Australia’s NBN Co will spend more than $3bn to roll out superfast broadband to meet surging demand from millions of people working from home due to Covid-19.
The A$4.5bn investment in fibre-to-the-home broadband, announced by Canberra on Wednesday, comes amid rising competition for government-owned NBN from 5G mobile technology, which analysts say threatens to erode the value of a network that cost A$51bn to build but has failed to deliver world-class speeds.
The NBN upgrade marks a U-turn for Australia’s conservative Liberal-National government, which had criticised the previous Labor administration’s decision to build a nationwide fibre network as too expensive and unnecessary.
But a 33 per cent per cent jump in internet traffic during the pandemic as people increasingly opted to work from home has persuaded Canberra to deliver on a decade-old commitment to build the world’s best broadband network.
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“This is the right time for this network upgrade,” said Paul Fletcher, Australia’s minister for communications. “There is a long-term trend of broadband demand growth — with a very significant spike this year as Covid-19 has changed the way we use the internet.”
NBN’s increasing revenues, forecast at A$3.8bn in 2020, up 34 per cent from the previous year, would enable the company to finance the upgrade from debt markets, Mr Fletcher said.
Labor’s NBN plan, drafted on the back of a drinks coaster on a plane, according to Australian folklore, was to connect 93 per cent of homes to a full-fibre network at a cost of A$43bn, to be completed in 2016.
But when the conservative government was elected in 2013, it scaled back the project to reduce costs by relying on existing copper wires that run to homes rather than replacing them with fibre.
The NBN completed its initial buildout this year at a cost of A$51bn but average broadband speeds continue to lag behind most developed nations. Australia ranks 61st in the world with average broadband speeds of 54 megabits per second, behind Belarus and Jordan, according to the Speedtest Global index.
Entry level broadband costs in Australia are among the highest in the OECD, according to a study last year by Point Topic, a UK-based market analytics group.
Analysts said the NBN must move quickly to roll out faster broadband services in order to head off competitive threats from 5G mobile operators.
“Mobile providers are aggressively pricing their 5G fixed wireless services, which would eat into NBN Co’s revenue stream,” said Ian Martin, analyst at New Street Research. “This upgrade is designed to head this off.”
The NBN upgrade will provide access to 1 gigabits per second broadband service for three-quarters of Australia’s homes and business by 2023. Currently, about 20 per cent of NBN customers have access to this type of superfast broadband service.