NBN flags frozen HFC connections thawing over the coming months

Cable premises still ring-fenced by NBN due to its HFC pause, which will be released to market in the next four months.

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(Image: APH)

Close watchers of the weekly rollout numbers from the company responsible for deploying the National Broadband Network (NBN) across Australia will note the number of Service Class Zero (SC0) premises had spiked just over a year ago, following the November 2017 pause on selling hybrid fibre-coaxial (HFC) connections.

In May, NBN labelled the ring-fencing a momentary inflating of the SC0 number, but it has stayed high ever since, with 1.4 million premises currently unable to connect to the network across all technology types.

Speaking to Senate Estimates on Tuesday night, NBN CEO Stephen Rue said that of the 1.4 million SC0 premises, 1,251,000 are HFC connections, but salvation could soon be at hand.

"There's quite a lot of HFC premises will be made ready to connect, quite a lot in the next four months," Rue said.

NBN was at pains to explain to senators that the number does not represent a static pool of premises, with a number leaving the SC0 classification when the HFC network was relaunched, as more are added to the network.

"At the end of this month, all of those ring-fenced premises will be released back. So what's essentially happened is we've progressed from April last year, we started releasing the HFC network gradually back and testing all of our processes again, and then by June and July, we started releasing back at scale," NBN chief network deployment officer Kathrine Dyer said.

"We have been building out a lot of new areas in HFC whilst we have been taking the premises out."

Read: ACCAN: Low-income Australians cannot afford NBN

At the end of 2018, NBN had 512,000 active HFC premises, the company said in its half-year results last week, out of a total of 4.7 million active connections. Overall, NBN has 9.5 million premises labelled as ready for service.

Rue told Estimates that the company is "well on track" to meet its September goal of reducing congestion on its fixed wireless network to less than 1 percent having speeds under 6Mbps in busy hours threshold.

NBN's wholesale business-grade satellite service will also see a soft launch in mid-year, before a full launch around the end of 2019, Rue added.

Australia is one of the more affordable broadband markets

The NBN CEO opened with a claim that is unlikely to be met with a chorus of agreement from the nation's NBN retailers -- that Australia is one of the more affordable broadband markets. Citing a study conducted for it by AlphaBeta which looked at 4,500 product and pricing plans in 22 countries, Rue said Australia placed seventh overall.

"The medium broadband price in Australia is equivalent to 1.4 percent of Australian per capita income, which is the seventh-lowest amongst the 22 countries analysed," Rue said.

"And this should come as no surprise, as we must continue to remind ourselves one of the original policy goals of NBN, which was to enable more competition in the retail market through providing a wholesale-only open access service to any retailer who wanted to sell a product."

In October, Aussie Broadband made the decision to shelve its lower-priced services after NBN ended its discount on 50Mbps connections.

"In our view, it will not be possible for providers offering a service under AU$55 a month floor price and an unlimited offering under AU$69 using the bundles," Aussie Broadband MD Phillip Britt told ZDNet at the time.

"Providers below this price point will most likely be short-changing their customers on the CVC bandwidth provisioned."

Also: TPG keeps top spot for download speeds in fourth NBN report

The retailer killed off any plan that was paying less than AU$55 a month, which saw customers on a 12/1Mbps or 25/5Mbps service with less than 100GB of included data.

Last week, Britt said CVC costs are holding back his company from offering unlimited data on plans faster than 100Mbps.

"The CVC pricing construct is the primary limiter here; we've only got 2.5Mbps of CVC allocated under the bundled model and someone on an unlimited plan on those higher tiers would have the potential to really cause some damage," Britt said.

The Aussie Broadband chief said the 100Mbps price will come down, but it will need a write-down of the NBN for the price pressure to be passed onto consumers.

"They can't hold onto the AU$51 [average revenue per user] amounts they are trying to achieve, because the mobile guys will wipe the floor with them," Britt said.

"As to when it will occur, that's hard to predict. They have released a short-term promotion around the 100/40Mbps services currently, but it has some conditions around it that requires a customer to stay with that service provider for X period of time, so its risky to implement."

Meanwhile, Rue told the Joint Standing Committee looking into the business case for the NBN last week that there are no impairment issues that would see the company needing to write down the value of the company, and that those calling for such action are just after a wholesale price cut.

"When people say there should be a write-down, I don't think that is what they are really calling for. Essentially, they are calling for the wholesale price to fall dramatically," Rue said.

"Calls for a large wholesale price cut puts at risk the long-term viability of the company ... without that, I truly believe you put at risk the digital future of the country, and all the benefits that flow."

Rue reiterated on Tuesday night that NBN is banking on enterprise services and customers moving up speed tiers for the company to make its AU$51 average revenue per user (ARPU) target that will see NBN become cash-flow positive.

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