Below is the end of financial year 2018 snapshot for the NBN rollout.
Rollout Progress as of 28 June 2018
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Update : NBN Co have been in contact via Twitter (see this thread) and advised they do not have a FY18 Target for Ready To Connect premises. The 8.7m target is just for Ready For Service premises.
To understand this comment from NBN Co I need to explain some background. This is a bit long winded but important if you want to understand the issue fully.
Ready For Service was a metric started at the beginning of the rollout (yes – when I was Chief Technology Officer) that measured the number of homes that were expected to be offered a service based on the initial network design for a particular geographic area. However, after the build of the network there are always problems with connecting every home that was in the design. Factors come into play that change the actual network build from the design because of local conditions. As a result not every home can be connected in the original design. For these homes NBN Co created a special category of service – called Service Class Zero (or SC0) – that classified the home as Ready for Service but not able to connected to the network. Unfortunately, in the early stage of the fibre rollout there were numerous problems with contractors and designs that caused the SC0 number to blowout to over 30% of the Ready for Service number. NBN Co was roundly criticised, quite rightly, for presenting the Ready for Service number when it was affected by such a large number of homes that could not be connected. This also caused confusion with customers and RSPs as they were being told there home was Ready for Service when in fact they could not connect to the network.
In 2017 NBN Co introduced the Ready To Connect terminology and started reporting these numbers weekly in their reports. Ready To Connect was essentially the Ready for Service number minus the Service Class Zero number. This was a positive change that should have been done much earlier. I had assumed the target for Ready To Connect would be the same as Ready for Service – ie the target should be to eliminate the SC0 problem. In fact NBN Co had largely achieved this by reducing SC0 to less than 2% of Ready for Service in 2016 (see graph below).
However it now seems that NBN Co don’t see it this way. The 8.7 million target for FY18 is just for Ready for Service – not for Ready to Connect. This is somewhat convenient because the number of SC0 premises has increased to approximately 13% of NBN Co’s Ready for Service premises – mainly due to their problems with the HFC network.
NBN Co has not responded directly to my question about what the Ready To Connect target is for FY18. After some digging I found this statement in the 2017 Corporate Plan for 2018-2021 (p 37).
The difference between ready for service and ready to connect was approximately 250,000 at the end of FY17. nbn forecasts this will peak at approximately 400,000 by the end of FY18 before substantially reducing to approximately 150,000 in FY19. nbn forecasts that all premises will be ready to connect in FY20.
So based on this information, I am making the assumption that NBN Co’s target for Ready to Connect is 400,000 less than the Ready for Service number of 8.7m premises. As a result the figures and graphics below have been updated to account for this. I have also highlighted the underperformance in managing the SC0 issue which as blown out to over 1 million premises due to the HFC issues.
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This is the final update for the 2017/18 financial year from NBN Co.
It is clear that NBN Co have missed both their Ready to Connect and Activation targets by a significant amount in the financial year.
For Ready To Connect the target was to go from 5,400,000 to 8,300,000 premises – an increase of 2,900,000 premises. However the achievement was 6,965,649 which was an increase of 1,565,649. As a result NBN Co achieved only 54 % of its FY17/18 target.
The Service Class Zero target was to go from 250,000 premises to 400,000 premises (ie. an increase of 150,000). The FY18 actual result was an increase of 802,105. As a result NBN Co achieved 19% of its target if we use the inverse of the percentage to account for a lower actual number being a better outcome.
For Activations the target was to go from 2,300,000 to 4,400,000 premises activated – an increase of 2,100,000. However the achievement was 4,030,582 which was an increase of 1,730,582. As a result NBN Co achieved 82% of its FY17/18 target.
The remainder of the usual graphs below show NBN Co’s rollout progress as of the end of the FY17/18 year.
The chart below estimates the revenue impact of NBN Co’s activation rate continuing below its target since the end of 2017. This graph looks at the the cumulative number of actual premises activated versus the target and then computes a corresponding cumulative revenue position against target. It is based on the ARPU reported by NBN Co each quarter – currently $44 per month.
It starts from a net zero position for activations and revenue as of 1 July 2016 (ie. the time span of the graphs).
At the end of FY2017 NBN Co were approximately break event against target. During the first half of FY 2018 NBN Co was ahead of its target until it started to turn in December 2017.
At the end of FY2018 NBN Co were approximately $18m below the cumulative target.
Please note this is just an estimate to gauge the financial impact of the slowing activation rate on NBN Co’s financials.
NBN Co Funding from the Australian Taxpayers
With the commercial viability of the NBN Co being called into question and the prospect of a write-down in the Australian Government’s investment becoming more likely, here is an overview of funding provided by Australia’s taxpayers for NBN Co under the different political parties.
Note : For the election year of 2013/14 the funding has been split 50:50 between Labor and the Coalition.
ARPU Progress as of 31 Mar 2018
NBN Co needs to raise ARPU to $52 per month in order to hit its financial projections by 2020.
The below graphs show the ARPU progress and also the contribution from different technology types (AVC revenue only).
Note : NBN Co released a special promotion offer in December 2017 which sees the 50/20Mbps AVC price reduced to the same as the 25/5Mbps price (ie. $27 per month) on the fixed network technologies.
