Exclusive: NBN Co withholds fibre upgrade price

NBN Co has refused to reveal the price paid by a Tasmanian resident to receive a fibre connection outside of the planned footprint because the figure could unleash a chain of events that brings the network to a grinding halt.

The "extreme" worst-case scenario is detailed in a freedom of information (FoI) determination issued to iTnews after a three-month investigation.

iTnews can reveal that eight Tasmanian residents set to receive wireless or satellite connections under the NBN requested quotes from NBN Co to be upgraded to a fibre line, under a trial program kicked off by NBN Co last year.

Of those, only one resident accepted the quote, which is payable in four installments.

iTnews lodged an FoI request in December seeking the price paid, on the basis that it provides an important case study of the cost of personally financing an NBN fibre extension.

However, NBN Co knocked back the request yesterday in a 10-page decision [scribd] that foreshadows grave consequences for the network should the price ever be made public.

NBN Co alleged that revealing the price paid by the Tasmanian resident could:

• Undermine future tender processes;
• Reveal NBN Co's business model and commercial strategy, "making the company more vulnerable to current and future competitors";
• Make NBN Co "potentially less attractive to investors when the company eventually privatises";
• Violate commercial confidentiality. The price is known only to "relevant staff, contractors and the Tasmanian resident" who has signed a non-disclosure agreement;
• Lead NBN Co to be sued by its construction partner, if the price was used to reverse engineer rollout costs; and
• Lead to greater secrecy in relationships between NBN Co and its partners.

"NBN Co's ability to engage high quality and competitive business partners would be undermined," the company said.

"It follows that NBN Co's negotiating position would be compromised, along with its capacity to generate shareholder value.

"In the extreme, it may mean that NBN Co would be unable to proceed with its mandate to roll out the national broadband network, which would have a negative impact on the Australian public."

Identical "extreme" reasoning was used to knock back a freedom of information request by Internode seeking access to NBN Co's contract with Telstra earlier this month.

Read on to page two for a copy of NBN Co's price quote method and to see why cost - rather than technical feasibility - likely dissuaded residents from paying their own way to fibre.

Those familiar with NBN Co's processes told iTnews it would be possible, but difficult, to provide a fibre extension to homes lying just outside of the planned network boundary for under $10,000.

The FoI determination reveals NBN Co developed no formal documentation for the way it generated quotes given to the eight Tasmanian residents.

NBN Co said it instead used a "quoting tool - combined with information from commercially negotiated agreements – to calculate" the prices, including the one that has been withheld.

A summary of the quote method provided to iTnews shows NBN Co and third party contractors attempted to determine the technical viability of a fibre extension to a single house or community based on:

• Distance from the nearest fibre distribution splitter
• Safety and environmental factors, and
• Required approvals for access to property and infrastructure.

NBN Co fibre network extension trial quote method

Any resulting quote would involve the total cost of new infrastructure, materials, services and processes carried out to develop and install the extended fibre cable, including third party costs.

"Each quote was based on the exact location of the premise requesting the extension," according to the quote method summary provided by NBN Co.

Sources said the biggest factor determining a fibre extension would be the cost of installation and ongoing infrastructure rental.

Most of the quotes would likely be technically feasible using aerial - rather than underground - cabling in the Tasmanian sites included in the feasibility trial.

A single "fibre split" from a nearby fibre distribution hub could be extended by up to 20 kilometres without signal degradation.

Materials, too, would remain cheap and likely already covered within existing supply contracts negotiated by NBN Co.

"It's the installation costs that is the key, and the ongoing rental cost of the space. I don't know what they would negotiate with [Tasmanian utility Aurora Energy] on that," one source said.

"If it wasn't in a fibre footprint areas, it's basically going to be a bespoke build so they're going to charge actuals plus a margin, I'd imagine, which could get quite expensive. Think about trucks going down the street with cherry pickers, having to put up aerial cabling and then you've got to get access to the poles and rental of the poles, it starts heading up quite considerably to run a single fibre."

Based on the information available, including the technical feasibility of rolling out fibre in distances up to 20km, it appears many of the quotes delivered to Tasmanian residents are likely to have been rejected by the residents based on the high cost of the extension.

An NBN Co spokeswoman said some of the eight residents involved in the trial rejected the quote once they were educated about the speed and capability of the fixed wireless connections they would otherwise receive.

Read on to page three as NBN Co caves under pressure to formalise its fibre extension policy.

Despite garnering one successful installation under the fibre extension trial, an NBN Co spokeswoman said the company considered the program a success.

A formal process to quote fibre extensions will be released in "the near future", the spokeswoman said.

But NBN Co remains months behind recommendations by a Parliamentary committee in November to tackle it "as a matter of urgency".

NBN Co chief executive Mike Quigley said in a letter [pdf] to committee chairman Rob Oakeshott that costing individual fibre extensions is a "significant diversion of resources" and would only be conducted in those areas "contiguous with our rollout and when we receive an application under a properly defined process".

Continued calls for a formal process by the committee and by communities wanting fibre instead of fixed wireless connections appears to have pushed NBN Co along.

"We're in the process of finalising a formal policy on network extension," NBN Co's spokeswoman said.

She ruled out the possibility of reference pricing for residents interested in receiving a quote.

Instead, "all quotes will be based on actual rather than reference prices to reflect the fact location, distance and accessibility will differ depending on the specific area".

It is understood NBN Co has engaged in discussions with some Tasmanian councils - including those governing the Triabunna and George Town second-release sites in the state's north - to consider larger extensions to the fibre footprint on a council-pays basis.

At least two Tasmanian councils have also discussed the issue with federal regional development and local government minister Simon Crean.

The discussions come after NBN Co developed a specific quote for the remote town of Julia Creek, at the request of Parliament NBN committee member, Ian Macdonald.

The company determined it would cost $1.14 million to deploy fibre across power poles to 271 premises in the town, which fell below the 1000-plus premises minimum usually required to be involved in the 93 percent fibre footprint.

Community concerns over the extent of the fibre footprint in Tasmania has continued to dog NBN Co's progress in the state, with councils and rallying communities lobbying for further fibre to other areas.

One group in South Hobart had pushed NBN Co, their council and Communications Minister Stephen Conroy's office to review the fibre footprint established for the region, which had been limited to 2400 premises in the second stage of the rollout.

The area was slated to receive detailed construction maps last month, covering up to an additional 22,000 premises in the region as part of NBN Co's first-year rollout schedule.

Stay tuned to iTnews.com.au for a full analysis of the FoI decision and its implications.