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Aussie Broadband chief sees a path for 1Gbps to be available to half the NBN

If NBN extends gigabit speed options to fibre to the curb, Aussie Broadband managing director Phil Britt has said that'll make it available to half of NBN's fixed footprint.
Written by Chris Duckett, Contributor
Image: NBN

Aussie Broadband has seen strong demand with around 5.5% of its customer base jumping onto the 1Gbps plans the ISP began to offer in May.

"In our view, much stronger [demand] than we actually anticipated in those plans," Britt told the Joint Standing Committee on the National Broadband Network on Friday morning.

"We think it could get to 10% within a couple of years."

As it currently stands though, NBN is only offering its 500-1000Mbps plans on 18% of its network, which consists of all its fibre to the premises footprint, and an initial 7% of the HFC network.

"We can provide it on some parts of the HFC network, it's roughly 9% of the HFC footprint today, and NBN has committed to increasing that footprint further," Britt said.

"We believe in time, it might be available to the fibre to the curb footprint as well, the technology certainly supports it, it's something that NBN needs to enable.

"So if that all flowed through, then probably about 50% of the footprint in total would be able to get those sorts of speeds."

Britt said there was pent-up demand in HFC areas for gigabit speeds, but users were waiting for a capable connection.

The Aussie Broadband chief added that there are "very few people that actually need that kind of speed".

"It's one of those things. If it's available, and I've got the income to support it -- because I mean that ultrafast plan is AU$150 a month sort of thing -- then I'll want it and I have it. And when they do an update, they might use it and they'll use it for like a download [that] might take 10 minutes or something like that, instead of taking two hours on another type of service, and they want that," he said.

"I guess I'm in that category as well; I traditionally live in a fixed wireless area, but I have a link to a neighbouring estate that has a mate that's got fibre to the premises, and so I get my ultrafast via an extension."

At the other end of the market, Britt said he could definitely see 5G starting to eat the lower end.

"I absolutely do think that 5G will have an impact at the lower end of the market, so people with a lower usage, may be less than 100 gig ... but I think at the more family to high end of the market parties, 5G is not really a solution that will play out in that regard," he said.

Returning to a familiar complaint in the form of the CVC, Britt once again called for NBN to charge only for access, not capacity.

"I guess the artificial constraints around CVC were probably relevant 10 years ago when it was dreamed up, but I think it's time we moved on from that," he said.

On the topic of NBN in the enterprise market, Aussie Broadband is not as critical as fellow telco Vocus has previously been.

"The thing to consider is that NBN has an obligation to provide basic level services to that building, and that building might have lots of large businesses, but it might also have the coffee shop, and the Subway, and whatever else is there, NBN has to provide a basic TC4 service to that," he said.

"For me, if you're going to have to service those small businesses anyway, then you might as well run the fibre in, and if that opens up enterprise opportunities, well that's a nice bonus.

"I don't see that it's a misuse of taxpayers money like what Vocus does. I see it that they have to provide the service to others in the building anyway, and then if I've put up in a seventh option in the building, well, then that's a bonus."

At the start of the year, NBN said it would retreat from the practice of directly signing up enterprise customers, following criticism from the likes of Vocus, and would instead need retailers to have a direct relationship with enterprises.

However, Britt sees a third way involving a panel of retailers.

"I think where [NBN] operates today is probably about right. Where it was operating six months ago, perhaps was going too far in terms of constructing deals and things like that," the Aussie Broadband chief said.

"I think where we would like to probably see it get to is obviously some very, very large customers want to deal directly with NBN, but I think it probably needs to move to more [of] an arrangement where if these large providers do want to construct a deal with NBN but then there's a panel of providers that can work with them, and essentially tender for the work, as opposed to every provider trying to construct the direct deal with that company separately."

Aussie Broadband is currently in the process of heading towards its AU$40 million initial public offering (IPO), and earlier in the week offered its customers a chance to purchase between 2,000 and 10,000 shares each, valued at AU$1 per share, for a potential total customer stake of AU$10 million.

The company is selling between 30 million to 40 million shares in the IPO, which would give the ISP market capitalisation of between AU$180 million to AU$190 million, and an enterprise value of approximately AU$150 million. Following the IPO, the current shareholders in the company would have a total stake of around 78.7% to 83.1% depending on how many shares are sold.

In fiscal terms, Aussie Broadband has been able to grow its revenue from AU$49.3 million in FY18 to AU$190.5 million in FY20, and forecasts it will record AU$338 million in the coming year. In statutory terms, the company has not posted a net profit since at least FY17.

The company said it did not intend to pay dividends to shareholders, and would instead be investing the money back into the business. Of the money raised, between AU$20 million to AU$26.5 million would be used to build out Aussie Broadband's own fibre optic backhaul network, AU$7 million to AU$10 million will be set aside for working capital, and around AU$3 million to AU$3.5 million will be used on costs associated with the IPO.

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