Feds arrive at $2500 to connect fibre to new homes

By Brett Winterford on Mar 18, 2010 2:13 PM
Filed under Networking

Greenfields legislation introduced to Parliament.

Developers should expect to pay some $2,500 on average to connect a new home with fibre for the National Broadband Network, and between $400,000 to $700,000 for backhaul connections, the Federal Government revealed today.

The approximate costs were revealed as part of an explanatory memorandum into the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010, introduced to Parliament today after several months of industry consultation.

The Department of Broadband, Communications and the Digital Economy came up with the $2,500 estimate for an FTTP (fibre to the premise) connection as "a midpoint figure amongst a number of available estimates" given by developers and network builders in existing estates, which ranged from $1,500 to $3,500.

The department's estimates were also "informed by international benchmarks, consultations and expert input" and should be "considered conservative."

The estimates were also developed independently of the Government's NBN Implementation Study, which it has chosen to withhold.

Broadband Minister Stephen Conroy had previously estimated that the cost of connecting a house could be more like $1,200, describing estimates of $2,000 to $3,000 per lot as being biased by "colour and movement".

The Government's cost estimates are key to its justification for mandating fibre connectivity in all new housing estates - or at least those Minister Conroy picks and chooses - whilst the National Broadband Network is rolled out.

A fibre connection to a lot, the Government estimated, is two-and-a-half times more expensive than a $1,000 copper connection.

But retrofitting a fibre connection over a copper one where "no fibre-ready infrastructure has been installed" is more like $4,000 per lot.

Should the Minister choose the middle-ground for a given estate - and mandate only that "fibre-ready infrastructure' (ie pits and ducts) is installed - the cost of retrofitting from copper to fibre is around $3,000 per lot.

The explanatory memorandum argued that such costs of connection are not exorbitant.

"To put this cost into context, a submission to the Public Works Committee by the Land Management Corporation (South Australia) estimated the per lot costs for one development to be $2,500 for water, $3,200 for stormwater, $4,800 for power and $4,800 for sewerage".

The memorandum said that developers tend to wear the cost of connections initially "although to a greater or lesser degree they may be recovered from purchasers" of the home by being built into its price.

The cost of inaction

The document includes several estimates for the cost of inaction, should the Government not succeed with a mandate on fibre in new housing estates.

It estimated that Telstra would spend $189 million a year to wire up 90 percent of the 210,000 buildings developed every year in Australia with a copper connection (at $1,000 per connection, $800 of which is civil works such as trenching).

It would cost well over twice this figure to wire up the same number of homes with fibre today - around $472.5 million.

But the Government estimated it would cost $756 million a year - a significant amount more - if these homes were fitted for copper in the short-term and not fibre, but had to be retrofitted for fibre at a later date.

"This high cost reflects the additional FTTP equipment that is required but also the need to undertake new civil works (trenching, ducting, pits) which is expensive, and to pull through new fibre cables," the explanatory memorandum reads.

The middle ground option - in which developers are only mandated to dig fibre-ready pits and ducts when laying in cable for these 210,000 premises, would cost $567 million per annum.

With these costs in mind, the Government considers that it would be $283.5 million cheaper in the long run to mandate fibre to every estate today, even if the upfront cost to developers was considerably higher.

A mandate to only provide 'fibre-ready pits', by contrast would save just under $100 million ($94.5 million) in the long term.

"If a mixed approach is adopted in which, say, 50 percent of premises are provided with fibre-ready infrastructure and 50 percent with FTTP the total cost per annum, would be $519.75 million," the memorandum states."

While clearly a higher cost than that of a full FTTP solution, it still represents a saving of $42.75 million. The final ratio of costs and savings will depend on the final mix adopted.

"The actual balance of FTTP and fibre-ready infrastructure and their costs and savings will depend on where thresholds for applying the measure to new developments are set. These would be contained in subordinate legislation."

THE OPTIONS

Federal Government estimates for the annual cost of wiring new Australian homes.

Copper only: $189 million

Fibre now: $472.5 million

Copper now, with fibre-ready pits: $567 million

Copper now, fibre later: $756 million

Feds arrive at $2500 to connect fibre to new homes

24 comments in this discussion

"I know what we need GOOGLE, they are offering 5 Towns with the population of 50k and 500k to connect every Home with Fiber @ 1GBIT at comparable costs to cable in the US. Just to show their ISP'S ..."

By ljraggy

Tags

greenfields, greenfield, fttp, fibre to the premise, national broadband network, nbn, nbn co, dbcde, housing estates, copper, fibre, pits, ducts

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Comments: 24

DJ Mar 18, 2010 7:03 PM	All this so the home user can..... surf the internet, download stuff or get their emails. How on Earth are service providers going to amortise these costs with their customers ?????? Will households be locked into 3 and 5 year contracts just to cover the installation costs ??? What a stupid, stupid, stupid idea. What a waste of money. Do you really believe faster internet access is going to produce all the extra productivity and service improvements required to generate revenue that actually pays for it ? Look to other countries with high speed broadband - they don't really care that it's fast. It's great that a web page loads 4 seconds faster, but in reality who is prepared to pay for it and, really, who cares.
mikeyx11 Mar 18, 2010 9:46 PM	DJ, if you are thinking of this in terms of how fast a website loads, then I would say you are severely short-sighted. Think of multiple 3D HD content, web-connected smart appliances, teleconferencing and telecommuting via high-speed VPNs, medical applications (looking after the increasing number of still-at-home elderly), high quality voice calls, mobile femtocells etc. I'm sure there's things I've forgotten, and things I could never even imagine. When they were laying the copper network nearly 100 years ago, they were thinking in terms of voice calls just like you are thinking of websites with fibre. Infrastructure like this needs to be future proof because of how expensive it is. The data used by the average home has increased 10000x if not more than it was 10 years ago. Open your eyes.
Tailgator Mar 18, 2010 10:09 PM	Re FTTH vs Copper costs 2.5 times more expensive. I say Bullshit!
HenryG1960 Mar 19, 2010 1:03 AM	There is a cheaper alternative to FTTH. In the short term, Telstra should upgrade the network with its existing CAN Fibre network by installing Alcatel ISAM equipment at Copper cabinets in the suburbs to eliminate long runs of copper from the exchange. This way only 1 km or less of copper is connected to ADSL or ADSL2+ Modems increasing download speeds up to 20Mbps (what we are supposed to get for our money). I have done this sort of work as a contractor in counrty Victoria. I sent a letter explaining all this to itnews & the Federal Government but itnews didn't publish it ( they must be supported of Kevin Bloody Rudd) & Senator Conroy's office sent me a letter saying the NBN would fix all these problems .... YES BUT AT WHAT COST TO THE GETTING POORER PUBLIC
hsvandrew Mar 19, 2010 2:13 AM	I wish there were just a few people in the community that could actually think into the future and not just about today. The NBN is about Internet, TV, Phone, Fax and everything else connectivity wise for your home. Considering as the article states, "$2,500 for water, $3,200 for stormwater, $4,800 for power and $4,800 for sewerage" the FTTP isn't going to cost much at all. It is expensive to setup a new estate and it is critical the government enforces FTTP right now today. Telstra has been allowed to build new estates in Melbourne over the last 10 years where either no broadband or broadband at ADSL2+ can't get speeds over 3mb/sec. DJ this isn't something a householder will pay to "get online". That is why the government is covering the costs.
neddludd Mar 19, 2010 7:43 AM	Yes, technically it has great potential.In 5-10years. But right now it seems like flying to work in your own 'helicopter'. Id just like a decent 'car' for a start. Problems happen when the people paying(taxpayers)are subject to all the risks while the people making the decisions are not.
EMwyres Mar 19, 2010 9:05 AM	I'm constantly surprised that supposedly intelligent people can't see past the political rhetoric in this whole project. $2,500 for the FIRST installation. Sure...that MIGHT be the figure, but it also might not be. A British firm outlined some weeks ago that based on the costs involved in a basically identical proposed network they rolled out in Canada, converted to $AUD, was about $500 per site, running cables through the sewer lines. One must also remember that this report discusses GREENFIELDS sites, where it is more than just kerb-to-home fibre runs. They have to run fibre all around the streets of the development and will have fibre runs already existing when you build your new home on this site. This is not a cost to the ISP or the end user. This is the developer of the estate being forced to pre-wire the entire site. This cost will go into the cost of building the house! This is NOT about existing developments - where fibre will be cheaply strung from power pole to power pole, inside existing Telstra ducting in the ground, or inside existing sewer pipes. There is no way that's going to cost $2500.00 a premise. But whatever the final cost is, that's the only the INITIAL cost. The first time the building is connected to the network. When the next person/business moves in there, that cost won't be required. Initial costs are going to be higher than in later years, sure...but over the life of the network - (many many many years) - the cost is recoverable. Lets look a little further again. Let's say you pay $79.95 a month now for ADSL2 on your phone line. Then you pay $25.00 for line rental, and other service fees from your copper provider (ultimately Telstra gets a slice in the end, which is why they are worried about losing their premise-access monopoly), and you're talking over $100.00 month for most people BEFORE they make use of the service. This will ultimately save you money in the long term, and you get faster, less latent connectivity. You just can't please some people! The initial pricing in Tasmania seems a little steep, but the ISPs aren't going to cut their own throats against what will be a very small number of initial customers. The economies of scale once this reaches the mainland, plus the competitive market for premise-access (which we have NEVER had before) means that prices will drive down, and the best providers will win out - just as they do now.
Bazwalt Mar 19, 2010 9:15 AM	Another thing to consider, is that the current copper network is so darn had to maintain that it costs an arm and a leg just to repair. Fibre is not subject to degradation and in the long term prospect of things - It won't require nearly as much effort to maintain. The biggest problem will still be the age old fibre cut issues because people didn't make sure to 'dial before digging'.
BrettWinterford Mar 19, 2010 10:12 AM	Here's a thought. For how long have we been served by copper? If you amortise the cost of the fibre connection over the life of its use, perhaps its not so expensive at all? (which leads to the next question - how long will fibre be king?) Edited by BrettWinterford: 19/3/2010 10:13:37 AM
umbria Mar 19, 2010 10:47 AM	It certainly seems worth adding $1,500 to the selling price of a $150-200K block of land in a new estate to have fibre instead of copper. (This article is only about the average cost of fibre to newly subdivided blocks.) Fibre laid today will continue to support all future speed increases without ever having to touch the cable, because it has no theoretical bandwidth limit. Not only is it durable, but it even permits instant echo-location should physical damage occur, speeding its repair. Really, this is a no-brainer.
anonymous Mar 19, 2010 1:14 PM	Bazwalt, BW and umbria et al are correct. Many of the leave-it-to-Telstra brigade are saying we don't need HSB in future because we haven't used it in the past. The NBN will probably take about ten years to complete and will be used for decades after that. It would be more than courageous to continue asserting that we won't need HSB during that time.
Perdix Mar 19, 2010 3:55 PM	On the face of it, $1,500 doesn't seem to be too bad, especially when compared with the costs that Councils charge for services and facilities that do not usually get provided. I don't think that this amount added to the cost of land is really significant, and I don't think it will prove to be a barrier for developers, who will cost recover. HOWEVER! These are cost estimates only, in other words, no one really knows and they are hoping it is about this price.It could be significantly more. Who will keep an eye on these costs and ensure that they do not rise, and are not tampered with by councils etc demanding an additional pound of flesh? Given that NBN is a monopoly, and it is the nature of any monopoly to increase costs over time, how do we know that we won't get "cost creep"? What competitive measures will be in place to ensure that prices don't escalate over time? Given that this country is going to have to do some serious residential building in the near future, how do we ensure that the cost of providing the infrastructure to new estates is kept at a sensible level and not 'blow out'simply because the marketplace does not have the necessary work force or material to meet demand? Or do we get a repeat of the shonky workmanship that has plagued the insulation industry of late? There needs to be some very serious thought given to how, logistically, all this cabling work is to be done, who is going to do it, how will they do it, what rights will they have to move over private land, public land etc. Do we have the workforce to do it, can we get the fibre in the quantities and at the price we need? 1 suggestion is to legislate to ensure that other govt bodies cannot interfere and claim a share of costs, remove some of the planning consent requirements so that no local, govt or environmental body can interfere with, or delay the deployments. Perhaps there needs to be some incentive in the form of tax relief for companies employed in doing the deployments, if it is of such great national interest to get the fibre to the front door, then some recognition of this long term social benefit should be provided. This would help with cost management. From reading all the various reports, documents etc, I get a sense that no one has really given too much thought to some of this, and there is a large degree of naiveté attached to the exercise, its in the national interest, so everyone will play nicely!. Most likely, as with the insulation fiasco, there will be a lot of people out to make a quick buck....build it and they will come?....well, maybe, if the price is right and there is a reason for changing.
zag Mar 19, 2010 6:22 PM	The $1,500 is only a low avg to install only for a getting built house, and that range is between $1,000 and $3,000, for a $400,000 house sure it's not much but does add to the overall build costs. If you bought a house in a greenfeilds area after it was built it would cost over $4,000 to get it hooked up to fibre and that's only the avg cost no range was given. Getting Fibre can be great but it will lock you into one provider only, and you would need to use piggy back services to get services via it. I currently don't think payTV goes through fibre at all as that backend would be all Telstra. The biggest cost isn't getting it installed but the monthly cost and who you'd pay that monthly cost to, then you'd have provider costs on top of that. Those will be the real telling costs, after all iiNet charge $50 for 5gig of data a month via fibre, then $130 for 20 or 30gigs of data and $160 for 90gigs, (these are guesstimate costs as well) if the monthly cost of the fibre line was $150 or $200 per month, it could be very costly per month. Then I wonder at how many people would be up for paying $300+ for a fibre line to the house.
zag Mar 19, 2010 6:31 PM	@Perdix - do we get a repeat of the shonky workmanship that has plagued the insulation industry of late? I've never seen any old time companies use foil for any sort of insulation it's extremely easy to install it and I just couldn't understand why companies were using it anyway, so I think it was just people wanting to do an install for $50 and pocket the rest some of those homes only have foil and nothing else in them. How ever I don't think you'd have the same problems but I do think costs will be cheap then become very dear as there will be such demand on people to do fibre installs that it could double or triple the prices given here. That is the current problem in the mining towns there's just so few tradies that you could be on a waiting list to build a house for 2-3 years.
Alex G Mar 19, 2010 9:16 PM	You've got to remember that this cost is only related to new developments. The cost to an existing house could be greater, because all the the phone points in the house would have to be converted to the Fiber link as well, not just hooking the Fiber up to an external access point. I haven't read anywhere that this would be payed for by the ISP or the Phone Service, this would be charged to the house holder. In other words, to get hooked up to this with your current house would be the cost of getting the wire to the house in the first place, the amount charged to convert all your phone access points to fiber, purchasing a new modem and phones for all the points, AND churning your internet connection to the provider that just happens to have access to your area, which could be even more if your current contract hasn't expired. For an existing home I reckon that you would be looking in excess of $5000, that you as the house holder would have to pay, because whats the chances that they would leave the copper in for you to use at your leisure, instead of the fancy new fiber network.
hsvandrew Mar 20, 2010 12:26 AM	@zag - i've got to correct all the mistakes you've made in your comment. First off, the governments plan mean you ARENT locked into a provider whereas when Telstra does a "fiber estate" you are locked into using them. This is one of the biggest positives about the NBN. Also with NBN Co not getting involved in consumer level retail sales, there is no conflict of interest like we have with Telstra. Every single consumer of PayTV outside of satelite is getting PayTV via fibre already! The next generation of TV I was talking about is called IP TV which is TV over the internet and is already widely used overseas in countries where 100mbps internet speeds are the norm. It is time we took our heads out of the sand and caught up. It costs business and consumers billions each year being stuck at the slow speeds we have today. Thankfully installing fibre is more tricky than insulation so hopefully it will only go out to serious companies like Agile. And finally, I think this sums it up best (and is very Australian)... If its only going to cost half what it costs to take my shit away to get high speed IP services to my house I really don't see what all the fuss is about.
Raj Mar 20, 2010 8:26 AM	Be real people! I am still waiting for Optus to lay 250m run of cable to my 10 yr old house which has undergound duct to their cable junction box up the road. I had even offer to self-fund the cabling to the tune of $5000. I still got "no thank, we will call you when ready".. YES, I have been calling Optus every 4-5 months for the last 8 years!! Give me 1.5Mbps wireless and I am happy (versus satallite disc)..and I am only 28kms from Sydney CBD.
DJ Mar 20, 2010 12:05 PM	Remember when the Govt pays = we pay. The Govt has NO money, it's ours. In addition, because the Govt will be allocating unbudgeted funds (ie: they are not drawing from a new revenue stream) our costs will increase. Our costs might increase through phone lines, internet, subscription television, licenses, supplier costs, whatever. My point is that right now, at this very point in time, not many people are going to care how quick their web pages load. Sure, there is a future element, but we're not there yet. We don't all sit at home in the evenings watching internet television or streaming live HD content (to any significant extent), so to outlay all of this expense for the sake of speeding something up (when we don't actually need it) is a waste of money (right now). If the roll out can be amortised over a period of time without significant cost increase, then OK, it might be something we can justify. Given the state of our economy and the (already) wasted taxpayers money from the Fed Govt, perhaps we should be putting some money in the bank and looking after important aspects of our country such as health, education, housing affordability. My 3G mobile data card is faster than my home ADSL internet. It's already here and it works.
Ace Mar 20, 2010 1:25 PM	Not entirely true @DJ. The govt does invest money in a number of ways. Just like the bank. You put money in, they make squillions off it. The only difference is that you withdraw your cash from a bank, while with the govt, you get services. The idea of govt PPPs is that the user pays, rather than everyone contributing. With at least major infrastructure like tunnels, highways, NBNs, this model is flawed. That fact that so many of the partners have gone bankrupt proves it. You may well be one of the 8% of people using 3G data networks and enjoying it, however if you were one of say 50% of the population the 3G network, you might be thinking that your dial-up modem is starting to look pretty good. So, it's not a matter of 'speeding up' the network, it's a matter of maintaining a usable network for a number of years.
prepro Mar 20, 2010 10:33 PM	OK so the NBN provide fiber to the pit out front of my property (brownfield estate), it is then discovered the lead-in conduit needs to be upgraded to install the 1fibre cable which currently has a hauling sock approximately 15-18mm round. Who pays the cost of the trench and conduit? the ONT is then installed on the side of my home to power this i will be required to have a PSU and PSU cable installed telstra currently require a double power point for this device who pays for this installation and power point? To enable me to connect to this ONT i need to re wire my home with cat5e or better and as the free to air and pay tv also come down this line i will also need to install a coaxial cable. To add to this i want multiple phone, data and tv outlets throughout the house i now need a star server installed, who pays for this? these are cost that are added to a new home in a greenfield estate as the points are installed at the time of construction. As with the network build there will be many hidden costs for the end user even before we consider who our ISP will be.
mikeyx11 Mar 22, 2010 6:34 PM	lol @Alex G. Convert the phone points to fibre? Hah, I think you should stop commenting on things you clearly have no clue about. The phone access points in the house can stay just as they are, copper, for as long as they serve their purpose. A device at the end of the fibre line at the house (eg fibre modem) splits the line up into ethernet or copper. If you think people connect phones and computers within their house using fibre, then you should probably educate yourself a little more before talking about grown up stuff.
listohan Mar 22, 2010 7:41 PM	All these figures sound rubbery to me as to what is or isn't included. Let's have the raw material cost of copper per metre and fibre per metre and debate on from there.
JanB Mar 23, 2010 5:14 PM	If anybody have seen any technical specifications from NBN Co limited for implementation of new F/O Broadband Network please us information. Otherwise all this talk is about only guesses.
ljraggy Mar 28, 2010 4:12 AM	I know what we need GOOGLE, they are offering 5 Towns with the population of 50k and 500k to connect every Home with Fiber @ 1GBIT at comparable costs to cable in the US. Just to show their ISP'S it CAN BE DONE. The Amazing thing is they pay for BAND WIDTH NOT DATA like us here in OZ. There is a Housing estate about 5km from me where Telstra is Connecting Homes for $1500 with Fiber but i would hate to use their Under Rated Data Plans.