Virus impact over each market - telecom operators, government agencies and regulators' responses - revised forecasts for the next 5 years.
Last updated: 23 Sep 2015 Update History
Report Status: Archived
Report Pages: 170
Analyst: Paul Budde
The roll out of the original FttH-based NBN is nearing its end, to be replaced by a so called multi technology mix, using the copper and HFC networks, which are used for the FttN roll out. This part of the roll out will start taking on momentum in 2016. All preparations have been made but there remains a level of uncertainty regarding the quality of the old network and any potential budget blow outs having been included in the longer term plans of the NBN company. This report analyses the changes and provides overviews and updates on the roll out as well as other statistical data on the project. It also details the different technologies and their individual plans and progress. With Malcolm Turnbull now in charge of the political environment in Australia it is expected that he will express his vision on the digital economy and the roll the NBN will play, these issues are also analysed in the report.
Researcher:- Paul Budde
Current publication date:- September 2015 (8th Edition)
Between 2009 and 2012, the NBN company designed the architecture for a national FttH network. Legislation and contracts were completed in 2012 and shortly afterwards the rollout started, based on a ‘rolling’ three year plan. The election of the Coalition government in 2013 resulted in a political review. As a result the FttH plan was abandoned and instead a so-called multi-mix technology (MTM) solution was introduced. This will see the continuing use of both the copper and the HFC networks.
However the government had to honour existing contracts that had been signed under the previous government, including the initial three years of the FttH rollout. It is this rollout that is saving the NBN at the moment as it is the only part of the project that is in full swing.
Under the new scheme, FttH will connect 26% of premises by 2020, while a further 44% will be served by FttN and the remaining 30% of it will receive services via existing HFC networks. Using this approach, the government anticipated that 91% of premises connected to fixed-line infrastructure would receive 50Mb/s by 2020.
This means a lot of hard work for the NBN company (their official name changed to NBN in 2015 but for practical reasons we will refer to them as NBN Co) as the rest of the project has hardly started. As we predicted when the government changed the plans for the NBN, this would take, not the six months indicated by the minister, but at least 2-3 years. So in all we have lost at least another two years. During that time the OPEX costs of the company continued, as well as significant extra costs in political reviews, consultancy reports, new designs, pilots and so on – all of these costs eating into a limited budget that, in the case of government funds, will start to run out in 18 months’ time.
On top of that NBN Co also faces a skill shortage, so it has plenty of headaches ahead.
In April 2014 the government formally opted for the NBN to provide a multi-technology mix rather than be predominantly FttH. Under the new scheme, FttH will connect 26% of premises by 2020, while a further 44% will be served by FttN – using the VDSL technology – and the remaining 30% of will receive services via existing HFC networks. Using this approach, the government anticipated that 91% of premises connected to fixed-line infrastructure would receive 50Mb/s by 2020. The capital cost was put at $29.5 billion (US$27.4 billion).
NBN Co was also instructed to focus on serviceable premises as a performance metric, as opposed to the number of premises passed, according to which a large number of premises had been passed by fibre but could not in practice receive services. NBN Co was serving 6,000 brownfield premises per week by mid-2014.
In December 2014 Telstra and Optus signed agreements with NBC Co setting out the terms under which their copper networks will be incorporated within the NBN. When regions are declared ready for service Telstra is obliged to cease advertising new retail and wholesale services, and will have an 18-month period in which its customers will be migrated to the NBN. For Optus, its HFC infrastructure will be retained in areas where it provides the best means to secure broadband for premises in the region.
The number of premises with an active NBN service across all access technologies has increased from 70,100 in June 2013, to 130,700 at the end of 2013; 156,000 in June 2014; and 870,000 by April 2015. NBN Co planned to connect over 3.1 million premises by September 2016.
The third element of the NBN is the HFC network. A bit of background here …..
The main cable network operators Telstra and Optus have upgraded their cable networks with DOCSIS 3.0 technology in recent years, and so provide data at up to 100Mb/s across much of their networks. This investment has helped to enable them to meet consumer demand for faster broadband services. However these upgrades are interim measures: in Europe, HFC networks commonly deliver data at 200MB/s or higher, and there is considerable scope for Australian players to make additional upgrades. The rollout of the NBN under the December 2013 strategic review has placed a greater emphasis on existing hybrid fibre coax plant being part of the national broadband plan. In December 2014 the revised NBN agreement saw Telstra’s HFC network and elements of Optus’s HFC infrastructure deployed as part of the NBN, thus reducing the overall cost of the NBN rollout, which aims to reach some 3.6 million premises by June 2016. In April 2015 NBN Co revealed plans to trial new HFC technologies in several suburbs of northern NSW and southern Queensland by mid-year, with a potential to incorporate DOCSIS 3.1 technology within the NBN’s multi-technology mix from 2017.
The other main cable player is TransACT, operating a hybrid fibre coax network in Ballarat, Geelong and Mildura. Since the acquisition of TransACT by iiNet in late 2011, these networks have been integrated in the latter company’s overall infrastructure plans.
At the beginning of 2015 there are 966,000 cable broadband subscribers, accounting for less than 8% of the total broadband market in Australia. However, most of these subscribers are high-end users providing relatively high ARPU for the cablecos.
When Australia began the discussion on its broadband future back in 2005 a key reason to warrant national attention and national investment was that Australia had dropped to around the 25th position on the international level that measured national broadband services. In particular suburban, regional and rural broadband was very poor. Telstra had a stranglehold on the market and there was little indication that this situation would change any time soon without government intervention.
When the NBN was launched in 2009 one of the goals was to get the country into the top ten of the international ladder. Now, in 2015, we have dropped to the 42nd position. This drop is mainly due to the ongoing delays in the rollout of the project, because of the partisan political situation in the country. With the rest of the world now moving clearly towards FttH Australia is set to linger on at the bottom of the international ladder for many years to come. Yes, the situation will most certainly improve, but there is no chance of the country ending up in the top ten in the near future.
Does this matter? We would say yes, as internationally high-speed broadband is seen as an important economic development. It is essential in order to increase productivity, to become more competitive and to develop new high-value jobs. Given the digital disruption that is taking place because of technological changes, we need to make sure that the Australian society and economy is ready and able to transform into one that facilitates the new sharing and networking economy models.
After the mining boom it is clear that Australia needs to diversify and that our very poor level of productivity needs to be improved, and the digital economy is key in that. If we want to be competitive in our Asian and globalised markets we need to lift our digital profile among our trading partners, and the NBN is key in that. We shouldn’t stop at the already out-of-date multi-mix technologies – these should be extended as soon as possible to a fully-blown FttH network, in line with what other developed nations are building.
Just a quick note to say thank for your helpful reports. I`ve used them a couple of times over the years and I found your talk at CeBIT, very interesting indeed.
Matt Joyce, IT manager, Medtronic
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