NBN Update No.5

by Nick Abrahams

The NBN Co Corporate Plan 2011-2013 (Corporate Plan) was released on 20 December 2010. The Corporate Plan details financial and operational information regarding the NBN. Key features of the Corporate Plan include:

• 120 points of interconnect (recently revised to 121 after consultation with the Australian Competition and Consumer Commission).
• Internal rate of return of 7 per cent over the life of the project (30 years).
• A uniform national wholesale access price starting at $24 per month with a basic service download speed of 12 Mbps and 1 Mbps upload rising to $150 per month for a 1 Gbps download speed and 400 Mbps upload.
• Total funding requirement of $40.9 billion, with capital expenditure over a 9 and a half year construction period estimated at $35.9 billion. Initial funding is to come from the government contributing equity of $27.5 billion and other funding expected to come from operational earnings and private debt.
• From 2015, NBN Co will begin raising funds through capital markets, with an estimated $13.4 billion needed for the project.
• NBN assumptions are based on 70 per cent take up of service.
• Existing underground infrastructure will be used and aerial deployment may be used where this is not possible.
• 93 per cent of homes, schools and workplaces connected with fibre.
• 4 per cent of premises to be connected with a wireless service and 3 per cent connected by satellite with speeds of up to 12 Mbps.
• Revenue forecast to be at $5.8 billion per annum in 2021 (when it will hit positive net income), increasing to $7.6 billion in 2025.
• Peak construction to see 5900 premises a day connected.

In November 2010, the government introduced two bills into parliament that set out the regulatory framework for the NBN:

• National Broadband Network Companies Bill 2010
• Telecommunications Legislation Amendment (National Broadband Network - Access Arrangements) Bill 2010.

Under the framework, NBN Co will operate in the telecommunications regulatory regime and as an open-access, wholesale only network.

The Senate has referred the bills to the Environment and Communications Legislation Committee for inquiry, which is due to report by March 16.

The Opposition and Greens have both expressed concern over several aspects of the draft bills. The industry has also indicated some concerns. The Greens have subsequently secured an agreement with the government to have NBN Co determined as a prescribed authority under the Freedom of Information Act, meaning that NBN Co will be subject to the same FOI regime applicable to other government business enterprises.

Recent contracts awarded by NBN Co and deals made include:

• $120 million paid to secure Austar’s spectrum holdings for NBN Co’s planned fixed wireless rollout in rural and regional areas.
• $5 million contract over 5 years awarded to Polaris Data Centre in Queensland to host NBN Co’s second data centre.
• Three equipment contracts worth over $1.6 billion, being:
  • $1.2 billion contract over 5 years awarded to fibre manufacturer Corning for multiple types of equipment.
  • $110 million contract over 5 years awarded to Warren & Brown Technologies to provide optical distribution frames and sub-racks that will connect NBN Co's equipment to external cabling.
  • $300 million equipment contract over 5 years awarded to Prysmian for underground cabling.
• E-Health trial at two NBN first release sites in Armidale and Kiama. Telehealth monitoring and high quality videoconferencing services will be delivered to the home via the NBN.
• Alcatel-Lucent won lead supplier contract for GPON and Ethernet aggregation equipment and a joint engineering partnership.
• Cisco awarded the $9.5 miliion contract over three years to provide the data centre platform to run NBN Co’s business and operation and support systems.

NBN Co has issued the following recent tenders:

• Request for Proposal for the supply of DC distribution units. Submissions closed 2 March 2011.
• Request for Capability Statement from manufacturers of pits, ducts and duct accessories. Submissions closed 4 March 2011.
• Request for Proposal for standardised frame or enclosure for mounting multiple equipment modules, such as servers, power supplies and other IT equipments. Submissions closed 10 February 2011.
• Request for Capability Statements for major installation and maintenance tools and test equipment required to provide and prove fibre optic connectivity within NBN Co’s network. Submissions closed 6 December 2010.

Five first release sites were selected by NBN Co where it will roll out the high speed broadband fibre to the premise network as part of live trials of its network design and construction methods on mainland Australia. Community consent in the first release sites has been reported by NBN Co as high, with an overall average of 74.2 per cent acceptance. All five sites are anticipated to go live in April 2011. Fourteen second release sites have also been announced, together with further rollouts adjacent to the existing five first release sites.