Attrition from the National Broadband Network (NBN) could cost the government nearly $2 billion per year by 2023 if NBN Co is correct about take-up rates contained in a new three-year corporate plan that is pivoting the company to focus on customer experience.
The company had entered a “critical period” as it careers towards “completion of the rollout as we have envisaged it” by June 2020, CEO Stephen Rue said while launching the NBN Co’s Corporate Plan 2020-2023 with a promise that the company will become “a full-scale delivery organisation centred on the customer experience”.
The network builder had 5.532 million active premises and 9.954 million premises ready to connect at the end of FY2018-19, and posted revenues of $2.825 billion for the year – a 43 per cent boost on the previous years, with average revenue per user (ARPU) increasing to $49 per month in fiscal 2023.
The final rollout figures included 1.5 million premises that were previously identified as underserved but now have access to broadband, the company said, noting that 91 per cent of premises in non-metropolitan areas had access to the NBN access network.
Some 4.7 million premises will be connected using fibre-to-the-node (FTTN) technology, with 2.5 million using upgraded hybrid fibre-coax (HFC), 1.9 million fibre-to-the-premises (FTTP), and 1.4 million using fibre-to-the-curb (FTTC) technology.
The balance will have been connected using fixed wireless (600,000 subscribers) and satellite (400,000).
A kinder, gentler NBN…
Revenues will continue to increase past the end of the build – peaking at $5.9 billion in FY2023 – as more customers come online. This would include projected revenues from business NBN services greater than $1 billion – up from $388 million this year.
Despite the network’s completion, however, NBN Co is only projecting fixed-line take-up rates of 73 to 75 per cent by 2023 – suggesting that the company will miss out on revenues from 25 to 27 per cent of fixed-line Internet customers.
Based on NBN Co’s projections, that would represent an additional $1.59 billion to $1.95 billion of annual revenues – which will go to competitors as those customers take up other connectivity options.
Even as revenues continue to increase, Rue said the company would be investing heavily to iron out remaining wrinkles in the network, which has overcome myriad hiccups over the past decade as it finally built up momentum towards its eventual completion.
“Improving customer experience requires an industry-wide cooperative approach,” Rue said.
“That’s why, in coming years, we will double down on our commitment to improve customer service by listening closely to what customers need – and working in collaboration with partners, the industry, and government to deliver on that.”
A key focus would be working with retail service providers (RSPs) to “positively influence aspects of the customer experience outside of our control”, he said, flagging “known factors” such as internal wiring and customers’ choice of modems.
Stable revenues of more than $5 billion would also “give us the sustainable revenue we need to get the right level of return to invest in the business,” Rue said, suggesting that the company would be investing “to improve customer experience and upgrade the access experience when the need and demand arises.”
That would include the delivery of speeds greater than 100Mbps and as high as 1Gbps, with planned expansion of faster DOCSIS 3.1 technology and adoption of emerging standards like G.fast, which the company will begin trialling next year.
“We won’t be standing still even though we expect to have 50 per cent of the network giga bit-capable,” Rue said, noting that wireless users would also benefit from new technologies like Massive MIMO and 5G mmWave.
He declined to be pinned down on upgrade plans for FTTN users that are currently suffering from substandard speeds, noting only that 90 per cent of fixed users can achieve 50Mbps or faster speeds and that “everyone will be able to achieve 25Mbps” in line with the government’s 2016 Statement of Expectations.
…but not necessarily a cheaper one
Rue stopped short of saying the company would reduce its controversial Connectivity Virtual Circuit (CVC) pricing, which was last adjusted in 2017 after years of complaints from RSPs that said it was keeping pricing artificially high.
Telstra recently claimed NBN services were among the world’s most expensive and called on NBN Co to scrap CVC charges altogether, although around $1 billion of the revenue from those charges goes back to Telstra every year in a long-term deal over the course of the transition from copper.
Yet persistently high charges weren’t helping stem the exodus of customers from the NBN – likely reflecting a high rate of attrition towards mobile alternatives, although Rue downplayed that argument.
“The fact the fixed line network continues to carry the vast majority of traffic in Australia, accounting for 90 per cent of all downloads, shows just how important the NBN will be to the nation’s download demand,” he said.
Yet for all the talk about speeds and feeds, long-term benefits of the network would flow best when Australians shifted to focus on making the most of their newfound connectivity.
“We need to alter our thinking so it is less focused on what the NBN is, and more on what the NBN can do,” Rue explained.
“The network is not just a network of pits, pipes and cables. It is the backbone of our digital economy, an enabler of jobs, an enabler of better healthcare and education – and a vital link that keeps this nation connected to itself and the world.”