NBN Co defends rollout costs with new data

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NBN Co defends rollout costs with new data

Pegs per-premises brownfields fibre cost at $2300.

NBN Co expects a minimum $2300 per premises cost to deploy fibre in built-up areas of Australia this year, but says it can drive that even lower over time.

The company today made in-depth disclosures of costs, take-up rates and usage statistics to the Joint Committee on the National Broadband Network, which convened in Sydney. (pdf)

CEO Mike Quigley used the disclosures to back corporate plan estimates of capital and operational expenditure on the network — at a time when critics of NBN Co are predicting multi-billion dollar blowouts in costs.

The expected per-premises cost for the brownfields rollout is based on 138 fibre serving area modules (FSAMs), where work started this year.

The total per-premises cost comprises three components: construction from the regional fibre access node (FAN) to a "multiport" in the street, given a range of $1100 to $1400; then, from the street to house or unit, $1100; and internal design works, which NBN Co put at "just under $100 per premise".

That puts the per-premises cost in the brownfields fibre footprint this year at between $2300 and $2600.

Having a contractor hit harder rock than expected could be reason enough for the cost to be at the upper end of the range.

"We have identified rock and soil types in general, but sometimes you have a small variation — you find a little bit more where you didn't expect it, or didn't find it at the design stage," NBN Co chief operating officer Ralph Steffens said.

The portion of cost allocated to works between the FAN and street are technically still estimates (officially, "estimates at completion") — as NBN Co are still awaiting final pieces of data from contractors before those costs can be declared as 'actuals'.

But Quigley said that did not impact the reliability of the figures.

"We have been a little reluctant to put some numbers on the table until we have some confidence in them," he said.

"I know we have been criticised for not coming forward with numbers, but ... whenever we put numbers forward, we wanted to do so when we had some confidence in them and they're not just wild guesses or 'off the top of our head' estimates.

"So where you've got estimates at completion, these are numbers that we have considerable confidence in given where we're up to in that build. We wouldn't put them forward if we didn't have some confidence in them."

The per-premises costs represent a large improvement on the costs from trial and first-release sites. They also put NBN Co squarely on target in terms of the costs it estimated in its corporate plan.

Quigley sees further room for cost reductions as volumes continue to grow.

"We are not going to stop here — we are going to work to drive these costs lower," he said.

"These are our best estimates today but we're not at the bottom of the cost curve at this point."

Speed demons

NBN Co's figures also show the network's end-users are taking up higher speeds in greater numbers than initial forecasts.

Where NBN Co expected to have 18 percent of its user base on the top-of-the-line 100/40 Mbps product, the proportion is actually 31 percent.

This is largely because NBN Co's forecasts had most users taking up the base 12/1 Mbps service. In fact, 39 percent of the user base opted for 12/1 Mbps, compared to a forecasted 49 percent.

The popularity of the 100 Mbps service "frankly surprised us a little bit", Quigley said.

Usage statistics also show the average NBN fibre user requires over 60 GB in quota, incorporating downloads and uploads.

The average NBN fibre user is downloading 47 GB a month from the internet, and uploading 14 GB.

NBN Co contrasted this with Australian Bureau of Statistics figures showing the average Australian fixed-line broadband user currently downloads 31 GB a month. Uploads aren't tracked.

Ludlam, Turnbull weigh in

Greens Senator Scott Ludlam praised NBN Co for its release of hard data on the rollout.

"What we've seen today finally from NBN Co is some facts, hard data on the table about the cost of the rollout," he said in a press conference outside today's hearings.

"They are a long way behind, [but] it's interesting now to see the costs are trending to where they said they would be in 2010. That's pretty encouraging.

"It [also] blows out of the water the Coalition's made up number that the NBN will cost the taxpayer $90 billion.

"That's been shown to be completely baseless today and I think the thing that comes through the most strongly for me is we need to stay the course on the NBN."

Opposition communications spokesman Malcolm Turnbull cast doubt on the costs in a separate press conference, saying he was "reasonably sceptical" over the gap beween estimated and actual costs.

"The NBN Co has not had a great track record of meeting any of its estimates to date, so I think they will [require] further consideration and examination before people will take them seriously.

"I think in terms of the cost of connecting premises at this stage of NBN Co’s life, given its failure to meet so many of its estimates particularly in terms of the rollout, I don’t think Australians will be satisfied with anything less than full audited financials."

Additional reporting by Allie Coyne.

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