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Featured, News, Telecommunications - Written by Renai LeMay on Wednesday, April 9, 2014 15:25 - 101 Comments
Hypocrisy: Turnbull approves MTM NBN without cost/benefit analysis
news Communications Minister Malcolm Turnbull has ordered the National Broadband Network Company to go ahead with the controversial ‘Multi-Technology Mix’ option for its broadband rollout, despite the fact that the cost/benefit analysis being conducted into the project will not be completed until the middle of 2014.
In Opposition, one of the central criticisms which Turnbull levelled at the then-Labor Federal Government was that it had initiated its popular NBN project without conducting a cost/benefit analysis into the project’s fundamental underpinnings. Such cost/benefit analyses are commonly conducted by government agency Infrastructure Australia.
The Coalition’s broadband policy document released in April 2013 (PDF) states regarding Labor’s NBN project: “NBN Co was created as a taxpayer-owned monopoly with a mandate to replace Telstra’s copper with fibre (and achieve a competition policy objective: the separation of Telstra’s network from its retail business). This decision was made in haste with scarcely any analysis of alternative options and with no attempt to measure its costs or benefits. ”
It further adds: “Labor’s re-establishment of a public monopoly in a crucial sector of the economy, and its archaic refusal to weigh options, costs and benefits, or seek genuinely expert advice, demonstrate disdain for the proven policy principles of the past 30 years.”
To address this problem, in mid-December Turnbull appointed a panel of experts, to be led by Michael Vertigan, a senior top-level Tasmanian businessman and executive who has also served as the secretary of the Department of Premier and Cabinet, as well as having an involvement with a number of other Tasmanian initiatives.
The panel is to conduct what Turnbull described as an “independent” costs/benefit analysis and review of regulation associated with the NBN. The analysis will analyse the economic and social costs and benefits (including both direct and indirect effects) arising from the availability of broadband of differing properties via various technologies, and to make recommendations on the role of Government support and a number of other longer-term industry matters. It is expected to be handed down in mid-2014.
However, in a speech delivered to the CommsDay Summit in Sydney this morning (and available online), Turnbull revealed he and fellow NBN shareholder minister, Finance Minister Mathias Cormann, had already given NBN Co the go ahead to significantly modify its broadband rollout plan, without awaiting the findings of the review.
Under Labor’s previous NBN policy, some 93 percent of Australian premises were to have received fibre directly to the premise and the remainder satellite or wireless, with a new government wholesale monopoly set up in the form of NBN Co to both deploy and operate the network. The model was directly aimed at delivering Australians the best possible national fixed telecommunications network, while also resolving long-term structural problems in the sector such as the vertical integration of former national telco monopolist Telstra.
However, NBN Co’s Strategic Review published in December last year changed the paradigm, with the company recommending (and the Coalition supporting) a vision in which up to a third of Australian premises will be served by the existing HFC cable networks of Telstra and Optus, with Fibre to the Node and Fibre to the Basement used in other areas not already covered by Labor’s FTTP approach. Satellite and wireless is to be used to cover some rural and regional areas as under Labor’s previous plan. This new model is known as the “Multi-Technology Mix” (MTM), or “the Coalition’s Broadband Network” (CBN).
“The Government has considered the NBN Co Strategic Review’s report of 12 December 2013 and agrees that the NBN rollout should transition from a primarily fibre to the premises (FTTP) model to the ‘optimised multi-technology mix’ model the Review recommends,” the two ministers wrote to NBN Co in a revised Statement of Expectations (PDF) to the company today.
The two ministers attached a number of conditions which NBN Co should have regard to when planning its network, including the fact that NBN Co would need to minimise peak funding requirements, optimise economic returns and enhance its financial viability.
“The design of a multi-technology mix NBN will be guided by the Government’s policy objectives of providing download data rates (and proportionate upload rates) of at least 25Mbps to all premises and at least 50Mbps to 90 percent of fixed-line premises as soon as possible,” the two ministers wrote. “NBN Co will ensure upgrade paths are available as required.”
Other issues the Government wishes NBN Co to take regard of are the need to prioritise areas as being poorly served with broadband; the need to ensure the “business rules” it establishes to determine which area will receive what broadband technology were “transparent” to the community, and “periodically updated; the need to integrate existing HFC cable networks owned by Telstra and Optus into the rollout where this is “feasible and economically beneficial”; and that NBN Co will trial various fibre network architectures to inform the company’s planning and decisions. Other issues were also to be considered.
Turnbull and Cormann also noted that the next significant document which will outline NBN Co’s next moved will be the company’s forthcoming Corporate Plan for the years from 2014 to 2017. And the two ministers noted the importance of transparency measures on the part of NBN Co, including various annual and quarterly reports and briefing sessions.
“The Statement is consistent with the Government’s view that rather than imposing technological constraints on NBN Co, politicians are better placed telling the company what objectives it should pursue, and how much Government money they have to achieve them,” said Turnbull at the CommsDay Summit this morning.
“I can genuinely say to you this morning that I am increasingly, if given the history a little cautiously, confident about the NBN. I am confident that we are assembling the right team to successfully run the company. I am confident that a more pragmatic and cost effective high speed network can be deployed. And I am cautiously confident that we have begun to reset unrealistic expectations in the community and in doing so begun to correct a considerable amount of misinformation.”
“I am becoming confident (this may sound idealistic) that some-time in the near future we may be able to talk less about plumbing, and focus more on how the communications sector and broader economy need to adapt and change to make the most of ubiquitous high speed broadband.”
“I don’t want to overstate our progress since September. There’s an immense amount of work yet to be done. NBN Co’s board and management need to transform the company’s culture and capabilities, settle new deals with Telstra and Optus, and resolve the many unhelpful surprises we’ve found inside NBN Co.”
“The Government has to settle important industry questions while picking our way through a minefield of interlocking policies, laws and commercial obligations, where everything is connected and nothing is quite as it appears. It’s a rum legacy. I sometimes wonder what Senator Conroy could have been thinking when he put this mess together – and then remind myself some questions are better left unanswered.”
I have only one question for Minister Turnbull today, and I suspect it is one of those that will forever go unanswered: How can the Minister possibly justify the Government’s decision to go ahead with the ‘Multi-Technology Mix’ for its broadband project, when it has not completed a cost/benefit analysis into the project? And, if the Minister will allow me a relevant follow-up question: Does the Minister consider it incredibly hypocritical to go ahead without a cost/benefit analysis, having ranted on for three straight years in Opposition about how appalling it was for Labor to have done the same?
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