The impact of TPG's rollout of fibre to the basement for 500,000 apartments and offices across Australia could have quite a severe impact on NBN Co's financials, NBN Co executive chairman Dr Ziggy Switkowski has said.
As NBN Co looks to change from a majority fibre to the premises rollout to a multi-technology model including majority fibre to the node, telecommunications provider TPG is forging ahead with plans to connect 500,000 apartment blocks and offices across Sydney, Melbourne, Brisbane, Adelaide, and Perth with fibre to the basement, and Telstra has also floated plans to roll out its own fibre to the building network should TPG be allowed to continue.
The decision to expand its fibre network will be examined by the government as part of the telecommunications industry cost-benefit analysis due to report to government in June, and it could potentially be in conflict with anti-cherry picking laws implemented by the former Labor government designed to prevent infrastructure builders rolling out their own fibre networks in highly profitable areas and undermining NBN Co's business model — which relies heavily on the profitable customers in city locations subsidising regional customers.
Switkowski told ZDNet last month that the proposal had the ability to undermine NBN Co's business model, but in a Senate Select Committee today, went further and said the impact could be quite severe.
"We haven't done the full economic analysis but the impact could be quite severe," he said.
TPG would likely target "high value" customers that could hit NBN Co's revenues by up to 10 percent, he said.
He said that under the existing law, NBN Co is operating under the policy that it is the exclusive wholesale provider of fixed broadband services, and companies should be wary of testing that policy, unless it is changed by the new Coalition government.
"If there are infrastructure-based enterprises that want to test that policy, they take the risk that NBN will respond in some way," he said.
The response may be for NBN Co to speed up plans to roll out fibre to the basement in the areas where TPG is planning on rolling out its network, but Switkowski said nothing had been declided.
"We haven't yet contemplated any reaction… but clearly that is an option," he said. "Fibre to the basement would be a reasonable commercial response."
NBN Co executives today also refused to confirm whether NBN Co was close to a deal to obtain extra capacity for existing customers on the interim satellite service, or add any new customers.
NBN Co's chief technology officer Gary McLaren said that NBN Co was negotiating with both satellite providers IPStar and Optus, as well as retail service providers.
"We've developed a set of options in consultation with satellite providers and RSPs," he said.
Negotiations were being conducted in consultation with Communications Minister Malcolm Turnbull and the Department of Communications, and discussions had yet to be concluded.
NBN Co is looking at implementing the least-disruptive solution that would require minimal work to be done for existing customers before the launch of the two NBN Co satellites in 2015, and this would include reusing some of the existing spectrum on the satellite service.
"We're using other parts of the RF spectrum that we don't have access to today," he said.
"We've done some fine tuning of how we used the existing spectrum... taking some of the power and other parts of the spectrum, and applied a less stringent criteria to get more capacity."
Any additional customers to join the over 44,000 on the satellite service would be less than 27,000, NBN Co said.