Telstra alone spent enough money in the last decade to build the NBN. Credit: iStockphoto

In the latest instalment of ABC Tech's investigation into the NBN and its alternatives, Richard Chirgwin shows that Telstra has spent so much money improving its network over the past decade that it could have paid for the entire NBN. Optus isn't far behind. If you think the NBN is expensive: compared to what?

In looking at the cost of the NBN, much of the attention focuses on the price tag of $37 billion (or even, if you want to take the higher, $50 billion). This is often described as "too expensive" either in terms of Australia's economy, or within the telecommunications industry.

I'm going to stick to the telecommunications industry as a context: how does the NBN compare to telco industry capex (Capital Expense) as a whole?

Actually, the NBN capex is less than that of just two carriers, Telstra and Optus.



*Optus estimated for 1998 - 2000, with different reporting standards used under Cable & Wireless ownership. For inflation adjustment, I used the Reserve Bank's online calculator.

The table can be summarised thus: Telstra alone spent enough money in the last decade to build the NBN.

To try and avoid criticisms that I'm over-counting things, I restricted this calculation to the capex item called "property, plant and equipment" (PPE). This calculation only takes into account dollars actually spent by our two largest carriers on buying the stuff that keeps their networks running. Capitalised software is excluded, as is investments in other entities and investment in intangible assets.

This data excludes the operational expenditure poured into the networks - which in the case of Telstra would include a certain amount of money maintaining the copper.

These tens of billions are only the cost of new "stuff" - optical fibre, mobile base stations, equipment in racks, computers, data centres, exchange buildings and the rest - that the two carriers need to buy, each and every year.

As you can see, the NBN's budget to install fibre, wireless and satellite is comparable to the last ten years' PPE spend by Telstra alone. Never in the last decade have Telstra and Optus spent less than a combined $3 billion on property, plant and equipment.

Of course, a considerable amount of the Telstra and Optus capex in that period has been spent on the two carriers' mobile networks. Those investments will continue and expand in the future.

Over on the fixed networks, the NBN will focus carrier capex away from customer access and free it up for the development of new services and investments, based on the equipment at the end of the network, the data centres and long-haul fibre investments.

Seen in isolation, the NBN looks like a lot of money, but the telecommunications industry is accustomed to spending big buckets of money on an annual basis.