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News, Telecommunications - Written by Renai LeMay on Monday, November 14, 2011 11:32 - 206 Comments
Citigroup: Coalition NBN plan “difficult to achieve”
news A detailed analysis of the Coalition’s rival National Broadband Network policy has found the “quick and dirty” plan would be difficult to achieve, faces significant hurdles and would wind the telecommunications reform process in Australia back by three years, although it would cost less than Labor’s vision.
The current generation of the Coalition’s alternative NBN policy was unveiled in early August this year by Shadow Communications Minister Malcolm Turnbull, although further details of it have emerged since. It outlines a scaled down approach to building national telecommunications infrastructure compared to the existing NBN policy, focusing on the likely separation of Telstra, upgrading current HFC cable infrastructure and targeted fibre to the node rollouts.
Reaction to the plan at the time and since has been mixed, with some commentators seeing a more competition-friendly appeal in the policy, while others have slammed it due to its much more limited approach compared with Labor’s flagship NBN policy, which would see all Australians receive next-generation broadband infrastructure, funded directly by the government.
Citigroup last week released one of the first extensive reports into the Coalition policy. Initially published by ZDNet.com.au, the report has since been taken down, but an anonymous reader has published the report in full online here.
In the report, Citigroup wrote that the Coalition’s policy was broadly a “market-driven” approach to broadband that would be “cheaper and quicker to build” than the current NBN policy. Citigroup estimated the total cost of the NBN policy at $16.7 billion, compared to the NBN’s $35.9 billion. Most of that funds would go to the construction of national fibre to the node infrastructure in areas Telstra’s copper network already exists — or fibre to the home in populated areas where it doesn’t, such as new housing estates.
However, the list of negative points Citigroup associated with the Coalition’s policy appeared to far outweigh the positive ones, with the analyst house arguing Turnbull’s plan had “some big hurdles”.
“While the Coalition policy represents the low cost alternative, it does little to reform the telecom industry, it effectively winds the reform process back three years and it still faces significantly budgetary, political and legislative hurdles,” Citigroup wrote in its analysis. “We believe a major policy change will be difficult to achieve for the Coalition.”
Core to the difficulty with the Coalition’s proposal is the future of NBN Co. On paper, Citigroup acknowledged this would be relatively easy.
“The NBN project is not protected by legislation,” the group wrote in its report. “It’s a wholly owned government operation. If the Coalition wants to shut down NBN, it’s as simple as contacting CEO Mike Quigley and then just turning off the funding.”
However, in practice, Citigroup noted there would be a number of obstacles to a Coalition Government winding back the company, ranging from accounting for expenditure already committed to the NBN project — as much as $15 billion by the next Federal Election to the question of what to do with the fibre rolled out thus far at that point (with the build estimated to hit some 1.3 million premises by that point) and re-drafting legislation.
In addition, the report noted, difficulties could arise if the Greens continued to control the Senate — as the party is a strong supporter of the NBN project. And pushback may arrive during the election from electorates where the NBN is slated to be rolled out in the immediate future.
Other problems could also stem from the implementation of the policy.
NBN Co is seeking to establish a uniform wholesale pricing policy across its infrastructure around Australia. However, Citigroup noted that the Coalition’s heterogeneous plan would undermine this approach. The policy also runs the risk of concentrating infrastructure in metropolitan areas, and the analyst group even questioned whether the speeds available under the Coalition’s policy would be fast enough to meet Australia’s needs in the long term.
“Unlike the NBN, the mix of access technologies used in the Coalition policy makes the upgrade path difficult,” the group wrote. “In other words, if the Coalition policy is implemented, it could simply delay an eventual national FTTH build.”
And the Coalition’s time frame for infrastructure rollout will also lag significantly behind that of Labor’s current NBN plan, with Citigroup estimating that it will take until the first half of 2014 to finalise a cost/benefit analysis into the infrastructure, until the end of 2015 to complete new contractual negotiations between NBN Co and parties like Telstra, and until the end of 2018 to implement separation of Telstra.
The release of the report attracted an immediate negative response from Shadow Communications Minister Malcolm Turnbull, who wrote on Twitter last week that the report was “very ill-informed”. “Puzzled Citi would write this without speaking to us — file it in the fiction section,” he added.
Opinion/analysis to be provided in a separate article.
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