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The state of Australia’s national broadband network

Australia’s national broadband network promises to improve broadband connectivity across the country but has been plagued by pricing issues. Here’s a look at where it is today and what lies ahead

After a couple of false starts, Australia’s National Broadband Network (NBN) kicked off with the formation of the government-owned NBN Co in 2009, but it soon became a political football. Various changes have been made and are still being made.

Here’s a look at the state of the NBN and what lies ahead.

Where we are today

As of 19 May 2022 (the latest figures published by NBN Co at the time of writing), more than 12.1 million premises were classified as “ready to connect”, and slightly over 8.5 million were activated for customers on an NBN plan with a service provider.

Customers’ choices of internet speeds appear to have settled this year, possibly as a result of the move to “Covid normal” following the easing of almost all pandemic restrictions. The split was 76% on 50Mbps and above and 24% on 25Mbps and below. There are signs that may change in future, but more on that later.

The initial NBN build was deemed “complete” by NBN Co in September 2020 and as “built and fully operational” by the then minister for communications in December 2020 (the Act governing the NBN required the minister to provide such a statement by 31 December 2020 or to formally extend the time limit). So, it is not surprising that most of the premises newly flagged as “ready to connect” are new developments.

For example, in the week to 19 May 2022, 2,178 premises in new developments became “ready to connect”, while the same was true for just 713 existing premises.

NBN Co’s current corporate plan says it “remains committed to connecting the remaining 11,000 complex installations…[including] difficult to reach homes and businesses, new development sites, and heritage and culturally significant sites”.

It is also planning network upgrades that will make its highest speed plans available to up to 75% of households and businesses in the fixed-line network by 2023 as demand arises.

Home Ultrafast plans offering peak download speeds between 500Mbps and 1Gbps are already available to more than 4.4 million premises that have FTTP (fibre to the premises) or HFC (hybrid fibre-coaxial), and NBN Co aims to increase this to eight million by the end of 2023.

This will be achieved by providing FTTN (fibre to the node) customers with an upgrade to FTTP when they order a Home Fast (100Mbps), Home Superfast (250Mbps) or Home Ultrafast plan. The upgrade is performed at no extra charge to the customer beyond the cost of their selected plan.

These upgrades are being progressively rolled out in suburbs and towns around the country.

Politics

It should be noted that when the NBN was announced by the Kevin Rudd government in 2009, the plan was to connect 93% of premises with FTTP, and the rest by fixed wireless, as well as satellite in remote locations.

But in 2013, the incoming Tony Abbott government effectively stopped the FTTP rollout in favour of FTTN and HFC (the latter in most areas covered by the former Telstra Cable network that was acquired by NBN Co). FTTC (fibre to the curb) and FTTdp (fibre to the distribution point, for multi-occupancy sites such as apartment buildings) were added to the mix along the way.

More recently, it was finally accepted that FTTN wasn’t up to the job, hence the planned upgrades to FTTP.

Opinions vary, but Royal Melbourne Institute of Technology’s Mark Gregory, a frequent commentator on the issue, suggests the cost of the build plus upgrades is likely to total more than A$70bn, whereas he estimates the original plan would have cost about A$50bn given the low interest rates prevailing in recent years.

And independent communications analyst Paul Budde agrees that it would have been cheaper to have implemented the original mostly FTTP network.

Yet, the multi-technology mix (FTTN, HFC, fixed wireless, satellite and hardly any new FTTP) was touted by both the Abbott and Turnbull governments as being a cheaper and faster route to a completed NBN.

Both major parties went into the recent federal election with policies relating to the NBN. Since a Labor government was returned (at the time of writing the party had won half of the seats in the House of Representatives, but it still wasn’t clear whether it would achieve a majority), we will look at what the Australian Labor Party intends.

Plans

As mentioned earlier, NBN Co’s current plan is to make near-gigabit speeds available to eight million premises by 2023. The new government intends to extend this to more than 10 million premises by 2025.

This would mean gigabit-class speeds would be available to 90% of Australians living in the NBN’s fixed-line footprint. Additionally, up to 660,000 premises in regional areas will be upgraded to FTTP.

Changes to NBN fixed wireless and satellite services have also been proposed.

For example, the fixed wireless network is to be upgraded so that all users can select plans between 100 and 250Mbps while satellite data allowances are to be increased to 90GB a month and use between midnight and 4pm will no longer be metered.

Currently, data allowances vary significantly between plans and providers, but examples include 45GB peak and 130GB off-peak, 60GB peak and 190GB off-peak, and 65GB peak and 235GB off-peak.

Whether the proposed changes will be enough to head off competition from the Starlink satellite service offered by US-owned SpaceX remains to be seen.

Pricing changes

There has always been controversy over NBN Co’s wholesale pricing structure, but recently proposed changes have caused alarm in various quarters.

A consultation paper entitled Proposed variation to the NBN Co special access undertaking published in May 2022 by the Australian Competition and Consumer Commission (ACCC) explains that the majority of NBN services – those provided over copper or HFC lines – are not covered by the existing Special Access Undertaking (SAU), noting that NBN Co has significant accumulated losses, and points out that the company has proposed changes that would mean substantially increased prices for services. The SAU determines how much NBN Co can charge for wholesale services and serves as a framework for non-pricing issues to protect consumer interests.

In particular, NBN Co wants to remove the connectivity virtual circuit (CVC) charge for higher-speed services. For some time, various residential service providers (RSPs) have been pushing for the elimination of the CVC charge that grants them NBN bandwidth, as that would mean their costs were more predictable, and make it easier to offer plans with unlimited data.

But keeping the CVC charge for lower-speed services while implementing price increases means their wholesale prices will soon be the same as the 100/20 speed tier, with download and upload speeds of 100Mbps and 20Mbps, respectively.

That is expected to happen by 2027 for 50/20 services, and before 2040 (the end of the SAU term) for 25/10, 25/5 and 12/1 services. 12/1 voice-only services would increase in price over time, but would still be less than $20 in 2040. Again, these are wholesale and not retail ­prices.

It should be noted that NBN Co predicts that around 50% of end users will need a 100Mbps service by 2030, and that consumers will be willing to pay more to meet their need for additional bandwidth to support new applications such as 8K TV.

On the other hand, modelling by the department of infrastructure, transport, regional development and communications’ bureau of communications and arts research suggests 50% of households would be satisfied with 29Mbps in 2028, with only 0.1 percent requiring more than 78Mbps.

Anecdotally, the pandemic-induced switch to working all or part of the week from home has led to some households switching to higher-speed connections as they need faster upload speeds to support videoconferencing and similar services without impacting other applications, especially when more than one person is working in the same home.

Another issue with the proposed variation is that the 25/10, 50/20, 100/20 and 250/25 tiers would see immediate price increases if the proposal is accepted. The 12/1 voice-only tier would see a small price reduction, while the remaining high-speed tiers would remain the same in the short term.

However, wholesale prices for all tiers would increase annually, using a formula based on the Consumer Price Index (CPI) and the growth in busy hour demand. Given the linkage to the CPI, it should be no surprise that this is projected to mean prices will double by the time the proposed SAU ends in 2040.

The ACCC appears to be less than impressed with the proposal, noting that the prices and price paths are not directly linked to current or future demand, and that retention of CVC pricing on some plans would result in wholesale prices increasing at uncertain rates. This is likely to force households and businesses to purchase high speed inclusions at a price that does not represent fair value to them based on their requirements, it said.

More than 80% of residential services are currently 50Mbps or less, so that last point is relevant to a large majority of households using NBN services.

Several RSPs including Telstra, Optus and TPG have spoken out against the proposal, saying that higher wholesale prices will lead to higher retail prices.

The ACCC is seeking submissions on the proposed SAU variation from members of the public as well as other stakeholders. It expects to release a draft decision in September 2022, by which the industry would have some idea about when the new government will put into action its election promises about the NBN.

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