NBN Co keeps deploying new HFC despite sales freeze

NBN Co has seen a $145 increase in the cost per premises of rolling out its HFC network as it is forced to bring forward spending to fix performance issues.

The company today said the HFC cost per premises had risen from $2258 in mid-2017 to $2403 at the end of 2017.

Some of the extra cost comes from an acceleration in the number of physical node splits being performed to reduce over-subscription.

The other part of the extra cost is drawn from the remediation work required to improve the overall performance of the HFC network.

Last November NBN Co was forced to freeze sales of HFC connections and pull 700,000 premises back from a “ready to connect” status.

The company took an immediate $50 million financial hit, while delayed revenue could top half a billion dollars.

It’s still unclear where NBN Co is at with the remediation work and whether the delays will extend b beyond June, in which case the financial hit will be even greater.

CEO Bill Morrow told the company’s first half results briefing today that it was "still too early to be specific on timelines for releasing this footprint but we are progressing quickly and I look forward to updating you shortly".

The higher cost per premise (CPP) for HFC incorporates costs that NBN Co chief financial officer Stephen Rue indicated had been planned but left out of previously released numbers.

“These costs were already anticipated in the long range plan but due to the revised nature and timing of the spend, it is now appropriate to include in CPP metrics,” he said.

Morrow said while the existing HFC network was remediated, the company was still rolling out new - albeit incomplete - HFC connections.

“We have not stopped the HFC build,” he said.

“That is continuing at pace and we are tracking well on declaring premises ready for service (RFS).

“Although ready to connect is what we care most about, ready for service is an important indicator of progress of construction.

“RFS readies the network to about 90 percent of the work that’s needed. For the parts of the footprint we’re building now, and moving forward, this same upgrade work will be performed before those premises are declared ready to connect.”

Morrow continued to back HFC, despite the lack of guidance on how the remediation is progressing, and rising suspicion in sectors of the industry that future portions of the rollout could be canned in favour of a different access technology.

“HFC remains an important part of our technology mix and we’re confident it will deliver the experience we all expect,” Morrow said.

He said the company did not believe the HFC stall would “have longer-term implications” for NBN Co nor its targets.

“We don’t believe it jeopardises our ability to complete the build by 2020 and to stay on budget with the $49 billion peak envelope funding,” Morrow said.