Australia’s NBN activation rate slowing?

NBN Co released it’s latest half year results on Friday 5 February (see here).

Most press reports ran with the headlines on NBN Co’s statements that FTTN customers are just as satisfied with their service as FTTP customers.

However, little mention was made of a deeper fact buried in slides released by NBN Co that show the activation rates of new customers is forecast to decrease in the next half year compared to the half year just gone.

In 1H FY 16 (from July to Dec 2015) NBN Co have moved from 486,000 to 736,000 active premises or an increase of 250,000 active premises. But the forecast for 2H FY16 (from January to June 2016) is to grow this to 955,000 premises or an increase of 219,000 premises. See the below graph extracted from slide 30 of the results (available here).

NBN active premises

To unpack this a little more let’s look at the increases in active premises for each of the last 5 half years and the forecast for the next half year.

NetAddsChart2

Activations on the FTTP and Fixed Wireless technologies have been growing at compound rates of 33% per half year.

But the forecast 12% drop in the next half year indicates a reversal in NBN Co’s steady progress.

NBN Co have not clarified this change. In fact it seems to contradict the press release accompanying the results which highlights that activation rates of 10,000 per week have been achieved and “will continue to climb”.

screenshot-www.nbnco.com.au 2016-02-05 13-26-47

Why would NBN Co’s activation rate be decreasing at this crucial time in the project?

The FY16 target of 955,000 active services is unchanged from the last set of financial results released in August 2015. So it may be that NBN Co are simply being conservative. They may have over-achieved in 1H FY16 but don’t want to adjust their forward targets. The actual result could turn out to be much better than the forecast. Could the timing of an election in 2016 have anything to do with the change?

Or maybe the FTTN and HFC technologies are taking longer than expected with new operational systems required for both NBN Co and its RSP customers needing to be put in place. If the actual number in FY16 comes out around the forecast number then this will probably have been the case.

Activation rates are important. As discussed in my earlier blog post on “Partisan Politics – The Cause of Australia’s Slow Broadband“, Australia is slipping further in global broadband rankings.

But perhaps more important activations equate to revenue. Delays in achieving target active premises are likely to cause revenue targets to be missed and funding requirements to increase beyond the current high end estimate of $A56 billion.

In its 2016 Corporate Plan NBN Co has forecast the following :

nbn-corporate-plan-2016-activation-rates

The average activation rates for FY17 and FY18 will need to be approximately 26,000 and 40,000 respectively per week. This will require growth rates in activation rates of over 150% and 300% respectively over recent activation rates of approximately 10,000 per week.

As can be seen below it is important NBN Co continues to build the rate of activations in order achieve its FY17, FY18 and ultimate target of 8 million active premises by 2020.

NetAddstoFy18

Australia cannot afford a slip in NBN activation rates – its broadband rankings and the cost of the project require the rates to grow steadily higher. Let’s hope NBN Co does exceed its target in FY16 by a substantial number.