Total NBN costs ‘no more than $27B’ – Axia chief

James Riley
Wednesday, 05 August 2009 16:24

Business IT - Technology

The National Broadband Network roll-out would cost considerably less than Government’s back-of-envelop forecast of $43 billion at no more than $27 billion, Canada-based Axia’s global chief executive Art Price has told a Senate committee.

Axia, which has won government contracts to build and operate open access networks in Alberta, as well as France and Singapore, was one of the bidders in the Rudd Government’ s cancelled fibre to the node (FTTN) RFP process.

And the company’s CEO Art Price says the disappointment of the failed RFP is tempered by the bigger opportunity presented by government’s new plan for a more ambitious fibre-to-the-premises network.

Speaking after appearing at a Senate select committee hearing investigating the NBN in Sydney, Price told iTWire that Axia continued to work to secure a major role for itself in partnership with government in the construction, ownership and management of an open access wholesale network.

Price says the project’s major capital cost would be in delivery the fibre to the home portion of the network, at about $20 billion.

The “Community Interconnect Grid” – or the national backhaul and trunk routes connecting communities – would cost between $5 billion and $7 billion, according to the Axia costing model.

The network would require financial support until it had achieved penetration of 60 per cent of end-user customers, with average revenue per user for simple ISP access and voice services of between $50 and $60, and little more than $100 with bundled value-adds like IP video and IPTV.

“The challenge is to structure the project so that it is attractive to capital markets, and to provide value for money to the Government,” Price told iTWire.

“We bring intellectual capital. We come to the table with clear next-generation expertise, and we know what it takes to bring the capital markets to the table,” he said.

“We see this project being right in our sweet spot. First, the Government is committed to the project at the executive level. That’s our first criteria.”

“And they are committed to an open access network – that’s our second criteria.”

“We have found that the process really starts when the Government says they are going ahead whether the incumbent likes it or not. That’s the first step, because then its up to the incumbent to deal with that fact,” Price said.

“We believe that Government has made that decision and are absolutely committed. It is not absolutely clear that the incumbent understands that yet.”

The passive component of the network was simply a long term civil infrastructure. The cost of capital in the initial installation and the use of  existing infrastructure are the dominant drivers of cost, he said.

But the reoccurring maintenance cost of fibre to the premises is relatively low – and lower than the legacy network.

The key for wholesale FTTP investments to be viable is to ensuring that market penetration covers the cost of capital for the implementation of the fibre to the premises and its associated infrastructure. Price told the Senate committee this financial scenario was equally true of the copper network when it was implemented under monopoly conditions.
 
Price told iTWire it was essential that in the construction phase that the architects are able to get “efficient use of existing infrastructure.” That is, the network needs cost effective access to ducts, telephone poles, water and sewerage systems, electrical ducts – as well as the acquisition of existing telecommunications infrastructure where it made sense.