There are a few points that NBN likes to continually push, day in, day out, in order to steer the narrative towards its strengths and hide scrutiny from its weaknesses. One of these major points is speed: that yes, since Bill Morrow took over the reins of themuch-malignedd agency, the speed at which the rollout has proceeded has been swift. During the past few years, NBN has beaten its own targets on ensuring premises have been made RFS (Ready for Service) each quarter. It’s also increased its revenue base and active user base. This is to be applauded.
The problem is, it is dramatically behind the political promises made by the Coalition as to when the rollout would be completed. It has not solved or mediated problems with backhaul, leaving this up to the customer to argue with their RSP. It has not answered questions in relation to design decisions at FTTN nodes, where NBN guidelines stipulate a local bandwidth pool of 1Gbit, rather than at least 10. In essence, it is replacing careful consideration to existing problems with sheer rapid pace – dropping nodes, patching copper and letting customers deal with their service problems. Nor has it not dealt with cripplingly high AVC/CVC pricing.
But you wouldn’t gather this from the 2017 Corporate Plan, a largely self-congratulatory document that spends its first third talking up its achievements. Satellite launches here, HFC breakthroughs there. Customer satisfaction? It’s crawled up from a dismal 6.6 to a 7.2 (this gets rounded down to 7.1 later on). It also bafflingly talks about G.Fast in relation to potential Gigabit speeds, when for that to happen a house would have to be on a single pair of perfect copper less than 100m from a node. In any case, this portion of the Plan is at the very least optimistic and attempts to detail the possibilities of the various technologies in play.
HFC Down, FTTN Up
Part B isn’t as optimistic. The document is beginning to get crunched by its $29.5b public budget and has begun to worry about the per-household cost of deployment. Where HFC was once slated to be as high as 30-32% of premises, making it somewhat of a reprieve for customers who were no longer getting fibre, this is now dropping back to around 25%, offset by an increase in cheaper FTTN connections. By the end of the rollout, there will be no more than 48% (21% FTTP/27%HFC) of premises on a connection that could realistically one day support a 1Gbit speed profile. According to the 2017 plan, this could be as low as 38% (17% FTTP/21% HFC).
The plan blames this on a variety of factors, ranging from “understanding of network planning and design” and “a move from demand drop to build drop lead ins”. Basically speaking, they found out how badly maintained the current HFC networks are, as many commentators and experts already knew. This has increased the costs of deployment, as equipment they once expected to keep was either too old or broken to keep in place. This has boosted the decision to use FTTN instead of building out HFC networks as originally planned.
This is an incredibly poor outcome. HFC is much more capable than VDSL2 in providing a strong, fast and consistent connection. It is distance-agnostic, isn’t affected by noise and environment, and has a much wider speed capability across its rollout area. Its comparable cost to FTTN should not rule it out, instead it should be considered best case when the two are put as a viable option for a build-out. With the proper backhaul in place, HFC should be easily capable of potentially providing a Gigabit connection that should be indistinguishable from Fibre on a day-by-day basis.
All this does is continue to force the narrative that the Mix isn’t really a Mix; it’s a way to retain as much of the existing copper network as possible. Placing FTTN at the centre of the network means entrenching copper for another decade at least, forcing customers to put up with noise and environmental issues they have been dealing with since the 90s. It’s cheaper in the short term, sure – but those power costs (for the nodes), will add up. Those copper remediation costs will add up. It’s almost a certainty that if a Coalition government is in power in 10 years that the network will eventually be sold off to TPG/Telstra or some kind of consortium who couldn’t give a rat’s arse about fixing any intrinsic issues with faulty copper – entrenching 50% of the population in an expensive upgrade situation to FTTP, funded by 5+ year telco contracts.
The other problem is that NBNco is not heeding its own research, choosing to roll out FTTP to brownfields (existing premises) using their original plan at $4400 per household, when the leaked “skinny fibre” plan showed costs could be reduced by a factor of 35-50%. This again artificially boosts the “preferred” rollout of FTTN, regardless of its current or future suitability.
Once NBN hits its $29.5B limit, things start getting interesting. The political situation is so toxic that it’s unlikely parliament would approve any more heavy public funding for it, outside of a few billion here and there to help transition to private investment. The corporate plan notes that it’s expected that Commonwealth “equity” would continue until the network was valuable enough and profitable enough to support any private funding.
The private side of things is more interesting and wholly ambiguous – will NBN simply go out and seek funding from traditional sources, such as super funds or capital markets. Or they may seek permission to get commonwealth backed bonds. Will this investment have any influence on the board or the direction of the company? Will the investment be considered good enough to facilitate the fairly heavy borrowing that will be required?
There is ambiguity in how the network can be funded, because the $29.5b cap is not legislated. It’s a guideline. A fairly hard guideline, but one with room to move. But nevertheless, it’s approaching soon enough and the company is beginning to feel the strain. Unfortunately, the lack of forward planning on the Mix before it was implemented by the Coalition has likely wasted millions on reviews, consultants, and design drafts that were guestimations until engineers actually had a chance to test in the field.
Only time will tell.