NBN Co hopes for enterprise saviour after $2 billion blowout

NBN Co will rely heavily on growth in its fledgling enterprise business to achieve a forecast leap in average revenue per user, as reduced wholesale prices, last year’s HFC network pause, and extra fixed wireless investments blew out its budget by $2.2 billion.

The total cost of the National Broadband Network will now be $51 billion, including a $1 billion contingency, and its internal rate of return forecast has been lowered from a range of 3.2 per cent to 3.7 per cent, down to 3.2 per cent.

NBN Co will be forced to borrow the extra cash on the public money market, rather than get it from the government, but gave no timeline for when this would be necessary.

Unveiling his first annual corporate plan as NBN Co chief executive, Stephen Rue said the payback for the investments was better customer experience, with average ‘bandwidth congestion’ falling from five hours and 23 minutes per week in June 2017, to 25 minutes per week today.

The total cost of the National Broadband Network will now be $51 billion, including a $1 billion contingency.
The total cost of the National Broadband Network will now be $51 billion, including a $1 billion contingency.

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NBN Co defines ‘bandwidth congestion’ as the amount of time customers suffer speeds which impact their experience, such as buffering of an online video or connection to a website timing out.

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NBN Co’s offer to retail service providers last December of 50 megabits per second download connectivity for the price of 25 mbps had seen the number of customers on speed plans of 50Mbps or higher increase from 16 per cent in June 2017 to almost 45 per cent.

Mr Rue was confident that people would retain a 50 mbps or higher connection, even as it became more expensive once the NBN Co’s offer to wholesalers, knows as ‘Focus on 50’, expired on October 31.

“When people are getting the quality of service they want at the time they want it, they will want to keep that,” Mr Rue told The Australian Financial Review.

However he admitted that much of the forecast growth in average monthly revenue per user from $44 to $51 by 2021-22 would come from NBN Co’s relatively new enterprise business.

The one part of the market where it competes head-to-head with other telcos, NBN Co would not provide precise figures on its penetration but a spokesman said products like its new 1 gigabyte-per-second ‘enterprise ethernet’ fibre offering were seeing it connect 20,000 businesses per month.

The forecast growth in ARPU would be a “challenge” to achieve, said a spokesman for shadow communications minister Michelle Rowland, as it had only increased by $1 in the past two years.

The stall to improve the cable (or HFC) network has put NBN Co way behind its forecast rollout schedule, with 9.7 million premises to be ‘ready to connect’ by the end of 2018-19, down from the 11.05 million expected in last year’s corporate plan. 

The completion of the network with 11.6 million premises ready to connect is still scheduled for the end of 2019-20 as per the last corporate plan.

“The NBN is on life support and today’s $2 billion cost blowout is nothing short of a disaster,” said shadow minister for communications Michelle Rowland.

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