nbn writedown looking increasingly likely

The admission by the ACCC that the nbn may need to pursue a different financial structure suggests that a writedown of the project is now firmly on the agenda, according to telecoms analyst Paul Budde.

In a blog post, Budde noted that he predicted following Turnbull’s re-election that without essential structural changes to the nbn strategy, 50% of the company will need to be written down.

The ACCC joining the growing ranks of others agreeing with that conclusion is a significant development, considering that the ACCC is not a political organisation, he said.

“The government is flatly rejecting any such calls. However, if they don’t take the lead it is important that the rest of the country (industry and users) start looking at what would be the best strategy in the wake of the inevitable writedown and restructuring that will result in a major change to the Australian telecoms market.”

The nbn will eventually need to be upgraded to either fibre-to-the-premises or fibre-to-the-curb, with either good quality copper or wireless providing the connectivity from premise to curb, Budde said.

It is not currently known whether it will be technically viable to use the upcoming 5G mobile standard for the last 50 or 100 metres and if such a connection will be able to provide high-speed broadband to users. In any event, 5G connectivity will require fibre connections to most mobile towers.

“So, in whatever way we look at the overall broadband network, 90% of all of the telecoms infrastructure will be fibre based and in this part of the network there is very little opportunity for competition,” Budde said.

“Nobody is going to build competing fibre-optic networks for residential use. So that infrastructure needs, in one way or another, to be managed through regulation. Of course we could, and should, have full retail competition beyond that.”

But Budde expressed concern that politics will interfere with the ability to develop a rational solution to the nbn infrastructure problem, with potential doomsday scenarios including continued political denial leading to increased regulation to artificially prop up a struggling nbn co.

“Splitting up the nbn company and selling it in bits and pieces could be equally dangerous if there is no long-term strategy in place on how to move the whole network towards a fibre-based one,” Budde said.

“One could easily end up with monopolies based on technologies such as fixed-wireless, HFC and FttN, and again the fibre-optic backbone network needed for the next development of the mobile networks (5G) will need to be included in a holistic national infrastructure strategy.”

He called for both political parties to sit down and discuss the issue “like grown-ups — taking into account the national interest and not party politics”.

He noted that apart from the US there is no other country in the world that doesn’t have bipartisan support for its telecoms strategy.

Meanwhile, analysis from Budde’s telecoms analyst company BuddeComm has found that growing momentum behind the nbn is leading to declines in fixed broadband access over copper and a shift towards the use of fibre networks.

Meanwhile the second-tier telco market continues to grow strongly, with particularly strong growth recorded by Vocus and TPG. Finally there has been a moderate improvement in Australia’s rate of adoption of broadband, although Australia still lags behind many developed countries in this regard.

Follow us and share on Twitter and Facebook