Friday, 17 August 2018 10:18

NBN Co cost per premises shows little movement over a year Featured

NBN Co chief executive Bill Morrow at a point-of-interconnent in Mount Cotton, Queensland, in 2016. NBN Co chief executive Bill Morrow at a point-of-interconnent in Mount Cotton, Queensland, in 2016. Courtesy: NBN Co

Many statistics in the NBN Co's results for the full-year 2018, announced on Thursday, show an improvement, but one area where things appear to be either worse or static is the cost of installation per premises.

The cost for setting up a full-fibre connection in a brownfields site was $4403 in June 2017 – and just two dollars lower, at $4401, by June 2018.

In the case of full-fibre greenfields connections, the cost per premises was $2393 in June 2017 and decreased slightly to $2255 a year later.

Fibre-to-the-node connections cost $2174 in June 2017 and rose slightly to $2244 by June 2018. HFC costs per premise increased a bit more, rising from $2258 in June 2017 and costing $2412 a year later.

cost pre premises

In the case of fixed wireless, the cost of $3569 in June 2017 increased to $3757 in June 2018.

Costs for provisioning services per premises have been known to generally fall as the rollout of a network progresses.

An NBN Co spokesperson said the costs per premise reflected the "complexity of the build here in Australia".

"We are connecting the entire country and Australia is a unique environment with vast cities, people living on big blocks of land and others living in regional areas or remotely - and our costs to deploy the network reflect this. In addition to the capital costs, CPP (cost per premise) also includes leasing costs associated with the initial construction of each access network.

"The reasons for CPP increases were:

"The increase in FttN CPP over the year was primarily driven by higher construction and connection cost associated with more complex build requirement during the first half of the year.

"The increase in HFC CPP since June last year reflects the inclusion of pre-ready to connect network optimisation and node work to be performed to facilitate a better experience for end-users connected to the NBN HFC network. This includes some costs that were forecast in future operating expenditure but (are) now brought forward into capex due to the timing of the spend.

"The Fixed Wireless CPP increase during the year reflects more complex build requirements in the latter part of the program and the extension of the network to less densely populated areas across the country."

Asked for his take on the cost per premises, Dr Mark Gregory, an associate professor in network engineering at RMIT University, said: "If you look at the rollout construction costs you would anticipate that the cost would decrease over time. In New Zealand the cost of rolling out fibre to the premises has fallen by about 40% over the past five years.

"NBN Co's costs do not appear to reflect normal practice, and this could be attributed to the construction approach that has been adopted, additional remediation works associated with the legacy copper and HFC networks or other issues being experienced within NBN Co.

"Overall, the shift to using the legacy copper and HFC networks has been unsuccessful and the end result has been higher costs and longer rollout times than what should have occurred."

Robin Eckermann, who led the creation of TransACT and served as its chief architect during the 2000-2003 network rollout, said it was not necessarily valid to assume costs per premise would come down further.

"Costs can vary quite widely from one area to another, depending mainly on the environment in which the network is being deployed and the amount of civil work that is needed," he said. "Whilst cost per-premise-passed for the different technology types are averaged down to a single figure, that figure is likely to encompass a fair range of variability.

"I think this has been demonstrated by some of the extraordinary costs which were disclosed about some of the early and difficult FttP connections. If NBN Co has been deferring attention to some of the more challenging environments, costs could well rise."

Eckermann said there were also factors that could contribute to cost reductions over time. "With the rollout in full swing, there should be healthy economies of scale – and efficiency should be at or nearing a peak with all of the parties involved having gained plenty of experience and refined their practices accordingly. We certainly observed this over the three-year term of TransACT’s FttK/VDSL rollout back at the turn of the century.

"So whilst some further economies may be achieved, I personally wouldn’t like to bet on any major reductions at this stage. I commonly hear the argument that costs (for example, for FttP) *should be* much lower than the figures cited by NBN Co – referencing case studies overseas that have little in common with Australia’s unique environment. In most cases, such arguments are put by academics with no real-world experience, or for political and/or ideological reasons. Costs are what they are!"

Graphic: courtesy NBN Co


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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.



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