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Full fibre cheaper for on-demand FttN upgrade model: NBN CEO

While fibre to the curb is cheaper than fibre to the premises as a general rule, NBN has said this is not so when upgrading fibre to the node in a piecemeal fashion.
Written by Chris Duckett, Contributor

The company responsible for the National Broadband Network (NBN) has said it would upgrade customers from fibre to the node (FttN) to fibre to the premise (FttP) because it is cheaper than alternatives such as fibre to the curb (FttC).

Speaking to the joint parliamentary committee examining the NBN business case, CEO Stephen Rue said the reason for the traditionally more expensive FttP being cheaper than FttC was due to the latter requiring a distribution point unit (DPU) to service up to four homes, with the cost of the unit being spread across homes connected to it.

But if one home is all that connects, it does not remain cheaper.

"When we when we look at a on-demand model, fibre to the premise is more cost-effective because you simply don't know if your neighbors are also going to sign up," Rue said.

"If you're upgrading ... one individual home, fibre to the premise will then be cheaper, but obviously if you then end up doing three, it's more expensive."

Rue added that across the FttC footprint, most distribution points, on average, service approximately 3.1 premises.

Chief operations officer Kathrine Dyer added it was often the case that when placing a DPU into a pit, the pit also needed remediation.

Under the plan announced in September, NBN is expecting around 200,000 premises to shift from FttN to FttP. This includes premises that are upgraded whenever an order is placed for a service that the copper lines are not capable of. The first orders are expected to occur in the second half of 2021.

However, NBN has yet to determine how, or whether, it would prevent customers from ordering a service, getting the upgraded lead-in, and then reverting back to their prior slower speed tier.

"It may be that that's the edge case, and we don't put a rule in for edge cases, or it may be we think that's a greater potential, in which case we need to put some sort of rules," Rue said.

"We need to work that through to be perfectly honest."

People not lucky enough to have received a full fibre connection have had an option to pay NBN for a bespoke build, leading to cases such as one person paying AU$217,600 to have a fixed wireless connection upgraded to FttP.

Rue said for people that have placed an order under the technology choice program but the build was yet to commence, the company would offer a choice to end the application and for money to be refunded. For those where an upgrade has been completed, no refund would be offered.

"Firstly, they may not be part of the footprints that are selected and, secondly, they are already receiving those benefits and it may be many years before we build out so we're not proposing to refund that," Rue said.

Earlier on Wednesday, the Australian Competition and Consumer Commission (ACCC) handed down its final report into the affordability of NBN's 12/1Mbps plans.

In the main, the ACCC said it was satisfied with what NBN was offering to retailers in its Wholesale Broadband Agreement 4 (WBA4), echoing comments made last week by chair Rod Sims.

"We consider that the market conditions are such that NBN Co's proposed access arrangements for those matters raised in the inquiry will address many of the issues of concern raised by the ACCC in its wholesale service standards inquiry," the report said.

"While the proposed arrangements from NBN Co differ from the positions we set out in the draft [final access determination] in certain respects, we consider that they are a marked improvement over the current WBA3 terms and should result in improved end-user outcomes."

NBN's wholesale price of entry-level 12/1Mbps plan has been set at AU$24.70 from December to April 2021, which will then drop to AU$22.50 from May to November next year.

As flagged last year, new daily rebates from NBN for late connections and fault rectifications will be introduced, with the rebate for missed appointments moving up to AU$50 for the first strike and shifting to AU$75 for subsequent misses. Rebates will also be extended to business-grade services.

The ACCC also ran up the flagpole the idea of having the Commonwealth introduce subsidies to get disadvantaged households onto higher speed plans.

"We acknowledge that the 12/1 Mbps access product might not adequately support the use of all online applications by some larger households, and the additional price of a higher speed plan may not be affordable for some larger households from a disadvantaged background," the report said.

"We consider that these issues are better considered via direct government assistance that can be targeted more directly at eligible households rather than via an internal cross subsidy."

The review did not resolve the ACCC's concerns about NBN relying on discounts as its main method of pricing, however, with the consumer watchdog saying it removed pricing certainty from retailers.

"We consider that the potential benefits of NBN Co having an opportunity to trial revised pricing arrangements ahead of making longer-term pricing commitments needs to be balanced against the potential for this flexibility to be abused to in effect supplant the certainty measures NBN Co has itself proposed in this inquiry," the ACCC said.

"If the latter were to occur, it would likely have implications for our approach to this issue in any future regulatory reviews."

The ACCC added that NBN and the federal government should look at whether the 6Mbps congestion threshold on fixed wireless connections needed raising. Fixed wireless congestion is defined by NBN as having a 30-day average busy hour throughput of under 6Mbps.

"While we acknowledge stakeholder views that the metric for measuring fixed wireless speed performance remains too low to provide an acceptable standard and should be extended, we note that 6Mbps is NBN Co's design standard for the fixed wireless network and the purpose of the fixed wireless rebate is to incentivise NBN Co to meet its own design standard on an ongoing basis," the report said.

Retailers that wanted the ACCC to force NBN to offer voice-only plans will be disappointed, as the watchdog said a cheap mobile plan is a "suitable substitute".

Earlier this week, NBN purchased Speedcast Managed Services, a subsidiary of Speedcast International that build and operates NBN's satellite network.

"Under the sale, Speedcast Managed Services employees, assets and equipment now revert to its sole client, NBN Co, to support the ongoing requirements of the National Broadband Network," Speedcast told the ASX. 

"Accordingly, the Master Equipment and Services Supply Agreement (MESSA) signed between NBN Co and Speedcast on 2 February 2018 will come to an end with immediate effect."

That contract was a decade-long deal worth AU$184 million.

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