NBN Co’s business model is now a major impediment that is restricting RSPs from significantly reducing congestion during peak hours.
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Two announcements this week have painted a grim picture of the National Broadband Network (NBN) in the lead-up to the federal election, and for many Australian consumers there is a grim reality that they’re not receiving what they pay for, even when a fully functioning NBN service does not meet their needs.
In the latest of the ACCC’s measuring Broadband Australia report released on Tuesday, the ACCC states that “some consumers continue to experience underperforming services that never achieve close to their maximum advertised plan speed.”
“This situation impacted 13 per cent of volunteers in the MBA program, including one in four fibre-to-the-node (FTTN) services on plans with a maximum speed of 50 and 100 Mbps,” it said.
These underperforming services continued to impact the overall download speed results. In addition, this latest report found that these services have a relatively higher latency, meaning the users may have a less reliable experience for uses like video-calls and online gaming, even where there are adequate speeds to support such applications.
This means that for the 58 per cent of FTTN connected premises that have selected 50 or 100 Mbps plans, there were about 374,000 underperforming connections at 31 March 2019.
For many of the FTTN-connected premises there is one problem or another. For about 1.3 per cent of premises in the FTTN footprint, connection speeds don’t reach 25 Mbps.
Peak time congestion remains a problem, and whilst peak speeds have increased marginally during the last reporting period, the ACCC chief executive Rod Sims stated that “RSPs need to continue to monitor their networks to ensure their speed claims are realistic, and we expect NBN Co and RSPs to work harder together to help consumers achieve the speeds they are paying for.”
It is time that the ACCC takes further action against RSPs and NBN Co to ensure that customers receive what they pay for. The marketing that is permitted about broadband plans is already far too lenient and misleads Australians about what they’re actually getting.
Mr Sims and the ACCC know that NBN Co is unable to deliver the products on offer. NBN Co has adopted technologies and built a second rate network that has failed to meet the ridiculously inadequate requirements set by the Coalition Government in 2014.
NBN Co’s business model is now a major impediment that is restricting RSPs from significantly reducing congestion during peak hours.
The cost of extra capacity being offered by NBN Co is too high, and in some areas of the network, there are infrastructure limitations affecting the overall NBN performance.
In the other announcement earlier this week, NBN Co released results for the nine months to 31 March 2019.
The Average Revenue Per User (ARPU) remains static at $45 per month. For NBN Co, more than any other measure, this is an indication that the business is failing.
In the 2013 projections, NBN Co should have hit an ARPU target of $51 per month by 2020, but this has now been pushed back to 2022 necessitating an additional $2 billion being borrowed to makeup the shortfall.
By 2020, NBN Co should have hit the target of a minimum of 8 million premises with an active service, but the latest figures show that only 5.1 million premises have an active service as of 31 March 2019.
What this means is that NBN Co is haemorrhaging cash at an astonishing rate. As of 31 March 2019, NBN Co revenue is about $229 million per month, whereas by June 2020 it should be about $408 million per month and this figure is now not expected to be reached until June 2022.
If the current trend in the rate of increase of ARPU continues, NBN Co could be $3 to $4 per month short of the $51 per month target by 2022 and this would amount to a shortfall of about $24 to $32 million per month.
If NBN Co is not able to find a solution to this problem quickly there should be little doubt as to the eventual outcome.
NBN Co CEO Stephen Rue continues to put out a positive message and is reported in the media as saying that NBN Co remains on track to become cash-flow positive in FY22.
Whilst Mr Rue has maintained a positive stance, the activation rate and slowing of the rollout as it enters the final phase will mean that there are assumptions being made by NBN Co that could come unstuck over the next couple of years.
NBN Co’s earnings before interest, tax, depreciation and amortisation (EBITDA) was reported to be negative $808 million for the nine months to 31 March 2018. The additional billion dollar loss in the current financial year was projected in the corporate plan for 2019-2022 and this now means that NBN Co will require about $51 billion in peak funding.
However, if any other current assumptions or projections should come unstuck, NBN Co will be looking at the need for a further cash injection, making it even harder for NBN Co to reduce the wholesale product costs to a level where RSPs will willingly purchase more capacity to reduce the peak hour congestion.
Samsung has begun heavily marketing their new 8K televisions. Whilst the cost of the new televisions is high, it is expected that by 2022 the cost of 8K televisions will become affordable for people looking to upgrade their televisions. Heavily compressed 8K videos can be downloaded off the internet at over 50 Mbps. How will the average household watch one or two 8K television or streamed videos over the NBN at the same time?
4K television is stalled in Australia due to the woeful state of the NBN, and what is available from streaming providers is very poor quality due to the low bit rates being used to limit buffering and increase congestion.
NBN Co’s corporate plan and financial statements remain silent regarding NBN Co’s plans to upgrade the NBN and it will need to do so as soon as the rollout has finished to meet current and future demand. The cost of the network upgrade could be as high as $16 billion today.
How will NBN Co fund the upgrades with the precarious financial position that it finds itself in today?
NBN Co’s “Focus on 50” campaign that aims to meet the Government’s requirement that 90 per cent of households be provided with at least 50 Mbps peak wholesale download data rate connections by 2019 is short sighted.
NBN Co’s cost blowouts, ongoing delays and poor performance is out in the open and it is time for a new Board and a new approach.
Mark Gregory is an Associate Professor in Network Engineering at RMIT University and is the Managing Editor of the Journal for Telecommunications and the Digital Economy
