The NBN's ballooning fibre repair bill

While getting homes connected to fibre is proving a headache for NBN Co, it might yet need to spend more money once HFC comes into play.

The latest figures on the rollout of the National Broadband Network are a bit of a mixed bag for NBN Co and Communications Minister Malcolm Turnbull.

The construction process is showing signs of stability but getting people on the fibre to the premises (FTTP) footprint connected is still proving to be a problem. It’s a legacy issue that NBN Co needs to get on top of lest it end up sinking the entire project.

One hurdle, it would seem, is defective fibre connections, which have reportedly stopped about 118,000 premises from getting connected.

NBN Co has since clarified that the quality and availability of the fibre optic cables is not the issue.

"The AFR report relates to the quality and availability of the thin plastic pipes -- or 'lead-ins' -- that historically have carried the copper telephone lines from the street to the home," an NBN Co spokesperson told Business Spectator.

"Our crews need to use those old pipes to run the fibre into the home in areas where the NBN is available. But sometimes we find that those pipes are damaged or missing and have to be replaced.

"Yes, this has cost implications. But the cost of this is covered in the overall budget for the NBN."

However with Fairfax papers reporting that NBN Co will need to spend in excess of $100 million to remedy the current defects, one wonders just how much larger can this repair bill go?

NBN Co’s updated corporate plan, due in the middle of this year, is expected to provide the necessary facts and figures on the repair job, but the $100 million price tag is only attached to the fibre to the FTTP footprint. What about the HFC, which is destined to play a crucial role in the overall NBN rollout?

NBN Co chief executive Bill Morrow and chief operating officer Greg Adcock really don’t have a lot of money to play with here. So what levers can NBN Co pull to ensure that the FTTP cost drain doesn’t damage its efforts in areas where it can move quickly?

Rebuilding relationships with the construction partners is one obvious lever, and that will require a combination of cajoling them with incentives but also providing them with strict guidelines and clarity as to the task they face.

Bringing back those contractors previously burned by the rollout process won’t be easy, but the FTTP process, for all of its benefits, was never going to be easy.

The premises passed versus the connections activated equation has always been a tricky one to manage, says Informa analyst Tony Brown.

“As they roll out the fibre through every street they put more homes in the Service Class1 category and they are unavoidably compounding their current problems,” he says.

The sleeper issue -- and this a legacy of Labor’s NBN -- is that a proportion of homes promised fibre required substantial investment when it came down to connections. The Coalition’s multi-technology NBN may have curtailed the FTTP footprint but the new-look NBN Co is still burdened with a significant task.

“The scale of the work, from pit to home, was massively underestimated,” Brown says, as was the scale of the remediation work that needed to be carried out by Telstra.

This was a landmine left by Labor, and Brown adds that connecting some 2.9 million premises to fibre is still a “bloody big job.”

With regards to the HFC, we are still pretty much in the dark on how NBN Co will utilise this infrastructure (terms and conditions that will be determined as part of ongoing negotiations) and we don’t need how much it will cost to rehabilitate the HFC footprints.

As far as the state of the infrastructure goes, Telstra’s HFC network is in reasonably good nick but Optus hasn’t invested a lot in its network for a long period of time.

The good thing about the HFC network is that a lot of it’s already on the ground, so as long as premises are utilising services delivered on the network things are easy. However, there are a lot of premises on the HFC footprint that have never taken up a service and will need to be connected. This will involve costs and while aerial-drop is a simpler proposition subterranean drops can end up causing a whole heap of headaches and costs.

The FTTP repair bill that NBN Co is currently trying to get to grips with is exactly the reason why telcos are perennially reluctant to commit to hard numbers in brownfields rollouts. Unfortunately, NBN Co has never had that luxury and the Coalition government was always on the hook to pick up the tab for following through, albeit at a much curtailed level, with the job started by Labor.

This story has been updated with additional comments from NBN Co.