news Analysis by the NBN company’s first chief technology officer Gary McLaren appears to have shown that the activation rate of new NBN broadband connections is actually slowing, in a move that McLaren has speculated may be due to political reasons in an election year or merely the difficulty of dealing with copper and HFC technologies.
Experienced technology executive and engineer Gary McLaren served as the NBN company’s first chief technology officer, spearheading the company’s development of a strategy which has seen Fibre to the Premises technology deployed to more than a million premises throughout Australia, as well as complementary Fixed Wireless and satellite technology.
However, McLaren was made redundant by the NBN company, along with its chief financial officer and head of its commercial operations, shortly after Malcolm Turnbull became Communications Minister.
Last week the NBN company released its latest set of financial results. The results show that the company continues to make strong strides in deploying its network — both the original FTTP network envisioned by Labor as well as the Multi-Technology Mix approach favoured by the Coalition.
As part of the results, the NBN company said in a media release that activation rates (where actual customers sign onto the NBN) continued to ramp up:
“The number of homes and businesses with an active nbn™ service increased to 736,000, with nbn breaking the 10,000 activations per week threshold in December 2015 (12-week rolling average) and will continue to climb.”
However, analysis published by McLaren on his blog over the weekend appeared to show that activation rates on the NBN were actually forecase to decrease in the next half year.
“In 1H FY 16 (from July to Dec 2015) NBN Co have moved from 486,000 to 736,000 active premises or an increase of 250,000 active premises. But the forecast for 2H FY16 (from January to June 2016) is to grow this to 955,000 premises or an increase of 219,000 premises,” wrote McLaren.
Delimiter recommends readers click through to read McLaren’s entire post, as it is quite detailed and appears to be well-argued, as well as featuring useful graphs.
According to the former NBN CTO, there could be a couple of reasons for this discrepancy.
“The FY16 target of 955,000 active services is unchanged from the last set of financial results released in August 2015,” wrote McLaren. “So it may be that NBN Co are simply being conservative. They may have over-achieved in 1H FY16 but don’t want to adjust their forward targets. The actual result could turn out to be much better than the forecast. Could the timing of an election in 2016 have anything to do with the change?”
“Or maybe the FTTN and HFC technologies are taking longer than expected with new operational systems required for both NBN Co and its RSP customers needing to be put in place. If the actual number in FY16 comes out around the forecast number then this will probably have been the case.”
McLaren further pointed out that the slower activation rate would have some significant implications for the NBN company — ranging from delays in achieving revenue growth, to delays in hitting its ultimate target of 8 million active premises by 2020.
Delimiter has contacted the NBN company to invite a response to McLaren’s analysis.
Fascinating analysis by McLaren, and I find it very hard to fault his reasoning.
Personally I strongly suspect that the NBN company is … let’s not mince words here: I suspect the NBN company is lying.
It is simply not reasonable to assume that the NBN company’s projections regarding activation rates on its network have not changed over the past six months since the company last released its activation rates in August 2015. Six months makes a huge difference in terms of the NBN company’s operations … by now it will have a huge degree more visibility in terms of its projected activation rates over the next six months than it would have had six months ago.
As McLaren says, there can only be a few alternatives here. Either the NBN company is downplaying its projections in order to ensure it does not miss any targets in an election year, or the situation with the MTM model is actually resulting in poorer than expected activation rates.
I prefer to believe the former.
It is also important to note that downplaying these results now could give the NBN company a chance later on to announce that it has exceeded its targets — at a time very close to the election currently slated to be held later this year.
Of course, it is also possible that both are true simultaneously … representing the worst of all worlds.
I must say, it must be quite inconvenient for the NBN company and the Government having former NBN insiders such as McLaren and former NBN chief executive Mike Quigley regularly publishing this kind of detailed analysis about the NBN rollout (see further pieces here and here).
It is very hard to refute their analysis … after all, they built the NBN company from the ground up and are personally responsible for almost all of its success so far. They know what they are talking about — and I have usually found them significantly more honest and transparent with the truth about the NBN rollout than some of their successors.