NBN offers big maintenance savings: BIS Shrapnel

By Paul Hemsley and Julian Bajkowski

Economic forecasting and industrial research house BIS Shrapnel has estimated that junking Australia’s existing copper phone lines for optical fibre-to-the-home under the National Broadband Network will deliver network maintenance savings of between $600 million to $700 million a year.

BIS Shrapnel’s estimates predict a reduction of up to 70 per cent over current copper network maintenance costs which are gradually increasing as the ageing network decays, in-turn creating problems for regional areas saddled with second-rate internet and connectivity speeds.

While the rollout of the NBN is now a political football between Canberra and the states, the nationwide scheme remains highly popular in regional and rural areas that have for decades suffered second-rate service from telecommunications providers trying to keep costs down in an unprofitable market segment.

The cost of copper network maintenance in regional, rural and remote areas of Australia is a significant cost input for Australia’s biggest carrier Telstra.

The carrier is banking on trading-in its costly and onerous conditions incumbent under the Universal Service Obligation which Telstra would shed along with its wholesale monopoly under the NBN.

Adrian Hart, senior manager of BIS Shrapnel’s Infrastructure and Mining unit told Government News that although Australia would not see a “fully deployed NBN under current plans until the early 2020s”, there were advantages in deploying optical fibre over maintaining copper in the future.

“As everyone knows in the telecoms industry, the copper network is incredibly aged and is terrible on the maintenance front. The biggest issues affecting it are water and corrosion. When we get floods and cyclones, if you go to the last Telstra annual report, you will see how much more money they factored into their budget for essentially maintaining their copper network,” Mr Hart said.

Floods remain a real and serious communications issue for many local governments prone to inundation not least because it can take weeks or months for full telecommunications services linked to the copper network to be restored.

Over the last few years large parts of Queensland (including Brisbane), New South Wales and Victoria have found themselves underwater raising questions about the long-term adequacy of communications infrastructure.

Although the carriers like Telstra can rapidly deploy generator-powered mobile base stations and exchanges to affected areas in emergencies, such measures are not enough to provide the capacity volume and quality that fibre-based fixed network services offer.

The cost of repairing and maintaining the decaying copper network is now so high that in many cases Telstra opted to deploy new fibre technology to replace parts of its network damaged by floods or fires.

“Overall we believe the copper network has maintenance costs of up to a $1 billion dollars [a year],” Mr Hart said.

“Our estimates from the maintenance study suggest that just by replacing all of the copper network with the fibre optic network [which] doesn’t have the water issues and the fact that it’s already failed or failing in many places, will save us between $600 to $700 million per annum once fully deployed, so that’s quite a substantial saving.”

BIS Shrapnel has also cautioned that the savings and benefits of the NBN “would be put at risk if the NBN project were delayed or cancelled by future Federal governments.”

That statement effectively increases pressure on the Coalition to enunciate its plans for the NBN in more financial and technical detail, especially in local government areas that are still serviced by legacy copper technology.

An issue of particular interest is whether a technology known as fibre-to-the-node (FTTN) remains a viable compromise option that could make savings by reusing copper lines from the street to the home rather than connecting premises directly to fibre as planned by the NBN.

So far, BIS Shrapnel is yet to be convinced by the economic merits of FTTN.

“From our view, FTTN obviously isn’t as a clean solution as FTTH. We’ll still have this last mile, or last few metres even, still relying on copper and you’ll still get tremendous maintenance costs from that,” Mr Hart said.

“It’s only really if you ditch the copper network and allow it to be decommissioned that you will see these kinds of benefits in terms of maintenance. The other thing is we believe after talking with many companies in this space that eventually the copper network will have to be transformed in some way; it is just becoming an aging dinosaur in the telecoms industry.

"Eventually we will bite the bullet and replace it,” Mr Hart said.

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