Thursday, November 20, 2014

Fibre to the Farm: Co-Op purchase & install possible and affordable

I sent this email to Fairfax journalist, Andrew Crothers (andrea.crothers@fairfaxmedia.com.au) and copied to Senator Sullivan, mentioned in the article.
Andrea,

I was interested in your story about Senator Sullivan calling for an NBN for the bush.
http://www.queenslandcountrylife.com.au/news/agriculture/general/news/mad-barrys-hotline-give-bush-its-nbn/2717778.aspx?storypage=1

There is a very strong project, that’s possible and surprisingly affordable that should be a major vote winner for the Nationals and hasn’t been discussed by any of the major parties.

I believe it should be self-funded and directly owned by those that benefit: rural subscribers.

Co-Ops have a very long tradition in Australia and have proved their economic value to regional industries time and time again.

I was born in Brisbane, around 3 years before the Senator. My father worked for the PMG for most of his career, spending from 1941-1945 doing Signals Intelligence in what became DSD.

I’ve worked in Networking & Computing since 1974, spending 7 years with O.T.C. and been involved with saving multiple large, high-profile Government I.T. projects in crisis over the last 20 years.

I’ve formally studied Economics, Accounting and Chemical Engineering besides Computer Science, and ran my own single-person consulting company for over 20 years.

My knowledge of Networking/Telcos, Economics and Business allows me to phrase questions and suggest solutions that others haven’t.

The National Library archived the 300+ pieces of mine on the NBN in the years leading up to the election.

I also had “5 minutes of press pack coverage” when I asked a Turnbull staffer a question about serious omissions in the LNP NBN election plan, no “ROI” or cost of DSL services, and was sworn at via email in response. These questions have never been addressed.

I’ve included links to a number of themes (“Fibre to the Farm”, “NBN is new Rivers of Gold”, various Myths), in what I hope is order-of-interest for you.

The primary point of difference between my view of broadband and current LNP policy is that Broadband is about Business, not domestic entertainment.

There is ample evidence that if, in 1999, Ziggy Switkowski had pursued the early 1990’s plan of “Fibre to the Kerb” by Telstra’s first CEO, Frank Blount, instead of wasting $10+B on failed investments, by 2005 we’d have had good broadband everywhere, it would’ve been entirely self-funded, not a dollar of Govt Funds needed, and the T3 float would’ve been closer to $7 than $3, and fully subscribed. Ziggy got forced out as CEO of both Optus and Telsta - not a stellar record.

I attribute he primary reason the NBN is a “government project we had to have” is directly attributable to the incompetence and lack of sound business management by Dr Switkowski during his term as Telstra CEO. The Australian public has lost three times at his hand: no early broadband services, low T3 price and now massive delays in achieving what was first floated around 10 years ago by Sol Trujillo.


Two things I didn’t highlight about “Fibre to the Farm”:

- there are two networks, and revenue streams, inside the one cable: Premises (FTTP) and long-distance Backhaul.
Same Fibre does both, doubling revenues.

- Every rural & regional village and township will also get full Fibre, not be forced to use the more expensive, less reliable, lower capacity Fixed Wireless service.
Some townships may wish to dig their own trenches and pull fibre, contributing “sweat equity” to allow NBN Co to more quickly provide FTTP, not Wireless.


If you’ve any questions, please don’t hesitate to contact me.

regards
steve jenkin



My special viewpoint/analysis led to Business Spectator publishing one of my pieces on alternate funding models for the NBN.
If the Coalition was serious about cutting costs, “letting the Market Speak" and providing good broadband to all the community, there are multiple additional funding models it could pursue:

http://www.businessspectator.com.au/article/2012/9/20/technology/taking-politics-out-nbn


With my limited access to hard data [Victorian + national data], I attempted to cost the extra cost “Fibre to the Farm”, and its surprisingly low ($2,500-$7,500), based on expensive deep burying of cable by large commercial firms: $10,000/km.
With 900mm-1200mm trenching and “sweat equity” installation by farmers themselves, this will be closer to $2,500/km.

These are my high-ball estimates of Fibre to the Farm, including a calculation of a payback period, well under a year without accounting for all savings:

http://stevej-on-bband.blogspot.com/2013/07/nbn-fibre-to-farm-splitting-cost-3-ways.html
http://stevej-on-bband.blogspot.com/2013/06/nbn-7500-for-fibre-connection-if-you.html


Based on 5 decades of the Overseas Telecommunications Commission (O.T.C.), NBN Co as FTTP offering up to 1Gbps, would provide “Rivers of Gold”:

http://stevej-on-bband.blogspot.com/2012/12/nbn-historical-financial-performance-of.html
http://stevej-on-bband.blogspot.com/2013/08/business-economics-of-fibre-vs-copper.html
http://stevej-on-bband.blogspot.com/2013/03/nbn-rivers-of-gold-scenario.html


The Vertigan/Ergas Economic Benefit/Cost Analysis stronly supports my case:
they estimate that 1Gbps (1000/400) services have an “elasticity” of -60 [the impact of price on demand]

For every dollar the price is reduced, income increases _sixty_ (60) times.
When it costs NBN Co exactly the same to provide an entry level service (12/1) as the 100-times faster 1000/400 service, this is a Royal Road to printing money _and_ following O.T.C. in reducing real costs significantly every year, paying down debt ahead of schedule and making “a motza” for the owners.

Before the Vertigan/Ergas CBA was released, I questioned if they’d account for the easiest, most accurate and readily measured “public benefit”: the increase in value to shareholders of the Telco sector. Ergas treated NBN Co as if it was fully-funded (like Roads), not the Private-Public Partnership that it is.

http://www.businessspectator.com.au/article/2013/4/4/technology/telstras-nbn-wow-factor
http://stevej-on-nbn.blogspot.com/2014/08/nbn-co-already-running-at-500-cost.html
http://stevej-on-bband.blogspot.com/2013/08/nbn-real-cost-benefit-analysis.html


Dispelling the Myth that the low-end subsidies High-end users: it’s the other way around.
The top 20% of subscribers generate ALL the profits of NBN Co, the rest of us get the service at cost or subsidised.
It is NOT “The City subsidies the Bush”, but “the High-End make ALL the profits”.

http://stevej-on-bband.blogspot.com/2013/08/myths-low-end-broadband-users-subsidise.html
http://stevej-on-bband.blogspot.com/2012/11/nbn-economics-of-ftth-vs-fttn.html


Alan Kohler went into print suggesting “Infrastructure Bonds” could be used to fund many important National Projects, not just the NBN.
That would give DIY Super Funds the chance to invest in good long-term, high-return, projects and for people who want these projects to put their money where their mouth is.

http://stevej-on-bband.blogspot.com/2012/12/nbn-funding-with-infrastructure-bonds.html


My analysis of Copper vs Fibre - Turnbull’s Copper Proposal was never a sound business plan.

http://stevej-on-nbn-er.blogspot.com/2013/08/nbn-numbers-from-turnbull-coppernode.html


--
Steve Jenkin, IT Systems and Design
0412 786 915 (+61 412 786 915)
PO Box 48, Kippax ACT 2615, AUSTRALIA


stevej098@gmail.com
http://members.tip.net.au/~sjenkin

Sunday, September 21, 2014

The Future is not a consequence-free zone for Modelling Consultants

Will Abbott be a one-term PM, will the Coalition gain a second term under a new leader? The satisfaction polls have never looked good for Abbott and on-line betting odds aren't too flash, either.

If Labor is elected in 2016 or 2019, will they follow the Coalition and initiate a round of Royal Commissions? Game Theory, especially "the iterated Prisoner's Dilemma", suggests that "Tit for Tat" is close to an optimum strategy for a co-operation/trust game like Politics. It should be odds-on that Bill Shorten will initiate an NBN Royal Commission in his first 90 days, it's "just good business" for them.

Will the various Ministers, especially Turnbull, face especial treatment, as misleading the Parliament is taken seriously by them? Almost certainly.

But what about the various consultants, like Communications Chambers (UK) and Henry Ergas? Would an NBN Royal Commission find them guilty of any criminal offences?

Saturday, September 20, 2014

Ergas: Using "Economics" to Lie to the Australian public

How do you turn a profitable high-growth, high gross-margin business at the centre of the current rapid transformation of the global economy into an overall negative investment? If you're Henry Ergas, you concoct a deeply flawed Economic Cost Benefit Analysis.

Henry Ergas calculated in 2009 that retail prices for NBN subscribers would be $170/mth, with $133 in the metro areas and $380/mth in non-metro areas. The costs & pricing were modelled for him by an experienced ex-Telstra employee who became the General Manager, Pricing, of NBN Co from Nov-2009 to June-2014, while actual retail prices today are one-third his 5 years old prediction.
Thus, for the most likely estimate of $170 per month, unit costs in metropolitan areas are of $133 per month, while those in non-metropolitan areas are just under $380.
Ergas quotes his own study, now proven to be wildly incorrect, in the NBN Cost Benefit Analysis, as "fact". That's the start of his falsehoods and misrepresentations.

Friday, September 19, 2014

Sanity Checking Ergas NBN Benefits: Turnbull says "very large benefits", Ergas/Vertigan find under 0.05%

Publicly, Minister for Communications, Turnbull, says of the NBN:
Fast broadband provides very large benefits for the economy and society, ... [emphasis added]
Under Turnbull, government funding for NBN Co is "strictly limited" to $29.4 billion, which over 25 years is under 0.05% of Australian GDP at current trends. Not by any definition "large".

Wednesday, September 17, 2014

Exposing the 'mysteries' at the heart of the Ergas "Cost Benefit Analysis".

The mystery at the heart of the Vertigan/Ergas "Cost Benefit Analysis", how you assess the highest-growth, highest gross margin Industry in the country and decide it's not profitable, won't be dealt with in this piece.

This piece is on the mysteries at the heart of the UK's Communications Chambers report, referred to in the Ergas CBA as a "Demand Forecast": Domestic bandwidth requirements in AustraliaA forecast for the period 2013-2023.

The CBA is for the 25-year period, 2015 to 2040, yet the bandwidth requirement is only calculated for a single decade. Are we to believe that somehow the final seventeen years of exponential demand growth "fell behind the couch"? No, this was a very considered and deliberate decision.

Sunday, September 7, 2014

Ask the Wrong Question, Get the Wrong Answer

The latest "review" of the NBN,a "Cost Benefit Analysis" is finally out and is predictably anti-FTTP, strongly at odds with reality.

Last year, the Financial Review was very clear that NBN Co was "on track" re-enforced by Mike Quigley, in accepting the highest award in his industry, laying out NBN Co achievements and their good financial performance and only a couple of days ago a story broke that new internal reports show that the FTTP rollout was cheaper than the retrograde FTTN.

Peter Martin, Economics Editor for Fairfax in this piece, falls prey to the dual Occupational Hazards of Journalists and Economics: skimming over complex topics and believing their economics knowledge uncovers all answers, even for subtle technical areas they've not sought specialist advice on.  Martin is wrong, massively so, in this piece.
NBN cost benefit analysis finds there's such a thing as too much speed

Thursday, August 28, 2014

Confirmed: Govt Intercepts can't identify source from large Telcos mobile internet

From long-running posts on problems with Carrrier-Grade NAT (CGNAT) by Geoff Huston of APNIC, I'd previously posited that the current call for "metadata retention" is driven by Intelligence Agencies needing to identify sources. This SMH article points to a recent 9-page PDF Consultation Draft, extracts below. Stilgerihan in ZDnet points to both the SMH piece and a 16-pg 2010 Draft, heavily redacted when first released under FOI.
Links: Brandis' follies, and metadata catches downloaders not serious crims.

CGNAT is only used by the largest Telcos. Twenty years ago, Optus used NAT for its Cable (HFC) internet and Huston writes about mobile Internet now using private 10-Network addresses internally.

Wednesday, August 27, 2014

What a real Cost Benefit Analysis does.

Contrast the noise from the Vertigan/Ergas report with a real report from Industry.
Note the description of what a CBA is intended to do.

I'm at a loss as to how a profitable business executing a detailed Business Plan, on-time and on-budget, and running substantially ahead of revenue financial projections, requires an Economic Benefits Assessment to the community. It's already profitable, there is no "Cost" component.

Friday, August 22, 2014

The Numbers are in. Now we know why Rupert is anti-NBN, pro mobile.

Murdoch famously tweeted that "NBN is ridiculous". His mouthpiece, The Australian, explained that away as:
"In fact, NBN would be great for Foxtel because it would take all those programs into every home."
But he is worried mobile technology has overtaken the need for the NBN.

Saturday, August 16, 2014

NBN Co already running at 500% Cost Benefit Ratio. Why the Vertigan/Ergas Review hold-up?

The Michael Vertigan and Henry Ergas "Cost Benefit Analysis" of NBN Co was announced on 12-Dec-2013 and is still yet to deliver their review.
Meanwhile, NBN Co has achieved more than 500% Cost-Benfit Ratio.

There are two problems I have with the assumptions and methodology announced:
  • Even under the dubiously recalculated figures, the IRR (Internal Rate of Return) of all versions of the NBN Co business plan is positive, albeit FTTP was 2%, down from the Quigley Business Plan of 7.1%.
    • NBN Co is not, and never has been, an expenditure-only investment.
    • The "Cost" of the CBA is zero by definition, and the resulting Cost-Benefit Ratio is infinite.
    • From the announced revised estimates, there was never a reason to run a CBA, once positive IRR's were established.
  • On the available Government Funding figures, somewhere between $5.3B and $7B has been injected as equity by the Federal Government into NBN Co.
    • There is already a directly attributable and precisely measurable economic Benefit of the NBN project: the additional increase in Market Value of listed Telecoms companies.
    • This is at least $36.5 billion,
    • for a Cost-Benefit ratio, already, in excess of 500%.
    • This is the direct benefit only to shareholders of the companies.