One of the first jobs Bill Morrow undertook when he became CEO of NBN Co in April 2014 was to set some goals for the company to provide focus for a work force that was understandably looking for some direction after the change of government the year before.

I was on the way out the door at the time but can recall the mission goals that Bill was setting for the year 2020 quite clearly, namely:

  1. Universal access to high-speed broadband
  2. More than 8 million premises activated on the network
  3. $4 billion annual revenue
  4. Customer satisfaction
  5. Best place to work

I will leave goals 1, 4 and 5 for another day and just focus on 2 and 3 in this post.

These goals were subsequently made public in some of NBN Co’s presentations (eg. NBN Co’s half year results presentation in February 2015).

Bill set the target year as 2020 to co-incide with the planned end of the rollout and also the time for when NBN Co would be looking to become financially independent from government.

But now as we near 2020 it seems that these two targets are heading into dangerous territory.

Firstly, the 8 million premises activated target is already slipping. In NBN Co’s 2017 Corporate Plan this target was mean to be hit by June 2020 (ie. the end of the financial year). By the 2018 Corporate Plan this had shifted to end of calendar year 2020 with only 7.5 million premises activated by June 2020.

Now it is looking like the even the end of calendar year 2020 target of 8 million activated premises is very doubtful. Currently NBN Co is running well under the 32,000 activations necessary to hit this target – see my rollout progress page for more details. On its current trajectory of approximately 23,000 per week an outcome of 7 million premises by the end of calendar year 2020 is more likely.

As a result the $4 billion annual revenue target is also looking shaky. Based on 7 million activated premises, annualised revenues will amount to only $3.7 billion assuming the current $44 per month ARPU. The revenue for calendar (and financial) year 2020 would be considerable less as the 7 million premises looks like being achieved at the end of the year.

So both the activation and financial targets are looking considerably doubtful as we enter 2019.

NBN Co’s financials are of particular concern given the doubt that has been raised over the sustainability of NBN Co’s ARPU by its key customers (eg. Telstra and TPG Telecom).

Currently NBN Co is expecting to receive it’s last funding contribution from government in FY20 and generate a small amount of positive cashflow ($0.1 billion) from FY22. However, with activations and ARPU under pressure it highly likely that further funding will be required beyond FY20.

Of course, this is all without consideration of upgrading the network to have deeper fibre deployed (eg. FTTC or FTTP). If a Labor Government takes charge of the NBN during 2019 it will need to grapple first with how to fund NBN Co to keep it afloat. This will be more urgent that finding extra funds to upgrade the network to the Labor vision of FTTP.

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I have recently had a paper published in the Australian Journal of Telecommunications and the Digital Economy titled “What Now for Australia’s NBN”. This is a long paper (over 10,000 words) but goes into some depth of the tragic history of Australia’s telecommunications and how politics eventually created the NBN we know today.

The paper also looks at possible ways forward from here.

You can access the paper at this link for free : https://telsoc.org/ajtde/2018-11-v6-n4/a162

Thanks to the TelSoc (publisher of the journal) for granting public access to this paper.

The post NBN Co’s target of 8 million activations by 2020 is looking very doubtful appeared first on Gary McLaren.

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