FTTH Pricing expectations

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#339055 7-Jun-2010 16:41

I think it was $3000 for the thrust and the duct and the wire and meter changing etc was the rest of it up to about $9000 - not sure the price of 130m of 100mm ducting.

Whatever, not cheap and it was going to me more if we wanted other services at the same time since the thruster only made a hole big enough for a single duct and that wasnt able to be shared with other stuff so to get the phone undergrounded and gas on at the same time was going to add more to it.

Needless to say, I still have only a 63amp overhead power cable to the house as no way could I afford to spend that much on an upgrade.

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Cymro

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#339070 7-Jun-2010 17:41

Screeb:
Cymro:
Look at the examples given in this thread for thrusting a trench, given the wide range of property in NZ $1-2k could potentially be underestimating the cost.

Again, I'm talking about the direct cost to the customer for an install, not the actual cost of building it.

It's the same thing, unless you are going to get a subsidy from CFH, someone will either be paying the costs upfront or over the term of a contract.

Screeb:
Cymro:Along the streets, not the last 10m, that will not be ducted, so you are either digging a new trench or bringing the cable up out of the ground, up a pole and over the pavement and into a house?

So? You were talking about how councils supposedly want everything buried, in which most of the cost compared to using lines is trenching along streets. Using existing ducting in my example saves almost all of this cost. The last 10m is the same either way.

No, we are talking about the last 10m being ducted or overhead, and the huge difference in cost, not to mention the fact that if the fibre passing the house is ducted and the last 10m is overhead, you will have cables "sprouting" before climbing a pole to reach the house.

Screeb:
Cymro: So who is going to pay it? The guy doing the install is going to want to get paid straight away, is the ISP expected to sit on $1500 of debt? Who pays right now if you want to hook up a new propery to gas for example? Or as another example, to hook up to existing fibre outside your house....

You already answered this yourself (amortization). Besides, who pays for the rest of the network? Do you have to pay for the cost of the fibre running down your street, your suburb, your city? All the networking equipment? No, of course not. It's recovered over time.

Keep to the point, the national network (fibre passing the property) is what CFH is implementing, the last 10m connection when someone actually orders a fibre conection is something entirely different and very likely to be a cost that the service provider (ISP) is going to be paying, and they will NEED to recover that from their customer either over the term of a binding contract with penalty clauses to protect themselves, or by passing the cost on directly.

Screeb:
Cymro: Sorry but I think you are being monumentally naive here, I completely agree that the full install costs will only need to be paid once, but no corporate entity is going to go around offering to own that kind of debt over a number of years without the guarentee that they can recover the costs through a contract, either as part of the base CFH access price that the ISP pays or the price an ISP charges it's customer.

Do you actually expect all the costs of building a nationwide network to be recovered in 24 months? The ROI for a nationwide FTTH network is at least 10 years. I'm sure you don't disagree with that. And yet there are no 10 year contracts for the customers. There is no guarantee of recovering the cost of building the network. So why separate out the last 10m from this equation? If they can handle being in "debt" with a nationwide network, then they can handle being in "debt" with another portion of that.

There are 1.6 million houses in NZ. If 75% (1.2m) are covered by the network, and the network costs $5b to build (low estimate), then that's $4167 per house to build the network (and it's likely that less than 75% will be covered in a reasonable timeframe). So that's basically a lower limit. Is that going to be recovered in 24 months? No. Should each subscriber have to pay $4167 + install cost? Of course not.

Again, I'm not sure you understand the difference between the proposed FTTH build and the last 10m install to a property.
Of course the full network is going to be paid for over a much longer term than 2 years via the wholesale price for access to the fibre, but the cost of the last 10m is an extra on top of the initial network build and something that will be done on demand, just as in the Verizon example, and incur a fee.
Bear in mind the full network is going to be a monopoly so can play a very long game recovering costs, the layer 3 service over the fibre is contestable so an ISP will have to recover any costs (install) from their customer over a much shorter period before the customer switches ISP.

Screeb

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#339629 9-Jun-2010 00:34

Cymro:
It's the same thing, unless you are going to get a subsidy from CFH, someone will either be paying the costs upfront or over the term of a contract.

This is all the same argument as below, so there's no point in saying it in two places.

No, we are talking about the last 10m being ducted or overhead, and the huge difference in cost, not to mention the fact that if the fibre passing the house is ducted and the last 10m is overhead, you will have cables "sprouting" before climbing a pole to reach the house.

The council's supposed dislike of overhead cables has nothing to do with what happens on someone's property. If the council insists on underground fibre, then the last 10m can be your nightmare scenario of "sprouting" from the ground. Oh no!

Keep to the point, the national network (fibre passing the property) is what CFH is implementing, the last 10m connection when someone actually orders a fibre conection is something entirely different and very likely to be a cost that the service provider (ISP) is going to be paying, and they will NEED to recover that from their customer either over the term of a binding contract with penalty clauses to protect themselves, or by passing the cost on directly.

[...]

Again, I'm not sure you understand the difference between the proposed FTTH build and the last 10m install to a property.
Of course the full network is going to be paid for over a much longer term than 2 years via the wholesale price for access to the fibre, but the cost of the last 10m is an extra on top of the initial network build and something that will be done on demand, just as in the Verizon example, and incur a fee.
Bear in mind the full network is going to be a monopoly so can play a very long game recovering costs, the layer 3 service over the fibre is contestable so an ISP will have to recover any costs (install) from their customer over a much shorter period before the customer switches ISP.

If the ISP is the one doing the last 10m, then this falls under CFH subsidy. Do you think the government and ISPs are going to sit by while no one gets FTTH installed because it costs too much? They're not going to just give up and say "oh well, we tried".

I also don't see why the national network operator can't do the last 10m. The ISP would tell them they have a customer, and the operator would build it, given they're in a much better position to do so. The operator isn't going to be making much money if no one can afford to connect to its network.

... an ISP will have to recover any costs (install) from their customer over a much shorter period before the customer switches ISP.

By the same token that an ISP is able to have "their" 10m taken over after a contract ends, they are also able to take over someone else's. If they're losing more than they take, then they have bigger problems (losing customers, or extremely unlucky). Either way, it's a silly situation, which is why it makes much more sense for there to be a subsidy or be built by the nationwide operator.

Anyway, this is all really getting besides the point. At the end of the day, my leading point is simply that you will not have to pay thousands of dollars to get FTTH installed (and if you did, it would increase the value of your property). There is no precedent for a consumer-targeted large-area FTTH network that costs thousands (direct to the customer) for installation. It would make the network unviable and pointless. It's all quite pointless to discuss it in the first place, since a lot can happen in 8 years.

If you're really concerned that it will cost so much to get it installed, then maybe you should be writing to the government and every company that has put forward their case to build the network. I'm sure they'll want to know about this fatal flaw that they've clearly overlooked. On the other hand, if you believe that it's not a problem, and that a large portion of the population will be willing to pay thousands for FTTH... that's a whole other argument (and it would make this one quite moot).

ockel

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#339723 9-Jun-2010 11:09

Screeb:
If the ISP is the one doing the last 10m, then this falls under CFH subsidy. Do you think the government and ISPs are going to sit by while no one gets FTTH installed because it costs too much? They're not going to just give up and say "oh well, we tried".

I also don't see why the national network operator can't do the last 10m. The ISP would tell them they have a customer, and the operator would build it, given they're in a much better position to do so. The operator isn't going to be making much money if no one can afford to connect to its network.

You've taken a close read of the RFP for CFH? Its a "pass the home model" with absolutely no funding for the last drop and the connection. Thats one reason why Vector are so keen to build - they build it and get reimbursed for each home passed (assuming on time/budget). There is no incentive for Vector to connect anyone and one could quite easily have a fibre network that is past 75% of homes with no connection if there is no demand. What makes it worse is that the Access Network Builder has, at that stage, no skin in the game and doesnt care whether there are any connections as its no financial liability. The ISP's wont care as they havent contributed one red cent to the build (given the distinction/divorce between access network and retailer). So at that stage its just the Govt with $$$ in the ground. The Govt of the day could very well say "oh well, we tried" or worse "it was a previous Govts silly idea that has no traction so we wont throw good money after bad for a service that households dont seem to want". Its a very real threat that many submitters have highlighted to the Govt and CFH in the process.

If you're really concerned that it will cost so much to get it installed, then maybe you should be writing to the government and every company that has put forward their case to build the network. I'm sure they'll want to know about this fatal flaw that they've clearly overlooked. On the other hand, if you believe that it's not a problem, and that a large portion of the population will be willing to pay thousands for FTTH... that's a whole other argument (and it would make this one quite moot).

Its a known fatal flaw and most companies that have put they cases forward have highlighted this risk. And that is why this thread of discussion is extremely important and highly contentious.

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maverick

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#339727 9-Jun-2010 11:22

Which is why I highlighted the articles from Saturday as it adds to my comments, will most NZers pay several thousand dollars to get connected to Fibre for the speed benefits it would bring over the existing and future copper rollouts ?.

So the questions are.

Is the the benefit worth the extra cost ?
Would you as a normal home user pay ?
Who do you expect to pay the 2 - 3k of costs involved with install and retro fitting homes ?
Would you expect to pay more for this service once installed ? (you will have to pay more)
Along with that if an ISP covered the costs (I can tell you my PERSONAL thoughts... no way!!!) .. how long do you think you are going to have to be locked into a contract for as a residential user ?
DSL2+ with cabinet rollouts brings higher speed options now ... does this not suit most users ?

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kyhwana2

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#339736 9-Jun-2010 11:36

maverick: Which is why I highlighted the articles from Saturday as it adds to my comments, will most NZers pay several thousand dollars to get connected to Fibre for the speed benefits it would bring over the existing and future copper rollouts ?.

Unless there are no/more generous caps (think 5-10x as much) than there are now, people own't bother..

ockel

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#339751 9-Jun-2010 12:24

From Commsday

"The ACCC says it is currently not concerned that the National Broadband Network in Tasmania is undercutting existing broadband services by pricing its ongoing access offering at zero cost. "

Thats how you stimulate demand for takeup. Especially when the Tasmanian Government says 15% takeup in 15 years.

Of course if an incumbent offered that then the competition authorities would be concerned.
And an ISP would love to offer that if it had deep pockets.

So Australia is creating a new monopoly access provider that will replace the existing monopoly access provider over time. Good thing they sold the previous monopoly provider. At least in NZ the Govt sold theirs long long ago so therfore it must be fair game to undercut and displace access with sub-economic pricing.

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ObidiahSlope

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#339776 9-Jun-2010 13:08

A related technical question.

The electrical wiring regulations cover underground power cabling.

If the fibre optical cable you install have no conductive components are you allowed to share a duct between power cables and and fibre optic cables?

I understand that the power and fibre cables need to be terminated in different boxes so that a registered electrician or certified lineman does not have to be present for any fibre work.

Obsequious hypocrite

Screeb

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#340006 9-Jun-2010 23:08

ockel:
You've taken a close read of the RFP for CFH? Its a "pass the home model" with absolutely no funding for the last drop and the connection.

I haven't read it in detail, no, but yes I'm well aware of the scope. I'm talking about commercial deal or extra subsidy in the case that it doesn't pan out (ie the scenario that consumers are faced with thousands of dollars to install).

Thats one reason why Vector are so keen to build - they build it and get reimbursed for each home passed (assuming on time/budget). There is no incentive for Vector to connect anyone and one could quite easily have a fibre network that is past 75% of homes with no connection if there is no demand. What makes it worse is that the Access Network Builder has, at that stage, no skin in the game and doesnt care whether there are any connections as its no financial liability.

I'm sure you know much more about this than me, but this just doesn't make sense. The builder is going to be matching+ what the government is putting in. It's not a free lunch to build (ie not 100% reimbursement) or maintain the network. No company is going to happily sit on an asset that isn't earning anything and is constantly depreciating, after spending $1.5b+ on it. At some point they will need to make their money back, and that means actual end users.

The ISP's wont care as they havent contributed one red cent to the build (given the distinction/divorce between access network and retailer). So at that stage its just the Govt with $$$ in the ground. The Govt of the day could very well say "oh well, we tried" or worse "it was a previous Govts silly idea that has no traction so we wont throw good money after bad for a service that households dont seem to want". Its a very real threat that many submitters have highlighted to the Govt and CFH in the process.

The ISPs will start caring when one of them decides to take the gamble and signs on customers. As far as the government goes - they're certainly putting a lot of effort into something that is supposedly so feeble. If they were just playing the throwaway vote game, they'd be spending the money on something else.

Its a known fatal flaw and most companies that have put they cases forward have highlighted this risk. And that is why this thread of discussion is extremely important and highly contentious.

If the companies believe it's a fatal flaw, then they won't go through with it. And weren't you just saying that there's no incentive to actually connect customers? If so, then they wouldn't care, so why did they supposedly highlight this "risk"?

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#340016 9-Jun-2010 23:46

With most people barely able to justify spending what they do on internet access with power prices going up, I dont think there will be much demand at all for FTTH unless it can come in under the cost of ADSL + SKY + Landline for tripple play I dont think it will move, even if the install is under $200 all up.

There would have to be considerable savings or reduction of risk of overage to interest a bulk of people.

I actually know of 2 people thinking of going back to dialup from bigtime because they have kids and have had bill problems in the past.

Richard rich.ms

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#340017 9-Jun-2010 23:48

maverick: Which is why I highlighted the articles from Saturday as it adds to my comments, will most NZers pay several thousand dollars to get connected to Fibre for the speed benefits it would bring over the existing and future copper rollouts ?.

So the questions are.

Is the the benefit worth the extra cost ?

Now? no. In 10 years? Maybe, depends on applications.

Would you as a normal home user pay ?

Me? Maybe.
My extended family? I doubt it.

Who do you expect to pay the 2 - 3k of costs involved with install and retro fitting homes ?

End user is going to pay for it somehow. I'd rather not spend my taxes connecting up perpetual beneficiaries, tinny houses/p labs, and a large % of user who may not see any benefit from fibre for years. I'd be keen on user pays, perhaps split into upfront cost + term recovery model.

as a landlord, i'd certainly look to providing an FTTH install to help differentiate a rental property and attract good quality tenants in a crowded market. i paid perhaps $1000 for a professionally installed Satellite dish as part of rental property build as i didnt want some cowboy sky installer with a large drill coming around later...

Would you expect to pay more for this service once installed ? (you will have to pay more)

Yes. At least until a critical mass of subscribers is reached and costs can be reduced

Along with that if an ISP covered the costs (I can tell you my PERSONAL thoughts... no way!!!) .. how long do you think you are going to have to be locked into a contract for as a residential user ?

3 years was a pretty standard term for mobile phone contacts until recently. i wouldnt want to sign up for something for that long though.

DSL2+ with cabinet rollouts brings higher speed options now ... does this not suit most users ?

Now? yes.
When some company with balls and money plans a nationwide iptv rollout and 'steals' the major premium content from SKY, perhaps not.

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exportgoldman

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#340025 10-Jun-2010 00:15

This whole Vector ad campain makes me laugh, at work we have a budget of around $500-$600/month for broadband, all three fibre cables are either literally at our door or in our building already (Vector, Telecom and TelstraClear) but all three of them want us to pay around $1000 for a ADSL type speed connection with a tiny data caps of around 50GB and then between $3-$20/GB after that with no free/split price local traffic.

If Vector really wanted to push the market forward and offer better than 'tiny straw broadband' perhaps they could start with offering broadband services on their existing already built network that are faster than 10 year old ADSL speeds for less than 10x the price of those same products.

I had one client on Orcon fibre which is paying over $1000/month/2megabits which threw in a big time connection to resolve problems with internet browsing/youtube because it was cheaper to get that extra 6 megabits than simply increasing the VLAN on the existing fibre connection. (DHCP with different DNS/and gateway - works well)

Now, if anyone knows of any providers which can offer us good pricing on fibre right now I'm all ears, a split pricing for local/international pricing would be good, and speeds above 10 megabits would be excellent.

Currently, ironically we go via telstraclear copper to their DSLAM down the road with 2 of our flat rate connections because their unused fibre in our basement is 10x the price.

May give XNET a call in the morning and see what they can do with the fibre pricing. Tried Compass, they said they had amazing pricing but after following up with them 3 times and getting no response I gave up.

Having said that they offer a WiMAX connection 10Megabits/1Megabits Up 50Gb for $79.95 which seemed like a good deal. We just need 100-150GB a month most of which is to alkami caches/windows updates etc.

Would I pay to get fibre plumbed into my house in this market - no way, once the pricing/speed is at least within 2x existing ADSL perhaps, but then ADSL2/VSDL will be out.

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#340035 10-Jun-2010 01:10

exportgoldman:

May give XNET a call in the morning and see what they can do with the fibre pricing. Tried Compass, they said they had amazing pricing but after following up with them 3 times and getting no response I gave up.

Give callplus a call as well - i use them. They can deploy over either vector and telstraclear fibre. I've been on both before. As a comparison, the monthly fibre costs are half that of going direct to telstraclear because you are only paying for one end of the connection.

If you bundle phone lines (e.g. sip trunks, or pots-voip-pots with devices) and internet together then the whole cost can come down as a provider can provision the voice over a seperate vlan on the same connection so you're not paying for two 'wires'.

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ockel

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#340091 10-Jun-2010 09:51

Screeb:

I haven't read it in detail, no, but yes I'm well aware of the scope. I'm talking about commercial deal or extra subsidy in the case that it doesn't pan out (ie the scenario that consumers are faced with thousands of dollars to install).

If there was a serious intention then you would have a fully funded rollout like Australia. What we know is that it costs significantly more than $1.5bn to PASS 75% of homes in NZ. And much much more to connect 75% of homes in NZ. As discussed below the submissions called for extra subsidises to connect homes. But so far thats fallen on deaf ears.

I'm sure you know much more about this than me, but this just doesn't make sense. The builder is going to be matching+ what the government is putting in. It's not a free lunch to build (ie not 100% reimbursement) or maintain the network. No company is going to happily sit on an asset that isn't earning anything and is constantly depreciating, after spending $1.5b+ on it. At some point they will need to make their money back, and that means actual end users.

Actually when the companies bid they can contribute x% on a home passed basis. This can be 0% ie the Crown funding the model 100%. So yes it could be a free lunch for the builders - provided they cost the build properly. It comes down to the bids themselves. Ideally the Govt would like to see a 50/50 model as indicated with the initial scope but it depends on the perception of the economics. If you thought end demand was minimal then you'd tend towards 0% private contribution. The bidders could offer in assets that represents a proportion and I imagine a process that agrees on the value of the assets contributed would result. There are examples and formulae (thanks to the imagination in Treasury) in the RFP. Personally I think the method of contribution and share swaps within the mechanism are a very smart way of presenting the case.

If the companies believe it's a fatal flaw, then they won't go through with it. And weren't you just saying that there's no incentive to actually connect customers? If so, then they wouldn't care, so why did they supposedly highlight this "risk"?

If you've been reimbursed for building fibre past the home then you've recovered your costs (its a civil project essentially). They'd prefer to have a model whereby the Govt subsidises the connection - obviously if you can get the Govt to pay some (or all) of the connection and you earn based on providing a service with no physical assets committed then you'd play the land grab game cos thats money-for-jam. Hence what we're seeing in Australia with the Tasmanian fibre price war. Little physical assets commited by the ISP's, no wholesale connection charge (and I understand no monthly wholesale charge for the first 12 months). So if i connect a customer in Tasmania and it costs me nothing to do it and I can get $30/mth for 12 months with no wholesale access (only traffic at which I'm charging ~$1/Gb) then thats $360 free money per customer.

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Screeb

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#340725 11-Jun-2010 17:39

ockel:
If there was a serious intention then you would have a fully funded rollout like Australia. What we know is that it costs significantly more than $1.5bn to PASS 75% of homes in NZ. And much much more to connect 75% of homes in NZ. As discussed below the submissions called for extra subsidises to connect homes. But so far thats fallen on deaf ears.

Will cost more than $1.5bn? Come on, no need to say silly things like that - no one is arguing that point. The intention is that it will be matched, so there's a minimum of "$3bn to do 75%" claim. I agree that even $3bn is not enough either. Way too little for 75% coverage. IMO the government needs to commit much more if they want 75% coverage. Otherwise they will have to reduce scope. But given that many people are already going crazy that the govt would dare spend $1.5bn on long-term infrastructure, that probably won't happen. At least not for a while.

Actually when the companies bid they can contribute x% on a home passed basis. This can be 0% ie the Crown funding the model 100%. So yes it could be a free lunch for the builders - provided they cost the build properly. It comes down to the bids themselves. Ideally the Govt would like to see a 50/50 model as indicated with the initial scope but it depends on the perception of the economics. If you thought end demand was minimal then you'd tend towards 0% private contribution. The bidders could offer in assets that represents a proportion and I imagine a process that agrees on the value of the assets contributed would result. There are examples and formulae (thanks to the imagination in Treasury) in the RFP. Personally I think the method of contribution and share swaps within the mechanism are a very smart way of presenting the case.

Do you really think it's going to end up 0% private contribution? I'm sure you don't. The government is of course picking between the companies that have made bids - at least one of them I'm sure is going to commit to spending.

If you've been reimbursed for building fibre past the home then you've recovered your costs (its a civil project essentially). They'd prefer to have a model whereby the Govt subsidises the connection - obviously if you can get the Govt to pay some (or all) of the connection and you earn based on providing a service with no physical assets committed then you'd play the land grab game cos thats money-for-jam.

As before, I find it very doubtful that there will be a 0% private contribution. Even if it was 0%, and there was 0% take-up, it would be pointless and a waste of time for the company to build the network - there would still be pressure to create end-user demand. To do otherwise is a waste of a business opportunity, and not a "land grab".

Hence what we're seeing in Australia with the Tasmanian fibre price war. Little physical assets commited by the ISP's, no wholesale connection charge (and I understand no monthly wholesale charge for the first 12 months). So if i connect a customer in Tasmania and it costs me nothing to do it and I can get $30/mth for 12 months with no wholesale access (only traffic at which I'm charging ~$1/Gb) then thats $360 free money per customer.

I don't know much about the AU situation, but still, I'm not sure what you're trying to get at here. It seems to be working out pretty well for the consumer, given the plans I've seen...?

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