Br0kenTeleph0n3

Following the broadband money

How Australia and UK differ on approach to broadband

with 10 comments

 

It is interesting to compare the Australian approach to a national broadband network with the UK’s apparently strategy-free approach, if only because the projected costs are within spitting distance of each other, give or take a few billion pounds.

Analysys Mason’s original estimate for a national point to point fibre to the premises (FTTP) network for the entire UK was £28.8bn; for a GPON-based FTTP service, £24.6bn; for a GPON FTTP network with a 93% population coverage rate, about £19bn.

Following the release of the business plan for the Australian government-owned NBN Company this week, NBN now plans to spend AU$37.4bn (£25.2bn) to build a wholesale-only, open-access, fixed-line broadband network over 10 years, ending in June 2021. This is six months later and 3.9% more expensive than originally planned.
NBN will deliver a GPON-based FTTP service to 93% of the population or some 12 million of 13 million-odd homes, flats and offices. Fixed wireless will cover 4% of the rest and two satellites the last 3%.
NBN will buy the voice and data traffic from the former incumbent Telstra and second carrier Optus, and rent Telstra’s passive infrastructure.

The taxpayers’ contribution via the government’s equity stake in NBN will be AU$30.4bn (£20.5bn).

In contrast, the UK is relying on the private sector (i.e. BT and Virgin Media) to provide a GPON fibre to the cabinet (FTTC) service to two-thirds of the UK’s 26 million homes, and is offering £530m in taxpayers money, plus “matched funding” from local county councils and some funding from various European Union development budgets.

Further comparative figures emerged in a Linked In discussion group started by Nguyen Duc. As Duc notes, geo-demographic factors determine costs.

The UK has 62.7 million people in 244,000 square kms, with 80% living in urban areas. Almost 90% of Australians live in a necklace of towns and cities on the coast, leaving the vast majority of the continent’s 7.7 million square kms to goannas and kangaroos. As a result, the UK’s population density of 257 plays Australia’s 2.9 persons per square km.
The economies of scale available for servicing a population density almost 100 times higher clearly work. On a per household basis the bill for a 100% P2P FTTP UK would work out at about £112 per household, the Australian are paying £2,100, which is one reason the NBN is controversial.

However, NBN is finding cheaper ways to connect homes, and the communications services providers are getting behind it.

NBN reports it has resale deals with more than 40 telephone and ISPs who represent 94% of the fixed broadband market. Similar deals are in the pipeline for the satellite and fixed wireless services.

Consumers can choose between more than 500 NBN retail price plans. Fibre prices compare “favourably to existing ADSL packages (but with the potential for higher speeds and greater capacity over the NBN)”, the firm claims.

The increase in data traffic, up 80% in a year on both fibre and copper networks, is way beyond what was assumed originally.

NBN says if this trend continues, NBN will be able to reduce wholesale prices faster than originally anticipated.

It has already committed to keeping the wholesale price for key products fixed for the next five years, and to keep later increases below the rate of inflation.

“Should actual data usage growth exceed the assumed growth rate, NBN would be able to reduce wholesale broadband prices more quickly and still maintain the same overall return (7.1%) for Australian taxpayers,” says CEO Mike Quigley.

The Australians will pay more for their network, amortise it over a smaller population, expect to reduce wholesale prices, and still expect a decent return on their money. The UK would have paid £6bn less, had a bigger market, seen at most a 12 year payback, and still chickened out.

Any comment?

 

 

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Written by Br0kenTeleph0n3

2012/08/12 at 19:22

10 Responses

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  1. Chickened out is the right word. We are going to be so far behind. We need some men of grit. And fibre.

    chrisconder

    2012/08/12 at 19:32

  2. Could we see the same happen in the UK and what flavour of government would it need?

    Somerset

    2012/08/12 at 20:01

  3. Even if the vision of NBN is implemented on time and within budget, it is interesting that there is still quite a bit of debate within Australia as to whether the design of the programme will deliver what is needed in the short-term: http://www.afr.com/p/technology/nbn_delays_cause_victorian_problems_8n4J7CzhbZWgftXsJo91zJ

    beelore

    2012/08/13 at 08:54

    • People are right to be sceptical about promises from governments, both in the short and the long term. GPON, like ADSL, is unfortunately, is a contended service, which means that consumers may not get all the headline speeds they are promised. However, on the information to hand at present, it appears that the average Australian consumer stands a better chance of getting more ‘bang for their’ buck than does the average Brit, possibly in the short term, and definitely in the long term.

      Ian Grant

      2012/08/13 at 10:39

  4. Reblogged this on ytd2525.

    ytd2525

    2012/08/13 at 17:17

  5. No comment required Ian. Your last line says it all. Shocking lack of understanding from our government, especially now that the wet trout from the House of Lords has been firmly slapped their face.

    RobL

    2012/08/15 at 08:34

  6. Let’s hope that UK Telecoms Policy gets moved somewhere sensible once Hunt’s DCMS gets abolished in the Autumn. We need to take the long view here and think of Internet access as a national infrastructure asset, not an upgrade to a paid-off-long-ago tired copper access network. Exactly HOW we do that is an interesting question. I am not totally convinced by the Oz NBN model yet, but would like to see a more locally-diverse set of solutions emerge. And that is not BDUK in its current shape!

    Lorne Mitchell

    2012/08/15 at 09:32

  7. Ian,

    As always, incisive comments. To quote Van Morrison (“Take me back, take me way, way back”) our current mess could have been circumvented a long time ago if we followed the advice of John Harper in his 1997 work “Monopoly and Competition in British Telecommunications.” With remarkable foresight he postulated the formation of a national infrastructure company (not within BT – ironic as he was a BT Senior Manager at the time) whose main purpose was to provide a service platform for competing service providers.Perhaps the Aussies read the book?

    John Nolan

    2012/08/17 at 11:19

    • Thank you very much for that John. Here’s a link to John Harper’s essayabout his book, and Amazon has used copies, if anyone is keen to own the book. Perhaps there is a kind soul out there prepared to buy one a send it to Jeremy Hunt. It might yield the best ever return on an 8 investment. Harper says, “What really matters is competition. There can be no going back on the principle of competition in telecommunications. The problem is to make it work.” As you say, Harper’s solution is to treat the infrastructure supplier as a public utility and let the competition take place among downstream companies. In UK’s case, that suggests the government should prise Openreach from BT’s grasp, and make it the national dark fibre provider. But perhaps it’s too late for that. Anecdotal evidence suggests there is lots of unlit fibre all over Britain. So perhaps the thing to do now is still to separate Openreach from BT, but to allow other carriers to compete directly with it for wholesale customers, the way they do now for enterprise customers. Ofcom’s Active Line Accessstandard could well be a starting point for such a move.

      Ian Grant

      2012/08/18 at 08:02

  8. Excellent comparison Ian.

    I do think the costs per connected customer are closer than they appear at first sight between the UK and Australia.

    Now this population data is 11 years old, http://www.demographia.com/db-ausua.htm however the extreme urban skew is clearly apparent ie. roughly 14 Million people (70%) living in only 11600KM^2 (0.15%) of the total continental land area.

    Guy Jarvis

    2012/08/20 at 12:09


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