NBN Full Year Financial Results: The Post-Mortem

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nbn, the company responsible for the rollout of the National Broadband Network (NBN), has just released its financial results for the last financial year. After heavy scrutiny and relentless criticism over the past year, nbn was determined to show the public that the NBN deployment is well on-track, that the company was financially viable and that FTTN is the right technology for the network. Here's what you need to know about nbn's financial results.

nbn really needs some good publicity. The company couldn't catch a break as it forged forward with the use of mixed technology (MTM) with fibre-to-the-node (FTTN) as the star of the show. Technology-savvy NBN critics have vociferously voiced their opposition to FTTN as it still relies on outdated copper technology. The better option, albeit a more expensive one, is a full fibre broadband network.

Former nbn chief Mike Quigley, said it's not too late to revert back to the original fibre-to-the-premises (FTTP) NBN plan, but as the company showed in its financial year 2016 presentation, it will not be budging on FTTN.

nbn has announced that in the last financial year, it has exceeded all expectations, both in revenue and in rollout progress. According to its presentation, nbn has doubled the number of premises that are ready for service to 2.9 million. It has more than doubled the number of activated end users (1.1 million) and, more importantly, doubled its revenue to $421 million.

nbn chief financial officer Stephen Rue attributed the revenue growth mainly to increased uptake of NBN services and the jump in average revenue per user (ARPU) from $40 to $43 in the last financial year.

While FTTP services is still the breadwinner of the MTM family, since parts of it was already rolled-out before new management arrived, nbn has lauded FTTN (and to some extent, copper) as the technology driving the company's success.

"FTTN is delivering exactly what we needed and we are able to scale up deployment from 25 million to 100 million," Rue said in the presentation. "Copper only required modest remediation, which is in line with our expectations."

He then proceeded to show that, since it was first launched in September last year, FTTN already has 119,694 active users. FTTP active users sit at 822,652. Fixed wireless was at 117,514 while satellite users came in at 38,764.

FTTN was also praised as the cost-effective technology to use for the NBN. The company pointed out that FTTP deployment cost per premise for brownfield and greenfield areas was $4411 and $2608, respectively. Meanwhile, FTTN only costs $2257 per premise, way below the expected cost of $3200 per premise.

"FTTP is significantly more expensive; FTTN is 49 per cent cheaper [than FTTN brownfield deployments]," Rush said and pointed to the quicker rollout time of FTTN as well.

nbn also tried to dispel concerns over FTTN's inferior performance compared to FTTP by showing a breakdown of user uptake based on download and upload speeds:

Fixed Line speed tier mix (upload/download by Mbps) As at 30 June 2015 As at 30 June 2016
12/1 35% 32%
25/5 42% 49%
25/10 1% 1%
50/20 4% 4%
100/40 18% 14%

As you can see, uptake for NBN packages at the slower end of town remained popular while higher speed plans stagnated. nbn does recognise that data consumption of users have jumped in the last financial year but said there was still little demand for higher speed NBN plans.

"The thing I want to point out is that we did some research of companies overseas -- Google, Comcast, AT&T and so on -- to ask about their Gigabit per second services and asked whether there was a lot of uptake. The answer was no, but they offer them as a market competitive element," nbn chief Bill Morrow said. He noted that while demand for such high speed services may increase with the advent of virtual reality and higher resolution media content, it's anybody's guess when this will actually happen. But nbn said its prepared to meet the demands in the future.

Morrow also addressed ongoing commentary about how the NBN should be deployed and criticism about FTTN:

"We know we are doing something important and vital for Australia. WE know there are many opinions on how this should be done but we have been given a remit to deliver the network as fast as possible and at the lowest possible cost.   "… People talk about Australia falling behind in [internet speed rankings]. That is not a reflection of the NBN and the technology behind it. It's a reflect of the ADSL circuits that are around and how we did nothing with those circuits while other countries [upgraded their infrastructure]. We are confident we will be competitive with those countries [through the current NBN rollout]."

You can find nbn's full financial results for financial year 2016 here.


Comments

    You need to redo the sentence "FTTN only costs $2257 per premise, way below the expected cost of $3200 per premise.". As the $3200 is really $2300

    When the bar is set so low - hitting 25Mbps at one instant in a 24-hour period means there's no problem with your service, according to nbn support - any old junk would meet targets.

    "As you can see, uptake for NBN packages at the slower end of town remained popular while higher speed plans stagnated. nbn does recognise that data consumption of users have jumped in the last financial year but said there was still little demand for higher speed NBN plans."

    Obviously the high pricing of plans with speeds higher than 25Mbps makes any conclusions based on take-up figures crumble. This pricing is simply out of reach of most Australians. It seems no one in charge actually looks at NBN plans. As one old digger on Facebook bluntly put it, it's just 'too bloody expensive'.

    Yet there's a good reason why it is. The desperate need to make back the expenditure before another upgrade is needed yet again in 5-7 years. It won't do that, of course, one reason being that there will be no high-revenue customers as higher speeds will not be available.

    As for longevity of the network, something beyond DOCSIS 3.1 will probably be developed for HFC, considering the large HFC operators overseas, but the cost is expected to escalate to a point where FTTP becomes economical in comparison.

    With copper, when you get to the point of mulling over the next available technology called G.fast, which in Australia's long loops will necessarily require overbuilding of the nodes with FTTdp, a similar cost rears its ugly head.

    These inevitable outcomes, added to the expected competitive threat from 5G, mean that the NBN is in the poop next decade. It will face another new rollout, with a similar time to build and a similar cost to the current one, to get any improvement to FTTN and HFC. Any at all. That's if the government of the day will stump up the tens of billions again.

    The alternative is incentivising Telstra, Optus and TPG to step in and build networks.

    Last edited 16/08/16 7:09 pm

      Conveniently ignores that FttN is incapable of offering more than 50/20 to half the footprint and that few ISP's offer 50/20 options.
      I lost out in Node lotto and have a max sync of 34/16.. I wonder why I haven't bought the 100/40 plan? - Probably cause I'm not interested in faster speeds.

    FTTN was only put in to buy time before FTTP. But the costs of labour and civil works, most of the cost of FTTP, only rise over time.

    Last edited 16/08/16 7:25 pm

    All you have to do is follow NBN australia on facebook and see their posts about "connecting people" ,etc. Just read the comments and you can get a feel of how current customers feel.... Along the lines of many people aren't even better off than their old ADSL connection.

    My eyes glazed over on about the 2nd line. I don't know much about anything, but I live in a small town in rural Australia. The tower is just down the road and apart from a couple of short outages, it's been unreal. Netflix, youtube and just the net in general I've had no complaints about. Plus considering I get 100 gb's amonth for $10 a week compared to what it used to cost for crap....I'm REALLY happy. Just saying.

    You can get unlimited quotas for $100/month at the 100/40Mbps speed tier from multiple providers now, and even $90/month from a couple. This has only happened recently, so few people have switched to that type of plan yet.

    However most providers are heavily skimping on CVC/backhaul, which means people can't actually use the speed they're paying for on the higher tiers. Many customers are waiting for that situation to change before bothering to go to the higher tiers.

    And most on FTTN aren't able to access the higher speeds at all, so they don't even get the option in the first place.

      This is exactly the thing that bugs me. My provider does not offer a 50mbps plan and as I'm on FTTN, 100mbps is not possible. I've just switched over to NBN because my plan cost has dropped by $10 and my data has gone to unlimited. Having worked in an ISP I was aware of the potential speeds I'd be getting and what I was getting previously.
      I've gone from a consistent 12-14mbps to a consistent 25mbps so it's a total win on all counts for me however the diagnostic tools in my modem show that my line speed potential is 38mbps. The only way I can get that is by paying for 100mbps which isn't worth it for the extra speed.

        Internode and SkyMesh are two larger providers that I know of that offer 50mbps plans.

    Cost per premises for FttN is only $2257 versus up to $4411 for FttP.
    That's brilliant if you ignore that my $2257 FttN gives me speeds up to 34mbps maximum.
    I'd be happy to pay the extra $30/month for a 100mbps service, but you can't offer it to me! I'm not even particularly inclined to pay the extra $15/month for a 50/20 service...
    It takes only 6 years for the loss in revenue to break even with the maximum cost to run fibre to the premises.
    Brilliant economic planning by the Economic geniuses of the Liberal Party!
    Build it right, or don't build it at all...

    What they should be showing is profit per residence (or pick a figure like 100,000 or 1,000,000 residences) for FTTP and FTTN for a side by side comparison. Of course the FTTN side would also have to deduct ongoing maintenance and electricity costs to give a true representation of just how crap the FTTN option really is.

    yield management - lower the cost and sell more. This is what needs to occur with the higher speed tiers. You also need to look into the Economic status of the areas were FTTP has been laid. If the areas with FTTP have low SES you can assume that a greater percentage would purchase the most cost effective nbn plans to suit their budgets

    Yet again, ignorance from the people building our broadband infrastructure.

    Oh sure, people don't appreciate having 100/40 now. But In 10 years, is that still going to be the case?

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