Revised NBN plan knocks price tag to $39.3b

Revised NBN plan knocks price tag to $39.3b

John C. Tanner  |   December 21, 2010
Australia’s National Broadband Network (NBN) project will cost slightly less than expected but will take three years longer to build and may come with basic retail connections priced at almost $50, according to its business plan released Monday.
The NBN Co. business plan, released by Communications Minister Stephen Conroy in Canberra, says the NBN project will cost A$39.5 billion ($39.3 billion), down from the previous price tag of A$43 billion.
The plan estimates that total equity and debt funding for NBN would be A$40.9 billion. The government will provide A$27.5 billion in equity, and NBN will borrow A$13.4 billion from financial markets between 2015 and 2021.
The plan also projects an internal rate of return of 7.04%, assuming 70% take-up of the service by 2025, and its first profit by 2021.
The plan also involves changes in the network design, with NBN Co agreeing to adopt recommendations from the Australian Competition and Consumer Commission (ACCC) that the network include at least 120 Points of Interconnect (POI) in a semi-distributed architecture.
The original design incorporated just 14 POIs in a centralized architecture, which NBN Co had said would minimize wholesale input costs for access seekers, eliminate a single point of failure along the fiber distribution hub and provide rapid traffic growth in all backhaul links.
However, the ACCC objected to the centralized POI plan due to competition concerns.
The NBN Co document says it has revised the network plan to conform to the ACCC’s requirements, but that doing so would have an impact on “deployment timing, costs and end-user take-up”.
NBN Co expects for the network to pass 1.7 million homes by 2013, with 570,000 actually using the service by then.
One major change in the plan is a longer rollout time. The plan says the network – which will cover 93% of the population with fiber, with the remainder covered by wireless and satellite connectivity – will take nine and a half years to build, which puts the completion date at 2021 rather than 2018.
Senator Conroy said the delay was due to a government promise to connect two million homes scheduled to be built this decade, according to the Sydney Morning Herald.
Senator Conroy said basic wholesale access packages will start at A$24 a month for a 12-Mbps connection, but declined to say how much the retail price would be, saying that was up to retailers to decide, and that the ACCC would monitor competition ‘‘to address any failure in these markets to deliver competitive outcomes, particularly in regional areas,’’ the Herald reports.
However, the Herald also claims that the A$24 wholesale price could translate to retail prices between A$53 and A$58, compared to basic DSL packages available now for around A$30 (albeit at far slower data speeds).

NBN Co president Mike Quiqley said the business plan still hinges on finalizing a A$11 billion deal between NBN Co and Telstra to use the incumbent telco’s fixed-line network, the Herald reports. Quigley said discussions with Telstra would continue through the holiday break with a goal to seal the deal in January.

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