NBN prefers greater
use of FTTN,
wireless to 3rd
satellite
7 May 2014
NBN Co must almost
double its
fixed-wireless
infrastructure
footprint, extend
its FTTN network
further into
regions, buy more
wireless spectrum,
tighten satellite
capacity controls
and share more
infrastructure with
mobile operators.
And while those
measures could
increase the cost of
the company’s
ex-wireline
footprint up by as
much as A$1.2
billion, the extra
cost was anticipated
in last year’s
December 2013 review
and is considered
necessary to catch
up with fixed
wireless and
satellite demand
almost 200% greater
than forecast.
Those are some of
the headline
recommendations from
the keenly awaited
Strategic Review of
NBN Co’s fixed and
satellite wireless
operations, just
released in Sydney
by NBN Co CEO Bill
Morrow,
parliamentary
secretary to the
comms minister Paul
Fletcher, and a
number of senior NBN
Co execs.
Prepared by NBN Co
itself and the
Boston Consulting
Group, the wireless
and satellite review
delves deeper into
some of the
regional-specific
problems highlighted
by the main
strategic review of
the NBN as a whole,
released last
December. As
communications
minister Malcolm
Turnbull flagged a
month ago at the
CommsDay Summit in
Sydney, the review
found that demand
outside the fixed
footprint had
originally been
underestimated by up
to three times, with
some 620,000
premises looking for
a satellite or fixed
wireless connection
by 2021 – against
original estimates
of 230,000. It laid
out four scenarios
to address this
issue.
The first and second
would still see NBN
Co launch two
satellites as per
its earlier
corporate plans,
with the first one
simply requiring
enough fixed
wireless base
stations to make up
the coverage
shortfall and the
second also pushing
fixed wireline FTTN
further out into
some distribution
areas – a
contingency, again,
suggested previously
by Turnbull. The
third scenario would
see NBN Co construct
and launch a third
satellite by the end
of calendar 2020,
while the fourth is
similar but would
have NBN Co entering
a partnership to
lease required
capacity on a third
satellite, rather
than building it
itself.
The second scenario,
which would ramp up
cumulative capex
FY11-21 from the
original forecast of
A$3.5 billion to
A$4.5-4.7 billion –
much of the increase
in the next few
years – was the
report’s favoured
recommendation.
Under this plan,
cumulative operating
cash flows to FY21
would be
A$5.2 billion in the
red with revenue and
opex also factored
in, A$1.2 billion
dearer than previous
corporate plan
forecasts. (The
scenario involving
construction of a
third satellite is
the most expensive
option, at a
projected A$4.8-4.9
billion capex and
operating cash
outflows of
A$5.3-5.4 billion).
Morrow was,
however, at pains to
emphasise that the
increase would fall
within the total
peak funding of A$41
billion outlined in
the December 2013
strategic review as
the cost of a
preferred
‘multi-technology
model’ to replace
the original design
of the NBN under
Labor, with no need
to source additional
taxpayer funding.
In addition, the
review suggested
that “given the
complexities and
uncertainties NBN Co
should continue to
include a 20%
contingency which
would be in addition
to the capex values
referred to here.”
FIXED WIRELESS:
Scenario 2 would see
NBN Co increase its
number of fixed
wireless base
stations from 1,400
to 2,700 to serve
85% more premises.
While Ericsson has
the contract to
build out the fixed
network under the
current plan, it’s
not yet clear how
NBN Co would assign
the contract for the
additional towers;
COO Greg Adcock
would only say that
it would depend on
whether the
company’s board
accepted the
review’s
recommendations.
“We need to await
the release of the
next NBN Co
Corporate Plan to
see what
implementation
actions NBN Co. will
pursue,” commented
Ericsson Australia
CEO Hakan Eriksson.
“Ericsson is in a
good position to
deliver on the
recommendations, we
have the expertise
and the ability and
we are ready to work
with NBN Co to bring
high speed broadband
to Australians.
The document also
noted that NBN Co
currently lacked
fixed wireless
spectrum rights in
urban fringe areas,
accounting for a
coverage shortfall
of some 80,000
premises – again
flagged earlier by
Turnbull. While the
review urged NBN Co
to secure those
assets, the current
provision for extra
spectrum in those
areas was redacted,
although the review
noted that to serve
them with FTTX
instead would cost
“in the hundreds of
millions of
dollars.” The review
also noted that the
fixed wireless
program was
currently behind
targets set in the
2012-15 NBN Co
corporate plan, with
“significant risk of
not meeting end of
FY14 activation
targets.”
There was also a
recommendation that
NBN “explore closer
cooperation with
mobile operators to
maximise the
opportunities to
share towers” – an
idea that Morrow’s
previous firm
Vodafone, for one,
has also been
pushing hard of
late. While the
mobile industry has
already been
exploring some
co-location options
with NBN Co, Morrow
told CommsDay that
“the idea now is
that we’re taking a
much more holistic
approach to this; so
for all 2,700 sites
we will have the GPS
coordinates, we will
work very closely
with all of the
operators that are
interested to see if
they have a need to
share that tower
[to] expand their
coverage, or if they
already have a tower
in place where we
can leverage cost
sharing, minimising
the towers that we
put up in
communities... and
of course the speed
of the rollout
itself can be
enhanced, from that
perspective.”
“Infrastructure
sharing makes sense
as it reduces cost
to the taxpayer and,
importantly, provide
additional revenue
streams for NBN,”
commented Vodafone
CTO Benoit Hanssen.
“This is a win for
NBN, the taxpayer
and regional
consumers. We look
forward to working
with NBN engineers
to determine how the
fixed wireless
rollout can
complement the great
need for improved
mobile coverage.
SATELLITE
SUGGESTIONS, FTTN
PUSHOUT:
All of the mooted
scenarios dispensed
with the idea of
sale-and-leaseback
arrangements for NBN
Co’s long-term
satellite solution,
an idea that had
been kicked around
until recently by
both NBN Co and the
industry. And across
each scenario, the
review suggested a
much more robust
product construct
sand fair use
controls for the
LSS, given that the
interim solution
originally lacked
“sufficiently
proactive” fair use
policies to stop
data usage
spiralling and
services degrading,
with attendant
capacity headaches.
The review also
advocated that the
commencement date
for the LSS be
pushed to early
2016.
Meanwhile, expanding
on Turnbull’s
earlier commentary
around the use of
FTTN to take some of
the load off
satellite and
wireless services,
Scenario 2 would see
the FTTN network
extended to serve
up to 25,000
premises currently
set for a fixed
wireless or
satellite
connection. That
would constitute
some 3% of the total
premises originally
outside the wireline
footprint,
potentially with
microwave backhaul
used for remote FTTN
deployments.
NBN Co’s
board and its
stakeholder
ministers, Turnbull
and finance minister
Matthias Cormann,
will now consider
the advice in the
review, in
conjunction with the
broader December
review; both will
help to inform NBN
Co’s next corporate
plan, due later this
year. As of last
week, NBN Co’s
fixed-wireless
network covered just
under 81,000
premises, with
12,859 of those
actually connected;
43,652 premises were
using the interim
satellite service.
