The NBN’s fourth Corporate Plan was released yesterday. It is a very important document that gives us the best indication yet of what the ‘multi technology mix’ (MTM) NBN will look like.

Download the new Corporate Plan here.

The plan is remarkably frank about the future of the NBN. It talks about doubling the footprint every year, for the next three years, to reach its goal of reaching 9.1 million premises by the end of 2018 (with 8 million activated by the end of 2020).

Revenue in the 2017-18 financial year is projected to be $1.8 billion, a sufficient amount to enable NBN Co to borrow the extra money it needs to complete the network beyond the Government’s investment, which remains capped at $29.5 billion. The amount to be borrowed is not known, but the plan “has produced a potential peak funding range between $46 and $56 billion, with a base case of $49 billion.

“Following a high level desktop analysis, management estimates that the MTM strategy delivers savings of $20-$30 billion when compared to a full FTTP rollout in the fixed line footprint.”

In other words, the MTM NBN could cost as much as $56 billion, while its estimates that a full FTTP network, as originally proposed by the ALP, would cost a minimum of $76 billion. The tens of billions of dollars of difference at the high and low end of these estimates indicate that they cannot be really sure.

The main reason the MTM might cost a lot more, the plan reveals, is that there are many uncertainties about the quality of the copper and HFC (hybrid fibre coaxial) networks that NBN Co is buying off Telstra and Optus. Here are some direct quotes from the new Corporate Plan:

• “Revenue may also be adversely impacted if copper quality leads to service degradation.”
• It will be a challenge to “integrate and maintain legacy copper and HFC network assets from Telstra and Optus, of which the organisation has limited experience and limited information (e.g. quality of Telstra’s copper network).”
• “Modelling continues to be revised as data becomes available from Telstra and Optus and from the operational experience of rolling out the new technology (for example, issues like copper rehabilitation).”
• “The quality of this [copper] network is not fully known as there has been limited opportunity to evaluate the physical infrastructure at significant scale. However, it is known that there is significant work required to remove broadband blockers from the copper network. If copper rehabilitation costs are prohibitively high in an area, NBN can choose alternative technologies to reduce costs.”
• “Rollout progress will be contingent on the condition of the copper and HFC network assets with respect to their suitability for expected service levels and the associated total cost of ownership.”
• “Capex estimated might prove inaccurate (e.g. FTTN copper rehabilitation, HFC lead-in cost).”

Get the picture?

A search of the Corporate Plan reveals 32 instances of the word ‘copper’, with most of those mentions (as above) expressing doubts about the condition of the network.

Call me old-fashioned, but I would have thought it would have been prudent business practice for those doubts to have been dispelled, and any concerns addressed, before NBN Co agreed to pay Telstra $11.5 billion for those assets. There are similar doubts expressed about the condition of the HFC assets.

We have the situation where the new MTM NBN will proceed with two thirds of the country receiving FTTN copper or HFC cable, at an undetermined cost that may prove to be almost twice as much as the Coalition promised at the last election.

The major reason for the blowout in cost, as spelt out in excruciating detail in the Corporate Plan, is because of uncertainties about the condition of the legacy copper and HFC networks the NBN Co has committed to buy for an agreed sum, despite by its own admission not knowing the condition of those assets or how much money will be needed to get them up to scratch.

There’s a lot of other stuff in the Corporate Plan. It’s a detailed document, well written in clear English and attractively laid out. Its editor should be congratulated. But it is essentially a giant admission of failure – the wonderful ‘sooner, cheaper, fast enough’ NBN will be none of those things.

Read it and weep.