NBN v UFB: Migration is the key

What will happen to the National Broadband Network after the Australian elections in September?

Should there by a change of government after the Australian elections in September, there will be a major review of National Broadband Network (NBN) operations and progress to date. The opposition has signalled personnel changes in the management and the board of NBN Co.

What will it mean for New Zealand which here the government's is currently rolling out the Ultra-Fast Broadband (UFB) Initiative?

It won't be as significant as some might think, according to David Kennedy, research director and principal analyst at Ovum.

That's because there are significant differences in approach, he says.

"With a 75 per cent target, the New Zealand approach has been more modest and more manageable than Australia's. In addition, the bulk of the New Zealand rollout is in the hands of an experienced network builder and operator, Chorus, in contrast to the NBN Co., which was a start-up in 2009.

"The one big advantage of the Australian approach is a clear process for migration to the new network. In fibre-to-the-home areas, copper will be decommissioned, forcing a migration. In the opposition's FTTN areas, copper will be incorporated into the new network, forcing a migration.

"But in New Zealand, two separate access networks will operate side by side for an indefinite period. This has already caused problems; the recent pricing decisions for UCLL and UBA services have the potential to disrupt migration to FTTH.

"The underlying issue is that New Zealand cannot afford to operate two access networks indefinitely and, therefore, a clear migration strategy is necessary."

Kennedy said the difference between the government and the opposition is principally about two things. First, it is a disagreement about the technology mix for the access network. Second, it is about the role of infrastructure competition in the industry.

"But it's important to remember that the two sides have a lot in common. They are both committed to a wholesale-only, national access network, structurally separated from the rest of the industry, and reaching 93 percent of the population. The remaining 7 per cent will be served by wireless (TD-LTE) and satellite broadband. These elements of the government's policy will be preserved, irrespective of who wins in September. This represents a major shift in telecommunications policy since 2007.

"The difference that has attracted the most attention is the use of FTTN/VDSL with vectoring that the opposition is proposing for most of the fixed footprint, rather than 93 per cent FTTH as proposed by the government.

"VDSL, it is proposed, will deliver 50Mbps to 100Mbps once vectoring is implemented. This choice is driven by a cost consideration; the opposition claims that this technology can meet all foreseeable needs, and will be much cheaper to implement.

"The opposition has estimated that the total cost of their project will be $A29 billion, including both capital and operating costs over the life of the project. The government's project is costed at $A37 billion, but a lot of analysts have questioned whether this can be achieved, given the significant delays that the NBN is experiencing."

He said the opposition would also allow other operators to build broadband infrastructure.

This is most likely in urban areas, where competition would drive wholesale prices lower than in areas where the NBN Co. was a monopoly.

"This is in contrast to the government's scheme, where alternative fibre networks are effectively banned and uniform national wholesale pricing has been imposed.

"My assessment is that FTTN/VDSL is an acceptable technology choice for Australia, for several reasons. First, rolling out FTTH to 93 per cent of the population, compared to 75 per cent in New Zealand, pushes up the cost of the network a lot. I agree that the government's $37 billion price tag is optimistic, because problems with quality and speed of rollout continue to plague the project.

"The NBN Co was forced to issue a revised Corporate Plan in August 2012, and in recent months they have been forced to delay targets again. I estimate they are around two years behind their original targets, as set out in their first Corporate Plan. Second, there is no demonstrated demand for the higher speeds that the FTTH can deliver, and the emergence of such demand is years away [if ever].

[x/hd] Counter argument

"The growing popularity of FTTN/VDSL technology in international markets suggests that a lot of other operators have made the same judgement.

"A counter argument is that FTTN investment would have to be written off if FTTH is needed in the future. However, it would still be possible to reuse part of the FTTN investment, especially if it is designed and built with a future upgrade in mind.

"In addition, any future FTTH upgrade is probably eight to 10 years away in most of the market. By then, much of the value of the FTTN infrastructure would be depreciated, meaning that the write-down would be significantly smaller than the original cost of rollout.

"So I don't see the additional costs of a future FTTH upgrade as a compelling argument against a 'FTTN first' strategy.

"And it is also important to remember that over 20 per cent of the market will already be FTTH in 2020, thanks to the early NBN Co. contracts [which the opposition will honour] and the installation of FTTH in all new developments."

Kennedy said he is unconcerned about the possibility of some geographical variation in prices, because the opposition will impose maximum wholesale prices to protect consumers.

"They also argue that their network will be cheaper to build, and that wholesale prices will therefore be lower across the board. When combined with the likelihood that FTTH costs are likely to be higher than projected, this argument carries some weight. And I also think that some competition will provide a useful benchmark for the regulator to set those maximum prices."

IDC New Zealand research manager Peter Wise, similarly doesn't see any "huge effects" for New Zealand should the Australian government change.

"We're well ahead of Australia. Most of the money here has been around the last mile connection. Australia is squabbling over the affordability of that.

"If the coalition goes ahead, they will end up with more of a backward model than us."

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3 Comments

Anonymous

1

What about the places where Chorus is removing overhead copper and replacing it with fibre? People on Telecom in this case are unable to get UFB as Telecom requires copper AND fibre at this point?

Carl

2

I have been since early March 2013 trying to get Fiber connection to my apartment runs as follows.....
Fiber laid in my street past my apartment block, the Chorus exchange is 800 meters from the building.

1) Contacted my ISP (Orcon been with them for 7 years) and they put in a request to Chorus, who respond sorry fiber not available there. Repeat the process a number of times over two weeks same response.
2) Went to the Chorus exchange and got hold of a manager who looked into it and he came back with yes it is available, but our data base is not recording it as available. Please get your ISP to make a paper request to Chorus for a connection. After another two weeks, I am finally told yes we can and will connect you.
3) I have had to go about getting and chasing Chorus and their contractor who will remain nameless for now, to get the work moving.

Now the FUN starts.
1) They finally get the resource consents, and get an installer to lay fiber in the building all floors, and to my apartment, Completed.
2) Nothing happens so I chase Chorus and get told they have to get another contractor to did a trench to lay from the street to my apartment. Finally happens (aside took two worker six hours to dig a trench 6 mtrs.).
3) More lag as they then have to get another contractor to lay the cable from the street to my apartment finally gets done.
4) More delay as they can connect me, NO another contractor has to lay the cable from the basement to the Control office where the connection between the street and the building risers has to be done Completed.
5) At present 7 weeks later I am waiting for the installer to come and put in the hardware and connect the floors, then my apartment, Still waiting.

And the Government is wondering why the slow uptake, I say look no further "CHORUS". And as a aside if you go to any ISP's site and make a request for fiber connection (I tried 15 minutes ago) for my building I still get sorry Fiber NOT available.

Laughable and very sad.

Anonymous

3

If the Coalition is elected in Australia they'll have in 5 years time what NZ has already had since 2011, a world class fttn/fttc network.

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