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  • Featured, News, Telecommunications - Written by on Tuesday, October 15, 2013 10:38 - 94 Comments

    NBN construction model failed, says Conroy

    conroygillard

    news Ex-Communications Minister Stephen Conroy has acknowledged that the private contractor model which NBN Co attempted to use in its national fibre rollout has failed due to the inability of the company’s partners to deliver on their commitments, in an admission which again raises the possibility of Telstra being brought back in to assist with the rollout.

    In every other country currently conducting nationwide telecommunications infrastructure rollouts, the company’s incumbent telco, which historically has owned the nationwide copper network, is involved in a pivotal fashion in also conducting the upgrades to that infrastructure, often with government assistance. In the UK, for instance, BT’s Openreach division is conducting a major fibre to the node-based network rollout; in NZ Zealand it’s a new division, Chorus, split off from Telecom New Zealand, in Germany it’s Deutsche Telekom, and so on.

    Often, in such examples, the Government of each country has taken steps to structurally separate the national incumbent telco into wholesale and retail divisions or even completely separately owned companies, with the intent that the wholesale division is not able to provide favourable treatment to the retail division, and has an incentive to independently upgrade the copper network.

    However, in Australia, the previous Labor Federal Government declined to pursue either the paths of separating Telstra’s wholesale and retail divisions or having the telco be involved in the NBN rollout, beyond providing access to its ducts and other network infrastructure. Instead, in April 2009 the then Rudd Government, with Conroy leading the telecommunications portfolio as Communications Minister, set up a new company, NBN Co, which engaged major national construction firms to deploy the NBN around Australia.

    Despite NBN Co having signed multiple construction contracts amounting to billions in fees, the latest set of quarterly rollout figures obtained by Delimiter this week show that the company is still making extremely slow progress with its network rollout. NBN Co added on only 83,700 fibre premises in the three months six June, and just 18,000-odd fixed wireless premises.

    Of particular note is the company’s Tasmanian operations, which have actually gone backwards slightly over the past several months. As at 12 August, NBN Co’s fibre network was listed as having passed some 32,003 premises in the state. However, by 7 October, the figures had gone down slightly for Tasmania, to just 32,001.

    Over the past year NBN Co has been forced to cancel a number of its construction contracts as they have failed to deliver, and either taken on responsibility itself for some of the work, or contracted new partners.

    In an interview last night on the ABC’s Lateline program (we recommend you click here to watch the full interview), Conroy said that he “naively” believed that the construction industry would keep to its contracts in terms of the NBN.

    “What we found was that the construction industry were unable to deliver on their contractual obligations,” he said. “And back in March-April, the NBN Co actually sacked Syntheo in the Northern Territory, have now effectively sacked Syntheo in South Australia, and have already brought in other providers before the election to begin work on the ground in Western Australia because Syntheo had failed to meet by not just a small margin, but an extraordinary margin their contractual obligations. So money was returned by Syntheo to NBN Co in Darwin.”

    “I’m not privy to all the final arrangements in South Australia or Western Australia, but what we’ve seen is some of Australia’s largest construction companies failed to deliver on their contractual obligations.”

    Conroy said that overall, he and the now-departed NBN Co board of directors had to take on the responsibility for believing that the construction companies could deliver on their contracts. Ultimately, he said: “I think the construction model that NBN Co put in place hasn’t delivered. But it hasn’t delivered based on contractual obligations not being met by these construction companies.”

    The news comes as speculation continues to mount that new Communications Minister Malcolm Turnbull will hand significant portions of the construction work for the NBN back to Telstra. During the election campaign, Informa senior analyst Tony Brown asked Turnbull whether one way of fixing the issues with NBN Co’s contractor workforce would be to bring in the Australian company most qualified to roll out telecommunications infrastructure in the existing copper network — the company that owns it, has all the network information, decades of experience and an existing workforce stretching into the tens of thousands that don’t need: Telstra.

    “It is curious that Telstra have not been used as a contractor to build any part of this network,” Turnbull responded. “I’m not aware of a new generation network of this kind … I’m not aware of any new generation network that are not being built by the incumbent. Even in say, Singapore for instance, there is an independent entity, a separate entity that is going to operate the network, [but] they’re still using Singtel to do the construction.”

    “I assume Telstra was excluded for political reasons, but Telstra should certainly be a candidate. Obviously there are details of price and matters of that kind, that are pretty relevant, but Telstra does have a huge amount of experience.”

    Telstra is currently conducting a trial of the Coalition’s preferred Fibre to the Node technology on its network. In addition, the telco has previously offered to conduct more construction work on the network.

    opinion/analysis
    I and many other people have been saying this for months: The construction model which NBN Co is using for the NBN is fundamentally broken and needs to be looked at again by the Coalition. Forget FTTP or FTTN; the question here is whether the model can be applied to make either work at all. Because based on the latest, terminally slow rollout stats, NBN Co and its contractor workforce is not well-suited to deploying either model. Why? Because they’re upgrading a network which is not their own; it’s someone else’s. That someone else is Telstra. As I wrote on Delimiter 2.0 back in August (subscriber content):

    “A growing body of evidence is mounting that NBN Co should seriously consider contracting the nation’s incumbent telco Telstra to build large sections of the National Broadband Network infrastructure, no matter which major side of politics wins the upcoming election, and no matter whether a fibre to the node or fibre to the premises model is eventually chosen.”

    Image credit: NBN Co

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    1. elbento
      Posted 15/10/2013 at 11:36 am | Permalink |

      Just once I would like to hear a success story for SMEs (honestly) capitalising on government initiatives for industry growth. Putting aside arguments about how the initiatives are executed, be it insulation, solar/green initiatives,etc., businesses always seems to under-deliver (at best) or engage in fraudulent/misleading behaviour (at worst)..

      NBN should have been a great opportunity for infrastructure builders..

    2. AJ
      Posted 15/10/2013 at 11:41 am | Permalink |

      Telstra is not contracted to build the NBN because Telstra is not a construction company they do not have the staff to build the network they would subcontract it to Transfield,Visionstream ect.

      NBNCo should have just taken control form the beginning and built the NBN itself it may have taken slightly longer to get up to speed but long term was the better option Unfortunately the NBN was being built to a 3 year election timeframe.

      • Posted 15/10/2013 at 2:51 pm | Permalink |

        Telstra would have major maintenance contracts with most of those subcontractors already so engaging them would seem simpler (in theory). It can be expected that Telstra are going to charge their margin on top for that project management / ease of entry layer. I’m sure that was a reality back when the initial tenders went out although Telstra were politically very opposed to the whole idea. Maybe a middle ground can be found for mutual benefit now…

        Saying that NBNCo should have built it themselves from the beginning makes no sense as THEY had no workforce to drive it.. they’d have to either poach thousands of skilled workers or import them to complete the rollout… enter Telstra access issues… again.

        • tinman_au
          Posted 15/10/2013 at 5:00 pm | Permalink |

          Saying that NBNCo should have built it themselves from the beginning makes no sense as THEY had no workforce to drive it..

          And yet that’s exactly what they did in the Northern Territory. And apart from the asbestos issue, and the Telstra negotiations, every hold up so far has been contractors.

          • Fibroid
            Posted 15/10/2013 at 7:02 pm | Permalink |

            But the NT NBN rollout was not scheduled to be finished until the end of 2015, we will never know if the NBN Co takeover did the job or not.

            • Brendan
              Posted 16/10/2013 at 12:19 pm | Permalink |

              Yeah, we do. Before you jump the gun, maybe see what the review into NBNco, and the deployment options, for a ‘technology agnostic’ (titter) politician states, first?

              I mean, feel free to rewrite history, just make sure you’re winning, first. :)

            • tinman_au
              Posted 16/10/2013 at 2:12 pm | Permalink |

              But the NT NBN roll-out was not scheduled to be finished until the end of 2015, we will never know if the NBN Co takeover did the job or not.

              It doesn’t really matter what the result would or wouldn’t be, I still think it was the best solution to the “he said, she said” issues that were going on with the contractors.

              • Fibroid
                Posted 17/10/2013 at 12:32 pm | Permalink |

                Well maybe, but we will never know.

                • Brendan
                  Posted 17/10/2013 at 3:20 pm | Permalink |

                  Yes, we will. Unless all action in NT has been stopped dead, it’s still occurring.

                  • Fibroid
                    Posted 18/10/2013 at 7:58 am | Permalink |

                    We seem to be going around in circles here, the outcome will be only known at the end of 2015 well into the Coalition version of the NBN build, so you are optimistically hoping the outcome of the strategic review and the Coalition appointed NBN Co implementation of that review is that the NT rollout is to continue on as the Labor NBN Co planned it in 2013.

                    • Alex
                      Posted 18/10/2013 at 10:47 am | Permalink |

                      Once again I find myself agreeing with you Fibroid…

                      But unfortunatley, as I have discovered over the years… going around in circles is inevitable with those who blindly support the lesser/inferior, using Telstra’s dilapidated copper, similar govt. spend and frankly dumb fraudband (as dubbed by the very government who now propose it but actually opposed it in 2007) FttN policy…

                      Frankly these node nerds must go around in circles, keep harping on about the real NBN’s missed targets etc, as they have absolutely nothing to support the above backward FttN plan.

      • Abel Adamski
        Posted 15/10/2013 at 5:06 pm | Permalink |

        Actually first thing M.Q should have done is start a construction arm and training organisation before even any planning commenced.
        Using contractors is fine for limited short term projects, 10 year project of this size – just not enough skilled people from the coal face up.
        Telstra can handle small volume using the same contractors/subbies, but not the size and scope of the NBN.
        Besides they would design and build a crippled consumer grade network knowing they would end owning the NBN and will make a mozza selling “business grade” services (basically basic FTTP NBN as we know it)

    3. Nich
      Posted 15/10/2013 at 2:59 pm | Permalink |

      What would ultimately be the difference? Same subcontractors (plus some extra Telstra may have still on staff), different managers?

    4. grump3
      Posted 15/10/2013 at 3:11 pm | Permalink |

      Based on Telstra’s usual charges I now realize that Turnbull’s $90-100B FTTH figures were probably quite realistic if they were given the task.
      But if he hands construction of FTTN over to them it might be ‘Faster’ but a lot less ‘Cheaper’ than originally stated?

    5. Brett Haydon
      Posted 15/10/2013 at 4:04 pm | Permalink |

      There seem to be a bunch of issues that could politically only be dealt with after the election, and Turnbull with his fresh board will be happy to let it collapse in a heap rather than address them. Sad really.

    6. Dale
      Posted 15/10/2013 at 5:57 pm | Permalink |

      “Because they’re upgrading a network which is not their own; it’s someone else’s. That someone else is Telstra”

      I thought they were replacing a network, not upgrading Telstra’s. Can you say which part of Telstra’s network was to be left in the original NBN plan? (apart from the ducts, which aren’t being upgraded by NBN as far as I know)

      • Harimau
        Posted 15/10/2013 at 7:11 pm | Permalink |

        +1

        The facts are correct, but the conclusion is wrong.

        NBN Co is(was) not upgrading a network, it is(was) replacing a network.

        Malcolm’s network, on the other hand, IS upgrading a network – so of course Telstra should be involved ONLY IF we proceed with an inadequate and inferior fibre-to-the-node rollout.

        I see no reason for Telstra to be involved in an all-FTTP fixed-line rollout. They would use the exact same subcontractors and the exact same construction model – except that you’ve now added another layer, and additional cost (paying Telstra).

      • TrevorX
        Posted 16/10/2013 at 12:04 pm | Permalink |

        NBN Co are using substantial amount of Telstra dark fibre for the Transit network – wherever possible, they will use dark fibre and only build their own where there is no preexisting available fibre.

        However, all the equipment connecting transit to the GPON network, the POIs, NTDs, routers connecting ethernet RSP networks to transit etc are all new NBN Co equipment. Calling use of dark fibre an ‘upgrade’ is stretching the truth.

    7. Harimau
      Posted 15/10/2013 at 6:42 pm | Permalink |

      Someone (I can’t remember who – I think it was on the Conversation, possibly Rod Tucker) once made the suggestion that the Australian military should take charge of the NBN construction work. It was kind of ridiculous, but the idea looks quite valid in retrospect.

      Others have made similar suggestions along the lines that NBN Co should have kept construction work in-house (or through a dedicated construction arm), and hired and trained workers themselves, instead of outsourcing the work to private contractors who have failed to meet their obligations.

      The take-home message appears to be: don’t rely on the private sector to deliver a project on a national scale.

      • Harimau
        Posted 15/10/2013 at 6:45 pm | Permalink |

        Mark Gregory, not Rod Tucker, The army should rescue the NBN

        And just for fun, found in the same Google search, Abbott to get military to roll out NBN

      • Fibroid
        Posted 15/10/2013 at 7:19 pm | Permalink |

        So when it comes to the Business plans the NBN Co have published over the years since 2009-2010 which contain all sorts of predictions on rollout targets, funding, ARPU , CAPEX etc it is only responsible I assume for those published figures only when they are correct.

        • Harimau
          Posted 15/10/2013 at 8:32 pm | Permalink |

          Conroy said it best. He and the board members and the other shareholder minister and Labor are of course responsible – responsible for believing that the contractors would live up to their contractual obligations, for naively putting faith in the private sector.

          Basically, what was on paper didn’t match what was in reality – both for the contractors who promised to meet targets, and for NBN Co who promised to meet those targets based on those contracts.

        • Brendan
          Posted 16/10/2013 at 2:09 pm | Permalink |

          No, Fibroid.

          You can plan for most outcomes. You can have a tender process and obtain contractual services. You can’t “make” the contractor not under bid, low-ball or otherwise interfere with how contracted services are actually delivered or how people are paid.

          It’s clear some operators got it right, for others this has been an issue. Which has then snowballed to make it a NBNco issue.

          The government tendered out work in good faith. The same would almost certainly occur for a FTTN network (unless sold outright to telstra). They are still, to a degree, dependant on contractors to honour contracts.

          Did the NBNco miss judge delivery timings? Almost certainly. But they’re not building the network itself, contractors are.

          Having said that, something of this scale has not occurred recently. It was never, ever going to be an “easy” job.

          Transitioning to Copper, should that happen, won’t be any easier. Just different.

          • Fibroid
            Posted 16/10/2013 at 4:25 pm | Permalink |

            They had three attempts at getting it right, assuming Labor got back in last election how much longer did the NBN Co need to get it right, number five, six, or all the way into 2021?

            No doubt what will happen is the Coalition will be crucified if their rollout target is missed by even 100, but of course memories are short when it suits, no excuses for them such as a national rollout of this magnitude is expected to have missed targets.

            • Alex
              Posted 16/10/2013 at 6:25 pm | Permalink |

              Yes we will see if those who have ‘never said one kind word’ about the real NBN (seriously, no plan, even MT’s sadly dated, self named fraudband FttN plan is 100% bad – making one’s 24/7 NBN hatred most revealing)… and revelled, due to obvious political obedience, in NBNCo not meeting their targets… will hold the FttN plan to the same enth degree nitpicking…?

              Then again, let me rephrase… no we wont see, there that’s better.

            • Brendan
              Posted 17/10/2013 at 9:28 am | Permalink |

              Fibroid, you appear to be espousing that it’s okay to hold NBNco (and Labor) to account (endlessly referring to delivery dates, like they’re the only important component) but not the new government.

              Whilst that’s refreshingly “real talk” it does massively weaken your point. I intend to hold Malcolm and the Coalition responsible, since they are now the stewards of future outcomes.

              I again look forward to the day you completely reverse your stance again, and state that delivery dates aren’t everything – when the inevitable delays strike the Coalition’s reworking of the NBN.

    8. MikeK
      Posted 15/10/2013 at 8:12 pm | Permalink |

      I disagree with some of the main points of your opinion/analysis Renai, Telstra can’t even fix their own network its been run into the ground and all Telstra can offer is contractors as well because that’s about all their got left. They just said they were laying off 1100 more workers, I don’t think Telstra is even interested in fixed line construction any more and judging by the mobile bills I receive there is more profit and a smaller work force in there mobile network. I think they would love to sell the govt their fixed line assets and kiss that side goodbye.
      We are just going to have to be patient while NBN fixes the problems as and well they occur, there’s no silver bullet solution.

      • Northern Blue
        Posted 17/10/2013 at 9:36 am | Permalink |

        Telstra have been spending lots of money – only into their mobile technology and supporting infrastructure. They were doing this pre-NBN as well. It would be interesting to ascertain why they thought, as a business case/model, this was the direction to go even though they still had sole control of the fixed connection network.

    9. RBH
      Posted 15/10/2013 at 9:57 pm | Permalink |

      I agree with the comments that Telstra would have been outsourcing to the same companies doing the work already and charging a commission on top. I suppose you could argue that they have experience in managing said companies and perhaps that would have been the better value option.

      I think our political leaders faith in PPP projects was proven misplaced a long time ago but can you imagine what the headlines would have said if NBNCo started up a construction arm of its own. It would have been a communist takeover just as the Coalition has always suspected of Labor.

      I think the best option and this is still valid is that NBNCo purchases one or two of these construction companies, does the work in house (perhaps still contracts out some of the work) and then sells off the companies later when the rollout is largely complete. The purpose is not to make money on the companies but to control costs.

      • haha yeah
        Posted 15/10/2013 at 11:38 pm | Permalink |

        You realise these contractors are losing money going bankrupt on NBN contracts. If you absorb these construction entities within NBNco, these losses will become NBNco’s losses. How does that work?

        • Harimau
          Posted 15/10/2013 at 11:58 pm | Permalink |

          Uh, no. How does it become NBN Co’s losses? How does THAT work? How does NBN Co not pay itself?

          • Brian
            Posted 16/10/2013 at 12:13 pm | Permalink |

            Some of you guys have really short memories. Remember when there was a big stink a couple of years ago because NBN Co were screwing over the contractors (or getting good value for money as the sycophants put it) by forcing low prices, ambitious rollout targets, and insisting the contractors take bigger commercial risks? Seems the chickens have come home to roost.

            If NBN Co took on the work themselves, NBN Co would still have to pay for materials, labour, and so on. If these costs add up to more than what they were expecting to pay the contractors, then that would leave a hole in their budget resulting in the equivalent of a loss.

            The elephant in the room is the sheer volume of fibre that needs to be installed and the fact that no matter how you look at it, there are simply not the number of installers available to install what was needed to meet the timetable. It doesn’t matter whether NBN Co hires outside companies, Telstra hires those same companies, or NBN Co attempt to do it themselves, they would all face the same underlying problem. Trading couldn’t fix it either. That takes time, costs money, and takes the skilled installers off the work to do the training. It would make the problem worse before it had any chance to make things better.

            It is not the contractors fault for not meeting the targets. They were just as inexperienced as NBN Co in a project of this scale. Had the job been dumped in Telstra’s lap, they probably would have demanded a slower and more costly rollout resulting in the usual whinges about them deliberately holding up the rollout for commercial reasons. Few would give them credit for anticipating the problems we are now experiencing. I suppose that if someone says they can deliver a high tech FTTP network for a good price and in a short timeframe, many will be sucked into believing it in the same way people are still being sucked into Nigerian money laundering scams today.

            The root cause of the problem was the fact that the rollout and budget was far too ambitious in the first place. It was doomed to fail from the start.

            • GongGav
              Posted 16/10/2013 at 12:54 pm | Permalink |

              How much more training is needed though?

              I dont think it takes a rocket scientist to pull a rope through a conduit, and thats what most of both builds end up being. The skills needed for the fine detail at the end really isnt all that different between plans, so skilling issues for one will be skilling issues for the other as well.

              Correct me if I’m wrong, but the basics seem like this to me.

              FttH plan rolls fiber up and down the streets. When you want to connect, NBN Co sends someone out to do that last mile work – drag a fiber line into your house and attach a NTU to the end, then activate the service.

              FttN plan rolls fiber to the node, at which point the technician has to figure out which copper line connects to which fiber bundle. Fundamentally, not much else.

              For both, the skilling is it that last connection from the fiber to what ends up at your wall socket, and not greatly different from each other. One is a personalised service, connecting just 1 premise at a time, while the other is a bulk service, connecting every existing phoneline in your area to the node.

              But that part sounds complicated to me, far moreso than the FttH pullthrough for the last mile. Not skilling-wise, I think they need pretty much the same ability, but from a logistics side its going to be like unravelling a mess of wires.

              Thats one of the elephants in the room for the FttN rollout – connecting the copper lines to the node and knowing whos who. More than one person has demonstrated that plenty of the existing connections arent documented, and were simply picking one pair or another to get a stable connection.

              I see that as being a potentially massive problem.

              • Michael
                Posted 16/10/2013 at 8:36 pm | Permalink |

                To pull something through a conduit is easy. However, where does the tracer line / cable come from. Normally you would remove a (faulty) line to make the initial tracer and use that to pull through the new line.

                To feed through new cable is not so simple.

                In addition all of the installation work is to be done as quickly as possible and while it is not a technically challenging role, it is an art form to complete it quickly. Are there existing lines in the conduit on which your line can become snagged?

                What size is the conduit? Is it one of the large CBD ones that you can walk inside (CSE procedures) or is significantly smaller with limited access. Is there asbestos present requiring further PPE and special precations?

                “How much more training is needed though?

                I dont think it takes a rocket scientist to pull a rope through a conduit, and thats what most of both builds end up being.”

                That sentiment is why there were a number of sub-contractors inappropriately handling asbestos around Australia.

                Trying to build a network across Australia was never going to be simple and accelerating it to the speed demanded in the business plans just magnifys the existing risks.

              • Fauske
                Posted 17/10/2013 at 1:20 pm | Permalink |

                I think you are missing a fundamental point in your “how much skill is required” argument GonGav. The two network transport mediums (copper vs Fibre) are completely different; splicing fibre at the house end to fit off your connectors going into the NTU is abn entirely different skillset from un-twisting a few pairs of copper and putting a “sugarcube” connector onto the internal home copper wiring. It has been brought up numerous times in the last few years as THE critical skills shortage in the current workforce.

    10. Francis Young
      Posted 16/10/2013 at 9:20 am | Permalink |

      NBNCo had to produce all of the contractor management material, all of the training and design documentation, but was not directly training or overseeing tradesmen doing the work.

      The road to hell is expensively paved with the good intentions of governments engaging external contractors to manage external subcontractors, instead of training and retaining staff with their knowledge and experience.

      For a decade-long project, NBNCo would be far better to engage workers directly and could then micromanage the build, including swift redeployment of flying squads as needed, direct reimbursement of actual expenses instead of fixed allowances, and meeting all of the employer obligations which contracting companies have possibly sacrificed in the interest of shareholder revenue.

      • quink
        Posted 16/10/2013 at 10:07 am | Permalink |

        Spot on, and they should have started full-in in 2007. Benefit of hindsight, I suppose. The thinking must have been that the contractor model works for Telstra, so let’s do it too.

      • Posted 16/10/2013 at 10:13 am | Permalink |

        “For a decade-long project, NBNCo would be far better to engage workers directly and could then micromanage the build, including swift redeployment of flying squads as needed, direct reimbursement of actual expenses instead of fixed allowances, and meeting all of the employer obligations which contracting companies have possibly sacrificed in the interest of shareholder revenue.”

        There are no examples from overseas to show that even this would have worked — all of the examples internationally, even where there are separate companies managing the rollout, such as NBN Co, point to the fact that eventually, everyone turns back to the incumbent telco to get the construction work done.

        • Brendan
          Posted 16/10/2013 at 12:24 pm | Permalink |

          It’s also true that Telstra is now primarily a retail operation, with a bolt-on wholesale devision that is still a horribly broken thanks to the combination of ACCC regulation and being gutted to inflate profits.

          Assuming that Telstra could undertake the gargantuan task in a timely manner, is perhaps expressing the same over-confidence that has us where we are, today.

          They would need to massively bulk up contracts, retrain and retain a massive workforce.

        • Steve Dalby - iiNet
          Posted 16/10/2013 at 12:53 pm | Permalink |

          >> everyone turns back to the incumbent telco to get the construction work done.

          This sort of thinking is what got us to where we are today. That is, a universal agreement that the incumbent is the problem. Suggesting that the incumbent is also the solution to that problem is circular thinking that ends up covered in excrement.

          If Telstra wasn’t a problem, there would have been no need to use NBN Co as a sledgehammer to structurally separate the network from Telstra’s control, in the first place.

          The NBN project wasn’t simply about improving the performance of the national infrastructure, it was also, very importantly, about fixing the ‘Telstra problem’.

          Successive governments introduced structural changes that steadily increased Telstra’s power and control up to the inevitable point that we had an environment that delivered the likes of Trujillo and Burgess giving the parliament and Australia the finger.

          We shouldn’t forget that.

          • Posted 16/10/2013 at 12:59 pm | Permalink |

            hey Steve,

            with respect, you’ve missed what we’re discussing here. The argument is not that Telstra should operate or own the NBN infrastructure.

            The argument is that, based on international experience, no NBN has ever been constructed successfully without the assistance of the incumbent in constructing the network. I explored this issue extensively on Delimiter 2.0:

            http://delimiter2.com.au/telstra-should-build-the-nbn-under-the-coalition-or-under-labor/

            Cheers,

            Renai

            • Posted 16/10/2013 at 2:48 pm | Permalink |

              >> The argument is that… no NBN has ever been constructed successfully without … the incumbent …

              Yes, I understand your point and I disagree with that.
              Let’s be specific (or pedantic, if you prefer) – Chorus is not Telecom NZ. Openreach is not BT. The incumbents have not been left intact, which is what your comments imply.

              New legal entities are the norm, structurally separate from the former incumbent.

              I don’t have a problem with a structural separation of Telstra – with the new legal entity being the wholesale-only network owner/operator. A separate entity (not a subsidiary) demerged from the former incumbent with their own board and their own KPIs is what Beazley, Keating, Howard, et al should have created, rather than what we have today.

              The road to such a separation may be different in 2013, but in my mind still a solution worth pursuing. After the pollies created the Telstra we have today, it seems that it will take major political intervention to remediate the legacy of those poor political decisions. Conroy’s path was the $11B deal and NBN co. That path is now being reviewed.

              I hate to think that the Coalition might abandon a sensible plan to structurally separate the national network from ALL retail businesses and give the job back to the company that has been a drag on innovation, competition and generated costs and uncertainty for the Australia market.

              I am happy to wait and judge on the actions taken by the new government, while, of course, throwing in my 2c worth in the meantime.

              • Posted 16/10/2013 at 2:55 pm | Permalink |

                Steve,

                my comments have got nothing to do with operating or owning the network. Nobody is saying that Telstra shouldn’t be separated! Least of all the Coalition!

                The concept is that Telstra should build the NBN, but that NBN Co should own and operate the network.

                In Singapore, there is a separate company operating their NBN. Yet SingTel, through its subsidiaries, largely constructed it. The same in NZ — Chorus, representing the wholesale division of Telecom NZ, is largely constructing the network for Crown Fibre Holdings. In the UK, it’s BT’s Openreach division. In Germany, Deutsche Telekom. In France, France Telecom.

                I could go on.

                We’re *NOT* talking here about the operation or maintenance of the NBN. We’re discussing the construction of the NBN, and who has the expertise and experience to do that. Internationally, experience has shown that only incumbent telcos can do that.

                I don’t think this is something that it’s possible to disagree with — it’s just basic fact.

                • MegaB
                  Posted 16/10/2013 at 4:17 pm | Permalink |

                  Assuming that Telstra would be able to manage the rollout any better is like assuming that a car salesman would automatically be a great formula 1 racing driver.
                  A conceptual relationship exists in each case, but that relationship does not have the causal outcome being implied.

                  The last time Telstra did anything similar was decades ago with the HFC rollout (starting 1994). Nowadays their only experience apart from throwing out the odd DSLAM is in letting their network degrade horribly.
                  About the only thing which they are currently skilled and experienced in is perhaps handling the 7% who don’t get FTTP.

                  International ‘examples’ are like ‘studies’ – it seems that everyone with an agenda can dig up something and bleat about it. “This country did FTTN so it must be good!!!” – “This country did FTTN and regretted it!!!”. “This country did this” “This country didn’t!” Yeah, yeah- whatever.

                  In fact, I think we have discovered a new and tiresome logical fallacy: “Argumentum a internationalis exemplo”

                  • Fibroid
                    Posted 16/10/2013 at 4:49 pm | Permalink |

                    Of course that discourse on Telstra experience with infrastructure rollouts conveniently omits that Telstra have been rolling out FTTH in Telstra Velocity estates since January 2007, so in terms of experience in managing FTTH builds they have it all over the NBN Co.

                    To then insinuate Telstra are not up to the FTTH rollout task because as you say ‘The last time Telstra did anything similar was decades ago with the HFC rollout ‘ is just plain fanciful.

                    • Alex
                      Posted 16/10/2013 at 4:55 pm | Permalink |

                      So what your telling us is, that even the copper owning Telstra is rolling out FttP instead of FttN…

                      How damning for MT and his plan, eh?

                      • Fibroid
                        Posted 16/10/2013 at 5:19 pm | Permalink |

                        Telstra Velocity is for FTTH in greenfield estates, the Coalition NBN plan is for FTTH in greenfield estates.

                        Your point is what exactly?

                      • Alex
                        Posted 16/10/2013 at 6:00 pm | Permalink |

                        My point is obvious… try harder.

                    • MegaB
                      Posted 18/10/2013 at 11:42 am | Permalink |

                      So Telstra have some small scale recent experience with cherry picked, limited rollouts. Shall we give them a golf clap for that?

                      Hey, I rolled out some network cable in my house. I guess by your reasoning I should be able to do the NBN by myself, right?

          • GongGav
            Posted 16/10/2013 at 1:30 pm | Permalink |

            What Renai said. The issue isnt why we’re here, its how to get the job done. The rest of the world ended up going back to their equivalent of Telstra, beause thats where the expertise was. The debate is whether thats the case here or not.

            They should be able to, but the question is now about how much they’ve gutted their own capabilities in the interests of profit, and what they can deliver. Are they still capable of providing the expertise needed?

            • Posted 16/10/2013 at 1:37 pm | Permalink |

              “Are they still capable of providing the expertise needed?”

              They would have to be better at it than NBN Co. That much we can say for certain, at this point.

              • Brendan
                Posted 16/10/2013 at 2:20 pm | Permalink |

                I don’t think so. Telstra has had a history of being increasingly recalcitrant, in line with being increasingly sold off.

                People have very short memories. There were numerous attempts to bend the government over (both liberal and labor) by Telstra.

                Attempts to effectively subvert regulation in return for ‘offers’ to build new networks.

                Telstra is and always will be part of the problem. And I am yet to be convinced they are the solution, or even want to be. Asking them to mobilize to build a an entirely new network, by carving up huge chunks of existing, at short notice – and expect a fast outcome, is naive.

                Incumbents build and upgrade to stave off competition, not because it’s a cool idea.

                Telstra isn’t BT. Pretending they could be ignores a lot of the reasons of why we’re here in the first place – NBNco exists because of Telstra, not inspite of it.

              • tinman_au
                Posted 16/10/2013 at 2:25 pm | Permalink |

                In their last go at major infrastructure, the HFC roll out, they only managed about 30% before throwing in the towel though? Seeing as the CAN was a work in progress since 1880, I’m not really sure any one (modern) company could manage to replace it.

                However, I still think it was short sighted of Conroy to not include Telstra in some way, Telstra managed South Brisbane and most large greenfields fine.

                • Brendan
                  Posted 16/10/2013 at 2:36 pm | Permalink |

                  To be fair, Telstra was included in the tender process. Sol decided it wasn’t worth it. And the rest is now history.

                  I think asking Telstra to clean up the mess, is akin to apping the nightingale effect.

                  • Fibroid
                    Posted 16/10/2013 at 4:52 pm | Permalink |

                    It was not because Sol didn’t think it was worth it.

                    • Alex
                      Posted 16/10/2013 at 5:59 pm | Permalink |

                      So if it the CEO thought it was worth it, it must have been sheer incompetence… as they couldn’t even manage a compliant bid, could they?

                      And you want the same incompetence to build our FttN network…?

                      • Fibroid
                        Posted 16/10/2013 at 6:14 pm | Permalink |

                        Well you don’t have anything to worry about do you.

                        Update: Sol’s not CEO of Telstra anymore.

                      • Alex
                        Posted 16/10/2013 at 9:22 pm | Permalink |

                        True (wow twice in two days)…

                        But with all the rehashing of comms obsolescence by your heroes, he’ll probably join Ziggy as part of the back to the future, poor mans NBNCo soon enough…

                    • Brendan
                      Posted 17/10/2013 at 9:34 am | Permalink |

                      So you’re going to claim a most legally competent company (Telstra has engaged in court battles with ACCC on more than one occasion) somehow “made a mistake” then?

                      Telstra’s lawyers are steeped and blooded in communications law, this is something they eat sleep and drink. Telstra doesn’t really make mistakes, they takes calculated risks to maximise returns.

                      This is now ancient history, Fibroid. Move on.

          • haha yeah
            Posted 16/10/2013 at 2:00 pm | Permalink |

            no the problem is Telstra competitors like iiNet have no interest in building infrastructure or wearing any capital risks but just interested in regulatory gaming and accessing third party infrastructure for close to free meaning nothing gets built at all.

            • Brendan
              Posted 16/10/2013 at 2:21 pm | Permalink |

              haha yeah no. just no.

            • Posted 16/10/2013 at 2:51 pm | Permalink |

              Just sayin’ – You should probably do some homework before making silly comments like that.

            • Alex
              Posted 16/10/2013 at 4:19 pm | Permalink |

              The back to the future puzzle is now complete…

              Part A – FttN using Telstra copper
              B – Ziggy… former Mr Telstra back onboard
              C – Ridiculous NWAT inspired nonsense comments reappearing

            • quink
              Posted 16/10/2013 at 4:19 pm | Permalink |

              iiNet has what, like a $5 margin when they use a Telstra DSLAM?

              But also something like a $30 when using one of their own.

              iiNet has every incentive to make capital investments and where they’ve been able to do so cost effectively, they have done so.

              If you claim that Telstra is providing wholesale services for “close to free” (or even cost with a reasonable profit margin considering their near-monopoly status) or that things like the recent ACCC final access determination have had any effect worth speaking of, then I may as well claim that the sky is mauve. Jellyfish are floating in all the mirrors. Gravity has suddenly gone sideways.

              • haha yeah
                Posted 16/10/2013 at 4:28 pm | Permalink |

                “$5 margin…. $30″… yes, dear…. that’s called regulatory arbitrage. All it does is discourage any new infrastructure builds.

                • quink
                  Posted 16/10/2013 at 5:03 pm | Permalink |

                  Oh, right, I forgot. We’re not supposed to talk about Regional Australia. Those guys are so provincial that even The Nationals abandoned them.

                  Of course, I’m talking about areas like, let’s say, Ashmore, slap-bang in the middle of the Gold Coast, but never mind that minor detail. Let’s arbitrage them out of affordable broadband, just like Henry Ergas is suggesting. But no, that cost difference has, in so very many cases, nothing much to do with anything other than padding Telstra’s profit.

    11. Kevin Cobley
      Posted 16/10/2013 at 12:19 pm | Permalink |

      It would have worked much better if NBN Co had never been setup and Telstra separated into 2 companies one the network wholesaler and the other a retail ISP, existing shareholders having stapled shares which could be sold separately on completion of the network.
      The network wholesaler would have different directors and would be required to set fees equally for all ISP’s.
      A fixed fee could have been paid to Telstra for each connection, and left Telstra Wholesale to organize and manage the whole project, it would have eliminated the sale of pits and ducts from the equation and as the Telstra monopoly was the Liberals baby would have largely ended the political wrangling about big new socialist enterprises.
      Politics has largely screwed improving Australian telecommunications infrastructure, all the parties are to blame. It would be much better if these fools acted in the national interest instead of their own.

      • Posted 16/10/2013 at 2:53 pm | Permalink |

        @Kevin Cobley

        Wot he said.

      • quink
        Posted 16/10/2013 at 4:08 pm | Permalink |

        I think even more importantly than vertical separation, which is pretty damned important, we should never have built these two HFC networks.

        Optus expected the degree of overbuild by Telstra to be 22% when they started, they were expecting the two to be complementary. Instead it was at least 80%.

        And then Telstra was sent to privatisation and allowed to keep its HFC network in 1997. Germany tried the same thing when Deutsche Telekom was privatised. The EU intervened in 1998 and it was sold off on a region-by-region basis. All this resulted in a much better outcome than here. What other telco in the world runs both, at an infrastructure level, ADSL2+ and DOCSIS deployments covering a substantial fraction of the country it operates in?

        But no, an obsession with keeping the value of Telstra high (while hiding all externalities) just so Costello could claim to have a surplus. But Labor, under the Keating government also allowed this overbuild to happen in the first place. Point is, there’s been a bunch of decision coming up on two decades ago that have led to the creation of a very bad situation that’s unique world-wide and the Labor NBN model, despite its flaws and with strong ACCC supervision until 2040 if not beyond, represented one of the best ways of effecting structural change for the better.

        But between Switkowski at NBN Co, meeting with Henry Ergas and all, I have very very little faith left that Australia’s future in telecommunications, especially in areas not right in the middle of a CBD, is much other than dismal.

    12. Brendan
      Posted 16/10/2013 at 2:31 pm | Permalink |

      As Kevin suggests, that Telstra was sold entirely, pretty much steered us to the point we are now.

      But, as a commercial entity, without strong competition and a need to ensure share returns, they were never going to build a FTTN or FTTH network (outside of greenfields) without regulatory relaxation.

      It’s funny how everyone now seems to think they’re the good guys and will git ‘er done. :)

      Also, Renai, this has been bugging me all day – the “get the best of the week” check box is enabled by default for every single reply. Can you see if some cookie or something can be used so it is remembered? [un-checks box again]

    13. Posted 16/10/2013 at 4:23 pm | Permalink |

      That video was painful to watch. Stephen Conroy must be the most ineloquent speaker I have ever heard, surely there is somebody more qualified to handle the Broadband portfolio. Renai perhaps?

      • Fibroid
        Posted 16/10/2013 at 5:46 pm | Permalink |

        Well he is only the temp until they find a permanent.

        :)

    14. haha yeah
      Posted 16/10/2013 at 4:48 pm | Permalink |

      Malcolm is facing a real dilemma. To right the NBN ship, he needs to get Telstra more heavily involved. But Telstra under Thodey has already closed the chapter of the past and is instead busily positioning itself for the post structural separation world of competing in retail services/mobile etc. Telstra has no interest in getting too heavily involved in network building and risky stuff of guaranteeing networks speeds, rollout deadlines, etc. Why bother investing so much managerial energy, resources, time etc in building a network that you will not ultimately own or be able to exploit as a competitive advantage? Finding ways of getting Telstra “interested” is probably a key reason in appointment of the Zigster as NBNco chairman.

      • Fibroid
        Posted 16/10/2013 at 5:13 pm | Permalink |

        Your are quite correct, but also Telstra is interested in keeping its $11b Labor ‘wireless upgrade fund’ intact as well, the drip feed of those funds depends on designated (broadly existing exchange areas) areas being shut down when the FTTH rollout reaches the required 90% footprint condition as specified in the October 2011 contractual agreement.

        What is the curly one for the new NBN Co head and the Government is how to incorporate a FTTN rollout within that agreement and still keep the drip feed to Telstra going up to the end game total of $11b.
        I can see a few solutions to this, including bringing forward the timeline and the conditions of the up to $11b payments on the condition Telstra frees up use of the copper to the NBN Co for FTTN.

        Telstra and their shareholders might be quite amenable in getting all of that $11b sooner rather than hanging out until 2021 to get the total.

        • quink
          Posted 16/10/2013 at 5:22 pm | Permalink |

          Honestly, I think Telstra has enough annual profit, $3.9 billion last year, that bringing forward those $11 billion aren’t going to be as huge an incentive if it means actually doing any amount of work for that money.

          Those $11 billion represent less than three years’ profit for Telstra. Let’s say that there’s an opportunity cost of a dozen or two percent on having that sooner rather than later and we get to less than a years’ worth of profit.

          So if it comes that the coalition starts demanding remediation of copper and so on, then getting those $11 billion sooner is not going to matter to them all that much.

          • Fibroid
            Posted 16/10/2013 at 5:44 pm | Permalink |

            I think bringing forward those payments is a mighty big incentive, they have only received $399M of that $11B so far, if you factor in the cost Telstra is incurring in remediation of the ducts for NBN FTTH use it’s not much at all.

            • Alex
              Posted 16/10/2013 at 5:54 pm | Permalink |

              So the remaining $10.6B is in MT’s hands…?

        • Brendan
          Posted 17/10/2013 at 9:45 am | Permalink |

          Telstra has stated that they will consider change, however the $11 billion agreed, is not negotiable.

          It’s not a lever that can be used. Telstra really doesn’t have to negotiate.

          I doubt Ziggy will be much more of a selling point, for Telstra to re-enter a market it’s already strangulated, let alone the regulatory changes the ACCC is almost certain to level should they be come prime builder for any FTTN network.

          If the competition legislation is relaxed, then ACCC involvement is all but guaranteed.

          I think it’s pretty clear by now that Telstra has moved on.. That Turnbull is even contemplating continuing the build through a government entity, despite a FTTN build almost universally being an infrastructure owner driven path, versus simply dumping it in the market, speaks volumes.

          Telstra isn’t BT. The situation here isn’t the same as the UK.

      • quink
        Posted 16/10/2013 at 5:16 pm | Permalink |

        Very well put.

        One way is to throw a massive amount of money at them, but even the effectiveness of that is very much questionable, seeing where we’re at with the NBN at this point after $11 billion to Telstra.

        > Finding ways of getting Telstra “interested” is probably a key reason in appointment of the Zigster as NBNco chairman.

        I can’t think of two better people than the Zigster (my brain asploded) and Henry Ergas to convince a company like Telstra to do utterly bizarre things against it’s own long-term interest, especially in as “free” a market as the coalition NBN under their guidance may accomplish.

    15. John,
      Posted 16/10/2013 at 8:25 pm | Permalink |

      The sad thing is we saw all this many years ago. Or at least our Grandfathers did.

      If you read the history books, at the turn of the previous century our fledgling telephone network was in a shambles. Fragmented private companies cherry picking areas without co-ordination, little or no standardisation.
      Frequently a subscriber on one network couldn’t even call a subscriber on a competing network.

      So the Government decided to step in and nationalise the entire industry. But there were many false starts and frustrations.

      To cut a long story short, The PMG eventually realised that it needed to do the following:

      Draft special legislation to give them the power to run cables, acquire private property, etc.
      Hire permanent staff and give them a reasonable wage and good working conditions.
      Establish permanent Training Schools in each State.
      Establish Line Depots and Exchanges in each town and suburb. Even country towns.
      Set up factories to design and manufacture their own equipment.
      Establish a large body of competent engineers to design the network.

      And on and on and on.

      From the initial announcement of the NBN, I have been amazed that they intended to implement a project (supposedly bigger than the original Telephone network), but without any sign of local depots or staff.

      Bloody crazy.

      • Alex
        Posted 17/10/2013 at 9:53 am | Permalink |

        … and imagine if they had have just given up and said, the iron wires are good enough?

    16. Reality Check
      Posted 17/10/2013 at 6:54 am | Permalink |

      To all the Labor-Conroy pukes: You finally see the truth about the NBN – the government lied, the NBN lied, Stephen Conroy lied. Get your heads out of your asses and realize the only way to get the NBN on track is to involve Telstra. Had Labor actually told voters the truth about the NBN, the last election might not have gone as bad for them. Instead, voters overwhelmingly turfed them and for good reason. Conroy as head of the department responsible for the NBN – should never be heard of again. How anyone would hire a blatant liar is beyond me.

      • quink
        Posted 17/10/2013 at 8:59 am | Permalink |

        The Morgan poll, the most accurate one, when Labor still didn’t have a leader, showed them ahead.

        Support is strong for the NBN. And another poll. And this.

        And Malcolm Turnbull is a liar too, you know.

        But to say that the execution was bungled up to this point, then yes, I’ll agree with that. But then again, the whole problem of Telstra – can’t live with them, can’t live without them – is not at all something the coalition is innocent of at all.

      • Alex
        Posted 17/10/2013 at 9:00 am | Permalink |

        Seriously…

        I think it is time for a reality check.

        You think the brand of one’s political persuasion makes a difference to a politicians ethics and honesty?

        Talk about heads where the sun don’t shine.

        Read my lips, they are all politicians, they all lie… wake up.

      • GongGav
        Posted 17/10/2013 at 11:35 am | Permalink |

        You really want to put the Liberal party up as a bastion of honesty? Really? Or do you think its OK for the prime minister to claim the costs of going to compete in a triathalon?

        Renai, this guy brings nothing to the debate but trolling and inflaming comments. Head over to ZD Net to get an idea. I ask you at least watch him closely if he continues to comment, because nothing good will come of it.

        This comment should show you the base standard, its nothing new for him.

      • Lionel
        Posted 17/10/2013 at 2:37 pm | Permalink |

        Really Renai? You approved this post?

        • tinman_au
          Posted 18/10/2013 at 11:54 am | Permalink |

          After having been put on “pre-moderate” for far, far less, I tend to agree :(

      • John,
        Posted 17/10/2013 at 3:00 pm | Permalink |

        Today’s version of Telstra no longer has the skills and resources required.

        It would have to outsource for skilled staff.

        The trouble is this national resource (skilled staff) has been trashed.

    17. Fibre Builder
      Posted 17/10/2013 at 1:39 pm | Permalink |

      I am relieved to at last see a major mass-delusion dispelled by Senator Conroys comments – the belief, held by many that have posted on this site over a long time, that there was any merit whatsoever in building Fiber to Brownfield MDUs. The Senator said the fibre rollout was “significantly lagging due to … Labor’s decision to wire up individual apartments with fibre rather than plant fibre nodes in basements”

      It is now obvious to the most avid of NBN believers that this part of the policy was plain wrong. FTTBasement was the only real world choice. Conroy admits it, Quigley hinted at it many times, and the industry were privately appalled by the delay and waste this inevitably would create. It is an interesting insight into mass psychology that so many people here held on to this delusion for so long. Can we now all agree that this is now a completely and correctly dead issue?

      • Lionel
        Posted 17/10/2013 at 2:35 pm | Permalink |

        “the belief, held by many that have posted on this site over a long time, that there was any merit whatsoever in building Fiber to Brownfield MDUs.”

        Did you actually read any or are you assuming? Most people that post in in favour of FTTH were almost unanimous in agreement that FTTB was a good solution for MDUs.

        “It is now obvious to the most avid of NBN believers that this part of the policy was plain wrong.”
        It has been obvious to them for a long time.

        “It is an interesting insight into mass psychology that so many people here held on to this delusion for so long. Can we now all agree that this is now a completely and correctly dead issue?”

        Ummm, I believe we always have… enjoy your empty gloat…

      • Tony Brown
        Posted 17/10/2013 at 3:12 pm | Permalink |

        To be fair even a lot of the passionate NBN advocates did admit that they should be doing FTTB/VDSL in MDU’s – although some held on to the “All FTTP Everywhere” position.

        However, being quite frank, the only relevant view was that of Senator Stephen Conroy and he stupidly stuck to his guns the whole way through – talk about cutting off your nose to spite your face! Its a bit late for his mea culpa now, the damage is done.

        If Conroy had allowed FTTB for MDU’s then NBN Co. could have connected urban MDU’s VERY QUICKLY and brought these subs online as a pretty lucrative revenue source.

        The real beauty of this plan would have been taking the “low hanging fruit” off the tree for the private players which, in turn, would have cemented NBN Co. as the monopoly player in the fixed-access market.

        Of course, this makes it sound easier than it it actually would have been to do in practice but would have been a perfectly sound move from a business point of view, very much in line with the “Build and Bill” approach deployed by many Greenfield telcos.

        Too late now of course and the like of TPG are swarming into the void – and you have to really point the finger at Conroy’s stubbornness for letting it happen.

        • quink
          Posted 17/10/2013 at 3:38 pm | Permalink |

          > If Conroy had allowed FTTB for MDU’s then NBN Co. could have connected urban MDU’s VERY QUICKLY and brought these subs online as a pretty lucrative revenue source.

          While it’s true that NBN Co could have been hooking up large MDUs very quickly it’d have been politically very bad – why do the people in the most dense areas get the NBN so much sooner than so many others is the question they’d have been getting hammered with again and again. Remember this rollout started in rural Tasmania. And the start date for hooking up these MDUs would still have been delayed by negotiations with Telstra and establishing the transit network and all of that.

          So while it’s true that they could be doing it very quickly, I wouldn’t think it would have changed the numbers in the rollout to any degree that would have mattered by the time that apparently matters the most – the period just before the election.

          > “All FTTP Everywhere” position.

          Not all MDUs are the same. If it’s a split townhouse, then FTTB is not the way to go. On the other hand, if it’s a residential tower with Cat 5 throughout, you’d be insane to go and try to redo the lot with fibre in this rollout.

          • tinman_au
            Posted 18/10/2013 at 11:49 am | Permalink |

            Tony is right about Conroy being stubborn, the call on MDU’s happened a long time before the election, but he (Conroy) didn’t want to hear it…




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