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NBN Co still on budget, CEO claims

Won't cost $AU90 billion

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While avoiding direct political comment on the federal opposition's fibre-to-the-node plans, NBN Co CEO Mike Quigley has told the parliamentary Joint Committee on the National Broadband Network he believes the project will still be able to meet its $37.4 billion capital budget.

Quigley told the committee there's “no reason to change the forecast”, adding that the capex budget includes several billion of contingency funds which he says NBN Co has not yet needed to touch.

With FSAM build data now available – in spite of the rollout delays announced earlier this year – Quigley said NBN Co now finds that the per-premise cost of connection for the 138 FSAMs completed or under construction is falling within the range of $AU1,100 to $AU1,400 per premises (at the connection level) and a total per-premises cost of $AU2,400.

“We are not going to stop here,” Quigley told the committee. “We are going to continue to work to drive these costs lower.”

The latest connection rate to the NBN continues to show a skew towards higher-speed services, with Quigley announcing that 31 percent of customers are taking the 100 Mbps service compared to 39 percent on the 12 Mbps service, and most of the remainder on 25 Mbps services.

Quigley noted that government policy could, if altered, put the company under an obligation to use “basement fibre” on suitable multi-dwelling units. However, both he and NBN Co CTO Gary McLaren warned against inflated expectations for such a policy, because many Australian MDUs are of town-house rather than high-rise style, and lack a central telecommunications hub (MDF or main distribution frame).

Under questioning, McLaren stated that VDSL-based MDU delivery would not allow customers to achieve the gigabit speeds which the company announced today will be added to its available wholesale plans (the plan announcement is here).

Without identifying the coalition document, Quigley was also critical of ARPU forecasts that assume a tripling of NBN Co ARPU, noting that the starting ARPU of $22 per user per month is an artificially-low figure.

That figure, Quigley said, is “an artefact of a very small base of subscribers in the early years, so you end up with an ARPU that is misleading. The lowest possible price – for the AVC – is $AU24. You can't really start with an ARPU of $AU22.”

The real customer ARPU now, he said, is $AU38.

Another key aspect of the coalition's “$AU90 billion NBN” assertion, that delayed completion would dramatically increase the funding requirement, was also cold-watered. COO Robin Payne told the committee that a two-year delay should reduce the NBN's peak funding requirement, “because we would be spending capex after we've gone cashflow-positive.” ®

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