Is NBN Co about to pay for 80 years of power pole access?
Historical prices for HFC access suggest NSW Government overcharging massively
According to the NSW State Government, NBN Co is being completely unreasonable in declining to fork over in the order of $400 million for access to electricity poles in that state. In response, NBN Co is, as it warned it would in October 2012, invoking the Telecommunications Act and using the poles without electricity authority permission.
As the Australian Financial Review reports: “NBN Co will force Ausgrid to allow the installation of fibre cables on poles in a bid to save money on the $37.4 billion rollout”, reminding us that “NSW Deputy Premier Andrew Stoner last year accused NBN Co of trying to scalp $400 million from taxpayers through its negotiations with utilities.”
There is, however, an important question to be answered: why would the state government – and by extension the electricity authorities – have ever expected anything like $400 million for pole access?
One way of answering this is to ask “who else accesses electricity poles in NSW?” - the answer being Telstra and Optus, for their HFC networks.
Neither of these carriers discuss such trivial components of their spend in their financial results. It is, however, quite certain that Optus at least is paying nothing like what NSW hopes NBN Co will pay: its cable network contributes a total income of the order of $500 million annually, so there isn't fat for a $400 million bill, no matter how you slice it.
At least one historical datum is available: what Optus told IPART in NSW in 2002. In its Electricity Undergrounding in New South Wales report (page 13), IPART wrote:
“Optus submitted that the current cost of maintaining its overhead network in NSW is approx $5 million per annum. The key components of this cost are rental of overhead poles ($4.25 million), and repair costs and associated labour costs ($.9 million)” (emphasis added).
Adjusted for inflation, and with a three percent annual increment to the rent thrown in, Optus would now be paying $5.8 million annually. If Optus passes 600,000 households in NSW with its HFC network*, that equates to $9.67 per household (*this is an estimate; when Optus announced its deal with NBN Co, the network was described as passing 1.4 million households in Sydney, Melbourne and Brisbane).
For the next part, The Register will be explicit with its calculation.
Households in NSW: 2.8 million
Fibre households under the NBN plan: 93 percent of 2.8 million = 2.6 million
Overhead fibre: 20 to 25 percent of 2.6 million = 520,800 to 651,000 households
Annual payment at $9.67 per household = $5.03 million to $6.29 million
If NBN Co received commercial terms similar to Optus' in 2003, adjusted for rent rises and inflation, it would be paying around the same as Optus for its annual pole rental. The NSW Government's demand for more than $400 million would, on that basis, represent nearly 80 years of NBN Co access to the poles.
Optus declined to comment for this story. The Register also asked Ausgrid (a major electricity infrastructure owner) if it is aware of any significant revision to the commercial terms upon which Optus accesses its poles, but has not received a reply.
The Register also put two questions to the office of NSW Deputy Premier Andrew Stoner, since it was he who, during 2012, relayed the demand for in excess of $400 million. Our questions are:
1. What benchmarks did the NSW Government use to set this price? And
2. Is the NSW Government aware of the commercial terms under which Telstra and Optus access electricity poles?
No response was received at the time of posting. ®
Note: The Register is aware that price per pole would be more accurate than per household. But in towns and cities, the spacing of residential electricity distribution poles is quite regular – sufficient that with a sample of a couple of million poles, the data that is available serves as a reliable proxy, in our opinion.
Update: Ausgrid has advised that there have been variations to its agreements with Optus, however, "due to the commercially sensitive nature of this matter we are unfortunately unable to provide further details."