NBN - gaining momentum but can it go the distance?

With the NBN rollout crossing an important milestone - 1m premises passed, we believe it is important to highlight some of the key trends emerging from the early stages of the NBN rollout. 

This blog post provides an overview of our recent deep dive report which outlines the early trends emerging from the NBN rollout along with our detailed revenue forecasts for the NBN. 

NBN revenues – take-up rates will drive ramp up but CVC charges will need to decrease

• While, we expect the NBN rollout to be delayed by 2-3 years, we forecast NBN revenues to grow to A$2.0b by FY20 from A$164m currently with ARPU remaining flat offset by an increase in take-up rate to 37% of premises (from 4% currently);
• We highlight that Fixed Broadband revenues (4.5% CAGR FY10-15) have failed to keep up with traffic growth (40% CAGR FY10-15) and we therefore believe the current usage-based pricing for CVC is not sustainable;
• We expect CVC charges to decline across our forecast horizon so that RSPs can maintain pricing and margins.

First million homes passed – what are the key takeaways?

With the first million homes passed in the NBN rollout, we highlight the following key trends:

• 4-5 RSPs dominate current NBN market share, a trend which we believe will continue through to 2020;
• there is no fibre premium as is evident from comparing pricing for NBN vs copper plans;
• majority (77%) of users are signing up for base speed tiers (12/1Mbps, 25/5Mbps) which indicates that users are unwilling to pay more for speed, unless their usage changes;
• bundled plans (voice + broadband) account for 75% of subscriber additions, reflecting the increasingly commodtised nature of voice under the NBN.

NBN lagging behind global peers - why?

We observe that the NBN is consistently behind its rollout targets compared to global peers in the UK and New Zealand.

We believe this is primarily due to:

1) Different organisational approach - while the NBN is a Government funded rollout, both UK and New Zealand have the private sector managing the rollout;

2) Failure to engage the incumbent telco - globally we observe the involvement of the incumbent telco (ie Chorus in New Zealand and British Telecom in UK) has significantly helped meet and exceed rollout targets, we believe the absence of Telstra from the NBN rollout is one of the key drivers behind the delay.

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This blog is based  on our recent Venture Insights report 'NBN - First million homes passed but a long way to go….', where we deep dive into our NBN forecasts and assess the key trends and drivers that are emerging as the NBN rollout gathers momentum. 

Venture Insights is a strategic research company. Venture Insights provides our clients a competitive advantage by outlining the key trends and implications flowing from disruption in key verticals that result from the information and internet age that we live in. We provide long term strategic thinking to capture the trends that will determine the winners and losers in sectors and sub-sectors as challengers test the rules of engagement with incumbents, whether they are in the telco, media or other digitally affected industries such as finance, health, travel, employment, real estate, etc.

We have partnered with Enders Analysis, the market leading independent research house for media, digital and Telco across UK and Europe. This supplements our local market coverage with coverage from UK and European markets so that our subscribers can gain insight on leading global trends.

For more information on this report and Venture Insights, please go to www.ventureinsights.com.au or contact me on [email protected]