For over 20 years NINA Inventor Guy Dixon worked in telecommunications and finance, dealing primarily with the business and economic challenges of networking access.
This work has exposed him to the complexity, fragility and inadequacy of legacy access networks. In 2008 Guy set out solve the inherent limitations of pits, trenched pipes, cables and power poles.
There are no established alternatives to power poles and buried or trenched utility services. In Australia the cost of ducting and pole costs is estimated at $150 per month per household. There are currently 9 million urban households; therefore the access market is approximately $1.35 billion per month or $16.2 billion per annum. This represents approximately 1.1% of Australia’s GDP.
Pressure exists to increase productivity via the mass deployment of broadband Distribution costs are prohibitive, with investments measured in the trillions of dollars. In Australia, the national broadband network has a civil cost component of approximately 70% (including the cost of the Telstra ducting which is unsuitable for competitive broadband). Planned and active distribution investments in Australia are in excess of $100 billion. In the USA, Google has commenced construction of its own fibre to the home (FTH) gigabit network. With civil costs dominating, this service will require charges of $70 per month, driven principally by civil works costs and rents to use already crowded power poles. We believe NINA is the best distribution system for these kinds of networks.
Other universal needs are to improve urban water security (by accessing new sources and improve water distribution efficiency), and to increase the distributive efficiency of alternative and sustainable power sources.
The Demand (Need) for NINA has two components
A. Community demand
B. Utility Service provider demand
For practical purposes we consider communities to be structured along Local Government Areas (LGA.) There are some 560 LGA across Australia, with the larger communities being located in the state capital and secondary cities.
The LGA authorities (Councils) are the entities whose approval and co-operation is required to establish NINA Access Pathway systems within their area of jurisdiction.
Typically they have responsibility for maintenance of curbs, gutters and storm water access points and systems. It is their right to approve configurations and designs- subject to broad guidelines set out in the Australian Standards, which set parameters for curb heights and profiles. Usage of curb and pavement space is largely at the discretion of Local Government, though with respect to utilities access State and Federal legislative instruments contained within State based licensing instruments for electric power distributors and water authorities may give powers to override Local Government objections. National access codes for telecommunications give more consideration to Local Government objections. Impact classifications, of high and low, exist. For example digging up a footpath is classified as “low impact” and therefore exempts utilities from seeking Council approval before going ahead.
NINA has considered these issues and sees no legislative barrier to Local Government constructing, owning, operating or granting approval to an operator to install and operate a ducting system integrated into the curb and gutter. Privatization of local infrastructure is not new to Australia- an obvious example being JC Decaux bus shelter, phone stands and public conveniences. This opens the NINA investment opportunity to many variations subject to capital availability.
We have modeled the economics of the NINA Access Pathway on the basis of a revenue royalty payment. Commercialization and outsourcing functions as represented by the NINA Access Pathway, irrespective of ownership structure, are within the scope of reforms and efficiency improvements considered in the PwC report into Local Government sustainability.
Many Councils have contributed to the debate to have power poles removed. In the early stages of installation, NINA will target Local Governments with known desires to have power poles removed. This desire is often concurrent with high environmental awareness and strong aspirations to improve community life. Removal of power poles is estimated to add around 3% to property values in an area, a huge boost for homeowners. Unfortunately, before NINA, this has usually proved to be prohibitively expensive. Click here to read an in-depth article about Perth's creative solutions to burying power lines.
The demand potential for the proprietary NINA solution is huge. We emphasize at this point the IP protection of NINA is strong- to build such a system without a license constitutes theft with both civil and criminal penalties.
The attraction for utility providers
For most distributed services, distribution to end-users is the largest single cost component and the most capital intensive. Using electricity as an example the cost to end-users has 3 block cost components. These are:
Generation cost (40%) + High Voltage Transmission cost (10%) + Distribution cost (50%) = Cost of Service
Within the distribution component the largest component of network revenue is the return on capital, which accounts for up to two thirds of the network revenues claimed under the regulated pricing. The return on capital is influenced by the size of a network’s regulated asset base (and projected investment) and its weighted average cost of capital (the rate of return necessary to cover efficient equity raising and debt costs).
The NINA Access Pathway supports the creation of economies of scope, allowing the civil cost (modules, trenching, pipes, poles, surveying, making good etc) to fall as more services use the space within. It also allows for economies of scale to develop as the volume of modules produced increases. By shifting to a lower cost base, with a higher variable cost component, a higher margin and return on assets and equity can be achieved.
Pricing within the NINA Access Pathway architecture is determined by competitive market forces and regulation can be either eliminated or reduced. A useful example is the mobile telephone market where Australia has three national providers, an active reseller market and limited regulation.
In the case of fixed utility services new markets can be entered by efficient operators who may currently only operate in a limited jurisdiction.
From a utility operational perspective it will:
1. Lower operational costs as maintenance costs from storms, trees, flood, fires, hurricanes, earthquakes and accidents are removed.
2. Lower the risk of revenue losses due to service interruption.
3. Reduce transmission losses (power networks).
4. Lower power cost for optical fibre networks.
5. Lower Carbon Tax imposts.
6. Lower technology risk.
7. Create new business opportunities.
8. Allow utilities to defend markets opened to competition.
9. Reduce debt burdens.
NINA creates a shift from fixed capital costs to more demand driven operational expenditure. This allows greater flexibility in service formation around issues such as quality of service and network security. This is particularly the case for data services, where for example, a particular user may require a dedicated fibre from an exchange to their place of operation and others may be happy to share capacity across a passive optical network (PON).
Buried underground cable faults are significant and time consuming to repair. Service interruption for underground cables is typically due to third party dig-ins and joint failures. Within the NINA Access Pathway, services are protected within a clearly visible concrete encasement so the frequency of cable breakage within the access network will move to near zero.
Construction of the network based upon loops should also enable disruptions to be removed almost completely as each block represents a parallel circuit. The AER/ACCC has estimated that the costs of electrical service disruption to the economy are currently approximately $1 billion per annum.
In the case of electricity the NINA network would, in the case of a national rollout, encase below ground multiple cables in more than 150 000 km of subsurface ducting.
NINA analysis indicates that upon completion, an encased power distribution network would generate material savings nationally of approximately $1 billion. This figure is comprised of both reduced transmission losses and carbon tax savings.
With NINA operational, because access to the ducting is simple and does not involve digging, the marginal costs of new or upgraded services are reduced. This enables utilities to closely align investment in capacity with customer demand and to reduce technology risks associated with over or under investment in a particular platform.
Costs and business risks of NOT participating in NINA
Consumer sentiment against poles and the digging of streets is growing and many local governments are actively seeking to have power lines placed underground. However the costs and who should pay has been a barrier. NINA is creating an economically viable solution that does not impose a cost upon consumers and creates an environment in which competitors can enter at a lower cost structure.
Should a current operator not relocate into a NINA Access Pathway once it has been installed (which is economically feasible without electricity e.g. for water, gas, optical fibre uses,) they risk leaving the door open for a more efficient distributor to enter the market.
Such an operator would have consumer backing and a powerful first mover advantage. This means that the incumbent is at risk of being left with a stranded asset and a competitor operating from a lower cost base- the “Withered Vine” effect.
National power distribution networks are expected to undergo massive reinvestment over coming years. The ACCC/AER has approved price increases in anticipation of $32bn of works to upgrade poles, transformers, cabling and introduce intelligent networking of the grid.
The NINA Access Pathway is compatible with the investment in transformers as these can be connected via the Pathway, which runs past all transformers. These are located within block boundaries and close to the overhead cable path.