NBN Co uses enterprise to finance more fibre for its network

NBN Co is now pitching its foray into the enterprise market as a way to finance the deployment of fibre further into its network, which it says could wind up benefitting residential users.

Against a backdrop of sustained criticism of its enterprise play - compounded by a recent formal rebuke by regulators over its behaviour - the network builder tried to reframe its reasons for being in the market around a “social” good, as opposed to a purely financial one.

NBN Co has previously couched its entry into the enterprise and government market as a way to shore up its finances, with up to 20 percent of total revenues anticipated to come from these high-end customers.

But the company’s executives told Senate Estimates on Tuesday night that it also saw enterprise as a path to finance more fibre in its network.

“When we deploy fibre - primarily it’s a fibre discussion - to these large branch networks that are spread across the country, on the back of a commercially attractive proposition for us, we’re pulling fibre deeper and deeper into towns and regional areas all across the nation,” chief customer officer for business Paul Tyler said.

“On the back of that fibre that we pull deeper and deeper into the network, that then unlocks the opportunity for other businesses that are all along the path to take advantage of that fibre. 

“The anchor tenancies that these large enterprises have afforded us … [are] generating great social outcomes in terms of the ability for other businesses to get access to it.”

CEO Stephen Rue raised the prospect of the fibre also benefiting surrounding residents as well.

Though he did not detail exactly what form this would take, it could reduce the cost of user-pays upgrades to better fixed-line access technologies for residents, or allow NBN Co to finance that upgrade work itself.

“When you, for example, pull fibre deeper because you’re providing services to an enterprise customer, it then brings down the cost going forward of clearly operating homes that are close to that business,” Rue said.

“The investment in fibre enables you to have a cheaper cost going forward if ever you choose to operate that area.”

NBN Co has so far secured big enterprise contracts from the likes of Woolworths, Coles and Australia Post, all of whom have extensive branch networks that will get fibre. 

Tyler said that enterprise and government customers were attractive in part because NBN Co “requires a payback of any investment within the first five years of its operation.”

In other words, NBN Co knows each fibre link will be profitable within five years. 

Those profits can either be ploughed into a “cross subsidy from business to consumer”, or be increased further by running spurs off the main fibre cable for other users (and uses).

Tyler said that NBN Co had approached “hundreds” of businesses and government organisations to sign up to its services.

He later said that the company had “taken orders in the hundreds” for its Enterprise Ethernet product, suggesting its conversion rate is reasonably strong.

“It’s a new product we’ve only released quite recently,” Tyler said.

“We have other business products and have sold a lot more of those.”