NBN denies another leak claiming FttN rollout delayed and over budget

A leaked document revealing the NBN rollout is behind by over 730,000 premises and is costing AU$250 more to connect each premises has been denied by the company.
Written by Corinne Reichert, Contributor

Yet another National Broadband Network (NBN) internal draft has leaked, this time alleging that the high-speed broadband rollout is seriously delayed and costing more to connect each premises.

A commercial in confidence internal progress report dated February 19, first sighted by Fairfax, revealed that the NBN is facing further delays and increasing costs, having fallen short of its construction timetable substantially.

While just over 1.4 million houses or businesses should have been approved by the date of the report, the figure was short by more than half, with just 662,665 approved as of February 12. The report also said that NBN achieved just 29,005 fibre-to-the-node (FttN) "construction completions", despite previously targeting 94,273 for this period.

"Construction completions currently sits at 29K against the corporate budget of 94K. Gap to target has increased from 49,183 to 65,268 as of week ending 12 Feb. Construction completions gap can be attributed to three main issues: Power, supply, and completions under review," the report says.

"Despite 'designed commenced' remaining above budget, all other significant milestones of FttN continue to remain behind target."

For design approved throughput, New South Wales is noted as being 22,422 premises short of its target of 27,719 as of February 12; South Australia is 4,665 short of its 7,610 target; Tasmania is 4,212 short of its 6,027 target; Victoria is 9,053 short of its 12,789 target; and Western Australia is 8,286 short of its 10,506 target.

"Action plans from NSW, WA, SA, and Tas will be required to ensure mid-May return to budget will be achieved," the document notes.

The report also revealed that 38,537 premises have had construction completions delayed due to "pending power issues". Late power approvals caused 16,061 of these, while the unavailability of power connections delayed 22,476 premises.

In regards to the latter, NBN identified "single nodes that require redesign". In addition, "NSW issue is two-fold: Firstly line of sight (design issue), and secondly power connection required upgrade and/or certification by utility company".

"Forecasted to have June 30 impact of 125,334 and 94,771 premises, respectively, and will be managed via tactical strategies on target to be cleared by March 31," the report says.

Of all premises to be connected, 34 percent have been delayed due to appointments booked and not used.

"Available integration capacity is only 66 percent utilised due to missed appointments," it said.

Construction per premises (CPP) costs, meant to be AU$1,114, stood at AU$1,366 as of February 12, the report said.

NBN has now denied that these documents are accurate, saying it has met all of its rollout targets thus far.

"NBN reject claims that the company is at risk of not meeting its targets; NBN has met or exceeded every key target for six quarters in a row," an NBN spokesperson said.

"The company is on track to meet or exceed its full-year targets of 2.6 million homes ready for service, approximately 1 million homes using the network, and more than AU$300 million in revenue. The company's management has proven repeatedly that it can effectively monitor risks and manage those risks.

"We will not be drawn on alleged internal documents, we report quarterly and our results are audited. This is an incredibly complex project unlike any infrastructure build anywhere in the world."

Shadow Minister for Communications Jason Clare, on the other hand, said this latest leaked document proves that the Coalition's NBN model "is a complete failure".

"Yet another leaked document from NBN Co has revealed today that Malcolm Turnbull's second-rate copper NBN is hopelessly delayed and over budget," Clare said.

"Internal NBN Co documents reveal that NBN Co has met less than a third of its internal rollout target for Malcolm Turnbull's second-rate copper NBN. The delays are due mostly to problems with connecting mains power to Malcolm Turnbull's large street side copper cabinets.

"Fibre-to-the-premises [FttP] -- Labor's 21st-century broadband technology, which was abandoned by Malcolm Turnbull so he could roll out last century's copper technology -- is a passive network that does not require mains power."

In reference to the report that the rollout is over-budget in terms of CPP, Clare laid the blame at the feet of decisions made by Prime Minister Malcolm Turnbull during his tenure as communications minister.

"In 2014, Malcolm Turnbull directed NBN Co to switch to his second-rate NBN on the basis of a dodgy report prepared by his yachting mate. His chickens are now coming home to roost," Clare continued.

"Malcolm Turnbull promised in 2013 that his second-rate copper NBN rollout would be 'at scale' by mid-2014. It is 2016, and the rollout has barely started. NBN Co has only completed 29,000 homes under its own steam, 65,000 homes short of their internal target.

"Today's revelations also prove that the government has no hope of delivering on its three year rollout plan. This is a plan for the election rather than a credible rollout plan, with only 510,000 homes to get HFC [hybrid fibre-coaxial] and FttN before the election, and 5.6 million in the two years following.

"It is a ramp Evel Knievel couldn't jump."

Greens communications spokesperson Scott Ludlam added that if the leaked report is accurate, Turnbull should admit his NBN model is a failed trial, and should return the rollout to full FttP, while Liberal Democrats Senator David Leyonhjelm said the NBN is a "sunk cost", and the company should be split to speed up its privatisation.

Communications Minister Mitch Fifield has added his voice to NBN's denial of the leaked document being accurate, saying the NBN is on track to meet its targets for the financial year and remain within the budget set out in last year's corporate plan.

"Any suggestion to the contrary is just wrong," Fifield said.

During its financial results presentation at the beginning of February, NBN reported that the number of active premises had grown by 450,000 over the first six months of FY16, from 322,291 to 736,052, while premises ready for service grew from 826,824 to 1,670,972.

NBN reported 36,003 active end users on satellite, as of the end of December; 82,435 on fixed wireless; 6,636 on FttN; and 610,978 on FttP.

It also reported a net loss of AU$1.24 billion on revenue of AU$164 million. The loss was a 37.4 percent increase over last year's AU$902 million loss, with revenue growing by 152.3 percent from the AU$65 million reported during the same period last year.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) for the six-month period ending December 2015 stood at negative AU$688 million, a 38 percent increase from the negative AU$497 million reported for the previous period.

Operating expenditure was AU$852 million in the first half of the financial year, while capital expenditure reached AU$11.1 billion over the life of NBN to date.

Capex by technology saw AU$151 million spent on HFC, AU$91 million on satellite, AU$180 million on fixed wireless, AU$599 million on FttN, and AU$669 million on FttP.

CPP for life to date has been AU$4,419 for FttP brownfields, AU$3,516 on fixed wireless, AU$2,770 on FttP greenfields, and AU$2,300 on FttN.

The Coalition's so-called multi-technology mix (MTM) NBN aims to cover 20 percent of the Australian population with FttP; 38 percent with FttN, fibre to the building (FttB), or fibre to the distribution point (FttDP); 34 percent with HFC; 5 percent with fixed wireless; and 3 percent with satellite services.

Over the last six months, NBN has launched its FttN network and the first of its two AU$620 million Ka-band satellites, which is slated to begin offering commercial products in late April; and doubled the speeds attained across its fixed-wireless network, from 25Mbps to 50Mbps.

According to NBN's construction plan, HFC will be delivered to approximately 3 million premises and fixed wireless to more than 540,000 premises, while it expects around 200,000 to 250,000 premises to be connected by satellite services.

The company has so far refused to break down its FttN, FttB, FttP, and FttDP numbers within the specified 5.6 million premises to be connected via one of these technologies.

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

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

Several instances of leaked documents have caused rising doubt about NBN's rollout, however; a leak last November revealed that Optus' HFC network is "not fully fit for purpose", with 470,000 premises in the footprint needing to be overbuilt by either Telstra HFC or fibre services.

That leaked document stated that the necessary work of overbuilding Optus' HFC network with FttN, FttB, or 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.

This was followed in December by another leaked internal draft document divulging that the cost to replace or repair the legacy copper network would amount to AU$641 million.

"State of copper network considerably worse than expected, leading to extensive work beyond the node," the document, dated February 26, 2015, said.

NBN ranked this risk as "almost certain", with "major" consequences.

"Decision to minimise remediation during build could reduce speeds available, create additional burden on connect, and hamper timely migration."

With NBN building 24,544 nodes by FY19 -- with 178 premises connected per node -- at AU$26,115 per node, the cost for copper remediation totals AU$640.97 million.

This figure was a significant increase from the AU$2,685 per node estimated in the December 2013 Strategic Review, which would have totalled AU$90.4 million.

NBN had previously said that while copper lines between the node and the home will not need to be replaced, the company will need to add or replace copper between the node and the pillar where necessary in rolling out its FttN network.

"We have to put new copper in to run to the pillar that serves all of our homes from our node to that pillar. And that could range in distance between right next to each other ... it is a short section, but it is new copper that has to go in the ground that doesn't exist today," NBN CEO Bill Morrow told Senate Estimates in October.

According to Morrow, copper has to be used rather than fibre-optic cable in certain cases depending on the distances being covered. He added that defective cabling could also be replaced, with more copper also added where there is not enough to service homes.

Morrow's comments came just a week after claims made by NBN that it has not had to replace any of the legacy copper between node and home in installing its FttN network, with end users able to achieve high speeds while relying on existing infrastructure.

With AAP

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