NBN Co to spend $1.4bn more on regional rollout

NBN Co will need to allocate up to $1.4 billion in additional funds to its fixed wireless and satellite rollout in regional areas after underestimating demand for the services by almost 400,000 users.

Despite planning to cover one million premises through satellite and wireless broadband, NBN Co only expected 200,000 services would be requested.

Instead, a review [pdf] conducted by NBN Co and released today suggested more than 600,000 users would request fixed wireless or satellite services by 2021.

The company will now need to adjust its NBN activities in the bush by choosing one of four options that will cost between $900,000 and $1.4 billion.

The first option involves doubling the 1400 currently planned mobile towers by 2021 to address the shortfall in premises outside the fixed-line footprint.

That option would attract further incremental capital expenditure of up to $1.3 billion.

Scenario two would bring the Coalition’s preferred fibre-to-the-node technology to 25,000 more regional users that had been originally slated for fixed wireless or satellite, at a cost of up to $4.7 billion.

The third and most expensive option - building a third satellite - had already been mooted by NBN Co. It would see capital expenditure likely reach $4.9 billion and would mean 47 percent of rural homes were covered by the satellite.

A fourth scenario also canvasses the launch of a new satellite but suggests doing so in partnership with a private sector organisation.

The shortfall is compounded by NBN Co’s lack of ownership of sufficient wireless spectrum in the fringe areas of urban geographies, with Optus holding most of the spectrum in those areas.

But the review refused to detail how much it would cost NBN Co to purchase the spectrum in order to serve 80,000 premises making up the gap in supply, despite Communications Minister Malcolm Turnbull previously placing the cost at $1.2 billion over the next seven years.

“Although NBN Co holds 2.3GHz and 3.4GHz spectrum rights in regional areas, Optus holds the same spectrum in metro areas and the surrounding metro fringe which extends a significant distance from each city,” the report stated.

“As alternative spectrum has not been secured, NBN Co has a spectrum gap in the urban-fringe zone around Canberra and the five mainland state capital cities.”

NBN Co today said the extra $1.4 billion needed was already included in its $41 billion capital expenditure forecast and as such it would not need to seek additional funds from the Government, which Minister Turnbull confirmed in a statement.

“Importantly, the high-level assumptions align with those made about the non-fixed line footprint in the December 2013 Strategic Review," he said.

"This means that there are no further changes to the peak funding requirements if NBN Co were to implement the recommended approach.”