Turnbull's NBN inspiration should also serve as a warning

Summary:The low take-up on BT's fibre-to-the-cabinet network should serve as a warning for Communications Minister Malcolm Turnbull to be careful what he wishes for.

A return to infrastructure-based competition could see the take-up rate on the National Broadband Network (NBN) plummet to levels experienced by incumbent British telco BT on its fibre-to-the-cabinet network, the very network that Communications Minister Malcolm Turnbull has frequently cited as an aspirational model for Australia.

Although BT's fibre-to-the-cabinet network (FttC) passes millions more premises than Australia's fibre-to-the-premises (FttP) NBN, proportionally more customers are taking up services on the NBN than on BT's network.

BT is spending around £2.5 billion to roll out fibre-to-the-cabinet upgrades to 19 million premises across two thirds of the UK, with around 50,000 cabinets to be installed across the country.

According to BT's second-quarter figures released overnight, the network is edging closer to completion, with 17 million premises now passed.

But for all those premises passed, the take-up rate leaves much to be desired. BT reported that out of the 17 million premises passed, over 2 million have active services. That's a little over 11 percent take-up rate.

By comparison, according to NBN Co's figures published earlier this week, the fibre network now passes a total of 225,263 premises that can order a service, with 62,242 active services. This is around a 27 percent uptake.

It would be far too simplistic for fibre-to-the-premises advocates to suggest that UK broadband users are turning their noses up at the indignity of having to actually use a broadband service with copper still utilised; there is a deeper policy reason as to why take-up might be much lower.

According to statistics compiled by Point Topic, there are around 22.3 million broadband subscribers across the UK, with around one third of those customers on BT. Firstly, that indicates the obvious — the majority of BT's customers are not on its fibre network yet — and secondly, it highlights that there are infrastructure-based competitors for BT in the market, such as Virgin Media. So although the network might pass 17 million premises, those premises aren't obliged to connect to the internet through BT.

If, as Turnbull has promised, the new Coalition government decides to ease up on the ban on infrastructure-based competition against the NBN, he could soon find a rather large hole punched in the revenue model for broadband policy.

The Coalition made a number of what Turnbull said were "conservative assumptions" about broadband uptake in its policy , and Turnbull has already predicted that around 25 percent of households will be wireless only by 2028, but how many premises will be using a fixed-line NBN alternative?

There's no denying that the UK rollout of the network has been fast, and on that basis alone, it's easy to see why Turnbull would want to mimic BT's success, but the Australian government is investing a lot more in the NBN than BT has in its upgrades.

If a full fibre-to-the-premises provider targets a profitable area like suburban Sydney and prices on par with the NBN but at faster speeds, it's hard to see how the NBN will keep its uptake rates and continue to get the expected rate of return that will pay it off in the long run.

No doubt this is what the boffins and their many consultants at NBN Co are currently weighing up as part of the 60-day strategic review that will ultimately decide where the project heads after this year.

Turnbull said when he took over as communications minister that he just wanted facts and no politics with the NBN. The Liberal urge to let competition run free, even in areas where many people believe a natural monopoly should exist, is one such political inconvenience that Turnbull may have to sacrifice in order to justify continuing the rollout.

Topics: NBN, Australia

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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