Govt ties business fibre upgrades to NBN Co's financial achievements

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Govt ties business fibre upgrades to NBN Co's financial achievements

Analysis: What revenue level is needed to tick off similar residential upgrades?

NBN Co’s ability to offer free fibre to more businesses is enabled by the company’s financial achievements, the government says, raising questions about what kind of financial performance is required before residential upgrades are offered.

Earlier on Tuesday, the government and NBN Co unveiled a $700 million project under which 1.4 million businesses qualify for free fibre, should they order an NBN enterprise service.

Communications Minister Paul Fletcher said in a tweet that NBN Co’s “investment in business fibre zones is possible because after seven years of methodically rolling out the NBN, we’ve proved up the business model and cash flows with revenue of $3.8 billion in 2019-20”.

The $3.8 billion figure is NBN Co’s total revenue, not just that from its business segment which was $666 million. [pdf]

The idea that upgrades are tied to NBN Co’s financial performance is, of course, no surprise.

The company previously threatened to axe future fibre-to-the-node upgrades if it were subjected to a rebate scheme that ate into its revenue. 

Fletcher’s commentary on how much revenue is enough to satisfy a business case for upgrades is, however, an interesting talking point, if nothing else.

Total revenue of $3.8 billion, of which $666 million specifically came from business services, is enough to make a conditional offer to 1.4 million businesses. That is, if the business places an order for Enterprise Ethernet, they will now more than likely qualify for free fibre deployment to all of their sites covered by the business deal.

An enterprise deal generally means signing up for a certain number of years - and potentially levels of use - in order to qualify for free fibre.

It’s not clear if there is a similar revenue level or other financial mark that, if met by NBN Co, would qualify the business case for free residential upgrades to fibre to occur (or, at least, for some sort of conditional upgrade offer to be made for residential users, other than individuals or areas paying their own way under technology choice).

iTnews raised questions with a member of the Minister’s office on Tuesday morning but did not receive a response by the time of publication.

'The road ahead'

A residential upgrade path to fibre could be clearer within 24 hours as NBN Co prepares to release its latest corporate plan.

Coinciding with the release, Minister Fletcher will address the national press club in a speech on “the road ahead” for the NBN.

How that “road” impacts both residential and business users is being keenly watched by industry.

NBN Co last provided a detailed roadmap of possible future upgrades back in mid-2018.

A Telstra spokesperson said in a statement that the telco “welcomed any investment that enhances telecommunications infrastructure”, but wanted to see “more detail”.

“It is important this investment [into business fibre] doesn’t lead to the inefficient duplication or overbuilding of existing infrastructure,” Telstra’s spokesperson said.

“We also look forward to hearing more about the upgrade path of NBN Co’s existing technology for residential premises, as that will require substantial investment over the next 10 years. 

“This will be particularly important for customers in areas serviced by FTTN and fixed wireless.”

Comment was being sought from other retail service providers.

One possibility previously raised by NBN Co is that residential fibre expansion will piggyback on the company’s investments in business infrastructure.

NBN Co said last year that its foray into the enterprise market would finance the deployment of fibre deeper into its network, which could wind up benefitting residential users.

This fibre could reduce the cost of user-pays upgrades to better fixed-line access technologies for residents, or make residential upgrade work pursued by NBN Co cheaper.

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