Hope for NBN pessimists

NBN Co has a big job to do no matter who wins the next election, and the Coalition will have to embrace fibre to the home sooner rather than later.

With the revised NBN numbers now finally out perhaps the focus can now finally shift from the marginal increase in costs to the more pertinent issue of the pace of the rollout. For now Labor's NBN is alive and kicking and the real question is just how many homes NBN Co can connect to the network before things change at Canberra. NBN Co still has plenty of ground to cover and what it manages to get done in the next 12 months could end up deciding our broadband future.

Given how far behind NBN Co is running at the moment it’s easy to see why a certain level of pessimism is starting to creep into the ranks of NBN watchers. Is Labor’s Fibre-to-the-Home (FttH) dream as good as dead? Was it too ambitious to begin with in the first place?

The new corporate plan shows that NBN Co is planning to ramp up the rollout, with the peak rollout speed in 2015 expected to be higher than originally planned. All of this is of course designed to get NBN Co as close as possible to the original completion date.

According to Ovum analyst David Kennedy, this ramping up is going to be the key short-term risk for NBN Co, because it will have an inevitable impact on upstream markets, particularly labour.

“Obviously NBN Co has made some assumptions about what these additional costs might be, but if they are wrong about those then costs will be higher," Kennedy says.

I don’t think NBN Co boss Mike Quigley will choose to count the pennies as long as more premises are connected to the network, having said that, he can’t afford a massive blowout either.

There is no plan B here, NBN Co has to get as many people as it can on NBN services and demonstrate the benefits of the network to them as quickly as possible. Unfortunately, the Labor NBN has not crossed the point of no return, it’s not even close. The number of homes connected is well behind forecast.

“It is still in the low thousands, they haven’t even rolled past the 100,000 mark yet and that to me suggests that they will not be able to provide the mass demonstration effect before the next election,” Kennedy says.

There will be some new contract commitments in place but even here there are plenty of complications and no room for any mistakes.

The relationship between the contractors taking the fibre to the homes and NBN Co has had its fair share of grumbling. But then again some of this is perfectly understandable given that the delays to the rollout, some of it because of inaccurate address data, has ticked off some contractors. Having said that, it is too early to tell if there is a big brawl looming over the horizon, what’s more likely is some good-old fashioned, tough decision making that could potentially lead to some delays.

NBN Co here to stay

There is no doubt that Labor’s FttH plan is on the brink but let’s not forget that it will leave behind a significant legacy. The parties may have their differences when it comes to the choice of technology and role of competition, however, both are committed to a national broadband rollout and both are committed to a wholesale only network. There will be a rollout no matter who wins the next election and NBN Co will still have an important role to play. Not least because the Coalition will want to privatise the network at some point and it will need something to sell.

NBN Co will have a different engineering task but there probably won’t be too many changes in the short-term. It will be managing a different type of network but as an entity it will survive.

The Coalition may be adamant about its Fibre-to-the-Node (FttN) but Kennedy says they must leave room for selective investment in FttH in the near-future.

“They are going to have think carefully about how that is managed. It’s actually getting easier these days to upgrade from FttN to FttH because vendors are developing FttN equipment in cabinets which are designed to be upgraded in the future,” Kennedy says.

That fits nicely into Turnbull’s argument but this is only one of the myriad complications that the next communications minister – and there's no guarantee that this will be Turnbull – will have to deal with.

Don’t give up on FttH just yet

As far as telco analyst Paul Budde is concerned the FttH battle isn’t over. First of all the FttH footprint extended in the next 12 months will be here to stay and it will be interesting to see how the Coalition intends to manage the consumer backlash from the three million people that have now been promised FttH by 2015.

Unscrambling the deals with Telstra and Optus will obviously be a major challenge and will chew up a substantial amount of time. According to Budde, one interesting element in this equation is the question of Telstra’s dominance.

“Most of the FttN scenarios put Telstra in a more leading position and both the ACCC and the industry will scrutinise these plans,” Budde says.

“This could become a massive debacle for the Coalition once in government.”

The Coalition will almost certainly use existing DSL and coaxial networks for as long as possible but at some point FttH will have to come into the picture and the Coalition will have to articulate its position on this.

A good example of why FttH will be a potent election issue is the recent fracas between the Victorian government and the Gillard government, about who wants want.

Politicians from the Labor and Coalition parties have each claimed that a NBN report commissioned by Victoria's Coalition proves their points on the NBN.

The Deloitte report, released by the Victorian government this week, found 350,000 Victorian households and businesses want faster broadband than is currently available, an increase of 63 per cent over two years.

While the Victorian government and the Coalition jumped on the figure to lambast the slow pace of the NBN rollout, Communications Minister Stephen Conroy took a different tact. According to Conroy, the rampant demand for high-speed broadband, particularly for speeds above 50 Mbps, reinforced the need for a FttH NBN.

Conroy has a point because that kind of speed can’t be delivered in any consistent way via FttN or coaxial network. So, FttH is going to have to be part of Coalition’s long-term NBN plan, whether it likes it or not.

According to Budde, the Gillard government needs to make the NBN the jewel in the crown of their election campaign. Expect to see plenty of stories spruiking the benefits of the FttH network and a scare campaign about the Coalition opting to pursue a second-grade broadband strategy.