NBN Co numbers suggest FTTP build could be done for close to Labor's budget

NBN Co CEO Morrow accidentally debunks Turnbul''s cost blowout story

The real cost of completing Australia's National Broadband Network (NBN) in its originally-planned fibre-to-the-premises configuration may well have been close to the $AU43 billion first budgeted, according to data presented by NBN Co's CEO and CFO to a Senate Estimates hearing.

Yesterday, CEO Bill Morrow and CFO Stephen Rue presented a remodelled cost-per-premises estimate to the government. In the new model, the cost of connecting premises includes cost inputs formerly excluded from the calculations under former CEO Mike Quigley.

Hence, lease payments for access to Telstra infrastructure such as pits and ducts – treated as operational expenditure under the former management – and internal labour costs have been incorporated into the build cost estimate.

With that change, the cost per premises presented to the senate is $4,316 per brownfields premises connection – rather than the average $2,400 provided by Mike Quigley in 2013.

The new cost model also includes the fully allocated cost of connecting customer traffic via the retail service provider (RSP) to the NBN Co transit network – something also treated as opex under the old cost model.

While this might be seen as increase in NBN build costs, The Register notes that the new cost-per-premises yields a fibre build for 11 million premises (the NBN's original target) of $AU47 billion* – around 10 per cent higher than the former government's $AU43 billion build budget, but a long way short of the $97 billion for a fibre rollout bandied about before Australia's 2013 election.

NBN Co describes the model Morrow and Rue presented yesterday as representing "fully allocated costings" that represents "the true and full cost of building the network" in greenfields, brownfields and fixed wireless areas.

Morrow said there was a small increase in per-premises brownfields costs between April 2013 and December 2014. This, he attributed to rising contractor rates and remediation work on the Telstra infrastructure.

The cost fell, however, between June 2014 and December 2014, reflecting the impact of new deployment practises (such as using smaller splitters and thinner cables).

NBN Co also revealed at the Estimates hearings that it is re-starting negotiations over the acquisition of Telstra's South Brisbane fibre-to-the-home network. That network was built when a hospital redevelopment started in 2011 and completed in 2013 required the relocation of the Telstra exchange.

The two parties halted negotiations over South Brisbane while they worked on revising the Telstra-NBN Co heads of agreement to take into account the then new government's multi-technology-model that incorporates HFC and fibre to the node. ®

*Bootnote: Vulture South's $AU47 billion estimate comprises 93 per cent of 11 million premises at the latest cost of $AU4,316 per FTTP connection, with the remainder at $3,637 per connection. ®

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