The final unknown is what Telstra would charge for access to its copper network. Credit: Rodolfo Clix, file photo (www.sxc.hu)

Telecoms analyst/journalist, Richard Chirgwin, examines the cost of building the Coalition's FTTN (Fibre to the Node) NBN alternative network ($15bn) and models the cost of its subsequent upgrade to a Labor-like Fibre to the Premises ($21bn). The figures do not include the cost of Rural Australia's Satellite and Fixed Wireless networks ($3bn) or the cost of procuring Telstra's copper network (unknown). In the spirit of open journalism, if you have information which could be used to further-tweak the models, let us know.

I'm perfectly happy to accept Malcolm Turnbull's claims (for example, this statement, in this National Press Club speech from last year) that a FTTN network can be built faster and for around one-third the price of the NBN.

The numbers aren't that hard to come by: for example, they were laid out by the Allen Consulting Group back in 2006, when the debate centred on Telstra's plan to deliver FTTN to half of Australia's households.

To ensure a like-for-like comparison, I'm going to run this calculation on the basis that ultimately, the FTTN network will have to reach 11 million premises (the NBN fibre is slated to pass at least that number by the end of the rollout).

Lets assume that a VDSL2 DSLAM port costs around $250, and use two figures from the Allen report - $130,000 per node site in fixed capex (actually putting the box in place and connecting it to electricity, plus fibre installation at the node).

I also have to work out how many nodes are required. Rather than run with the rough estimates in play at the moment, I have calculated how many nodes would replicate Telstra's current ADSL2+ exchange-level coverage (around 90 per cent of households - although most don't receive fast speeds). This is simple enough, since you can combine Telstra exchange locations and ABS maps to estimate who lives within different distances of the exchange.

Out of 11 million predicted households, 10 per cent won't receive the FTTN service, and of the 9.9 million that remain, 13 per cent won't need a node. This leaves us with 8.6 million households to be served by FTTN (as I said, to make the calculation a like-for-like comparison with the NBN). At 200 premises per node, that means the network will require 43,065 nodes.

I've also included an estimate of $100,000 for equipment that will need to be installed in the Telstra exchange to support the nodes, for the roughly 2,800 ADSL-enabled exchanges now in service.

We can now estimate costs for the proposed FTTN rollout:

If those costs are correct, we have a balance of around $8 billion for installing fibre from 43,000 nodes back to the exchanges. Is this cost realistic?

I need some kind of estimate of total fibre distance. The table below shows a current estimate of the geographic distribution of households from exchanges, and hence the number of nodes at each distance band.

With this estimate of around 60,000 fibre kilometres to connect the nodes, we can now tabulate the rollout for 8.6 million premises.

This leaves us $6 billion to install the fibre - and with only 60,000 KM to cover, that should be plenty. Considering that our network owner will be using existing ducts, and won't be renting the ducts from a third party, a national average of $100 per meter seems to leave room for all manner of disaster.

Is a $15 billion estimate for an FTTN rollout achievable? It appears the answer is "Yes."

The FTTN-to-FTTP upgrade

This is a much more vexed question. As I noted in another outlet, The Register, the BT Openreach installation fee of around 1000 UK Pounds to 1500 UK Pounds for a 500-meter fibre connection appears to be subsidised to some degree.

However: the proportion of households at various distances from exchanges also allows us to estimate the total node-to-premises distance for our 8.6 million premises. We only need to assume that in each distance band, premises are distributed evenly - that every home is on average 900 meters from a node (I suspect a 600 meter average node distance is too optimistic in Australia).

The total node-to-premises distance is in the order of 7 million kilometres. If we apply the BT price of 1000 UK Pounds per 500 meters, or 2000 UK Pounds per kilometre (around $3000), the national upgrade has a maximum price of over $21 billion.

If that were the end of the story, to get FTTN upgraded to FTTH would cost someone - end users, government or carriers - $21 billion in addition to the original $15 billion capex. Of course, a network owner would do their best (via efficient network design) to reduce this.

(Whether the upgrade costs $10 billion or $15 billion or $21 billion, please note: I have ignored all the other costs that are built into the NBN Co budget.)

It may be more economically efficient to do so as a private venture enterprise (depending on whether this is the best way to spend consumer or corporate capital).

However, it should not surprise anybody that my models here - for which I used no data whatever from the NBN - yield similar FTTH outcomes.

Whether you believe in a big-bang, forklift-upgrade fibre-to-the-home rollout or an incremental approach - for the fibre is to reach the premises - the most expensive part of the rollout will be the last. This holds true with or without having FTTN as an intermediate point; the difference is not the cost, it's the timing.

Note: I have left out considerations of the copper ownership in this analysis, because it would not represent capital expenditure in the rollout of FTTN. Instead, I assume that the copper will either be owned by the same body as rolls out the network, or alternatively, that it will be rented as "naked copper", as part of the network's operational expenditure.