have a field day with property owners loosing thousands of dollars in value due to the unsightly Fridge Node out front.

 

[Smurf1976]

I'm also looking forward to the outcry of Fridge Nodes appearing out front of people's homes and how likely local councils are to play ball with granting permits for the work that is required. Will councils try to get some form of "rent" for use of public land? The 6.30pm trash news shows will have a field day with property owners loosing thousands of dollars in value due to the unsightly Fridge Node out front.

I can also see "NBN fibre connected" becoming a common feature of property sales and rental advertisements in much the same way as a garage, air-conditioning or a modern kitchen are considered features of a property likely to attract buyers / renters.

In my opinion, a house with fibre connected will in the future be worth more than one that doesn't have it. Once people wake up to this situation, that will shift the debate somewhat I'd expect.

 

[drsmith]

I would be tempted to invest because: ........

I'm relieved you're only tempted.

With regard to any learning curve, that should be factored into forecasts and not used as an excuse to justify chronic shortfalls.

With regard to the copper network, if 20% needs to be replaced then the flipside is that 80% is still serviceable.

 

[NBNMyths]

How then does this impact negatively on the rollout schedule to June 30 2014 and if it does, why wouldn't that be reflected in NBN Co's rollout forecasts bearing in mind our 3-year electoral cycle ?

That appeared to be the context of your statement.


I know it's very much a hypothetical question, but would you personally invest specifically on Labor's plan from where it currently stands, rollout delays and all ?

Perhaps I need to clarify...

NBN Co have contracted a certain amount of work over a 3 year period.

...Under the Labor policy....
The contractors have taken those contracts, but would work under the assumption that the NBN is a 10 year project, and there will likely be additional contracts following on from the current ones (particularly as there are already options to renew). Thus, those contractors would be comfortable continuing to ramp their workforce and training based on the assumption that the size of their workforce will need to continue increasing for the next few years as the rollout hits target volume.

...But now...
The contractors have taken those contracts, but know that they will not be renewed. They know that the FTTP rollout will end at the completion of the current contract. Thus, they will employ and train the absolute minimum number of people to fulfill their obligations. Depending on the penalties written into the contract, they may even be happy to deliberately fail to meet targets rather than spend money empoying and training people for a job that's about to finish. They will also likely want to tender for FTTN, which they may divert parts of their workforce into before completing their FTTP obligations.

As sydboy wrote, I also agree that Turnbull will point at the missed targets and blame FTTP, when the reality will be that the contractors saw the end coming, and wound down accordingly.


Yes, I'd be happy to invest currently, but only if the current tech and regulatory regime were guaranteed to continue until completion.