A couple of important NBN corrections


analysis Over the past several weeks, several prominent newspaper commentators have published a number of factual inaccuracies with respect to the Federal Government’s National Broadband Network project. With the aim of informing good public policy debate, it seems appropriate to try and correct the record.

I anticipate that this analysis will be the first in an ongoing series of ‘corrections’ which Delimiter will publish with respect to media commentary about the NBN project. Although Delimiter continues to remain independent from both sides of politics and consequently is not pro- or anti-NBN, there is clearly quite a large degree of inaccurate statements being published about the project, as an extensive Whirlpool thread on the subject demonstrates.

Our first subject for correction this week is an opinionated article published on 4 January by long-time Daily Telegraph commentator Piers Akerman. Akerman’s broad argument is that the NBN is short of its predicted take-up rates, as per NBN Co’s release of customer take-up numbers on 3 January this year (PDF). I’ll address Akerman’s statements here one by one.

“The NBN is the most expensive piece of infrastructure ever committed to by the nation and is on track to be the greatest ever economic disaster any government has ever created.”

It is true, the NBN is a highly costly piece of infrastructure. Although it’s regularly compared to the Snowy Mountains hydroelectric scheme, in today’s currency that project only cost about $6 billion, while estimates for the cost of the NBN range anywhere from $25 billion to above $50 billion, depending on who you talk to.

However, as blogger Greg Jericho points out in a column on the ABC’s The Drum site, there are different types of costs. The NBN billions are not technically an “expense” for the government, as it is expected to generate a positive return — or at the very least, break even — on the government’s investment in it. Consequently, it does not appear on the Federal Budget, and expenditure on the NBN is not siphoning money away from other projects. Building the NBN, for the Government, is similar to buying stocks or bonds. The money is not technically being spent — it’s being invested. And so the term ‘expensive’ doesn’t mean much until it can be shown that the investment will make a loss. And even then, the only real ‘cost’ will be the amount of that loss.

In this light, Akerman’s comment that the NBN is an expensive piece of infrastructure is at best simplifying a complex truth and at worst misleading.

With regard to Akerman’s second statement, It is factually incorrect to state that the NBN project is on track to be an economic disaster. It is very early days for the project (which will not reach full fruition for perhaps 15 years), and the NBN is so far broadly on track (within reason) for its rollout schedule and finances. You can see this from its detailed annual report for the 2011 financial year (PDF), in which it details that it hit a number of critical milestones over that 12 months. Further evidence of this can be found in NBN Co’s corporate plan (PDF), which details its technical rollout timing, which it has broadly hit. The NBN appears to be more or less on track so far.

“Only 4000 homes have been connected to the fibre optic cable so far at a cost of more than $1 billion … NBN’s own projection for 2011 were 35,000 connections. That is a huge discrepancy and a massive failure to deliver.”

Actually, as I have previously documented following similar statements by Tony Abbott, the 35,000 figure is skewed by the fact that the vast majority of those customers were slated to be on so-called ‘greenfields Build-Operate-Transfer (BOT)’ networks — networks that may have already been built by other companies and used by NBN Co. It is very possible that these customers are already receiving high-speed fibre broadband speeds, just not technically through NBN Co. In short, these are ‘paper customers’ for NBN Co — people transferred to its books on paper, with no real network infrastructure consequences.

If you look at NBN Co’s projections for customers on its own network, which is the figure which really matters, it is likely keeping up or maybe even ahead of its projections for customer sign-up rates as at January 2012. It is factually incorrect to say that NBN Co has failed to deliver on its corporate aims so far. The real test will come by mid-2013, when it is slated to have signed up several hundred thousand active customers on its own fibre infrastructure. That’s probably the first time we will really know where the company stands.

“Everything about the NBN is dodgy.”

This is a factually incorrect statement and a generalisation. In practice, most people I have spoken to within the telecommunications sector have had high praise for NBN Co’s staff members and commercial dealings so far, especially those involving its chief executive Mike Quigley.

“The creation of the NBN Co was itself a demonstration of Labor’s lack of administrative skills and ineptitude with no background checks conducted on the men who have been handed a blank cheque drawn on the taxpayers of the nation.”

This is factually incorrect. Egon Zehnder, the executive search firm which helped the Federal Government hire Quigley, is on record as stating that it conducted “thorough background checks … including police and credit record checks, as well as personal references” on all candidates for the post of NBN Co CEO — including checks on Quigley.

Akerman appears to be referring to Quigley’s previous employment at French networking giant Alcatel-Lucent, and the links which some have drawn between the executive’s time there and allegations of corruption and bribery in Alcatel’s division covering Central American country Costa Rica. However, US officials have never sought to investigate or interview Quigley or former NBN Co Jean-Pascal Beaufret over the issue, and there is no suggestion either were involved in the Alcatel-Lucent problems.

The second article I want to go through is this piece by Dean Jaensch, a political science academic and commentator for The Advertiser in Adelaide. Like Akerman, Jaensch notes the NBN is a huge infrastructure project. His article is much more solidly based in reality, but there are still some points which need to be addressed.

“The roll-out is miles behind what NBN Co set as a target. It promised 35,000 connections by mid-2011. By the end of 2011, the NBN Co spin-doctors proudly announced that they had connected 12 per cent of the target.”

We’ve addressed this issue above. In fact, NBN Co may actually be ahead of its actual physical customer sign-up targets — just not on paper.

“We did not even have the opportunity to closely examine a prospectus before we decided to invest. The Government can claim that its mandate to inaugurate the NBN was based on the 2010 election result.”

This is factually incorrect. The Federal Government has produced a ream of documentation, reports, business cases and so on about the NBN over the past several years, and a giant debate on the issue has been ongoing for the past five years since Labor first took an initial ‘NBN’ policy to an election back in 2007. The public has had more than enough information to decide what its view is on the NBN, and has had the chance to vote on it several times. Actually as a policy, the NBN was taken to the 2007 Federal Election under Kevin Rudd. It was a popular policy at the time, and there is evidence that it was an influential issue in both the 2007 and 2010 elections, with Liberal Party research showing it was a critical issue in several key electorates.

“But it would be a good idea to let the public learn and understand what is going on in the finances and productivity of a company that they, not the Government, own and will pay for. Secrecy is not the best way to win support.”

Jaensch is implying here that NBN Co has not released enough information about its finances. However, this is factually incorrect. The company’s annual report and business case documents contain a comprehensive raft of information. In addition, NBN Co is subject to Freedom of Information laws, meaning most of its internal corporate data is publicly available upon request.

“This low productivity has the potential to be interpreted as another policy failure coming up.”

This is a bit subjective, but I would argue NBN Co’s take-up rates are only one indication of the NBN’s success and/or failure as a policy, because the public take-up rate of the NBN is only one aim of the policy as a whole.

The NBN policy also aims to restructure the telecommunications industry by separating Telstra, increase retail broadband competition, eliminate broadband blackspots, increase the overall speed of broadband in Australia, decrease the need for ongoing regulation in the sector, boost Australia’s digital economy and even create employment and boost general technology skills in the community. And yes, the Government also aims to make a financial return from the investment.

In this light, a complete analysis of the NBN’s success would need to look at many different areas, not just retail broadband take-up rates. In addition, there is also the fact that retail broadband take-up rates are somewhat irrelevant with respect to the NBN, because the imminent shutdown of other copper and HFC cable broadband networks mean that most Australians will eventually migrate onto the NBN infrastructure anyway.

There have been many other incorrect public statements about the NBN over the past few weeks, but I hope I have addressed some of the more high-profile ones by media commentators here. If you see other examples of NBN-related inaccuracies out there that need correcting, please forward them to me.


    • Give it a minute, the accusations of bias will flood in. Renai probably has his “You say bias – I hear Duh” link ready in the clipboard read to paste :)

  1. Good article, it really does show that accurate reporting, not even unbiased but at least accurate has devolved into such a non – issue for most of Australia’s press. I am speaking mainly of The Australian and the Daily Telegraph, these papers are more worthwhile as toilet paper than the commentary they provide. They really are jokes.

    • Hilarious; it looks as though the Daily Telegraph might have pulled the article down. The URL is correct, but even on the main Akerman blog page, the entry has disappeared. I’ll try and find out more tomorrow.

      • I’d read the blog entry by Akerman earlier, and while it was full of garbage, the fact that it was a blog post would (I would’ve thought) removed it from any limitations of code of conduct/responsible reporting constraints. So I’m somewhat puzzled as to why the material is not available.
        In addition the Murdoch Press outlets would appear to transferring their more contentious and ‘loose with the facts’ articles to the Opinion and Blog pages to avoid those very same obligations.

  2. Over the past several weeks?? The media have been peddling “factual inaccuracies” from the inception of the NBN.
    Good to see its FINALLY being brought to attention. There are many on Whirlpool who have been correctly pointing out the problems for a long time.

  3. I’m all for a healthy debate, but one premised on factual argument. Certain sections of the media keep throwing mud, which they hope will stick, but usually there is nary a grain of truth in the mud. The basis of this is because it has so turned into a political argument as opposed to a policy argument. As with most tabloid media (and political organisations), never let the truth get in the way of a good story…

  4. Speaking of threads on whirlpool, there was one by a fine gentleman who got fed up with similar misleading or downright incorrect crap from the daily telegraph and brought his concerns (successfully) to the Australian Press Council.
    If someone can be bothered going through the process of submitting specific complaints such as those detailed in the fine article above, there’s a slight chance it will see a reduction in the amount of FUD being thrown about and get down to an actual informed debate (probably a pipe dream I know).
    I’m not entirely sure what the council covers, their site states “Australian newspapers, magazines and associated digital outlets”, but surely it’s worth a shot?

    Here’s the link for the WP thread: http://forums.whirlpool.net.au/forum-replies.cfm?t=1835806

  5. The best (and only) way for the NBN Co to prove its worthy success is to proceed with haste to roll-out the network. This project will be the cornerstone for success or failure, at the ballot box, for the Gillard Government.

    Senator Conroy is being frustrated in his delivery efforts by the ACCC who in topical Public Service style work at minimal speed to highlight their perceived self importance. Also, of no assistance to Senator Conroy is opponents of Telstra who see advantage in attempting to frustrate the NBN Co/Telstra agreement.

    The argument pro or against the NBN is now futile. An NBN Fibre Optic system would be an advantage to Australia, that is beyond argument and the enthusiasm and ability of Mr Quigley to deliver the network is agreed so let us ignore the side issues and go full bore on the build that so much depends upon.

    • NBN Co are trying to roll out as fast as they can Syd, but your beloved Telstra keeps holding them up. Sadly, there is nothing new about Telstra hindering progress in the comms/internet arena. Thats been their modus operandi for the best part of 15 years now. Sad, but true.

    • “The best (and only) way for the NBN Co to prove its worthy success is to proceed with haste to roll-out the network.”

      Assuming that Telstra and the ACCC can make decisions “with haste” in order to not stall progress.

      Then there’s the opt-in versus opt-out debate that dragged the process down.

      “Also, of no assistance to Senator Conroy is opponents of Telstra who see advantage in attempting to frustrate the NBN Co/Telstra agreement.”

      Actually the ACCC and Telstra slowed down the process. Opponents have been all but ignored. For example the POI count is primarily an arbitrary decision by the ACCC, at the behest of Telstra.

      But lets blame all those pesky ISPs, whom (again) have mostly been ignored.

      “An NBN Fibre Optic system would be an advantage to Australia, that is beyond argument and the enthusiasm and ability of Mr Quigley to deliver the network is agreed so let us ignore the side issues and go full bore on the build that so much depends upon.”

      Apparently Mr Turnbull has not got “the memo”. He still believes the future is to maintain, indeed embrace the past.

      I do agree though. Ultimately, the returns and value of the NBN, going forward, outweigh the cost.

  6. Great Stuff Renai. The bigger problem here is industry self regulation does not appear to exist. I’m astounded by some large media outlets because their behaviour in regards to this project clearly highlights the need for industry reform. You would think they would be trying to keep a low profile… especially when media reform is on the table, in parliament at this time. The hundreds of articles about this project with outright misleading information is unheard of in recent history.

    It seems clear that media need to be taken to task for misleading the public. Currently you can write what you want about a “project” and because its not a person, you can pretty much make it up as you go along with no consequences… think election day. This holds especially true if you are a large media outlet as many people would be scared to go up against you. Then again, it also seems if you label something as “Opinion” you get a free pass.

    The press need to be held responsible for what they print. Something akin to escalating financial penalties, upheld by law, with directions provided by a judge to cease and desist. If ignored then the penalties escalate until they stop or they go broke.

  7. The problem with “journalists” like Akerman is that is clear what their agenda is, sure only a few retards are fooled by them but the real issue is that there is more than one Akerman, if he doesn’t “fill the void” for these people someone else will. It’s like Loosestping says it’s all about throwing mud and getting some to stick, this machine gun approach works well for them and they know their audience.

    These “articles” and the ones who write them should be named and shamed. I’ve done my part with the “Hall of Shame” http://delimiter.com.au/forum/national-broadband-network/121-hall-shame.html but this is just an index of articles. Some genius came up with a good idea a while ago about a current affairs show on current affairs shows http://michaelwyres.com/2012/01/idea-show-current-affairs-on-current-affairs-shows/ perhaps a website that scrutinises in minute detail these articles in a similar way would be the best option. It needs to be made clear exactly what are facts and what are unsubstantiated claims as more than often it is very blurred, especially when it comes to the NBN.

    Also the fact that some of these things are labelled “opinion” and appear in blogs is irrelevant. Since they appear on the publications websites they deserve to be scrutinised just as much imo.

  8. Being Opinion also doesn’t excuse publishing incorrect information or lies.

    Using the same journalistic standards applied. [sarc]In my opinion Malcolm Turnbull was responsible for the sub prime mortgage crisis because.he was managing director of Goldman Sachs Australia.[/sarc]
    Doesn’t mean it’s true, accurate or should ever be published as opinion.

  9. I’m all for the NBN. Regardless of me being in the industry, I feel the NBN is a great a national infrastructure project, and I like to see these posts and corrections continue.

    Keep up the good work guys.

  10. The good thing about current technology is that programs such as Paperport and Free PDF writers are readily available, ALL these opinions and articles can be saved as PDF files in appropriate folders. They can remove them or hide them behind paywalls but they can never be “lost”. I actually have a copy of the Herald Sun loudly and ecstatically proclaiming that Hewson had won the election displaying their bias as a badge of honour. The media shapes public beliefs and perceptions, potentilly as has been the case in Australia in the Goebellian tradition of tell the lie enough times and it becomes the truth, effectively controlling the Government and the Nation. They do need to be accountable as a result

  11. What does need to be considered also is that so much of our media is now foreign owned, I read an article re investments touting utilities and infrastructure as safe investments with a good guaranteed return, that same media investment adviser and the media organisation he appears in are most vociferous in demanding privatisation of all utilities and infrastructure, strange??

  12. Excellent article. Right wing Australian media outlets and the various slime bag reporters and bloggers they employ, have been running a systematic campaign against the NBN since the project’s inception. The problem is people like Akerman don’t seem to care whether they are actually reporting the facts or not. It’s clear they made up their mind about how to cover the NBN a long time ago, and they are very clever with their vatious spin tactics to make th NBN look like an unnecessary indulgence at a time of “economic uncertainty”. Unfortunately I can’t see anything changing this in the short term.

    As long as these reporters can continue to cherry pick figures out of context and frighten people with the notion that Australia is losing 50 billion dollars (which as Renai quite rightly points out, isn’t even close to the truth) they will continue to spread their lies and misinformation. It’s perfect cannon fodder to help bring down the Gillard government.

    Retractions or corrections of factually incorrect reporting are so rare when it comes to papers like the Daily Telegraph or The Australian. Even if they are caught out printing out-right lies, you’d be lucky to see a correction printed on page 8 in small type where no one will see it (after the damage to public perception is already done), and I guess since blogs aren’t really legislated, reporters like Akerman can say pretty much anything he wants. Can you imagine an apology or even a correction on Akerman’s blog? No, neither can I.

    That’s not to down-play the importance of articles like this one though. I trust Delimiter as a source of truly non-biased tech news, and any one that reads it regularly would surely agree. Its awesome to see Renai taking the time to set these issues straight in the most logical and reasonable way possible. I just hope that these facts catch on in the mainstream media (you would be a great guest on ABC’s ‘The Drum’ Renai!) so as many people as possible can be informed of the truth. Keep up the great work.

  13. As long as it provides value for money, I’m all for it.
    The politicians will never agree…time will tell.
    All I can hope is that we have made the correct decision as a nation in voting in the best people we can at the time who can appropriately manage the knowledgable people who are all fighting for their pet project to be funded.

    ..otherwise we’re all stuffed…and it’s our own fault!

    Isnt politics a wonderfully short sighted beastie…

  14. The comparison between the Snowy Mountain’s scheme and the NBN can be done in many ways. The way that makes sense to me is to compare the cost of the scheme to the countries GDP. A quick google search didn’t turn up a definite figure for Australia’s GDP in 1950, but I’m guessing it was around $20B. Our GDP now is around $1T. Scale up the $820M spent on the Snowy Mountains scheme by the same ratio and you get $41B – which is roughly what we are spending on the NBN. They will also take roughly the same amount of time to complete – a decade.

    In terms of relevance, the Snowy Mountains scheme only directly effected Victoria and NSW. The infrastructure laid down by the NBN will touch the entire country.

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