NBN is considering building over the Optus hybrid fibre-coaxial cable it purchased for $800 million after finding the network is in such a degraded state that it is not fit for purpose.
The national network builder's deal with Optus for its HFC network was approved by the ACCC in August, just two months after it inked a similar deal with Telstra.
The contracts cleared one of the final regulatory roadblocks to the rollout of the Coalition's multi-technology mix NBN.
However, NBN is now assessing completely overbuilding the Optus network - rather than upgrading it as originally planned - due to its dire state.
Leaked NBN documents sighted by iTnews reveal the network builder is considering replacing the network at an extra cost of up to $375 million to an already blown-out project.
The document warns the Optus network is “not fit for purpose”, and integrating it as part of the NBN would carry numerous operational risks.
According to NBN, the Optus network contains equipment that is nearing end of life, while parts of the network are already oversubscribed and lack capacity for NBN services.
Overbuilding Optus HFC with either Telstra HFC or fibre-to-the-node could deliver higher operational success and operational simplicity, the document states.
But doing so would mean NBN would miss its rollout targets by a total of 633,000 across 2017 and 2018, leaving those premises unconnected until 2019.
It would also mean spending as much as $375 million extra on the network, which is already expecting a cost blowout of up to $15 billion, pushing the network past its original $41 billion budget to as much as $56 billion.
In the document, NBN said a total of 470,000 Optus HFC premises in 65 service areas would need to be overbuilt.
The suburbs of Footscray, Laverton and Thomastown in Melbourne's west were listed as examples of some of the Optus HFC areas that would need to be addressed.
Opposition Communications Minister Jason Clare described the document as showing "more evidence of the absolute mess that Malcolm Turnbull has created with his second rate NBN".
"It reveals that the Optus HFC network, a key component of Malcolm Turnbull’s second rate NBN, is in far worse condition than Australians were led to believe and NBN Co is considering overbuilding the network – costing hundreds of millions and meaning hundreds of thousands of Australians will have to wait longer to get the NBN," Clare said.
"In order to manage risk nbn regularly prepares for multiple scenarios in the network deployment. The document concerned is part of that ongoing approach of risk mitigation," an NBN spokesperson told iTnews.
"Our corporate plan has accounted for the ebbs and flows expected in a project of this scale.
"Scenario planning is part of good governance and has been accounted for in the corporate plan released in August."
An Optus spokesperson said both the telco and NBN had always acknowledged parts of the HFC network would need an upgrade.
"In advance of handover there has been and continues to be major investment into the HFC network to manage subscriber growth and capacity demand," the spokesperson said.