Sacre bleu! French FTTP costs compared to Australia.

Wouldn’t Australia’s massive land mass and small population mean that like other utilities (such as roads, electricity, water etc.) universal deployment in Australia is almost always going to be more expensive than other developed nations?

France has an area of 674,800 square kilometres compared to Australia’s 7.741 million square kilometres.

First. The total capital expenditure on FTTH only according to the NBN corporate plan is about $28.5 billion.

Second. France Telecom already owns all the ducts. NBN Co doesn’t own the ducts. That’s about $11 billion, which we can near enough assume is for the FTTH rollout only. That’s $11 billion that NBN Co wouldn’t have to pay if the coalition hadn’t privatised Telstra. That makes it about $17.5 billion.

Third. Said $17.5 billion amount to about $1430 per household at 12.2 million premises.

Fourth. The French rollout until 2015 for $2.4 billion and 10 million premises covers, I’m going to guess, Paris and Marseille. If nothing else, we can consider them representative. The population density of Paris is 22,000 persons per square kilometre, over about 3000 square kilometres. I’ll bet you anything that these two billion euros won’t be spent on rural areas, but on the most urban areas in all of France, especially as this deployment is driven by competition from two other competitors. Assuming 2.5 persons per household, that’s about 9,000 premises, or a cost of about $2.1 million per square kilometre. The population density of Sydney, which is near enough average for the FTTH rollout as planned, is 2,000 per square kilometre, or 800 premises over 12,000 square kilometres. That’s about $1.1 million per square kilometre. I could have just as well picked Brisbane, but the western side of the council would skew the numbers a bit.

Fifth. GDP per capita in Australia is higher, by about 50%, than that of France, as are many of the costs involved in Australia. So, we would need to bump up the French cost to about $3 million a square kilometre to do the equivalent work if it would be done in Australia.

Sixth. France Telecom has claimed that they won’t see a return for their money for about 30 to 40 years. NBN Co will see a return for their money, plus 7%, in about twenty years (down to 8% of total funding in 16 years already, actually), and does so at a lower wholesale cost than Telstra Wholesale can do at a very reasonable cost, as long as you compare it to countries with even remotely the same GDP. Surely given that, those numbers you’ve managed to produce don’t hold much meaning?

And last. It’s really quite sad that you didn’t put a disclaimer on here that you own France Telecom shares. You’d think it’d have been the overriding priority in a blog post like this on the day after you were asked on Lateline about it and on the day you were on the front page of smh.com.au and theage.com.au about that matter.

You can fiddle with the numbers all you want, feel free… especially where the population densities are concerned it isn’t exactly right, but the fact is that the per area, if not per premise, cost at the end of the French rollout is comparable to the one in Australia.

Doing the same job for a third or a half or a quarter or whatever the cost as it would in France for every square kilometre of the network doesn’t sound so bad now, does it?

And it certainly sounds better than spending near enough half that money, as you’re proposing, only to throw away the whole amount in about ten or fifteen years’ time, when we really should have FTTH everywhere. You know those 12,000 square kilometres? You’re proposing we build nodes a square kilometre at a time. That’s about 12,000 nodes in Sydney alone, all of which wouldn’t even be needed with FTTH and would be quite obsolete and actually somewhat of a hindrance if we do go FTTH. Insanity.

Kane, Ludite has two ‘d’s, just like Abbott has two ‘b’s and two ‘t’s. Abbott. Luddite. Simple.

Malcolm, punny as ‘Go Go Escargot’ may be, did you ever hear the Aesop fable about the Tortoise and the Hare?

In case anyone doesn’t want to read my long replies, here’s the quick summary:

* Australia is 50% more expensive.

* Malcolm Turnbull is taking the per-premise cost of rolling out fibre in the centres of Paris and Marseille only.

* And comparing it with the per premise cost of rolling out satellite to Lake Pialpotingoona, wireless to Bowenville and fibre to Kingaroy.

* Upon discovering the latter, Malcolm Turnbull exclaims ‘Sacre Bleu’ like anyone investing in France’s future should and everybody with any sliver of common sense suffers an aneurysm.

The end.

Right, I’ve got a comment stuck in moderation (and hopefully this one won’t be), so I’ll just post the quick summary of it:

WellWizard, check out the SAU page on the NBN Co website. You’ll see that there’s no price increases until 2017, and until 2040, NBN Co is committed to keeping price increases to less than half of CPI. The ACCC can do whatever it wants to after that. Telstra is a horizontal and (to a much lesser extent) vertical monopoly run for profit. NBN Co is a horizontal monopoly run for barely a profit that is supposed to enable consistent cheap access across all of Australia, including the bush and enable competition on top of it.

Also, China Telecom is stopping DSLAM rollouts and doing FTTH instead, at $160 to $180 per premise. The typical areas in which they’re doing it have three times the population densities that we’d have here, and GDP is about a fifth compared to the one here. I also forgot to subtract ongoing capital expenditures before, so it’s about $1150 per household, and NBN Co is being quite pessimistic in the costing of installation and materials, so the actual number may be under a thousand.

It’s my assertion, basically, that unlike what Malcolm Turnbull implied above, which is that Labor is doing it really expensively, the per premise cost is a combination of three things, if you compare China, France and Australia:

* The country’s GDP or similar relative cost indicators.
* The population density where FTTH is being rolled out.
* Whether who is rolling out already has access to ducts or not.

If you establish those three factors based on international experience, then there’s no reason to think that Labor is doing it needlessly expensively.

Dom says:
“Keep in mind that a coalition government created a mess known as Telstra which is both a horizontal and vertical monopoly run for profit. NBN Co is a horizontal monopoly run for barely a profit until 2040 at least, and the ACCC (or whatever there may be in the future) can decide whatever it wants to do then.”

I’m glad you brought up Telstra. Telstra and the “National Champion” approach to public policy is what got us into this mess in the first place.

Telstra’s effective monopoly in the telco space has not been addressed. In fact over the years the government (both parties) has been complicit in strengthening it. Giving Telstra & Optus cable licences and allowing a virtual content monopoly with the formation of Foxtel.

The logic in the day was to form a national champion that would conquer the region in telecoms a strategy that went pear shaped for Telstra.

We need to go back to first principles and deal with the Telstra dominance. Build effective competition in the sector. This will involve structural changes to Telstra.