How NBN Co's 'Fibre on Demand' works

NBN Co’s Technology Choice Program (TCP) provides a mechanism for individuals or local community groups to upgrade their National Broadband Network (NBN) access technology and while the concept might appear straightforward, for one local community group - the Nathan Forrest Community Association (NFCA) – the road to a technology upgrade has been a bewildering one.

With the TCP process a difficult one to navigate the NFCA is in for a struggle when it comes time to decide whether to proceed with a technology upgrade.

Technology choice program

The TCP is described as a mechanism for interested parties to pay for a change to their NBN access technology and the program includes the “Individual Premises Switch” and the “Area Switch”. As the names suggest the Individual Premises Switch “refers to the option to switch eligible individual premises to an alternative NBN technology” and the Area Switch “refers to the option to switch an eligible group of premises to an alternative NBN technology”.

The technology upgrade options available through the TCP include a wide variety of options encompassing the six technologies currently included in the Multi-Technology Mix (MTM) NBN and may include additional access technologies such as G.Fast over coming years.

There is no upfront fee to apply for the TCP, however, after the application is submitted and it has been assessed “for eligibility based on information provided in the application forms, the rollout plan and against the eligibility criteria mentioned in the Technology Choice Policy” there is a fee payable to receive the feasibility study estimate.

For the feasibility study fee of $330 for an Individual Premises Switch and $1100 for an Area Switch NBN Co provides a two page report which includes a Google earth projection of the location, a cost estimate that is expressed as a range with about 20 per cent between the low and high values, a series of statements warning that the estimate is just that and advice on what to do next.

It is at this point that applicants are required to take on significant risk without being provided with a firm quote. The next step in the TCP process is for a formal design and quote to be prepared by NBN Co and the fee for the design and quote must be paid up front even if the applicant decides not to proceed beyond the design and quote stage. The design and quote fee is likely to vary between 10-20 per cent of the final cost.

Having received the design and quote the applicant is required to commit to what is known as the build quote, but applicants will again find that the build quote is not a firm quote, but is variable based on any telecommunication remediation required to install the optical fibre cables and any asbestos removal required.

With applicants contracting with NBN Co for an access technology upgrade GST is payable on payments made under the TCP and because NBN Co took over the cost of infrastructure remediation and asbestos removal from Telstra under the revised agreement, it’s now seeking to pass this additional cost directly to TCP applicants.

The Nathan Forest estate on Queensland’s Gold Coast has 124 lots and is representative of many thousands of similar property developments found right around Australia. However, the Nathan Forest estate suffers from very poor access to mobile cellular, broadband and has poor television reception.

NFCA chairman Mr Neville Dowling says he “was surprised at the comparatively poor quality of communications services (internet, mobile phone and television reception) in a location just 8km from a major urban centre.” Dowling subsequently spoke with other residents and found that they were just as unhappy.  A small team of residents then got the ball rolling on how to have the communication services improved.

In early 2014 Dowling sent in a submission to the local Member of Parliament Scott Buchholz highlighting the poor communications in the Nathan Forest estate and forwarded the submission to Tracey Gilmore, a local councillor, who then facilitated a meeting with representatives of the estate. This resulted in two petitions being presented to the council in March 2014 for assistance to gain access to improved communication services.

Gilmore met with NBN Co representatives and on June 5, 2014 announced that the local areas of Maudsland and Mt Nathan would be prioritised for the NBN fixed access network footprint. On September 16, 2015 NBN Co identified that the technology to be rolled out in the Nathan Forest estate would be Fibre-to-the-Node (FTTN) and installation commenced in early 2016.

Dowling contacted NBN Co about submitting a TCP to find out what the cost for an upgrade to FTTP would be for the estate and he was encouraged to submit an application as quickly as possible to avoid additional fees that might occur due to the time available to process the TCP before the FTTN rollout was scheduled to commence.

An application was lodged on June 15, 2015 and as the application includes a requirement that submissions be supported by a council or incorporated body, Gilmore wrote to NBN Co on July 6, 2015 in support of the application.

However, after some delay with NBN Co trying to establish who would make the feasibility study fee payment and who would communicate with NBN Co regarding the application it became evident that there was a need for the community for form an incorporated body.

Dowling called a community meeting in early August 2015 and over 60 residents living in the estate voted unanimously to form an incorporated body and to proceed with an application under NBN Co’s TCP for Fibre-to-the-Premises (FTTP). The NFCA was incorporated on August 18, 2015 and NBN Co was formally notified of the NFCA within a couple of days.

After a further delay an invoice waiving partial fee payment was issued by NBN Co on September 14, 2015 for the initial technology upgrade cost estimate, payment occurred on September 16 and NBN Co provided the cost estimate on October 16, 2015. The feasibility study estimate is based on a “desktop design” and “an estimate of the costs to design and build the infrastructure required for the Area Switch.”

It’s anticipated that the feasibility study estimate would have a deduction from the final estimate for the FTTN that would not be installed. The NFCA received a cost estimate range that reflects the brownfield FTTP installation figure provided in the NBN Co Corporate Plan 2016. Dowling contacted NBN Co for clarification and was told that the feasibility study estimate already included a FTTN deduction based on a single FTTN node installation, but this does not appear to be the case because the figures provided would be too high otherwise. The NFCA is concerned about the feasibility study estimate and is still waiting for clarification from NBN Co.

The NBN Co Corporate Plan 2016 states that the weighted average Cost per Premises (CPP) for brownfields FTTP is $3,700 and FTTN is $1,600. The Nathan Forest estate contains 124 lots equating to approximately $458,800 for FTTP and $198,400 for FTTN excluding the infrastructure lease cost of $700 that applies to both technologies. The final cost to the NFCA for brownfields FTTP should be approximately $260,400 or $2,100 per premises.

The anticipated FTTP upgrade cost of $2,100 per premises does not appear to include the cost of carrying out telecommunications infrastructure remediation and asbestos removal so the final cost per premises is unknown because NBN Co is not prepared to provide a firm quote to TCP applicants before the build commences.

Hurdles to overcome

A key issue for any local community group, such as the NFCA, is the need for nearly every property owner to commit to participating in a TCP application, because if one or more property owners do not participate the final bill will have to be paid by those that participate.

And there does not appear to be anything to stop a property owner that does not participate in an Area Switch application from benefiting from the infrastructure installed.

Another issue that has not been explained by NBN Co is what happens when a number of Individual Premises Switch applications are submitted in an area that has FTTN installed where the premises are quite some distance from each other. The FTTN equipment has a limited number of FTTP ports available limiting the Individual Premises Switch installations in the area around each node.

One aspect of the TCP - going from FTTN to FTTP - closely follows the UK BT Fibre on Demand program. BT was beset by major issues and customer outrage because the cost for an Individual Premises Switch from FTTN to FTTP was significantly more than what the cost would be per premises if the fibre was used to connect 24 to 32 premises.

This means that the cost for an Individual Premises Switch application is likely to be prohibitively expensive in Australia, especially when the telecommunication infrastructure remediation and asbestos removal cost is also added in. NBN Co has not released the details of any Individual Premises Switch applications and told Business Spectator that “since the [TCP] launch we have had considerable interest and applications, but only a very limited number have progressed to date.”

What happens if RSPs get involved

The TCP provides an opportunity for Retail Service Providers (RSPs) to offer plans that include technology upgrades, which is a bit like getting a new mobile phone when signing on for a new two year mobile cellular plan.

The question of whether RSPs can offer plans that include technology upgrades was put to NBN Co and the response from NBN Co, which has now been added to its website, was that it “will welcome the ability for Service Providers to apply on behalf of their downstream customers to facilitate an Individual Premises Switch at the end of 2015.”

NBN Co has been asked whether the same applies to Area Switch applications and a response has not been received in time for this article. It’s likely that some of the RSPs would see the opportunity to sign up a whole estate to be a valuable business proposition.

If 50 per cent of a 124 lot estate, such as NFCA, was to sign up with a RSP the $260,400 cost of the technology upgrade could be recovered if the 62 customers agree to pay an additional $40 per month for four years.

However, there is a possibility that other RSPs might consider this situation to be anti-competitive and what would happen if one of premises in the estate wishes to connect to the NBN using a different RSP?

The question of whether RSPs can offer plans that include technology upgrades to one or more premises has been put to the Australian Competition and Consumer Commissionbecause this approach provides a cost effective avenue for individuals and local community groups to get the broadband access technology that is desired without a significant up-front payment.

The average CPP technology installation costs provided by NBN Co in the Corporate Plan 2016 are debatable, especially when the installation costs reported by NBN Co are compared to installation costs reported overseas.

It is vital for consumer confidence, to reduce complaints and to reduce the potential for expensive legal action that work carried out under the TCP be subject to independent audit and this means that there is a need for the average CPP for FTTN and FTTP installation costs reported in the Corporate Plan be independently verified and for an independent auditor to be appointed to oversee work carried out under the TCP.

The Australian Communications and Media Authority and the Telecommunications Industry Ombudsman have been sent questions about how the work carried out and charges made under the TCP will be audited and verified and what will happen if consumer complaints are made.

The Communication Minister Mitch Fifield should take action to have NBN Co’s TCP made GST free. The NBN rollout does not involve a GST payment per premises so there should be no GST for TCP applicants that proceed with a technology upgrade before the NBN rollout occurs in their area, if at all at any time. To require local community organisations, such as NFCA, to pay GST on top of the cost of the FTTP rollout and the unacceptable additional charge for telecommunications infrastructure remediation and asbestos removal could be the final straw for the average family to bear.

Mark Gregory is a senior lecturer in the School of Electrical and Computer Engineering at RMIT University.