Remove 74% of the utility by reducing 25% capex

With much fanfare, NBN Co today released a redacted version of their 60-day Strategic Review intended to assist the Government in shaping their policy, or statement of expectations for the company.

In their strategic review, NBN Co canvased multiple scenarios which they have considered:

  1. Revised Outlook (continuing with current plans)
  2. Radically Redesigned FTTP (or — not so radical, but we'll get to that)
  3. FTTN short loop, FTTB large MDU
  4. HFC in HFC footprint
  5. FTTN and HFC (no demobilisation)
  6. Optimised Multi-Technology Mix

I want to focus on the first two and the last one, in terms of projected completion dates, capex, and technology mix (and subsequent influence of download access bandwidth).

Comparison of Revised Outlook
(continuing with current plans)
Radically Redesigned FTTP Optimised Multi-Technology Mix
Completed in 2024 2023 2020
Cumulative Capex
FY11-24
$56 billion $44 billion $33 billion
Opex (FY11-21) $23 billion $23 billion $27 billion
Mix of technologies
FTTP 100% 100% 26%
FTTN/dp/B 0% 0% 44%
HFC 0% 0% 30%

Revised Outlook

Typically referred to the "Labor NBN", this scenario essentially revises the projections in revenues and completion date (amongst many other things) under the current network design for NBN Co.

Revised Outlook (continuing with current plans)
Completed in 2024
Cumulative Capex
FY11-24
$56 billion
Mix of technologies
FTTP 100%
FTTN/dp/B 0%
HFC 0%

These new forecasts which were not remotely close to NBN Co's latest (but unpublished, nor approved) Corporate Plan which the Australian Financial Review leaked around election time. There's a lot to debate about in terms of the accuracy of the assumptions made by NBN Co and their independent auditors in the forecast and the Capex projections. I'm sure they'll be covered in the media in the near future, so I won't dwindle on them right now.

Ahh ha! We have a radical FTTP approach!

The new folks at NBN Co must have had a brain wave. They call it the "Radically Redesigned FTTP Network", so let's have a look at page 85 of the strategic review for information about it…

A radically redesigned FTTP deployment is estimated to cost   per brownfields premises passed82, representing a saving of   per premises passed relative to the Revised Outlook FTTP cost outlined in Section 2.
NBN Co Strategic Review — page 85

Typically, when you suggest cost savings… it'll make sense to show or demonstrate the savings made. But no, it must be an "on-water operational matter" (oops, was that my outside voice!?).

NBN Co outlines three key aspects which are supposed to be cost saving measures, shaving $12 billion dollars in Cumulative Capital Expenditure between FY2011—2024.

  1. Increased labour productivity
    • realisation of experience benefits through improved learning and feedback loops, systematised in the new delivery model
  2. Cost-efficient architecture and materials
    • reducing from 3 to 1.2 fibres per premises
    • increased use of aerial deployment
    • removal of PON protection
    • using smaller diameter fibre cables
    • use of gel-free cables
    • eliminating the battery back-up for the NTD
  3. Cost-efficient construction techniques
    •   (black blocks are known to save a lot of money)
    • aerial extension methods
    • alternative customer drop implementation techniques optimising fibre testing at multiport
    • usage of direct bury cable

Interestingly enough however, both Increased labour productivity and Cost-efficient architecture and materials contain aspects that were being considered to be implemented for the preparation of the 2013-2016 corporate plan.

realisation of experience benefits through improved learning and feedback loops, systematised in the new delivery model

This certainly sounds like something that should be done progressively as a company optimises its processes; is it really that radical?

reducing from 3 to 1.2 fibres per premises… alternative customer drop implementation techniques optimising fibre testing at multiport… using smaller diameter fibre cables…

These optimisation technoqies sound interestingly familiar… where did I hear them…?

I am talking about things that had already been identified, like smaller diameter cables that had already been designed by cable companies, reduced and more efficient testing, smaller footprint multi-ports that had already been designed, reductions in fibre counts and corrections in planning tools that allowed smaller mandrels and greater fill ratios for ducts. […] At the end of September, NBN Co was on track to implement these cost reductions, as any sensible company would. - See more at: http://telsoc.org/event/national/2013-12-02/mike_quigley_reflects#sthash.83Skq4AG.dpuf— Mike Quigley
Source: http://telsoc.org/event/national/2013-12-02/mike_quigley_reflects#sthash.83Skq4AG.dpuf

As Mike Quigley (former CEO of NBN Co) had indicated in his TelSoc speech on the 2nd Dec, changes are continually being made to save costs. Yes, any sensible company would look to save costs and improve/optimise processes. Did the strategic review consider these changes which were already in the process of being implemented into their Revised Outlook — or did they inflate the figures and forecast to aid in political motives?

Radical changes? I say not. All I can say is   (again, black blocks are known to save a lot of money)

Radically Redesigned FTTP
Completed in 2023
Cumulative Capex
FY11-24
$44 billion
Mix of technologies
FTTP 100%
FTTN/dp/B 0%
HFC 0%

But wait, we can save 25% of that!

Here's a deal, Malcolm! We'll save you 25%… but we'll only give you 24% of what you would have had. This is what I mean:

Comparison of Radically Redesigned FTTP Optimised Multi-Technology Mix
Completed in 2023 2020
Cumulative Capex
FY11-24
$44 billion $33 billion
(25% reduction, $11 billion over 23 years1)
Opex (FY11-21) $23 billion $27 billion
(17.4% increase, $4 billion over 10 years2)
Mix of technologies
FTTP 100% 26% (reduction of 74%)
FTTN/dp/B 0% 44% (increase of 44%)
HFC 0% 30% (increase of 30%)

The geniuses at NBN Co figure it's better for them use a mix of technologies… to save 25% of capex; that is:

  • only build 26% of the FTTP network
  • build 44% of a node-based technology
  • ignore 30% by reusing the Telstra/Optus HFC network

And we haven't even looked at the extreme contention on a HFC network — especially if it becomes the NBN, nor the issues with FTTN — be that distance, poor copper, remediation/maintenance costs… (the list just goes on and on…) Have we even factored in the costs of purchasing the copper or the HFC… or are they gifts from Telstra and Optus?

Yes, we save 25% by only delivering 26% of a full FTTP network. Clap clap for Malcolm, FTTN/HFC is definitely the way to go *sacrasm*.


I'm sorry — saving 25% of capex just doesn't cut it for me if you're only going to deliver 26% of a network. Go back to the drawing board, Malcolm — this is why we need the NBN.


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