NBN Co is considering plans to build and launch a third satellite to serve rural and regional areas, a move that could increase the cost of the project, amid concerns the existing two satellites being built will fail to meet expectations.
Sources close to the national broadband network have told The Australian Financial Review that a review into the wireless and satellite elements of the $41 billion infrastructure project, set for release before the end of the month, will recommend further consideration of a wholly new satellite to be built and launched some time in the next decade.
Two satellites, tentatively named 1A and 1B, are already under construction in the United States under a $620 million contract with Space Systems/Loral, and are due to launch separately from French Guiana next year.
Once complete, they will be able to provide up to 25 megabits per second download speeds to the 200,000 most remote homes and businesses, which cannot be cost-effectively served with fibre, copper or wireless technologies.
NBN Co chief executive Bill Morrow told media and analysts last week that the first of the two satellites was 70 per cent complete and on track for delivery.
But it is understood that continued uncertainty about whether the satellites will be sufficient to meet demand has prompted ongoing conversations within NBN Co about whether to build an additional one.
Though internal corporate plans suggested two satellites should be able to cover 580,000 homes and businesses by the end of the decade, a strategic review released in December revised that figure down to 206,000 by 2020.
It included a potential addition of 100,000 premises from 2021 onwards, presumably by adding a satellite.
"Customers are taking up fixed wireless and satellite faster than planned," December's review said.
"Under a 'business as usual' model, NBN Co will need to add another 800 base stations and possibly an additional satellite if current levels of demand continue, contributing to the increased cost described."
Though the review redacted potential cost blow-outs to the satellite project, it is understood it found the cost could increase from $1.9 billion currently to as much as $4.3 billion.
The second, more comprehensive, review of the satellite and wireless roll-outs is expected to push further for a third satellite.
Communications Minister Malcolm Turnbull told the Commsday telecommunications conference this month that the review had found a $1.2 billion shortfall in cash flows for the two roll-outs, which are vital to the project but the least lucrative.
Mr Morrow would not confirm the plans when asked about the issue. "I think all options are considered in the review," he told The Australian Financial Review.
"Of course you know that was one of the options but I don't want to state anything until we finalise everything, take it to the board, and take it to the minister's office.
"Most options were considered . . . it's about service, time to market and the overall cost."
NBN Co is also yet to secure the international orbital slots – the physical location where satellites sit in space – in time for the launch next year. It has been in negotiations with international governments and private companies, including on-again, off-again talks with local outfit Kacomm, in an attempt to secure the slots.
An NBN Co spokeswoman said the company was confident of securing the required orbital slots.
Company executives have come under fire in recent months over underestimating the capability of an interim service established to serve remote homes, schools and businesses while the permanent satellites are built. Though capable of handling 48,000 users, the service filled more quickly than first expected, slowing internet speeds for most on the SingTel-Optus-owned satellites.
Mr Turnbull said the government would spend $34 million expanding capacity for the interim service and subsidising other internet connections for those unable to receive the service. But long term, a third satellite may be necessary to ensure those without access to wireless, fibre or copper, are capable of receiving a faster internet connection than is available today.
Mr Morrow said the company had sought to better understand potential demand for improved regional broadband after underestimating the interim service.
"Let's wait until the review comes out. But I think you're going to see a mix of satellite, fixed wireless and then, what we actually pool and/or put in the ground, that those boundaries may well shift to optimise against the limitations of satellites, fixed and the cost of putting stuff in the ground," he said.