FttN NBN needs customers more than coverage: NBN Co report

FttN NBN needs customers more than coverage: NBN Co report

Summary: The NBN's self-funding nature means the Coalition government should prioritise boosting its subscriber numbers in new rollout areas over rushing to meet coverage objectives, a confidential NBN Co report has advised.

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Fibre-to-the-node (FTTN) technology might be faster to deliver in its early days than fibre-to-the-premise (FTTP) technology, a confidential NBN Co report has advised, warning that lower revenues from the Coalition's national broadband network (NBN) strategy mean "it will be important to prioritise activations over...any coverage objective."

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Viability of the Coalition's FttN model depends on maximising customer density, not its speed: NBN Co. Image: CC BY-SA 3.0, David B King

“While FTTN architectures typically have a reduced construction period compared to the rollout of FTTP architectures, ramping up to a volume rollout of FTTN architecture will take time,” the report – prepared by NBN Co during the caretaker period to form part of the incoming government brief given to incoming communications minister Malcolm Turnbull – warns.

Noting that FTTN's limited product set would restrict the possibility of offering high-value services over such a network, NBN Co warned that the government would need to ensure that large numbers of users were switched over to any FTTN NBN as quickly as possible, so as to maximise revenues.

This would be important because the NBN has been costed based on the idea that rapid growth in the number of users would generate a revenue stream that would help fund the ongoing network rollout.

The speed at which the NBN can generate its own revenues is directly related to the amount of money the venture will need to borrow to complete its rollout. In modelling around the FTTP network, NBN Co advised, extending the rollout by two years "resulted in lower funding requirements, assuming everything else remained unchanged."

“This is because areas which have already become profitable can start to lower the peak funding requirement once a certain level of revenue contribution from these areas is achieved.”

"If lowering the peak funding requirement remains one of the main policy parameters, then it will be important to prioritise activations over and above any coverage objective."

Rollout speed has been a key aspect of the Coalition's broadband policy, which has been built around delivering a minimum of 25Mbps to all Australian premises by 2016 and at least 50Mbps to 90 percent of fixed services by 2019.

Rushing to meet these objectives – without ensuring a high activation rate – would lead to a revenue shortfall that would need to be made up for in the form of additional debt, NBN Co advised, noting that debt would be increasingly difficult to pay off given the reduced revenues of the FTTN model.

“Profitability will be achieved earlier if the period between the rollout of the network and the activation of end-users is reduced,” the report warns.

“However, if the time between network construction and end-user activations is extended, then peak funding requirements would likely be materially higher. This is particularly acute in the early years of the rollout as a number of elements of the NBN Co infrastructure are put in place.”

Implementation of the NBN transit network, fixed wireless and satellite networks, “high risk” IT systems, other “common capital expenditures” and “the buildup of NBN Co's overheads to support the rollout” would all impose a significant funding burden that could, the company advised, only be met if the FTTN rollout were to ramp up its revenue generating capabilities as quickly as possible.

That means maximising the number of subscribers on existing infrastructure in limited areas rather than funding the rollout of the entire network from the start, then waiting for subscriber numbers to build over time.

“In other words,” the report notes, “if lowering the peak funding requirement remains one of the main policy parameters, then it will be important to prioritise activations over and above any coverage objective; or, at least to maintain a close alignment between construction and end-user activation.”

Former NBN Co CEO Mike Quigley addressed the concerns in a recent speech in which he warned that the government should not let politics distort the costing and rollout of the network.

Turnbull has previously dismissed the report as “totally political” and out of date – despite subsequent evidence to the contrary – and has promised details of his network's cost and technological models will be revealed soon.

Turnbull recently received the findings of the strategic review but has delayed its release and defied calls by the Senate to make the document public. Turnbull's office has advised the report will be released before the end of the year.

Topics: NBN, Broadband, Fiber, Government AU, Australia

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Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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6 comments
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  • Let me translate

    This is what NBNCo is saying. With ultra high speed fibre the NBN could concentrate on selling a few well-off people expensive services, and wait for everyone else to have to sign up when their copper connection was disconnected. But with lower speed FTTN they'd have to concentrate on signing up as many people as possible.
    Gordon D
  • Turnbull is getting covered in bull

    The FttN NBN is a farce. It has the potential to ruin Turnbull's career.

    It's going to be a gigantic botch up, and Turnbull is going to be blamed for it.

    The NBN people want to get maximum activations. Who is going to want it? I get almost 20Mbps with ADSL2+, but I am close to an exchange.

    But Turnbull's network, which can only guarantee 25Mbps, also needs to be close to the exchange, or close to a node.

    People don't want FttN. Nobody is excited about it. In fact, people may be hostile to it, if they see it as blocking the FttP fiber that they really want.

    A backlash to FttN would be devastating to it. In fact, consumer apathy will devastate it too.

    Why would anybody in their right mind go from 20Mbps ADSL2+ to 25Mbps VDSL2? In fact, most FttN NBN customers will get 12Mbps VDSL2. Actually slower than some ADSL connections. Even the mobile phone network, using LTE-Advanced, will blitz Turnbull's NBN. Plus, if you look at download speeds, it looks even worse for FttN.

    I guess they'll have door-to-door salespeople to try to convince people to move to FttN. But that won't work. Withdrawing the PSTN phone network, and forcing everyone to NBN against their wills would be the only way to get numbers.
    Vbitrate
  • I am a willing customer but....

    The fibre though my street was completed in July 2013.
    I registered my interest very early in the peace.
    I tried to become a paying customer.
    They, NBN, promised to connect in early September 2013 (Before Turnbull !!!!!!)
    However, due to whatever problem NBN has, the eraliest date I get now is early April 2014.
    I am sure I can't blame good old Malcom T for that but sure can blame the incompetence of NBN.
    They had daily crews inspecting the fibre, the pits and what not.
    3 to 4 man per group, 1 man working, 2 or 3 with bits of paper and writing things down.
    Transport no problem, at least 2 vehicles per group.
    No door to door salesman yet, nothing, maybe they don't need my monthly fee.
    chris64-8a5e7
  • Please make something happen!

    I would just like them to get their shit together and just make something happen, anything. My ADSL 2+ is shit because I am too far from the exchange.... Please just get to work and do something because if you don't, by the time you roll out the NBN to the majority it will be obsolete and everyone will be using 4G +.

    F F S just do something !!!!
    Hondo13
    • 4g - really?

      4g will never replace a fixed line connection - data/reliability are 2 reasons.

      FTTN won't help your copper situation - the only thing that will is FTTH.

      It would have taken 10 years, but the pay off would have been enourmous
      ice444
  • The biggest problem ....

    The biggest problem I see is that both the Labor party and the Liberal party are/were making concessions where they can't afford to make concessions.
    Labor - fastest solution, but they rolled it out to their marginal seats first, so take up wasn't high. Current speeds in the area were not taken into consideration. Rollouts should have started 1.5 to 2 kms from the exchange where distance starts affecting ADSL speeds significantly.
    Liberal - conceding on speed (and network quality/reliability) to save money but have also indicated they will be starting out further from the exchanges.

    I still believe the Labor NBN is the right choice but all MT really needs to do is retarget the initial roll out areas.
    colonel.mattyman