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NBN: FY18 will be 'most difficult' year during rollout

Calling its momentum 'undeniable', NBN reported revenue of AU$1.001 billion and EBITDA of negative AU$2.4 million for the full financial year.
Written by Corinne Reichert, Contributor on

National Broadband Network (NBN) CEO Bill Morrow has said the 2017-18 financial year will be the most difficult for the company, thanks to taking the rollout into high-density cities across Australia.

"Looking ahead, FY2018 is another significant construction year, and arguably the most visible and difficult as we roll out in high-density cities," Morrow said during NBN's full-year financial results presentation on Tuesday.

"We are taking our learnings from the first half of the build and applying them to ensure greater serviceability and efficiencies, particularly as we introduce fibre to the curb into the mix."

NBN had earlier this year warned of possible civil works disruptions throughout calendar 2017 as it needs to gain access to pits and existing infrastructure within metropolitan areas including Sydney, Campbelltown, Brisbane, Gold Coast, Hobart, Devonport, and Fremantle.

Morrow told ZDNet that as the rollout picks up pace, the main customer experience issues are falling into two major categories: Migration onto the NBN; and speed expectations, both of which are being addressed by NBN and its retailers.

"As people are getting migrated over to NBN, we see about 10 to 20 percent of the time people come over, it's not the experience that they should be having. We know NBN contributes to that, and that's our internal processes and internal systems and training that we're working on that we will sort, and it'll take a number of months before we get this behind us but it is a top priority," he told ZDNet.

"Equally so, there are issues on some of the retailers that are doing the same thing with their own process and system and training improvements. And there's the way in which we actually talk to one another, hand over information, that we are working on collaboratively to be able to make that end-user experience better for the on-boarding process."

Morrow added that consumers are also being put on speed tiers by retailers without being told they can choose a faster option, and are also suffering from congestion during peak periods -- although he denied that this had any correlation with NBN's connectivity virtual circuit pricing.

"During the evening, when traffic is at its busiest when I'm watching Game of Thrones, I see this buffering and my speed then drops from what was 12[Mbps] at five in the morning down to 2 or 3[Mbps] at worst in the evening ... most of the time it is related to the provisioning of the network by the retailer, and they know this and they're working on it."

According to NBN's FY17 financial results, announced on Tuesday, a majority of NBN users are still choosing the two slowest speeds available, with 53 percent of fixed-line users on the 25/5Mbps speed tier; 78 percent of fixed-wireless users on 25/5Mbps; and 66 percent of satellite users on 25/5Mbps.

It was also revealed last week that some FttN users could potentially be stuck with connections incapable of hitting 25Mbps until June 2022.

"We all need to better explain what speeds will be provided to the end user," Morrow said during the results presentation.

NBN's efforts to improve customer service have seen it create a dedicated churn team to work through issues as quickly as possible while the Australian Communications and Media Authority (ACMA) investigates customer experience in moving across to the NBN following hybrid fibre-coaxial (HFC) transition complaints.

According to Morrow, NBN's "momentum is undeniable"; as of June 30, 2.44 million premises have been activated, and 5.7 million premises are ready for service (RFS).

For the full financial year, NBN reported revenue of AU$1.001 billion, up 138 percent from AU$421 million for the previous financial year, with earnings before interest, tax, depreciation, and amortisation (EBITDA) of negative AU$2.4 billion -- 53 percent higher than the previous year's negative AU$1.57 billion.

Life-to-date capital expenditure (capex) stands at AU$19.4 billion, with AU$6 billion spent during the year, and operating expenditure amounted to AU$3.4 billion.

NBN's fibre-to-the-premises (FttP) network made AU$369 million revenue during the quarter, with 1.07 million active end users and 1.52 million premises RFS. Cost per premises (CPP) for FttP brownfields was AU$4,403, while for FttP greenfields it was AU$2,393. NBN spent AU$433 million on capex for the network technology during the year, down substantially from last year's AU$1.1 billion capex spent on FttP.

The fibre-to-the-node (FttN) network jumped from AU$10 million revenue last year to bring in AU$172 million revenue this year, and cost AU$2.34 billion in capex. As of the end of FY17, FttN had 957,919 active end users and 2.5 million premises RFS, with a CPP of AU$2,174.

NBN's HFC network brought in AU$13 million in revenue, cost AU$1.2 billion in capex, and had 152,786 active end users and 758,416 premises RFS at AU$2,258 CPP.

The fixed-wireless network, which will begin offering a 100Mbps service next year, almost doubled from AU$27 million revenue last year to make AU$50 million this year, with a capex cost of AU$317 million, which CFO Stephen Rue said was due to the acquisition of a further 261 wireless sites and the integration of 233 base stations. Fixed-wireless had 184,678 active end users as of June 30 and 517,543 premises RFS, with a CPP of AU$3,569.

Lastly, NBN's satellite network now has 74,931 active users and 418,135 premises RFS after switching off the interim satellite service during the year. Its satellite division made revenue of AU$19 million during the year, up from AU$10 million, with a capex of AU$210 million.

Average revenue per user (ARPU) has stayed stagnant for several years now, at AU$43 per month.

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