NBNCo’s latest corporate plan is another lemon

NBNCo’s latest corporate plan is another lemon

The NBN has yet to be completed, the cost is now $57 billion, and the Coalition has announced a new plan for the NBN that does not withstand scrutiny. In short, it is a lemon, and a very expensive one at that.

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The NBN has yet to be completed, the cost is now $57 billion, and the Coalition has announced a new plan for the NBN that does not withstand scrutiny. In short, it is a lemon, and a very expensive one at that.

NBN Co’s Corporate Plan FY21 and media release of last week continues in the fine tradition set by NBN Co over the past six years. Only a cursory glance is needed to rank this vision for the NBN right up there with worst of political nonsense.

It might be expected that NBN Co, as a Government Business Enterprise (GBE), would remain above the political fray, but its Corporate Plan FY21 is dismally thin on facts about the operation of the business and chock full of politics and obfuscation.

What the Coalition has failed to mention is that NBN Co’s management team has consistently failed to achieve revenue forecasts and continue to make revenue and Internal Rate of Return (IRR) forecasts that appear to be over-stated, based on NBN Co’s track record over the past six years.

If you’re looking to gain a better understanding of NBN Co’s peak funding, debt profile, cash profile, revenue streams, operating costs and forward projections you’ll be disappointed because only three pages of the 62 page Corporate Plan FY21 contain actuals and projections on the business fundamentals and the information you would be looking for is not provided.

Do you know when NBN Co will be cashflow positive? Well NBN Co does not appear to know as well, because you won’t find this projection in the Corporate Plan FY21.

Given the hoo-ha that we’ve had to endure for the past six years about the multi-technology mix NBN, you might expect to find details of how much has been spent on each technology and where the cost blowouts have occurred and why.

If you turn to Page 53 of NBN Co’s Corporate Plan FY21, Table 2 states that over the next four years, NBN Co is forecasting the number of active FTTN/B connections to decrease by 200,000 from the peak of 3.2 million connections.

Given that NBN Co has declared the NBN rollout to be complete, this means that $3.5 billion is being spent to achieve somewhere between 200,000 and 400,000 activations at the over-priced 100 Mbps and exorbitantly priced plans up to 1 Gbps over the next four years. Seriously?

How this is expected to solve the underlying revenue problems is anyone’s guess, but it should be very apparent that the additional expenditure is really all about finishing the rollout.

NBN Co has been spruiking DOCSIS 3.1 (HFC) and G.Fast (FTTC) for the past five years and in 2016, the former Communications minister and later Prime Minister Malcolm Turnbull stated “we plan to run DOCSIS 3.1 trials in 2016 and we plan to have DOCSIS 3.1 services commercially available in 2017.”

“Bringing DOCSIS 3.1 on board is the cherry on the cake that will give us even more capacity and really make sure that there is plenty of bandwidth for everyone on the network to have a great experience.”

For premises in the FTTC footprint, G.Fast is built in to the DPUs that connect the fibre to the telephone cable lead-ins. What this means is that NBN Co could have provisioned G.Fast at any time, but co-existence problems with existing services, especially in multi-dwelling units appears to have delayed G.Fast.

The G.Fast problem appears to have been solved by NBN Co by simply discarding FTTB customers from the upgrade.

Here we are in September 2020 being told that $6 billion more will need to be spent to provide what the Coalition said would be delivered by mid-2019.

NBN Co has again put forward a public facade that the business is ok, yet in the Corporate Plan FY17 revenue for FY20 was projected as $5 billion yet it reported $3.8 billion in actual revenue. The Corporate Plan FY18 makes a projection of $5.4 billion in FY21 and this year the forecast has now been reduced to $4.5 billion.

This year the Corporate Plan FY21 does not appear to have a revenue breakdown and forecast for residential and business customers.

NBN Co is making a considerable investment in providing fibre to regional business centres, so it might be assumed that a business activation projection would be warranted. Apparently not.

NBN Co is now projecting an ARPU of $49 per month by FY24 and it should be remembered that for the past six years NBN Co has been forecasting an ARPU far higher than what has been achieved.

Last year, NBN Co forecast that ARPU would rise from $44 per month in FY19 to $49 per month in FY23.

This year NBN Co appears to have adopted an alternative accounting standard for EBITDA than what was used previously. The EBITDA is overly optimistic when compared with previous years and this raises concern when the underlying revenue and cost forecasts are not being met.

This year, NBN Co has gone all in with an IRR forecast of 3.7 per cent. If you were wondering if the IRR forecasts over the past six years, or even the past three years, have been met you would be disappointed because there is no information about past performance but there is a lengthy statement about why the IRR forecast might not be achieved.

The joint announcement by Finance minister Mathias Cormann and Communications minister Paul Fletcher on this new NBN plan is nothing but hyperbole and underscores the lack of understanding that led to the current situation.

At a cost of $57 billion and climbing, and with a broken business model, now 25 per cent of homeowners being told that nothing will be done to upgrade their unreliable congested and poorly performing NBN connections.

The Coalition Government’s NBN plan for the period to mid-2023, a point when it is expected that a re-elected Coalition Government would have placed NBN Co up for sale, fails to achieve the promises made by the Coalition in 2013 and every year after that.

In 2013 the Coalition Government under former Prime Minister Tony Abbott promised “fast, affordable” broadband for every Australian. Today, up to four million households are connected to the NBN over unacceptable broadband connections. The majority of households have unreliable and congested NBN connections and everyone is detrimentally affected by NBN Co’s over-priced products.

Telecommunications is an essential service and the COVID pandemic, which is not over, should provide solid evidence as to why funding for a world class NBN is money well spent. And this means for every Australian, irrespective of where they live or work and their socio-economic status.

The Coalition Government has presented the nation with another lemon, but as this new plan is really all about finishing the old plan and cementing the digital divide, the status quo has been maintained. The only change has been yet another cost blowout.

Mark Gregory is an Associate Professor in the School of Engineering at RMIT University and is the Managing Editor of the Journal of Telecommunications and the Digital Economy

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