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Australia's NBN Seeks More Govt Cash to Cover Loss-Making Rollout

Robert Clark
News Analysis
Robert Clark

Australia's troubled NBN has once more been in the headlines for all the wrong reasons.

Prime Minister Malcolm Turnbull, whose government has committed A$50 billion ($38.5 billion) to the project, has this week described it as a "calamitous train wreck."

The state-owned NBN Co Ltd. , set up in 2009, has now passed nearly 6 million out of its target 11 million premises.

Originally, it was set up to deploy fiber-to-the-home (FTTH) to 93% of Australian households.

But under a trimmed-back model introduced by Turnbull, only 17% of homes will be fully fiber-connected. Under this "mixed technology" approach, fiber-to-the-node (FTTN)/VDSL 2 will account for 48% and hybrid fiber coax (HFC) for 27% of the rollout, with wireless and satellite connecting the rest.

But the wide deployment of copper means the fastest broadband packages are no more than 100 Mbit/s on the downlink -- exposing them to competition from increasingly capable mobile networks.

NBN CEO Bill Morrow says the company is losing money on each connection and will need a further subsidy from the mobile operators themselves. Absurd as it might sound, this lies within the logic of the NBN model. Instead of rolling out first in commercially attractive urban areas, the NBN's initial focus, for political reasons, has been in the uneconomic rural districts.

To help cover that cost it earns a levy from fixed-line competitors of A$7.09 ($5.46) per customer each month. Morrow is seeking a mobile version of that to support NBN's uneconomic services.

But as well foot the bill for the rollout it must acquire Telstra's access network. NBN is expected to pay the incumbent a net A$11 billion ($8.5 billion) for the Telstra infrastructure, and Morrow says this works out at about A$1,000 ($770) per customer.

Additionally, NBN must pay the incumbent for access to its ducts and dark fiber.

And because it is a commercial operation, the company is expected to deliver a return to the taxpayer of 3% to 4%.

The rollout of Gigabit broadband access networks is spreading. Find out what's happening where in our dedicated Gigabit Cities content channel here on Light Reading.

Turnbull -- a former banker who took Australia's first private ISP to an IPO in the late 1990s -- rejected the request for an extra subsidy.

But he said the problem wouldn't have happened if NBN had been put in the hands of an existing telco.

"Setting up a new government company to do it was a big mistake," Turnbull told reporters.

He cited the case of Chorus in New Zealand, which expects to reach 85% of the population with a 1Gbit/s service.

The New Zealand government split the network and retail operations of its incumbent operator and turned the network company, with its own ducts, fibers and data centers, into the NBN.

A new IPSOS global survey puts Australia at the bottom of 28 countries in broadband satisfaction. Just 32% of consumers rate the service as good or fairly good -- down six points from a year ago.

— Robert Clark, contributing editor, special to Light Reading

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