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A graphical guide to the NBN Implementation Study

Facts and figures from the Government's $25m report.

on May 11 2010 1:53PM

A comparison of Government’s initial cost estimates and “detailed cost modelling” conducted by authors of the Implementation Study. Backhaul costs are projected to be lower than initially estimated, with shorter total distance required and a lower expected unit cost. Overheads are higher, and the cost of deploying technology for the last 10 percent is higher due to the recommendation to extend fibre to 93 percent of premises, instead of 90.

The projected internal rate of return (IRR) for NBN Co is sufficient to cover the cost of interest on Government debt, based on “reasonable assumptions” for cost and revenue.

From a commercial standpoint, Government is the most natural owner of the risk versus return trade-off before NBN Co reaches steady-state operations. Government must be prepared to adapt the amount and nature of funding for market conditions and project uncertainty.

The majority of deployment cost is civil works related, so distance is a critical variable in an estimation of the overall cost of deploying fibre.

Ninety percent of Australia’s population occupies just 0.2 percent of the land mass. The final 10 percent includes premises in rural towns, at the edges of regional towns, and urban fringes.

The cost of deploying fibre rises as the distance between premises increases. The rate of increase begins to accelerate at around the 80th percentile; by the 93rd percentile, it costs 2.8 times the 50th percentile cost.

While deploying wireless is cheaper than fibre, low wireless uptake will drive costs up substantially. The study considers that Government should be willing to pay a premium to extend the fibre footprint given its superior performance.

A satellite network has three major cost components: satellite design and launch, gateways, and customer premises equipment (CPE).

A cost comparison of fibre, wireless and satellite deployments across the final 10 percent of premises. A satellite service is required since guaranteeing 12Mbps speeds under a fixed-wireless solution becomes prohibitively expensive to deploy beyond the 97th percentile.

NBN Co should offer a level of service between a ULL service and resale service, lowering barriers to entry across the market, yet providing scope for product innovation and differentiation.

To ensure healthy competition in Australian telecommunications, NBN Co’s monopoly at the active layer should be for a limited period only – for example, 8-10 years. Here’s how the industry transition could unfold.

To deliver superfast services, service providers must construct or purchase a range of inputs that form links in the connectivity chain from an end user to the core of the internet.

As well as adhering to ACMA’s Customer Service Guarantee Standard that outlines the maximum time it should take to activate a service, NBN Co should meet minimum installation objectives.

Likely coverage outcomes for new premises.

NBN Co cannot replace the role of Telstra as the retail service provider of last resort, so Government will need to determine the best policy response for ensuring that end users across the country have a service provider willing to offer them service.

Many other countries are currently rolling out fibre to meet the growing demands for speed and content, with uptake varying significantly. The Australian market is likely to be most similar to those of Japan, South Korea and the United states.

Several tradeoffs impact the specifications of an entry-level data product. The implementation study recommends an entry-level service in the range of 20Mbps.

Technologies that have a higher data rate and quality of service are able to support a greater range of applications. It is therefore not meaningful to discuss the provision of identical services at the same price over different access technologies, study authors wrote.

Broadband in Australia is constrained by usage-based pricing. The range in usage pricing of different ISPs suggest that the prices charged by many providers are well above the level that would be explained by the cost of providing data downloads.

Recommendations from the NBN Implementation Report, which was authored by KPMG and McKinsey & Co.

Linked Articles

Study: Penalties for those that compete with NBN Co Study: More fibre, less retail cost, for rural NBN users NBN Co: Prepare to build $3.5bn backhaul network Government claims NBN will pay itself off

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A graphical guide to the NBN Implementation Study

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