Chorus warns of $300 million UFB blow out

Chorus, which is charged with building 75 percent of the government's $1.5 billion Ultra Fast Broadband (UFB) network, says it expects its part in the network to cost $300 million more than initially expected when the company started the build 18 months ago.

Revealed during Chorus' half-year analysts report this morning, where the company posted interim profits of $84 million, the telco says the capital cost of laying fibre ducts have risen "from $1.4 billion and $1.6 billion, to between $1.7 billion and $1.9 billion". 

The cost for passing through a premise for Year 1 areas has increased by $200, to $3500. Year 2 areas have increased by $300, to $3200.

Chorus says the majority of the build is going according to previous estimates, but outlier cost centres have popped up in Ponsonby, Wellington CBD, and Queenstown. All this is exasperated by slow compliance at a local government level, adds the company.

"It's just taking many more days getting past these difficult areas than one would want," says Chorus chief exec, Mark Ratcliffe.

Paul Brislen, CEO of TUANZ and media go-to-guy on all things telco, says the cost blow out will force Chorus to rethink how it goes about building out its part of the UFB.

"The cost per connection is remarkable. It looks to me that Chorus hasn't done the sum changes it needed to," says Brislen.

"I don't think the government is planning to give an extra $300 million to Chorus. This will force Chorus to look at their overheads and where they can cut costs."

Arial deployments, where fibre is carried along power lines instead of through ducts dug under ground, might be a way to keep costs down says Brislen, and one Chorus says it is already investigating.

Another would be to better utilise existing fibre networks built by local fibre networks (LFCs) since the early 2000s, says Brislen. Chorus already does so with FX Network for backhaul capacity, and uses Unison Fibre's ducts in the Central North Island.