Australia - The National Broadband Network 2.0 - Stats and Updates early 2014

Date: February 12, 2014
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Publisher: BuddeComm
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Australia - The National Broadband Network 2.0 - Stats and Updates early 2014
The economic focus of the NBN should move from costs to benefitsAustralia - National Broadband Network - Developments and Analyses

After the September 2013 election in Australia, and with a new government in charge, a number of reviews were announced that will shape the future direction of the NBN. For a start, the Minister asked NBN Co to first carry out its own review, based on the original specifications of the NBN – it being a majority FttP rollout.

The outcome was that at a strategic level the NBN will most likely continue fairly smoothly. There will most certainly be changes made to the rollout but these could quite possibly be implemented by NBN Co itself, now that it has largely been relieved of the political pressure under which it had to operate during the onslaught of attacks by the then Opposition, which started off with a policy to ‘kill the NBN’. At this stage at least the NBN now has bipartisan support.

The recent announcement regarding the protection of the NBN against cherry-picking was another good step forward.

Also, because of the likely continuation of the NBN many of the issues that existed under the previous government remain unchanged and therefore will require the attention of the present government, and/or will need to be taken into account in future policy developments. BuddeComm has already indicated support for certain changes to the NBN in relation to greenfield developments and multi-dwelling units (MDUs) and these issues will now receive significantly more attention than they were given in the past. Again, earlier comments and analyses made on these issues remain relevant under the new government.

The rollout has seen delays, but at this stage there are no indications that this will affect the longer-term outlook for completion of the project. The review will obviously shed more light on this, but so far the issues seem to be more one-off and/or resolvable – for instance, by being more flexible in the use of technology, for example, in MDUs.

A serious omission remains – that there is no policy or information that takes into account the importance of the NBN for the digital economy, the opportunity to use it to increase digital productivity, and where this infrastructure fits in relation to e-business, e-health and e-education.

This is an untenable situation as important decisions regarding a project that will run over a 20-30 year period are being made in a policy vacuum. Costs and technologies have been discussed ad nauseam, but so far nobody has addressed the enormous economic and social benefits, essential in running a modern society. We put the question forward – can we afford not to have an FttP-based NBN?

There is still a misalignment between the social and economic benefits of the NBN and NBN Co’s business plan. The new government wants to prioritise the underserved areas and is looking at other technologies to create some early wins. The question, however, is how much can be changed at this late stage – and also whether it will really lower costs and speed up the rollout.

Australia is highly reliant on its income from natural resources and, like other resource-rich countries, it needs to diversify its economy. Interestingly, it is these resource-rich countries that are leading the rollout of FttP around the world. The main reason for those governments becoming involved in digital infrastructure is to increase their country’s competitiveness and productivity in areas other than resources.

All these issues are addressed and analysed in this report

The FttP Rollout

Unfortunately, during the period 2009-2013 the NBN rollout became a political football, resulting in an environment where NBN Co experienced many constraints and constant diversions of management time and energy into unproductive activity. Under enormous political pressure NBN Co had to balance its plan between what is technically required to deliver a first-class infrastructure, on the one hand, and delivering as much as possible before the September 2013 election on the other.

After the election the new government had to further revise the rollout projections downward.

As promised, it will honour existing contracts that have been signed under the previous government; and it instructed NBN Co to come up with a plan that will see as much as possible salvaged from the original NBN plan, based on a more agnostic deployment of technologies.

There are many ‘unusual’ reasons why the rollout has seen so many delays – the negotiations with Telstra and Telstra’s asbestos scare are among the most notable ones. The question is whether these were simply one-offs and NBN Co should therefore be able to catch up. The foreshadowed reviews will reveal if that is possible or if the problem is more structural. In the meantime, after the asbestos scare the rollout has resumed and has been ramped back up to its original plan.

The next step after that is for RSPs to sign up customers for their broadband service. Uptake among some the first sites is already climbing to 50%-60% but with all the uncertainty surrounding the future of the NBN many customers are understandably confused and this is affecting the cutover rates.

Many local councils have also expressed concern regarding the future of economic developments in their regions if the NBN is downgraded.

Fixed Wireless and Satellite Networks

The NBN will connect approximately 7% of all premises in the country to wireless networks. They consist of an LTE-based component that will cover 5%, with a satellite-based network dealing with the remaining 2%. In all, just under one million premises. In 2013 NBN Co announced an upgrade of the infrastructure with new speeds of 25 Mb/s download and 5 Mb/s upload.

The two ka-band satellites that are currently being built at the cost of $2 billion will be managed by Optus.

In late 2013 the interim satellite reached full capacity and plans are underway at present to boost capacity to service as many customers as possible.

The first fixed-wireless release sites are under construction and this network should be finalised by 2015. As the wireless rollout had bipartisan support, it will more or less continue as planned under the new government.

Surveys, Statistics and Forecasts

The Australian telecommunications market will change dramatically over the next ten years, accelerated by an urgent need to increase digital productivity across businesses and government sectors. Major economic transformations are underway to face the many economic, social and environmental problems, and high-speed broadband, M2M, cloud computing and real-time data analytics will play a key role in this process.

Over-the-top (OTT) applications are being developed and provided by many industry and government sectors and as a result these are becoming increasingly prominent in the development of the future of the telecoms industry. This will start to blur some of the borders between these sectors, as well as blurring borders between infrastructure, IT and applications.

The NBN will become the predominant infrastructure, and as a utilities-based network it will also provide its services to other sectors, such as healthcare, education and business. With these sectors involved we will see the industry developing specific new business models around infrastructure, ICT and retail. IPTV and other media and entertainment applications will also begin to play a more important role.

The question remains – how successful will the telcos be in retail space?

They will have to decide where they want to play. Infrastructure will largely move to NBN Co, its contractors (eg, Telstra) and a few backhaul providers. Companies also have the opportunity to become the ICT providers to those other sectors. The larger sectors in particular will create a sizeable demand for value-added infrastructure services. The first of these moves are already underway, with a focus on cloud computing, M2M and data analytic services. Contracts have been signed in the healthcare and energy sectors and various government services. These new developments offer a glimpse of the direction the industry will take in the future.

All of this will help the industry to broaden itself and double its size to around $80 billion by 2020.

Data in this report is the latest available at the time of preparation and may not be for the current year
1. NBN 2.0

1.1 The new plan of the new government
1.2 Analysis of NBN 2.0
  1.2.1 Two competing NBN offerings
  1.2.2 The multi-technology NBN
  1.2.3 Design and rollout problems
  1.2.4 Contracts, negotiations and regulations
  1.2.5 The execution
  1.2.6 Current FttH plan requires simplification
  1.2.7 So on to the next review in 2016?
  1.2.8 Still missing – a national vision

2. DEVELOPMENTS AND ANALYSES 2014

2.1 No NBN cherry-picking – another step in the right direction
2.2 NBN debate continues in a policy vacuum
2.3 Regional councils concerns over the NBN changes
2.4 Privatisation of NBN is not popular
2.5 The NBN will always remain in Beta
2.6 Will the NBN be unravelled?
  2.6.1 The delicate nature of a wholesale-only model
  2.6.2 Structural separation allows for wholesale-only model
  2.6.3 No demand for fibre-based services?
  2.6.4 National digital productivity
2.7 NBN Co given the opportunity to save the current NBN
2.8 Telstra’s cashflow may suffer from NBN rollout delays
2.9 What PRISM, credit card hacking and Chromecast have to do with FttH
2.10 Retirement of NBN Co’s first CEO
2.11 The pros and cons of vectoring
2.12 Will LTE steal the broadband revolution?
2.13 Multi Dwelling Unit broadband
2.14 Is the NBN Co business model flawed?
2.15 NBN – telecoms or digital infrastructure – a SAU question
2.16 Pilbara – a lost NBN opportunity
2.17 NBN leadership or NBN procrastination
2.18 The Dutch Disease, broadband and the mining boom
2.19 Comparisons with broadband plans from AT&T and BT
2.20 NBN could slash telecoms maintenance costs
2.21 Broadband demand-side management
2.22 The NBN and the opportunity for ‘virtual’ players
2.23 Will infrastructure constrain the digital entertainment market?
2.24 Will the half-built HFC disaster be repeated?
2.25 Four million households within reach of the NBN by 2015
2.26 Digital infrastructure essential to manage the transition to the e-world

3. POLICIES AND REGULATIONS

3.1 NBN Under the Coalition Government
  3.1.1 NBN Statement – Minister Turnbull
  3.1.2 NBN Co given the opportunity to save the current NBN (Analysis)
  3.1.3 NBN reviews
3.2 Regulatory Framework
  3.2.1 Introduction
  3.2.2 Bills passed House of Reps
  3.2.3 Key elements of the Companies Bill
  3.2.4 Key elements of the Access Bill
  3.2.5 The key points of the NBN amendments
3.3 Special Access Undertakings
  3.3.1 The NBN Co Review
  3.3.2 Analyses - telecoms or digital infrastructure – a SAU question
3.4 Joint Committee on the National Broadband Network
3.5 Regional Telecommunications Policies
3.6 Regulatory reforms for the transition period
  3.6.1 Introduction of regulatory instruments
  3.6.2 Regulatory instruments - analysis
  3.6.3 Final Access Determinations for fixed line telecommunications
  3.6.4 Layer 2 bitstream on non-NBN Co networks
  3.6.5 Telstra needs to tighten up its migration plan
3.7 Government to fund NBN voice migration
3.8 Budget funding for the National Broadband Network
  3.8.1 Administrative and regulatory support
  3.8.2 Funding planned until 2016
  3.8.3 Funding for The Department of Broadband, Communications and the Digital Economy (DBCDE)
  3.8.4 Funding for the ACCC and ACMA
3.9 Telstra Structural Separation Undertaking
  3.9.1 Telstra’s initial undertaking
  3.9.2 Migration Plan
  3.9.3 The Australian Competition and Consumer Commission (ACCC) involvement in the NBN
  3.9.4 Telstra’s Structural Separation Undertaking
  3.9.5 Universal Service Obligations
3.10 Sale of NBN Co
3.11 Special access for smart utility services

4. THE FTTH ROLLOUT

4.1 Overview, updates and analyses of the roll out
  4.1.1 Roll out update by the new Government
  4.1.2 The initial announcement
  4.1.3 Roll out progress report late 2012
  4.1.4 Roll out update mid 2013
  4.1.5 Take-up rates late 2013
  4.1.6 NBN Co breaks out state-based rollout data
4.2 Tasmania
  4.2.1 NBN Pilot Roll out
  4.2.2 Other NBN related projects
4.3 The first mainland release sites
  4.3.1 Introduction
  4.3.2 Armidale
  4.3.3 Kiama
  4.3.4 Willunga
4.4 Second-release sites
  4.4.1 Nineteen new sites
  4.4.2 Second construction phase
4.5 Detailed overview of the roll out program
  4.5.1 National overview
  4.5.2 Dapto first on the list for 2012
  4.5.3 Eight more cities announced – February 2012
  4.5.4 Roll outs northern Queensland
  4.5.5 Brunswick
  4.5.6 98K more premises across the country
  4.5.7 Newcastle
  4.5.8 Western Sydney
  4.5.9 Western Australia
  4.5.10 ACT
  4.5.11 Darwin
4.6 Multi-dwelling units
4.7 First fixed wireless roll outs
4.8 Roll out issues - Analysis
  4.8.1 Community engagement
  4.8.2 Inhouse networking
  4.8.3 Existing FttH users?
  4.8.4 Municipality Broadband
  4.8.5 Real estate investment
  4.8.6 Brownfield restrictions
4.9 Regional Backbone Blackspots Program (RBBP) - Historic
  4.9.1 Background information
  4.9.2 Adelaide blackspots receiving high-speed broadband

5. FIXED WIRELESS AND SATELLITE NETWORKS

5.1 Introduction
5.2 NBN Co’s Fixed Wireless Network
  5.2.1 Services based on 2.3GHz spectrum
  5.2.2 Construction plan
  5.2.3 Visionstream to construct the network
  5.2.4 NBN facilitates wireless competition - Analysis
  5.2.5 Fixed wireless rollouts
  5.2.6 Other developments
5.3 The NBN Satellite Network
  5.3.1 Introduction
  5.3.2 Ka-band satelittes
  5.3.3 Satellite speeds
  5.3.4 Interim regional and remote satellite services
  5.3.5 Running out of capacity
  5.3.6 Boost to capacity
  5.3.7 10,000 VSAT terminal milestone for NBN
  5.3.8 Via Sat to supply satellite ground equipment
  5.3.9 Ground station gateways
  5.3.10 Satellite launch contracts
5.4 Why wireless broadband is no alternative to FttH - Analysis
  5.4.1 Problems in metro fringe areas

6. SURVEYS, STATISTICS AND FORECASTS

6.1 Introduction
6.2 Market Surveys
  6.2.1 Privatisation of NBN is not popular
  6.2.2 FTTN modelling results
  6.2.3 NBN speeds over 25Mbps
  6.2.4 Broadband benefits for households
  6.2.5 Poll prefers FttP plan above FttN plan
  6.2.6 Support for fast broadband via an NBN
  6.2.7 Customers prepared to pay for higher speeds
  6.2.8 NBN Business Readiness Survey - 2013
  6.2.9 Research into the NBN first release sites
  6.2.10 Stats and demographics for the 2012-2015 NBN footprint
6.3 Industry transformation
  6.3.1 Introduction
  6.3.2 Fixed infrastructure market
  6.3.3 Wholesale market
  6.3.4 The retail market
6.4 Penetration Updates and forecasts
  6.4.1 Early uptake indications
  6.4.2 Broadband access penetration forecasts
6.5 The mobile market
6.6 The digital economy - trans-sector market
  6.6.1 Forecasts – 2015; 2020
  6.6.2 The digital media market
6.7 Business market survey
  6.7.1 NBN impact on industry output by 2020
  6.7.2 Summary of survey findings
6.8 Business models and mergers and acquisitions (M&A)
  6.8.1 Fixed market scenarios
  6.8.2 Mobile market scenarios
6.9 Forecasting notes

LIST OF TABLES

Table 1 – NBN budgeted and actual expenditure – 2008 - 2015
Table 2 - Key NBN metrics for 30 June 2013
Table 3 - Deployment schedule for 2011-15 corporate plan
Table 4 - Deployment schedule for 2016-21 corporate plan
Table 5 – Numbers of premises passed – first release sites (incl. Tasmania)
Table 6 – NBN pre-sales take up rates first release sites
Table 7 - NBN Co 2012 roll out schedule
Table 8 – Benefits of broadband for households – a national framework
Table 9 – Scenarios – summary of benefits in 2020
Table 10 – NBN take up rates first release sites (pre-sales indications)
Table 11 – Broadband uptake* scenario forecasts – 2015; 2020 (household penetration)
Table 12 – Impacts of the NBN on industry output at 2020 (% change)

LIST OF CHARTS

Chart 1 – Market share size of NBN trans-sector market – 2020
Chart 2 – NBN services revenue share estimates by market share – 2015
Chart 3 – NBN services revenue share estimates by market share – 2020
Exhibit 1 - Key elements of Telstras SSU
Exhibit 2 - Privatisation of NBN is not popular
Exhibit 3 – The Regional Backbone Blackspots Program
Exhibit 4 - IP Channel Bonding
Exhibit 5 – Summary of scenarios considered in this report
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