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Voila! The new NBN corporate plan

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Image by Dan Jensen

While Australia struggles to figure out its NBN problems, a new plan has been formed based on financial projections, writes Paul Budde.

SINCE THE COALITION GOVERNMENT has taken over the NBN back in 2013, we have seen the goalposts being changed nearly on an annual basis. It started soon after Malcolm Turnbull’s infamous announcement: “we will bring you the NBN for around $25 billion and deliver it in 2016”.

The reality, of course, is that now in 2019 the costs are estimated at $51 billion and the rollout will be completed by the end of 2020, be it for around 100,000 premises that will be left in the too-hard basket, to be sorted out later.

In order to get from investments needed from $25 billion to $51 billion and from completion in 2016 to 2020, ongoing adjustments had to be made and this was also again the case in the new plan.

The aim of reaching $51 ARPU per customer has been pushed forward again — this is a major problem for the industry as that will mean a further squeeze on their margins. Consumers are not willing to pay more for their subscription so the costs of this push will solely rest on the shoulders of the retail service providers. The margins of the RSPs are going down to the 10 per cent mark. In comparison, margins for the retail providers in the energy market are 30 per cent, sometimes even higher.

According to OECD figures, Australia is now the country with the least affordable high-speed broadband network. So it is hard to see how NBN Co will be able to squeeze even more money out of the Australian public.

The company seems to realise this and is starting to change the goalposts here as well. It has changed the weighted format of the ARPU and will now have targets for certain customer groups. They have been successful in the business market and this might compensate for pushing prices higher in the consumer market.

In general, various financial projections have again been lowered for the next period.

The company will need to borrow the last $2 billion on the private market and it will be interesting to see if there will be an appetite for it this time. Previously, they tried to borrow a much higher amount of $19 billion but no one was eager to invest in the broadband network, so the Government had to step in. Of course, $2 billion is much less, but still a sizable investment, so this will be a good test for the NBN.

All of these manoeuvrings indicate that the financial situation of the NBN remains shaky, but the good thing for them is that its shareholder – the Government – doesn’t seem to be bothered by this.

A major concern from my side is that there is no indication on how to move on from the second-rate NBN to a full-blown high-speed broadband network, especially for the FttN element of the project. As previously stated, over the next decade as much as $30 billion will be needed to fix this and there is no mentioning of how is going to be done, not before 2023 and also not beyond 2023.

As mentioned in my blogs before, it is rather frightening that we as a country don’t have a long-term plan for our national telecoms infrastructure. On a more positive note, as for example shown in New Zealand, the costs of rolling out fibre has come down significantly over the last decade and I have now heard figures of around $20 billion needed for a full fibre upgrade. I will need to check that out further.

While the Corporate Plan does provide various new goalposts for the period 2020-2013, based on the developments over the last decade there is no certainty that this time they will be on target. Based on the previous situation, there is a much larger likelihood that the goalposts simply get pushed out further in the next plan and the plans after that.

Another telling story is that hardly anybody has been taking up the satellite service beyond those 70,000 that have been transferred from the old satellite service to Sky Muster. The system could potentially cater to some 600,000 connections but has currently less that 100,000 users. As mentioned before, we disconnected our Sky Muster service in Bucketty as the Telstra ADSL+ service (note, not ADSL 2) was more reliable and not slower.

While NBN Co is congratulating itself with all of its achievements, it is important to note that these achievements are being realised years and years later and at a quality that is increasingly lower than that of our trading partners. When we started the NBN back in 2007, Australia was ranked around #25 on the international ladder, we now feature somewhere around #60. I can’t see that the current NBN achievements are a reason for celebration.

Paul Budde is managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.

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