Monday, June 20, 2016

Deflation, Housing Bubbles and Sacred Cows

Contrary to the Political party's dictate, there is no Revenue or Spending problem in Australia. There is however, a lack of honesty, debate and courage, the willingness of our Pollies to broach hard subjects and engage in a meaningful three-way conversation: voters, conservatives and progressives.

There's $120 billion of Revenue that Political Parties choose not to collect or discuss, yet they claim we have a $37 billion 'deficit' which they say will increase "as far as the eye can see".

It doesn't have to be this way.

Wednesday, March 2, 2016

Questions to the Government on the NBN: why are you hiding important figures?

Questions on the NBN I'd like to see asked in Parliament Question Time, or posed directly to Turnbull and his Ministers by Mainstream Media:

  1. Cost to the Taxpayer:
    • What is the cost to taxpayer, as shown in a Budget line-item, of the NBN so far?
    • What is the expected on-Budget cost to taxpayers of the MTM-NBN when fully rolled out and upgraded to the promised levels already made? Is that 2020 or later?
  2. Quality of NBN Investment:
    • Since when is an IRR of 2.7%-3.5% better for an investment than 7.1%?
    • Just what are the nominal & CPI-adjusted monetary values of each investment?
    • Despite multiple attempts, the Liberals have yet to offer any convincing evidence that the 2013 Business Plan was deeply flawed. It was well ahead of all its financial milestones, whereas the Turnbull legacy is a litany of successive upwards revisions, to around double the number taken to the 2013 election.
  3. Funding:
    • Why haven't the 500,000+ Self Managed Super Funds with $600 B assets, looking for long-term, high-quality investment, been offered a large ($30B) 15- or 20-year NBN Bond?
    • That not only takes the funding pressure off the Government and hence taxpayer, it actively transfers or shares Risk with willing investors and simultaneously provides an important financial sector with a perfectly targeted investment vehicle. They are patient investors looking for guaranteed returns and stable, dependable growth businesses.
  4. Rollout Preferences:
    • Why haven't any of the ~10 M affected subscribers been offered the option to contribute directly to the increased costs of Fibre vs HFC or Copper Pair/VDSL2? Even on the inflated and manipulated MTM figures, the CapEx (not Peak Funding, the real cost), per line is $2,300 for FTTN and $4,400 for Full Fibre.(Table 8: CPP by technology, page 67)
      Why haven't subscribers been given the option to pay $1,250 towards Full Fibre, repaid over 3-5 years?
    • Requiring people to put their hands in their own pockets conclusively demonstrates "value in use" and their "willingness to pay". We don't have to take anyone's word for it.
    • At a stroke, this would remove all the future Copper service upgrades, reduce the Capital Requirement, provide a commercially significant priority order for rollout and make the 65% of taxpayer-voters who want Real Broadband very happy.

Friday, February 19, 2016

The MTM-NBN rip-off: saving $250 Million costs the taxpayer $125 Billion.

Related links. This was originally a comment on a previous post.

There's a point  related to hidden OpEx costs which makes a nonsense of Cost-Per-Premises of "nbn ltd":
the bulk of maintenance costs will be spent on the Copper Pair network. [50% of all? FTTN 50% higher?]
Where is that in the CPP costings?
That, for me, makes these company documents not 'business' but 'political', they are misleading figures.

Thursday, February 18, 2016

MTM: the Road to Nowhere. Waste on a truly grand scale.

The widely reported Feb-2016 Australian Infrastructure Plan, resulted in a piece on The Register ("Calls for sale - in pieces - to promote competition, plus reveal of bush services' costs").

This is a repost of my comment, and a couple of follow-ups (here and here) in response to a comment claiming a 'Fail', copied below.

Two good friends contributed off-line feedback:
  • Just like buying a power tool. A good one last a lifetime and a poor one lasts for a couple of sessions with it.
    • I'd phrase as: Professionals find it cheaper to buy & maintain expensive tools that JFW’s (Just Works), not a throw-away for every job.
  • Sometimes I wonder if anyone actually gets the basics of network design and deployment. So many people think in the ultra-short term rather than in the medium to long term. Every dollar spent now saves potentially hundreds in the future when it comes to network design and deployment.
    • It's the difference between buying a cheap TP-Link router and a Cisco router for business. One might last a year, the other will last a decade.

Tuesday, February 9, 2016

Things I don't understand about NBN Economics: how does $1,500/premises become $4,500?

I can’t figure out the basic cost equation of the NBN.

If it’s costing ~$1,500/premise to install new fibre, how does the full cost become $4,500?
What does the extra $3,000 buy us?
The POI’s (Points of Interconnect) and transit network, the network operations centre, the provisioning & billing systems and what else?

There is a difference between ‘passing’ and connecting premises, so what proportion of the $1,500 is 'passing' and 'connecting'? That's hard to find and doesn't account for a three-fold increase.

Edit: Fibre cost-estimate Sources added at end, 20-Feb-2016.

Wednesday, January 27, 2016

Fast Start to 2013 Broadband posts

A Primer: fast start to Stevej-on-bband

Taking on Three NBN Memes of the Mainstream Media

Why you want Fibre to _your_ premises:
The full Fibre NBN is the biggest free kick we'll be offered in our lives: Grab it now or lose it forever.
A longer version of “Why Fibre?”.
Problems with the Coalition Plan.

One of my first pitches for “Fibre to the Farm”.
Today I’d include a wholesale Mobile Service [esp for ‘blackspots’] and wholesale public WiFi access network.

NBN Financials: Hidden costs of a VDSL Fibre to the Node network
A long piece addressing specific differences between Copper and Fibre that have raised with me and highlighting additional costs, problems and deficiencies with a DSL/FTTN network.
The Rivers of Gold Scenario: What if NBN Co _does better than forecast_??
Ain’t nobody looking at the Upside :)
Why, apparently, did NO business journalist actually try to “sanity check” the Turnbull / Ellis spreadsheet?
If I can do it at all, then expert journalists with decade(s) of experience could’ve cranked the numbers in less than a day.

Sanity Checks of Turnbull 2013 Plan: too many questions

On the 8.9M DSL services, they were to save $1910 per line, valuing the Fibre install at $2810/line, or a total of $34.3 billion vs the $28.5 billion of the NBN Co 2012 Corporate Plan.
The Coaition estimate could never have been less than $26.5 billion.

Is the real Coalition NBN plan going to need CapEx of $20.5 billion or $35.6 billion, a 75% increase on their first estimate??
The electorate deserves an update.

Unpicking Coalition Claims - failing Sanity Checks.
The claimed $20.5 billion CapEx also fails basic sanity checks.
$8.1 billion in CapEx is traded for Opex and only 28% of FTTP network is built or $5.5 billion of $17.2 billion after (common) Access costs.
Then $8.1 billion has to be added for an FTTN.
That's $3.6 billion less in construction and $8.1 billion swapped for OpEx, for total CapEx savings of $11.5 billion, yet they turn a real $5.5 billion difference into a claimed $17 billion saving.
Conveniently $6 billion of "Other CapEx" has been ignored.
The sub-projets are now identified in detail by NBN Co.
Because the breakdown of CapEx and OpEx has been deliberately withheld, nothing is included in the plan.

Prime NBN Questions:

The Ninety Billion Dollar Swindle:
  • What does the NBN ‘Cost’?
    • Wrong question! It _makes_ money for the taxpayer.
  • What was the extra cost to the taxpayer of Full Fibre:
    • around $10M-$20M/year.
  • Where’s the NBN in the Federal Budget?
    • Nowhere to be seen! The NBN is an INVESTMENT, not an Budget Expense:
      For any investment, need to look at the Profit & Returns, not ‘Capital Cost’, plus the Risks.
The MTM is the Ultimate “road-block” - the Balkanised Network with no road back to Fast Broadband (fibre).
  • The MTM can never be upgraded and, just like all the incompatible State Rail Networks, only becomes more unprofitable and more expensive to fix as time goes on.
  • After the 2013 debacle, NO mainstream political party can ever afford to back Full Fibre again.
  • Abbott's outstanding success was making the issue of Fibre Broadband a toxic issue & instant election loser.
"No going Back” or “Throwing Good Money After Bad” - what happens next?
  • Turnbull's “Four Horsemen of the Apocalypse” apply, in spades, to his own MTM-NBN. It’s started to unravel already - running over time & under spec… We’re onto the fourth radical increase in ‘cost'
    • The ALP may suggest “can’t undo this mess”, but the MTM is already a massive failed project that cannot be retrieved.
    • Overbuilding with Fibre is the ONLY commercially viable outcome: Do NOT throw good money after bad, it’s a waste
The commercial risks of the MTM-NBN and failure scenarios:
  • Crystallising Losses, forcing them onto the Federal Govt Budget and for the taxpayer to immediately pick up the tab. The ALP will be blamed for Turnbull's deliberate financial destruction of the NBN.
The importance of the AusSat story:
  • How in a decade was ten-plus billion transferred from the taxpayer to private hands, as “the only rational thing to do”?
    • The current value of Optus with 30% of the market should be around 25% of Telstra's $65B.
  • AUSSAT accumulated $600M in debt because it was wasn't allowed to fully compete with Telstra and was deliberately undercapitalised, forced to load up on debt at record high rates.
    • AUSSAT was given away for its debt,
    • plus a Free unrestricted Telco license,
    • plus 5 years competition-free, the "Duopoly".
Who really needs Fibre?
  • A: The Bush.
  • Key Communications Policy questions are:
    • Funding NBN directly by subscribers and SuperFund Bonds, Fibre-to-the-Farm and a Shared Mobile Blackspot & Public WiFi network
Did the ALP ‘throw’ the 2013 election to permanently solve the Rudd-Gillard schism?
  • We may never know.
  • The NBN was an election winning issue, yet the ALP didn’t leverage it.
  • All Turnbull's arguments were easy to knock over:
    • "How much will it more cost ON BUDGET?"
  • Nor did the ALP ask the PBO to cost “Direct Action”, NBN or “Border Protection”.
  • Why? “too hard” or “too true”?
PBO claimed, in a personal communication, "it would've cost millions" to cost both plans.
  • PBO is tasked ONLY with reporting "Budget Fiscal Impact", implied is "over 4-year forward estimates".
  • the ONLY Budget Impact of BOTH plans was the interest paid on Equity and Revenue received back.
  • To 2020, economic impacts of both NBN plans would be very similar.
  • Trivial, as in 1 days' work, to create comprehensive spreadsheets of both plans for Budget Fiscal Impact.

Either the PBO staff are incompetent, inexperienced or were running an Agenda.

Background pieces:

20+ years of OTC financials. What Telstra doesn’t do with Marketing & Technology:
  • for 3 decades OTC rode Moore’s Law and
  • dropped real prices of phone calls _every year_,
  • making increasing profits and gross margins…

Malcolm Turnbull 'regrets' staffer's outburst in email to technology blogger
Oliver Milman, The Guardian. 07-Aug-2013
A nice contemporary report of my exchange with Stephen Ellis.

Comparing Plans.

Capital Expenditure (CapEx):
                $20.5B (28% FTTP, 65%? FTTN, 0% HFC),
versus $37.4B for 93% Fibre
Magically, Turnbull was saving $17.4B out of the $17-$18 Fibre Rollout sub-Project
[ONLY FTTP was to be changed & Telstra still got paid per service.]
yet he was still spending ~$5.5B on Fibre and $8.1B on FTTN.
That’s $13B-$14B out right there [pretty much the 1st revised figure]
Peak Funding:
                $29.5B “and not a penny more”
Notable because of the ZERO IRR, FTTN needed to be Fully Funded by Equity with NO additional borrowings.
Breaking this promise or premise is very, very bad news for NBN Co.

How will they still be “more affordable” but earn extra money to gain & payback private sector debt?]
versus $44.05B, of $30.4B Gov Equity + $14B commercial debt,
due to be raised at a time when they’d have strong cash-flows and an established P&L + Balance Sheet.
Internal Rate of Return & Positive Cash Flow year:
                “above zero in real terms for all ‘new’ investment”. i.e. NIL RETURN by design.
                A very poor public investment.
                Cash-flow positive FY 2020-2021 [with 1st rollout (of two)]

versus 7.1% on $30.4B, or $65B over 30yrs (notional $$$, not NPV)
                Cash-flow positive, IIRC, FY 2019/20. maybe 2018.

I’d already deduced the cost-per-premise of “passing” & “connecting" premises (~$1500 & $1100 per-premise install, most to Telstra to purchase ‘lead-in’).
[The NBN Co data released in April 2013 was $2450 & $1100, IIRC.]
There was also a Common Cost for _all_ networks, incl FTTN: the “transit network” plus POI’s and the Software & Systems.
Turnbull _always_ had to pay for the Telstra “disconnection” on top of the supposed $900/port connection cost, yet it doesn’t seem to be counted.

Estimate of cost-per-premises and common costs.

Reverse-engineered spreadsheet of Turnbull’s ‘Policy’.

Other Points on early analyses of Turnbull 2013 Plan:
  • The early year ARPU’s ($22) were _less_ than the minimum $24 AVC charge (12/1Mbps).
    • The ULLS charge was $16.
    • How could they do this when they never noted their changed AVC fee schedule?
  • There seemed to be a swap of OpEx for CapEx (rent not buy). I couldn't properly estimate it.
    • Despite this, the OpEx for the known-to-be-expensive Copper was much lower than for FTTP, known to be much lower OpEx.
    • How could that be???
  • There was an implicit, never explicit, implication that “full Fibre (GPON)” was the final end-point of BOTH LNP & ALP policies.
    • As it was never stated, only implied by ‘the listener’, there is technically no ‘broken promise’. Just misleading & deceptive conduct.
  • The acknowledged _deliberate_ waste of the investment [never included in the spreadsheet]:
    • 50% CapEx “reuse” for upgrade from VDSL to Fibre.
    • This was around a $4B charge, half the 8.9M premises at $900/premise CapEx figure.
  • The FTTN design silently & _deliberately_ shifts a substantial cost to subscriber.
    • Over 25yrs, around $500 up-front + $50-$100/year, yet this is never accounted for, not even in the latest two financial plans.
    • The supply, install and maintenance of the CPE (Customer Premises Equipment) - the VDSL2 modem - is now the subscribers cost.
    • These non-standard VDSL2 modems also had significantly _lower_ functionality:
      • single VLAN-port, not 4-port as in Fibre NTU, and
      • no obvious “Multicast” capability. [This should be the ‘sleeper’ part of the Network. Scheduled b’casts over Fibre at multiple bitrates.]
  • I failed to notice & cost an implicit major Network Upgrade. The “25Mbps you all get 25Mbps, upgraded mostly to 100Mbps by ??? (2018)”
    • I had tried to estimate the number of Nodes needed.
    • They increase _quadratically_ with access rate.
    • Twice the rate == FOUR times the number of Nodes, at $30k/node…
    • Keeping the "Going Faster” promise would turn a dodgy project into a financial quagmire.
  • I also failed to notice & cost two large Telstra related charges:
    • the _additional_ cost of Acquiring the Copper + Pillar (turns out it wasn’t a payment to Telstra, but a reduction in costs they had to bear)
    • the cost of Software & Systems Upgrades and Network Design. Turns out to be many _billions_.

Monday, December 7, 2015

Tuesday, May 26, 2015

Dispelling Turnbull's lies: under $50M/year for the extra cost to the taxpayer for the Full Fibre NBN vs mangled mess FTTN/HFC/tin-cans

Turnbull's Big Lie in the 2013 election campaign, and underlying the subsequent Reviews, is simple, profound and very, very deliberate:
What will it "cost" (implied, 'the taxpayer') to build the NBN?[that's the Network rollout, not the company]
Turnbull always knew that the one and only difference in cost to the taxpayer between his mangled copper mess and the Quigley Full Fibre plan was the yearly interest on the difference in Equity 'injected' by the Government into NBN Co. It's why he's worked so hard to discredit the 2012 FTTP business plan, to disguise the real difference between the Plans.

Budget Impact of NBN: it's only Equity investment, no Fiscal Budget Impact. [2015-16]

Sources, quotes and links for Equity Funding of NBN Co.

  • income from Future Fund (earnings) noted in fwd estimates
  • nothing for NBN. [but millions of subs]
The AASB rules differentiate clearly between investments and expenses as only investments provide a return. Investments appear as Capital or Assets on the Balance Sheet, while expenses appear as Expenditures in the Profit and Loss Statement. Depreciation of Investments, their reduction in value, is an expense.

Thursday, May 14, 2015

Turnbull's Swearing Staffer, Ellis, charged with indecent act and drug possession.

Post on Pre-election Blog. Turnbull senior adviser, Ellis, has quit. I'm still to get an apology.

There are two issues for me with Turnbull's Ministerial Office and his actions:
  • Anyone in a Ministerial Office, let alone "a senior advisor", doing drugs and behaving badly enough in public to get charged is not a fit and proper person to be on the public payroll or involved in making public policy. This is not "a private matter", this goes directly to the suitability for office and the poor character of the person.
  • Turnbull never offered an apology, never contacted me in any way (nor any of his staff, nor Ellis or Lynch) and issues a rather misleading twitter that "calm restored". Only in his mind and  his staffers.