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NBN Co business case: Key findings - Updated

NBN Co business case: Key findings - Updated

Key findings from the 36-page NBN Co business plan summary released this afternoon

The Gillard Government this week released a 36-page summary of the NBN Co business case, prepared by the network wholesaler.

The report was released following heated debate around the Telstra separation bill in the Senate and negotiations between Prime Minister, Julia Gillard, and independent senator Nick Xenophon. It precedes the full, 400-page business case set to be released in December, with those elements deemed commercial-in-confidence redacted.

You can view the full summary here but we’ve outlined some of the key findings of the summary below.

Key findings

$35.7 billion capex required

NBN Co will require capital expenditure of $35.7 billion for the rollout of the fibre-to-the-home network, as well as an additional $13.8 billion to meet obligations under pending agreements with Telstra. Of the capital expenditure, $34.4 billion will be used to build the actual network - including $9.9 billion for individual fibre connections - while $1.3 billion will be used for replacement and maintenance.

NBN Co maintains peak government equity is $27.1 billion; slightly more than the $26 billion estimated by consultants McKinsey & Company and KPMG in the NBN Implementation Study released earlier in the year.

Telstra negotiations done and dusted by June 2011

The non-binding Financial Heads of Agreement announced between NBN Co and Telstra earlier this year is expected to be completed, with full documents signed by June 2011. The timeline, which has already seen some delays, will ensure negotiations are finalised between the companies by next month. The agreement will then be passed on for approval by Telstra shareholders as well as the Australian Competition and Consumer Commission.

Though originally slated as a $9 billion agreement, NBN Co expects to pay $13.8 billion to the telco for decommissioning Telstra’s copper networks and migrating all fixed-line customers over to the NBN. Total capital expenditure for the entire project is expected to be $37.4 billion if the deal does not go ahead.

8.3 million premises passed

The $34.4 billion build capital expenditure identified in the business case summary allows the wholesaler to connect 8.3 million premises to fibre. The remaining 12 million premises will be passed by fibre, and/or connected by either fixed wireless or satellite by the end of the rollout.

’Business as usual’ rollout coming end of 2011

NBN Co plans to begin rolling out fibre-to-the-home in a ‘business as usual’ sense from December 2011, following mainland trials set to go live in April next year. Construction on the first five sites began in July, with a further fourteen new sites to join them later in the year.

A full commercial service is currently slated for September next year, by which time the wholesaler expects to have passed six per cent of premises with fibre. The company states it will be fully ready for market by August 2012.

Wireless coming next year, satellite delayed

NBN Co expects to have secured spectrum essential for the wireless component of the NBN by the end of this year, with construction of the network itself to begin in November 2011 following trials.

The satellite portion of network - serving those most remote of Australians - will be able to access an interim solution from June next year. The wholesaler expects to have two of its own, Ka-band satellites up and running by 2015, part of a project estimated to be worth $1 billion.

1Gbps speeds demanded by 2015?

The summary suggests NBN customers could demand 1 gigabit per second (Gbps) speeds by 2015, based on assumptions from key equipment provider, Alcatel-Lucent. NBN Co’s own projects are far more conservative; while one suggests 1Gbps speeds will be not be needed before 2038, another indicates 100Mbps speeds may be suitable for decades to come.

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Tags Telstra-NBN Co dealNBN Co business planNational Broadband Network (NBN)nbn coIndependent Senator Nick Xenophon

More about Alcatel-LucentAustralian Competition and Consumer CommissionetworkKPMGLucentTelstra Corporation

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