New NBN Corporate Plan

By now the news is a long day old that NBNCo has released their second Corporate Plan. Plenty of people are quite excited about this.

This latest plan, as you may have guessed, supersedes the first one, which was released in 2010. This new plan updates and refines many of the figures and assumptions included in the initial corporate plan, based on evolving situations, recent deals with Telstra and Optus, and knowledge that has been acquired over the past 24 months.These differences can be broadly broken up into the following categories:

1. Cost

This has predictably been the area that news reports have focussed on, and onto which the Federal Opposition has triumphantly latched. The projected cost for the building of the NBN has increased by 3.9%, or approximately $1.4billion, bringing it to a total cost of $37.4billion. This is quite a lot of money. Notwithstanding that this figure remains well-below the $50billion price-tag that the Opposition loves to throw around, Shadow Communications spokesperson Malcolm Turnbull has labelled this increase as both 'disastrous' and 'an insult to Australian taxpayers'. It is useful to be told how we should feel about it.

Communications Minister Stephen Conroy reiterated that there will be no additional 'tax' to fund this increase, and that the increase would be funded by faster release of government bonds. He failed to add who was supposed to be insulted by this. In fact he looked mostly peeved about the whole thing himself.

Given that the NBN is an investment, it is worth noting that the rate of return on government investment has also risen by 0.1%, to 7.1%. This has gone largely unreported, and was not mentioned by Turnbull or Conroy, who seems to have grown terminally incapable of selling a good message.

2. Fibre Roll-out

The largest factor affecting the overall fibre roll-out (which is surprisingly small, although I suppose Australia is still basically the same size as it was two years ago) is the move from an opt-in to an opt-out model. Put simply, NBNCo now connects your house to the NBN automatically whether you ask it to or not, and then install a NTU (Network Termination Unit), unless compelled not to. If for whatever reason you don't want to be connected, you have to say so, to 'opt-out' as it were. NBN Co will still pass 12.2 million premises with fibre, with 8.5 million of those expected to connect to the network by June 2021; up 200,000 from the previous corporate plan. This owes largely to the aforementioned Optus deal.

Offsetting this to a degree is the advantage that due to the Telstra deal, NBNCo will have access to more exchange space and more existing dark fibre than had previously been thought. 

 

There are other minor factors, but this has resulted in an increase of fibre roll-out from 181,000kms to 206,000kms.

3. Take-up Rates

Curiously, take-up rates have barely changed since the first corporate plan. NBNCo will still service approximately 12.2 million premises with fibre. The recent deal with Optus means that about 500,000 customers will be migrated from that carrier's cable network sooner rather than later (this increasing upfront expenditure and eventual return on investment). Another million or so premises will be serviced by fixed wireless or satellite services. This is roughly the same as previous figures.