Optus wants NBN Co management outsourced


The chief executive of Optus has delivered a landmark speech outlining a wide range of controls Australia’s number two telco wants implemented on Labor’s flagship National Broadband Network project, including the complete outsourcing of NBN Co’s management on a recurring basis.

Speaking at the Kickstart Forum on the Gold Coast this afternoon, O’Sullivan told a packed room of journalists that certain controls needed to be placed on the NBN project to ensure NBN Co didn’t simply become another Telstra.

Over the past several years NBN Co has directly hired an extensive management team led by chief executive Mike Quigley, with executives being dragged from a wide range of positions across the telecommunications and other industries to help steer the construction and operation of the NBN.

However, O’Sullivan outlined an Optus proposal where “the operation of NBN itself should be put out to competitive tender” – with groups competing to run NBN Co for periods – with contracts being renewed every three, five or seven years, for example – contingent on the performance of each team. NBN Co’s management structure could even be split up, O’Sullivan argued – so that, for example, one group could run each state or smaller geographic area.

The advantages of such a structure, the Optus chief said, would be that it would put NBN Co’s management under what he described as “market pressure”, and the creation of another layer of telco companies in the Australian landscape would be fostered. In addition, he said, putting the work out to tender would ensure regular “checks and balances” on NBN Co, to ensure it didn’t become similar to a greedy toll road operator – constantly raising prices to cover revenue shortfalls.

Secondly, O’Sullivan called for an independent oversight body to be set up to regulate NBN Co.

A number of parliamentary committees, for example, have already been proposed to fulfill such a function – and NBN Co itself is required to report both to its shareholder Ministers in the finance and communications portfolios, as well as appearing before Senate Estimates committees to justify its efforts.

O’Sullivan acknowledged that NBN Co’s Quigley had already highlighted the dangers of too much oversight in the construction of the NBN. However, the Optus chief compared the sort of oversight body he was proposing to the Reserve Bank – which he noted was completely independent from the political process.

In addition, the executive again called for Telstra’s deal with NBN Co – which has not yet been finalized – to be released into the public domain. “Telstra shareholders should have the right to sign off on that deal, but so should all Australians,” he said.

O’Sullivan claimed the $11 billion which NBN Co expects to pay to Telstra under the deal, to move Telstra’s customers and some infrastructure into the fibre company, would “greatly distort the market” when the NBN was rolled out – allowing Telstra to bulk purchase market share in the new fibre world.

“There will be a land grab in the first years of the NBN … The economics of acquisition will be strongly distorted by the deal. We’re not asking for any favours here. All we’re asking is that that industry gets a level playing field as NBN Co is launched,” said O’Sullivan.

Lastly, the Optus chief called for greater clarity around the regulation of the next generation of applications content which will be delivered over the fibre network. He claimed that companies like Google and eBay had achieved a “winner take all” dominance over the internet.

“There is a huge cliff edge for any second entrant which wants to be a challenger in those application areas,” he said, highlighting the problems being suffered by Telstra advertising and search division Sensis – which has recently revealed it’s suffering sharply as a result of the decline in interest in print advertising.

O’Sullivan suggested that “hyperlinks” could be placed on the websites of companies like Google and eBay, linking to competitors – or even that the traffic for such sites could be auctioned to provide access for “others who might bid to hold that auction, or for providing that search at a better price”.

Overall, O’Sullivan’s speech focused on the need to maintain the push for increased competition in the Australian marketplace, with the Optus chief frequently mentioning what he saw as Telstra’s still-dominant position in Australia and the efforts of Optus and others in addressing what O’Sullivan saw as market inequality.

“I can assure you, this is not a cosy duopoly,” O’Sullivan said. “In fact, to thrive, we have to be the champions of competition.”


  1. Has this dude lost his mind? Tender off competitive management? What is this? Dune? It’s already an external company to the Commonwealth as much as it can be without it being uncontrollable should it go rogue yet the dude wants to push it out yet says if it doesn’t it’ll be like Telstra? Seriously going to need to have his head read, if he isn’t careful he’ll doom his company and Telstra will slowly pull their finger out and start being more competitive.

    • lol awesome Dune reference — I had to think about that for a second :)

      I agree, O’Sullivan’s outsourcing proposal struck me as appalling — it made me believe he is really quite far from the current debate around the National Broadband Network. There is simply no way that the Federal Government would ever agree to putting management of NBN Co out to tender … and neither should they. It would engender instability and an incredible level of resentment on the part of NBN Co employees — why should you feel that the management has the best interests of employees and the company at heart, when they have the justify their existence in competitive tenders every few years?

      O’Sullivan has jumped the shark drastically, in my opinion — his comments about Google and eBay were further examples of ludicrous thinking.

  2. Certainly an interesting idea. I do see a number of problems with it though.

    “one group could run each state or smaller geographic area” – That essentially creates a political system inside the running of NBN Co. The network is supposed to be uniform across the country, I don’t want to see parts of the country getting a better deal due to internal politicking within the management.

    “creation of another layer of telco companies in the Australian landscape would be fostered” – Errr…no. Another layer of unneeded and costly bureaucracy would be created, not telco’s.

    “Telstra to bulk purchase market share in the new fibre world.” So? What’s stopping Optus or TPG or Internode or anyone else putting their customers straight onto the NBN when it becomes available? The idea of this “market share” thing is a bit of a red herring – no matter who is providing the retail service, the network will be the NBN – and that’s what matters.

    • O’Sullivan’s comments were particularly hypocritical when you consider the fact that this afternoon he refused to disclose anything about Optus’ negotiations with NBN Co — despite calling for Telstra’s to be made publicly available.

      • O’Sullivan has been in his bunker playing WoW and ignoring the rest of the industry for far too long. What a completely out of touch bunch of statements.

        It’s almost as if he’s scared that the “Quigley and the Quiglets” will still be in charge fifty years from now – like there won’t be a single change of management personnel ever.

        In fact, that’s probably what he is scared of! An organisation willing to innovate instead of stagnating – (read: Optus).

        • No kidding. It just seems like he’s disconnected from what’s going on at the moment. I respect the guy quite a bit – but I feel his time is likely up at Optus.

  3. I don’t agree with pretty much anything he said, and the idea of auctioning ‘search traffic’ absolutely scares the shit out of me. I don’t want my traffic redirected to some other search provider if I type in google.com (I’m assuming that’s what he means by this)

  4. The search thing is just bizarre. If I understand what he’s talking about, it would actually make competition harder because traffic will just go to the highest bidder, rather than whom ever provides the best service…

    I use Google for search because they’re the best, if someone else came along who provided better results, I’d switch in an instant. No need to “auction” traffic.

    • Yeah the auctioning traffic idea was the most bizarre part of his speech yesterday — I just couldn’t see why he would propose something like that. Makes absolutely no sense to any rational internetist.

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