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NBN technician Rajav Kapil connecting an apartment block to the National Broadband Network (NBN) in Brunswick, Melbourne, Tuesday, March 11, 2014. (AAP Image/David Crosling)

The extent to which the government’s decision to force NBN to switch to Malcolm Turnbull’s Multi-Technology Mix model will expose it to financial disaster has become clearer this week from Telstra head Andy Penn’s comments about his 5G rollout.

As Crikey reported in April, 5G is superior to NBN’s mishmash of fibre-to-the-node and HFC cable, now being built at the direction of Malcolm Turnbull when the Coalition took power in 2013. It has previously been unclear what kind of impact 5G would have on this second-rate NBN. Now, Penn has provided some specific numbers on that, and it’s deeply scary for NBN.

NBN’s financial performance relies on a 73-75% take-up rate for its services — that is, 73-75% of premises in Australia will end up using an NBN service. The 25-27% that do not are a mix — according to NBN:

  • “Not every premises in Australia is expected to want access to the nbn network, e.g. holiday homes.
  • Some premises with lower data needs are expected to choose to use mobile only products.
  • Some premises may use fibre alternatives / nbn network wholesale competitors”

In previous years, NBN provided a breakdown of this in its corporate plan: empty premises, 8.5-9.5%; mobile-only, 15-16%, alternative fibre, 1.5%. In its corporate plan last year, however, this breakdown mysteriously vanished. It’s now becoming clear why.

This week, Penn said that 5G was likely to increase the level of mobile-only households by 10-15 percentage points from current 15% levels — meaning the level of mobile-only households will grow to 25-30%. Even under Penn’s low-growth 5G scenario, NBN’s take-up rate will fall to 65%, and could be as low as 60%. That will be catastrophic for its revenue.

NBN is already financially problematic as an asset earning a return for the government, courtesy of its need to reduce its wholesale prices in the face of fierce criticism about poor speeds and network congestion. A dramatic fall in its forecast take-up rate will wreck its financial forecasts. This week has already revealed that its rollout is set to slow even further and may miss the 2020 scheduled completion date — although, ironically, this means lower payments to Telstra. 

The company is sticking to its 15% mobile forecast. “Even the mobile operators themselves have acknowledged that the nbn network will continue to serve the vast majority of the market,” a spokesperson told Crikey. “We expect 15 per cent of premises will be wireless-only. We keep a very close eye to see if it will stay true. Our estimates have not changed but we continue monitoring.”

NBN also argues that any impact will take significant time. “Delivering national 5G network coverage will require mobile operators to build out fibre much deeper into the network – this is likely to take a considerable time to achieve given the amount of work involved.”

Nonetheless, NBN’s next corporate plan in August looks set to be a truth-telling moment for a company forced to embrace the Coalition’s cynical policy — and one that may force Turnbull to finally confront the financial consequences of his appalling stewardship of broadband in Australia.

Peter Fray

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