Feds arrive at $2500 to connect fibre to new homes

By Brett Winterford on Mar 19, 2010 8:17 AM
Filed under Communications

Greenfields legislation introduced to Parliament.

Developers should expect to pay some $2,500 on average to connect a new home with fibre for the National Broadband Network, and between $400,000 to $700,000 for backhaul connections, the Federal Government revealed today.

The approximate costs were revealed as part of an explanatory memorandum into the Telecommunications Legislation Amendment (Fibre Deployment) Bill 2010, introduced to Parliament today after several months of industry consultation.

The Department of Broadband, Communications and the Digital Economy came up with the $2,500 estimate for an FTTP (fibre to the premise) connection as "a midpoint figure amongst a number of available estimates" given by developers and network builders in existing estates, which ranged from $1,500 to $3,500.

The department's estimates were also "informed by international benchmarks, consultations and expert input" and should be "considered conservative."

The estimates were also developed independently of the Government's NBN Implementation Study, which it has chosen to withhold.

Broadband Minister Stephen Conroy had previously estimated that the cost of connecting a house could be more like $1,200, describing estimates of $2,000 to $3,000 per lot as being biased by "colour and movement".

The Government's cost estimates are key to its justification for mandating fibre connectivity in all new housing estates - or at least those Minister Conroy picks and chooses - whilst the National Broadband Network is rolled out.

A fibre connection to a lot, the Government estimated, is two-and-a-half times more expensive than a $1,000 copper connection.

But retrofitting a fibre connection over a copper one where "no fibre-ready infrastructure has been installed" is more like $4,000 per lot.

Should the Minister choose the middle-ground for a given estate - and mandate only that "fibre-ready infrastructure' (ie pits and ducts) is installed - the cost of retrofitting from copper to fibre is around $3,000 per lot.

The explanatory memorandum argued that such costs of connection are not exorbitant.

"To put this cost into context, a submission to the Public Works Committee by the Land Management Corporation (South Australia) estimated the per lot costs for one development to be $2,500 for water, $3,200 for stormwater, $4,800 for power and $4,800 for sewerage".

The memorandum said that developers tend to wear the cost of connections initially "although to a greater or lesser degree they may be recovered from purchasers" of the home by being built into its price.

The cost of inaction

The document includes several estimates for the cost of inaction, should the Government not succeed with a mandate on fibre in new housing estates.

It estimated that Telstra would spend $189 million a year to wire up 90 percent of the 210,000 buildings developed every year in Australia with a copper connection (at $1,000 per connection, $800 of which is civil works such as trenching).

It would cost well over twice this figure to wire up the same number of homes with fibre today - around $472.5 million.

But the Government estimated it would cost $756 million a year - a significant amount more - if these homes were fitted for copper in the short-term and not fibre, but had to be retrofitted for fibre at a later date.

"This high cost reflects the additional FTTP equipment that is required but also the need to undertake new civil works (trenching, ducting, pits) which is expensive, and to pull through new fibre cables," the explanatory memorandum reads.

The middle ground option - in which developers are only mandated to dig fibre-ready pits and ducts when laying in cable for these 210,000 premises, would cost $567 million per annum.

With these costs in mind, the Government considers that it would be $283.5 million cheaper in the long run to mandate fibre to every estate today, even if the upfront cost to developers was considerably higher.

A mandate to only provide 'fibre-ready pits', by contrast would save just under $100 million ($94.5 million) in the long term.

"If a mixed approach is adopted in which, say, 50 percent of premises are provided with fibre-ready infrastructure and 50 percent with FTTP the total cost per annum, would be $519.75 million," the memorandum states."

While clearly a higher cost than that of a full FTTP solution, it still represents a saving of $42.75 million. The final ratio of costs and savings will depend on the final mix adopted.

"The actual balance of FTTP and fibre-ready infrastructure and their costs and savings will depend on where thresholds for applying the measure to new developments are set. These would be contained in subordinate legislation."

THE OPTIONS

Federal Government estimates for the annual cost of wiring new Australian homes.

Copper only: $189 million

Fibre now: $472.5 million

Copper now, with fibre-ready pits: $567 million

Copper now, fibre later: $756 million

 
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