Leaked NBN documents show Optus HFC not fit for purpose

Internal drafts by NBN have shown that Optus' HFC network will need to be overbuilt, blowing out both the timeline and budget for the high-speed broadband network.

Optus' hybrid fibre-coaxial (HFC) network is "not fully fit for purpose", according to a leaked draft by the National Broadband Network (NBN) company, with 470,000 premises in the footprint needing to be overbuilt by either Telstra HFC or fibre services.

A leaked document, called HFC Plan B: Overbuilding Optus, dated November 2015, states that the necessary work of overbuilding Optus' HFC network with fibre to the node (FttN), fibre to the basement (FttB), or fibre to the distribution point (FttdP) will lead to a peak funding increase of between AU$150 million and AU$375 million, with NBN to miss its FY17 ready-for-service target by 300,000 premises, and its FY18 target by 333,000.

"Overbuilding the Optus HFC network with either Telstra HFC or FttX could deliver higher probability of success given the current state of the network [and] significant operational simplicity," the document says.

"Optus network is not fully fit for purpose. Optus nodes are oversubscribed compared with Telstra, and will require node splits. Existing Optus CMTS don't have sufficient capacity to support NBN services. Noise (ingress) [is] causing interference and degrading end users speeds."

The wide-scale rollout of HFC services was approved by the Australian Competition and Consumer Commission (ACCC) in June, with a revised AU$11 billion deal allowing NBN to take ownership of Optus' HFC network and Telstra's HFC and copper assets.

The modified agreement came as a result of the Coalition government's decision to move away from a full fibre-to-the-premises (FttP) rollout to the present so-called multi-technology mix (MTM) network incorporating FttN, FttB, and HFC.

"Leaked documents have today revealed that the cost of Malcolm Turnbull's second-rate version of the NBN is likely to blow out again, and it will take even longer to build than he promised," Shadow Minister for Communications Jason Clare said.

"It reveals that the Optus HFC network, a key component of Malcolm Turnbull's second-rate NBN, is in far worse condition than Australians were led to believe, and NBN Co is considering overbuilding the network -- costing hundreds of millions, and meaning hundreds of thousands of Australians will have to wait longer to get the NBN."

Last month, Clare said he expected the NBN to move to G.Fast FttDP technology.

"NBN has also recently revealed that they are about to trial G.Fast in the lab," he said. "I think it is likely that sometime between now and the next election the new Minister will announce that NBN will be rolling out fibre-to-the-curb -- using G.Fast."

The leaked documents show that NBN is indeed considering using FttDP.

Clare also admitted that should Labor return to power at the next election, it will be impossible to return the NBN to the approach used before the Coalition won government in 2013.

"I can't fix the mess this government has made with the flick of a switch or pull out every node or stop all the work NBN is currently doing without potentially causing more problems and wasting a lot of sunk investment," Clare said.

"If anyone thinks I can just click my fingers the day after the election and we can go back to the way it was they will be disappointed."

Australian Prime Minister Malcolm Turnbull attempted to alleviate the Coalition's liability over the NBN's cost blowouts and changing forms of technology on Wednesday afternoon during Question Time.

"Let's be quite clear about this: The National Broadband Network project was undertaken by the previous Labor government after, literally, 11 weeks consideration," Turnbull said.

"It was a shockingly reckless failure of policy and process. When they embarked on the project, they had no idea what it would cost, and they had no idea how long it would take -- and there was no way they could have known that, because the reality is they had not done their homework.

"They committed the Commonwealth to a staggeringly ambitious project with costing, they said, AU$43 billion, but they had no idea whether it would be that much, or much more. It was, in its own way, the craziest thing done by the Labor party in six years of misgovernment.

"As is the lot of the Liberal and National parties, we've inherited this mess, and we've had to clean it up. Most bad projects get worse, this one is getting better, and it is getting better because we changed the management, we changed the board, we gave them the flexibility to get on with the job."

Labor Senator Stephen Conroy, however, laid the blame squarely at the Coalition's feet, telling the Senate on Wednesday afternoon that it had been common knowledge Optus' HFC assets were not fit for purpose, but that the government had insisted NBN purchase them for the MTM NBN.

"Today, we've seen a document from the National Broadband Network company, which demonstrates, once again, the folly and the lies of those who've been peddling the NBN MTM," Conroy said.

"What we've seen today is a document that shows that this government are so inept, so incompetent, and so ideologically driven that they are prepared to buy a network from Optus which the minister said today in Question Time were going to use the Optus network, but what NBN Co have found after being made to buy it by Prime Minister Turnbull is, I quote: 'It's not fit for use'.

"There's a reason that we were going to close it down: Because it wasn't fit for use. We knew it, Optus knew it, the whole country knew it, but not Prime Minister Turnbull. He decided he knew better than all of the engineers, all of the experts in the country, and Optus today are laughing all the way to the bank."

For its part, Optus agreed that its HFC network needs to be updated.

"Optus and NBN Co have always acknowledged that parts of the HFC network would need an upgrade to support the NBN's product set," an Optus spokeswoman said.

"In advance of handover, there has been and continues to be major investment into the HFC network to manage subscriber growth and capacity demand."

The ACCC said in August that the original HFC deal would have seen Optus eventually decommission its HFC infrastructure -- a decision that Turnbull had called "a black day" in 2012.

"The ACCC had regard to the need for regulatory certainty and its view that the balance of benefits and detriments identified by the ACCC in 2012 was not likely to have changed, despite policy and technological changes since then," ACCC chairman Rod Sims said.

"This was partly because Optus would still be unlikely to invest in significant upgrades of its HFC network in order to provide infrastructure-based competition beyond the short to medium term."

The revised agreement will place obligations on Optus to use the NBN for the next 15 years, and share spectrum with NBN before the HFC network is progressively handed over.

NBN's three-year construction plan, released last month, said it will provide HFC to approximately 3 million premises.

NBN in August revealed in its three-year corporate plan that the peak funding cost for the project will reach between AU$46 billion and AU$56 billion, with a base case peak funding target of AU$49 billion.

"Due to the long-term uncertainties, management is forecasting a range of possible outcomes. The corporate plan, together with an initial forecast of years beyond FY18, estimates a peak funding in the range of AU$46 billion to AU$56 billion," the company said.

"Management are targeting a base case peak funding of AU$49 billion, which includes a contingency of AU$4.6 billion for unforeseen risks inherent in a complex infrastructure built over multiple years. This contingency is intended to cover revenue, operating costs, and capex risks."

The risks taken into account by the company covered the implementation of the HFC deals with Optus and Telstra, among other issues.

Turnbull claimed the project would have cost around AU$30 billion more had the government retained Labor's pure FttP NBN model.

"The corporate plan shows that the multi-technology mix remains the most cost- and time-efficient means of completing the NBN, delivering upgrades six to eight years sooner, and at around $30 billion less cost than an all-fibre to the premises alternative," Turnbull and Finance Minister Mathias Cormann said in a joint statement.

"The company's conclusion is that an all-FttP approach, as proposed by Labor, would have a peak funding requirement of AU$74 billion to AU$84 billion and would not be finished until as late as 2028."

In response, the company responsible for rolling out the NBN said it is currently conducting a 4,500-premises HFC trial in Redcliffe, Queensland, and has not found any "unexpected" technical issues with the Optus network.

NBN said the leaked document was developed as part of ongoing risk mitigation, and that the company regularly prepares for multiple scenarios in network deployment.

"Our corporate plan has accounted for the ebbs and flows expected in a project of this scale," the company said.

"Scenario planning is part of good governance and has been accounted for in the corporate plan released in August."

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