news In its Corporate Plan 2017, released yesterday, NBN Co confirmed that it is still expecting to complete the broadband network on time, and predicted the peak cost of building the network would be $2bn lower than it expected last August.
The firm said in the report that, currently, almost two thirds of all Australian premises are either in design, construction or able to order an NBN service, and that the company remains on track to complete the network build by 2020 – both predictions made in the Corporate Plan 2016.
NBN Co’s expectation that it will meet a target of connecting 8 million premises by the same year is also unchanged.
However, there are some notable differences in the financial predictions going forward, including:
- Increased annual revenue for FY2020 to an estimated $5bn (up from $4bn last year), with ARPU (average revenue per user) forecast to $52 (up from $43 last year)
- Remains on track to complete network build with peak funding of $49bn (down from 52bn last year)
- Decreased top end of peak funding range by $2bn to $46-54bn
- Increased IRR [internal rate of return] to 3.2–3.7% (up from 2.7–3.5% last year).
In the report NBN Co explained the funding changes as being down to more information being available, reducing uncertainty:
“Progress in FY16 has provided more data with which to forecast, but considering the scale and complexity of the network build, much uncertainty remains. The plan continues to support a peak funding base case forecast of $49 billion, and a range of $46 billion to $54 billion. This is a narrower range than last year, reflecting a reduction in uncertainty as the NBN network is rolled out.”
NBN Co CEO Bill Morrow added in a statement that strengthening the NBN’s relationships with its partners, finalising contracts to the end of the build, and improved data quality have enabled the company to “minimise many of the uncertainties and cost assumptions in the business”.
“This has led to a projected decrease in the top end of the peak funding range, now $46-54 billion, down from $46-56 billion in the 2016 Corporate Plan,” he said
On the increased average revenue per user (ARPU) predicted this year (a $9 increase), the report said:
“This increase is driven by increased usage, growth in speed tier mix, and a strong contribution from business revenue, consistent with the retail market opportunity.”
Morrow explained that data consumption is key, with expected growth of 30% each year (CAGR). “This will result in increased ARPU, which, paired with a positive speed tier mix, will produce strong revenue growth,” he said.
The NBN said that while the network remains a “critical and highly complex project”, the risks are “known and are being managed”.
Despite widespread criticism of its ‘multi-technology mix’, even from ex-staff members, the company further suggested this “technology-agnostic approach” enables it to select the “ideal technology” for each neighbourhood as one of the final steps in the design process, as well as to introduce new technologies as they become commercially viable.
Morrow commented that this “flexible” approach ensures NBN Co can deliver broadband access “to everyone as soon as possible and at least possible cost”.
“The road ahead is steep,” he said. “We are realistic about the challenges and we are well aware of the risks. We have never been better prepared to manage the successful delivery of the NBN network.”
Image credit: NBN company