Phoney Tony has released his ground breaking NBN policy today on Betamax for those of you that are interested.

The guy from Marathon just run up here to tell us.

Can Australia afford the Coalition’s NBN?

Consumers know well that buying a cheaper product often costs more in the long term when the cheaper product has to be replaced. This is true of the Coalition’s vision for the National Broadband Network (NBN): it may cost less in the short term, but not in the long term.

The Coalition will save around A$14.6 billion by replacing Labor’s fibre-to-the-premises (FTTP) version of the NBN – which, as the name suggests, delivers fibre optic cable to directly to premises – with a cheaper, fibre-to-the-node (FTTN) alternative – which involves delivering optical fibre to a shared “cabinet” (or node), then connecting the cabinet to residential and business premises using existing copper telephone wires.

But careful analysis of the details of the Coalition’s NBN policy shows its FTTN network does not provide good value for money.




As the Coalition is quick to point out, fibre-to-the-node technology is used in many parts of the world, but there are some major differences between the Coalition’s NBN business model and the model being used by overseas operators.

One difference is that Telstra owns the existing copper network, over which the FTTN technology will operate. In overseas deployments of FTTN, the company deploying the entire network is typically the incumbent operator that owns the copper network.

Deploying FTTN is clearly a good alternative for these companies because it enables them to extract as much value as possible out of the copper network before it inevitably becomes obsolete.

Unlike FTTN deployments elsewhere in the world, the Coalition’s business model requires that a full commercial price be paid for access to the copper network. The Coalition hopes it will obtain access for the same amount (A$11 billion) NBNCo has agreed to pay for access to Telstra’s ducts and pits.

That comes to approximately A$1,000 per premises, and pushes the Coalition’s NBN cost up to about A$29.7 billion, or about A$2,320 per premises. It will likely be the most expensive FTTN deployment anywhere in the world.

What will the Coalition get in return for its A$11 billion? It certainly won’t be a shiny new Ferrari – rather, a rusty FJ Holden that requires constant maintenance, love and attention to keep it running.




Telstra has not disclosed the details, but there is anecdotal evidence maintenance costs for the ageing copper network could be as high as A$1 billion a year. Added to that, parts of the copper network will require remediation because very high bit-rate DSL (VDSL) technology – which will be used in the Coalition’s network to send data over the telephone wires from the node to the premises – does not always work well over an aged copper network, with problems such as:

• intermittent degradation due to water ingress
• poor wiring
• old technology fixes such as bridge taps and pair gains, which degrade performance.

While no-one (including Telstra) knows how much it will cost to remediate the copper network to make it VDSL-capable, the cost is likely to be a significant hit on top of the A$1 billion a year ongoing maintenance costs.

Facilities-based competition

Another problem with the Coalition’s policy is that it permits facilities-based competition – whereby multiple providers of internet connectivity can connect customers via competing parallel networks. An example of facilities-based competition is the parallel hybrid-fibre-coaxial (HFC) networks owned by Telstra and Optus that run alongside each other on the power poles in many suburban streets in Sydney and Melbourne.

Facilities-based competition might seem like a good idea on the surface, but could have serious implications for the cost to the taxpayer.




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