news Telecoms industry commentator Paul Budde has said that while the NBN rollout is currently “in a good place”, “storm clouds” may lie ahead as a lack of investment causes issues further down the road.
Writing on his blog, Budde acknowledged that currently NBN Co is making a success of meeting rollout targets, saying: “If we take the politics, the disappointment about the second-rate infrastructure, and the wholesale/competition issues out of it, then there is no doubt that NBN Co is now in a good place with the rollout of its multi-technology mix broadband network.”
While it is a pity that this “well-oiled machine” cannot be used to deploy fibre to the premises/distribution point (FTTP/FTTdp) instead of fibre to the node (FTTN), Budde said, there is a “good chance” that the company will hit its 2017 target and possibly improve on it.
However, the future is not all necessarily looking bright, according to the telecoms consultant.
Although NBN revenues are up, he said, the financial future of the company remains “very uncertain” with government money “running out” at the end of financial year 2016/2017 and remaining doubt as to how NBN Co will raise the rest of its investment.
This raises the possibility that the government may have to provide the funds, since under the current circumstances it would be “very difficult” for NBN to raise the money privately.
“Competition in the multi-dwelling market is growing, especially from TPG; and at the same time new high-speed wireless technologies are entering the market with much better broadband services and they are cherry-picking in some of the high growth broadband markets,” Budde said.
Additionally, the company’s “current second-rate NBN based on older technology” and an ACCC review, which will deliver its outcome in 2017, creates further uncertainty – all of which, Budde suggested, will make it difficult to get private investors interested.
In order to keep up with customer demand and compete with companies offering better alternatives, the NBN will “eventually have to be upgraded to full FTTP, or at least FTTdp”, he predicted – and that could require an investment of at least double the current approximately $20 billion needed to complete the current rollout.
“This also means that there will be an overlap in investments. In other words, some of the current investments will become stranded before they can be properly written off,” Budde said.
According to PwC, the value of the current multi-technology mix NBN once completed would be little more than $25 billion – or as Budde put it: “roughly half the cost of building it”.
“So, while from an infrastructure deployment point of view the company needs to be congratulated on the current results, at the same time it will have a massive job ahead to get its investment and business models in place based on the upcoming realities,” he concluded.
Image credit: Paul Budde