Great articles on other sites
- Unless kids are working, coding should not be taught: Abbott | ZDNet
- CSIRO, NICTA merger could cost 200 jobs - Training & Development - News - iTnews.com.au
- Sydney Opal card travel history can be accessed by police
- NBN analysis 'like foxes reviewing the hen house': Clare
- Call made to end inflight phone ban
- Australian government undoing profit shifting clamp down: Labor
- National security law reforms
- Victorian Government calls for contributions to shape Victoria’s digital economy
- Will IBM pip Azure at the Aussie cloud post?
- Competition watchdog should break up Foxtel monopoly: Ludlam
News, Telecommunications - Written by Renai LeMay on Thursday, April 17, 2014 11:01 - 169 Comments
Turnbull lies on NBN to Triple J listeners
news Malcolm Turnbull yesterday made several statements on the ABC’s Triple J radio station regarding financial projections for Labor’s National Broadband Network project which the Communications Minister is aware are false, with the former investment banker inaccurately conflating investment capital and government expenses for the project as well as exaggerating financial figures.
In an interview on Triple J yesterday (listen to the entire session here), Turnbull was asked by a listener why he had given NBN Co the OK to go ahead with the Coalition’s preferred “Multi-Technology Mix” rollout model for the project, when the cost/benefit analysis long promised by the Coalition for the project had not yet been completed. When in Opposition, Turnbull constantly criticised the then-Labor Federal Government for not having completed a cost/benefit analysis into its NBN policy before going ahead with the project.
In response, Turnbull stated that NBN Co’s Strategic Review published last year “concluded that if we had continued with Labor’s all-fibre rollout, it would have taken us four more years to complete it, and $73 billion”. The Communications Minister added: “In order to get the project done within an affordable cost envelope, we needed to be able to give the company the flexibility to use different technology, and that is the MTM model — $41 billion — $32 billion cheaper.”
“There is a very big choice between us and Labor,” Turnbull said. “Labor made a single technology platform — fibre to the premises — a religious or political objective. They said everybody has got to have fibre to the premises to 93 percent of Australia, regardless of what it costs, regardless of how long it takes. No matter what.”
“What we’ve said is look, in the real world, time and money do matter, and affordability do matter, whether it’s for the government, as the investor, or for consumers like us as purchasers of internet access. What we’ve done is given NBN Co the flexibility to use the technology which best suits the environment of a particular location. And obviously, you would use as much fibre to the premises as you can, but the question is one of affordability.”
However, NBN Co’s Strategic Review document, which Turnbull has read and is familiar with, directly contradicts some of Turnbull’s statements.
Page 17 of the document (available here in PDF format) contains a table displaying the various scenarios which NBN Co has examined in its effort to meet the new Federal Government’s objective of being able to deliver high-speed broadband to all Australians. There are six options, ranging from the ‘Optimised Multi-Technology’ mix preferred by the Coalition (using a mix of Labor’s preferred Fibre to the Premises technology, as well as the technically inferior Fibre to the Node and HFC cable options) to Labor’s existing policy, which is standardised on Fibre to the Premises.
The first problem with Turnbull’s statement is that the Minister has conflated government investment with expenses, alleging that the Coalition’s MTM policy is “$32 billion cheaper” than Labor’s.
However, the table makes clear that in almost every scenario, NBN Co would actually make a modest return on the Government’s investment in the project, ranging from 1.7 percent to 5.3 percent. This means that the Coalition’s MTM policy would make slightly more money than Labor’s FTTP option — but neither will, in the long-run, cost the Government anything. The money will be recouped through monthly broadband subscriber fees.
Basic accounting standards, which Turnbull is aware of from his history as an investment banker (he was managing director of Goldman Sachs Australia from 1997 to 2001) hold that there is a key difference between invested capital, which may make a return or a loss, and an expense, which is defined as a cost against incoming revenue. As different types of money they are treated very differently for accounting purposes.
Several years ago the Parliamentary Library of Australia produced a definitive statement on this exact matter, noting that the Federal Government’s capital invested in NBN Co could not be listed as an expense on the Federal Budget. Turnbull is aware of this document and explicitly acknowledged this treatment of the Federal Government’s capital investment in NBN Co in a small note published at the end of an article in August 2012.
“As far as the balance sheet point is concerned, let us just cut through the fog of spin and nonsense here,” wrote Turnbull at the time. “A dollar saved on the NBN Co build is a dollar less for the Commonwealth to borrow and service with interest,” he said. “Under the accounting rules the expenditure on the NBN does not count towards the budget outcome – so much deficit or surplus – but it is cash – real money – nonetheless and it does add to the debt burden of Australians.”
The only case where NBN Co would not make a return on the Government’s investment, according to the company’s Strategic Review, is in one revenue projection case for Labor’s original FTTP policy; but even then it would be expected to make only a modest loss — meaning the project would still not be listed as an expense for the Federal Government, and the Government would take only a small hit to its finances.
Other elements of Turnbull’s statements are also inaccurate.
Turnbull stated that the Coalition’s version of the NBN would be $32 billion cheaper than Labor’s. However, the table makes it clear that if Labor’s all-fibre FTTP policy was radically reworked, and the Government funded the capital entirely itself, Labor’s FTTP policy would cost $54 billion, rather than $73 billion — just $15 billion more than the Coalition’s version.
It is also believed that the value of NBN Co’s infrastructure at that point, being an all-fibre build rather than a mix of technologies — would make the company worth significantly more as an going concern in the long-term, because it would not need to invest further capital to upgrade its fundamental optic fibre network for a period estimated between 50 and 100 years. NBN Co executive chairman Ziggy Switkowski has stated that portions of the MTM Mix option would need upgrading within as short a period as five years.
Timing is also an issue. Turnbull told Triple J listeners that Labor’s NBN policy would take four more years to deliver than the Coalition’s MTM policy, but the Strategic Review document shows that if the network was re-worked, it would take only three years.
Lastly, Turnbull stated: “Labor made a single technology platform — fibre to the premises — a religious or political objective. They said everybody has got to have fibre to the premises to 93 percent of Australia, regardless of what it costs, regardless of how long it takes. No matter what.”
This statement is, as Turnbull is aware, also factually inaccurate. When the NBN project was announced in April 2009, it featured a capital investment scheme of $43 billion and a timeframe of 2020 for the rollout to be completed. Furthermore, the FTTP model was chosen for several reasons: Both because in the long-term (50-100 years), it is currently the only viable technology to service Australia’s growing technology needs, but also because of the need to restructure the telecommunications industry by overbuilding Telstra’s existing copper network, and hence removing Telstra from its monopoly position in Australia’s telecommunications market.
Turnbull’s comments on Triple J this week represent only the latest time the Member for Wentworth has consciously misled the public with relation to an aspect of Labor’s NBN policy. For example, in August 2013, during an election debate on the ABC’s Lateline project, Turnbull appeared to have made a deliberate attempt to mislead the public about the cost of connecting to the NBN’s 1Gbps fibre service, stating that such connections would cost “at least $20,000″ a month, despite the fact that the Liberal MP was aware the cost is likely to be much less.
The other side of politics has also been guilty of misleading Australians about the project.
Also during the election period, for example, then-Communications Minister Anthony Albanese appeared to have issued a media release deliberately misleading Newcastle residents about how the Coalition’s rival NBN policy would affect the area, with the Labor MP falsely stating that the NSW city would “miss out” on upgraded broadband entirely under the Coalition’s plan.
Labor MPs in general also engaged in misrepresentation when it comes to the Coalition’s NBN policy. A number of ALP election advertisements have inaccurately claimed, for example, that Liberal policy would see Australians forced to pay up to $5,000, or else they would be left “on the old, slow copper network”, while connection to Labor’s fibre-based NBN would be free. In fact, under all circumstances the Coalition still plans to provide upgraded broadband connections to all Australians not currently on the existing HFC cable networks. Copper is a feature of the Coalition’s preferred technology — but significantly faster speeds are still faster on FTTN than on existing copper networks.
Like many Australians, I was outraged yesterday when I listened to Turnbull’s comments on Triple J. The Communications Minister simply cannot continue to conflate capital investment with expenses, if he wishes to maintain any veneer of credibility. NBN Co’s own Strategic Review — produced under the Coalition’s watch — indicates that under almost all scenarios, NBN Co’s rollout will make a return on investment. This project will not cost money. The company’s own document shows it will MAKE money.
Claiming Labor’s all-fibre NBN policy will cost $73 billion is like claiming that a house in Turnbull’s electorate of Wentworth would cost $2 million. Sure, it would — on paper. But in real life you also get the asset you bought, which will most definitely appreciate in value in time. It’s meaningless to talk about investing capital unless you also talk about projected returns, as Turnbull is very aware.
In addition, as he has previously done in other cases (for example, the Coalition’s background briefing paper which erroneously claimed Labor’s NBN policy would cost $94 billion to deliver), Turnbull has deliberately taken the worst case scenario here with respect to Labor’s NBN policy, despite the fact that the Strategic Review document itself contains a scenario which would deliver Labor’s vision for significantly less.
NBN Co’s Strategic Review makes it very clear that the company could deliver an all-fibre FTTP network to Australians for just $15 billion more and only three years later than the Coalition’s Multi-Technology Mix project. This infrastructure would be vastly superior to the Coalition’s version and would not need to be upgraded. In the long-term, I strongly suspect it would be worth more financially than the Coalition’s MTM Mix.
With this in mind, Australians are very entitled to ask: Why is the Coalition not focusing on the option that would deliver us significantly better value for money? Why buy a second-hand 1979 Toyota Corolla when we could get a Tesla Model S for only a little bit more, and only a little later? Seems like basic common sense to me.
One can only describe what Turnbull said on Triple J yesterday as “Turnbullian” logic which doesn’t make sense in the real world. Black is white, one plus one equals three, and capital investment equals expense. A new era of spin has truly begun.
Image credit: Office of Malcolm Turnbull, NBN Co
Leave a Comment
Blog, Enterprise IT - Jul 5, 2014 13:53 - 0 Comments
More In Enterprise IT
- Qld’s Grant joins analyst firm IBRS
- Westpac dumps desk phones for Samsung Android mobiles
- Ministers’ cloud approval lasted just a year
- WA Govt can’t fund school IT upgrades
- Turnbull outlines Govt ICT vision
Blog, Telecommunications - Jul 5, 2014 12:12 - 0 Comments
More In Telecommunications
- Telstra gets $150m for NBN FTTN trial
- How Australia got online 25 years ago
- Palmer pushes for minimalist NBN policy
- NBN debate heats up at IEEE conference
- Spirit deploys 200Mbps FTTB to Southbank
Analysis, Industry, Internet - Jun 23, 2014 10:33 - 0 Comments
More In Industry
- ABC tech reporter founds micro-transactions startup
- Australia’s got ICT talent: So how do we make the most of it?
- ‘Thriving’ Aussie tech incubator scene a ‘mirage’
- Corporate highs: The US P-TECH model for schools in Australia?
- Facebook wants to hide its Australian earnings
Blog, Digital Rights - Jun 30, 2014 22:24 - 0 Comments
More In Digital Rights
- “Rational debate” needed around surveillance
- Web blocking technically impossible: iiNet reminds Govt of undisputed fact
- We like e-readers – but library users are still borrowing books
- Coalition, Labor support new surveillance laws
- Anti-piracy laws will increase piracy, says Budde