NBN Co released its latest Corporate Plan on 30 August 2019 with the headline that it is on track to finish the build of the network by June 2020. After a decade in the build phase NBN Co is highlighting how it now plans to move to an operational mode with a focus on customer experience.
This provides an opportunity to review how the Corporate Plans have changed over the period of the build phase. Officially seven Corporate Plans have been released with the first in 2010. A draft Corporate Plan was prepared in September 2013 but never officially released due to the change of government, but was leaked to the press in 2014.
Below is a comparison of the various costs (forecast and actual) for the period from FY10 to FY21 for four of these plans released at key stages of the projects and Australia’s changing political masters.
The Rudd 2013 figures are based on the last predominantly FTTP architecture plan and are taken from the draft 2013 version that was never officially released. The Coalition conducted a strategic review in late 2013 and came up with revised peak funding figures of $64 to $73 billion for a predominantly FTTP network architecture which it used to justify the switch to the Multi Technology Mix (MTM) network plan.
The Abbott, Turnbull and Morrison figures are all based on the official Corporate Plans that have been released on a yearly basis. Under the Coalition the peak funding requirement has increased by $10 billion to be now $51 billion. Furthermore approximately $6 billion of contingency in the first Coalition plan has been eroded to zero making the actual increase in forecasted costs equal to $16 billion.
This $16 billion is made up of a loss of $3 billion in revenue and an extra $13 billion in capex to complete the Coalition’s Multi-Technology Mix network rollout.
As the end of the NBN rollout nears the question of further technology upgrades is becoming more topical. Upgrades of the FTTN and HFC network to FTTC and FTTP are likely to cost an additional $10+ billion in capex. The cost of such upgrades will need to be funded by taxpayers or private financiers in the short term. An increase in capex to fund technology upgrades may see the total peak funding approach the Coalition’s own estimates of $60+ billion made back in 2013 for the predominantly FTTP network.
The initial plan by the Labor government for an FTTP network based on the Coalition’s own 2013 strategic review costing is looking more and more compelling with the benefit of hindsight.