Sunday, December 19, 2010

Australia's NBN Co. Releases its Action Plan

Australia's NBN Co. published detailed financial and operational plans, including its capital expenditure budgets, network architecture, a 30-year forecast of take-up rates, and financing as well return-on-investment assessments for the government's A$27.5 billion in the national broadband project.

The announcement and press conference also included a discussion on the open network architecture, Telstra's role and cost recovery in decommissioning the existing copper infrastructure, and pricing, which will include a basic service offering with a download speed of 12/1 Mbps at a uniform national wholesale access price of $24 a month.

NBN Co CEO Mike Quigley said the goal is to provide broadband throughout metropolitan, regional and rural Australia in a cost-effective way. "Building a genuinely national broadband network in a country such as Australia requires a central role for the Government, as no commercial enterprise would be likely to fund such an endeavour," Quigley said.

Significantly, NBN Co expects to generate an Internal Rate of Return of 7% per annum - in excess of the Government's cost of funds, or long-term bond rate. Commercial negotiations remain on-going with Telstra and other parties, but NBN Co. expects these to wrap up shortly and full construction work to underway next year.

Some key elements highlighted in the NBN Co. plan:

  • NBN Co. will connect 93% of homes, schools and workplaces with optical fibre delivering broadband services with speeds of up to 1 Gbps.

  • 4% of premises will be covered with a fixed wireless service capable of delivering 12 Mbps downlinks at the edges of each cell. It will be fixed wireless with no roaming.

  • The 3% of rural Australian location outside of the fibre or wireless footprint will be covered by satellite with speeds up to 12 Mbps. Two Ka-band satellites will be launched by 2015. Arrangements are being made for an interim service.

  • There will be a progressive disconnection of copper and HFC services and decommissioning and deactivation of Telstra's copper and HFC networks as the FTTP network is rolled out. NBN Co. will make use of existing Telstra exchange space as well as its existing ducts and conduits.

  • The NBN will cover 13 million premises by 2021 and involve installing 181,000km of Gigabit-capable Passive Optical Network (GPON) and 57,000km of transit fibre.

  • Over the 9.5 year construction period, NBN Co plans to build or lease 120 Points of Interconnect and 980 Fibre Serving Areas.

  • NBN Co will also pass all greenfields developments by the end of deployment, representing some 2 million premises in the fibre footprint.

  • Deployment of the NBN is planned to take place concurrently across multiple Rollout Regions. NBN Co is already constructing five First Release Sites on the mainland, and has announced the locations of 19 further Second Release Sites.

  • By the end of 2020, the network rollout will be complete.

  • Total revenue to NBN Co for its wholesale service to the end of the construction period is forecast to be $20.8 billion.

  • Annual revenue is forecast at $5.8 billion in FY2021 and $7.6 billion in FY2025.

  • Total capital expenditure to the end of the construction period is forecast at $35.9 billion.

  • Total operational expenditure net of revenue over the same period is $1.0 billion.

  • The Australian federal government will initially contribute equity of $27.5 billion. This will be paid back with a return over the life of the project. Other funding will come from operational earnings and private debt.

  • From FY2015 NBN Co will begin raising funds through capital markets.

  • Together the equity and debt funding add to a total funding requirement of $40.9 billion including funding costs.

A 40-minute webcast with Mike Quigley is on the NBNCo website.