nbn on track for 2020 completion

By Dylan Bushell-Embling
Friday, 01 September, 2017

nbn on track for 2020 completion

Eight million premises and $5.4 billion in annual revenues by 2020 — that’s the plan.

The nbn remains on track for completion in 2020, and nbn co is aiming to become cashflow positive by 2021, according to the company’s latest corporate plan. Yet the estimated total cost of the rollout has blown out to approximately $49 billion, within a range of $47 billion to $51 billion. At $49 billion, the rollout will cost 66.1% more than the $29.5 billion estimated by Malcolm Turnbull when he announced his original nbn policy in 2013.

The figure is also $6 billion more than the estimated peak funding cost of Labor’s original nbn project, as announced in 2009. But Turnbull had at various times insisted that Labor’s plan of connecting 90% (later increased to 93%) of the population with fibre to the premises (FTTP) would instead cost between $74 billion and $94 billion — claims that Labor has repeatedly disputed.

As previously announced, nbn added 2.8 million premises to its footprint in FY17 and is targeting having an additional 3 million premises ready for service in FY18. The company aims to pass an additional 2.5 million premises in FY19 and the final 400,000 in FY20.

Meanwhile, service activations doubled from FY16 to FY17, the corporate plan shows. There are now more than 2.4 million retail broadband services in operation over the network. Annual revenue accordingly grew by $600 million over the financial year to reach just over $1 billion, and is expected to grow fivefold between FY17 and FY20 to reach $5.4 billion.

The plan calls for 8 million homes and businesses activated by 2020, with cumulative activations scaling more than three-fold over the next three financial years.

nbn co is meanwhile incorporating more components into its multitechnology mix. In November, the company revealed plans to deploy fibre-to-the-curb (FTTC, also known as fibre-to-the-distribution point) technology, which uses existing copper lines to connect to a distribution point unit outside of a home — the distribution point is connected to the fibre backbone.

The company’s CEO, Bill Morrow, said FTTC is expected to support 1 million premises across the country, and that nbn co is evaluating ways to expand that footprint further. The first wholesale FTTC services will launch in 2018.

Adopting FTTC has allowed the company to bring forward the rollout for 200,000 premises to FY19. “This now means we expect to be 97% completed by the end of June 2019,” Morrow said.

Internet Australia has called the decision to adopt FTTC a step in the right direction towards abandoning the use of ageing copper wires.

“While we maintain it would have been better if nbn co had stayed with an all-fibre rollout, FTTC is a reasonable middle ground. At least it can be upgraded to full-fibre at a later time. When it comes to FTTN, it’s a case of ripping it out at great expense,” said the organisation’s executive director, Laurie Patton.

“[The government] cannot ignore the billions it will cost within a decade or so to replace the FTTN as it increasingly proves inadequate… The way we’re heading now, whoever is in office in 2020 will have to deal with our biggest ever national infrastructure debacle. nbn co will owe the government circa $19 billion and within 5 to 10 years it will need to fund a very expensive FTTN replacement.”

As well as FTTC, nbn co is evaluating emerging technologies such as G.fast and XG.FAST — capable of providing speeds of more than 1 Gbps using existing copper lines — as well as the hybrid fibre coaxial (HFC) transmission technology DOCSIS 3.1 and fibre transmission technology Next Generation Passive Optical Networking (NG-PON2), which is expected to provide speeds of up to 10 Gbps.

BuddeComm senior research analyst Phil Harpur noted that recent legislation meanwhile paves the way for all new greenfield construction sites to be supplied with FTTP infrastructure, or made ready for an FTTP deployment.

“The nbn has in place measures aimed at improving competition, minimising costs and providing a level playing field for participants in this sector. Controversially, developers and home owners will be charged for the infrastructure costs in new housing developments,” he said.

Ultimately the nbn is set to become the predominant network infrastructure in Australia, Harpur said.

“As a utilities-based network it will also provide its services to other sectors, such as health care, education and business. With these sectors involved we will see the industry developing specific new business models around infrastructure, ICT and retail. IPTV and other media and entertainment applications will also begin to play a more important role.”

nbn co has been facing criticism over the number of customers opting for lower speed tiers and the high prices of the top-tier plans. The corporate plan indicates that currently more than 80% of customers are on the 12 Mbps download/1 Mbps upload or 25 Mbps download/5 Mbps upload plans.

While nbn co expects adoption of the higher tier plans to increase by FY21, the company still expects around 70% of retail end users to be subscribed to these two lower tier plans.

The low adoption of higher tier plans has been blamed in part on the size of the connectivity virtual circuit (CVC) charge, the price nbn charges each retail service provider for bandwidth they then allocate to their customers. The CVC influences the price retail service providers charge for various tiers of nbn service.

The corporate plan notes that in June, nbn co adopted a new dimension-based discounting model that reduces the price paid per unit as the average amount of CVC allocated per user increases.

Meanwhile, nbn co has announced plans to modify the ‘check your address function’ on its website to provide greater clarity as to when individual premises are able to connect to the nbn.

Presently, the function provides a street-level overview of when premises are ready for service, but does not take into account when individual premises need additional works to receive a connection. These additional works take an average of six months to complete.

In cases where premises within a ready-for-service footprint require additional works, nbn co also plans to attempt to provide a time frame of when these premises will be able to order a service.

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