news Shadow Communications Minister Malcolm Turnbull yesterday claimed the new corporate plan released by NBN Co this week showed the project was falling “disastrously” behind its benchmarks on both financial and infrastructure rollout measures, in a trend which he described as being “insulting” to the nation’s taxpayers.
Yesterday the Federal Government released a new corporate plan for NBN Co covering the years from 2013 through 2015. The plan shows that the project as a whole had increased its projected capital investment cost by 3.9 percent overall to make a total of $37.4 billion, with the total construction time for the infrastructure having been extended by six months as delays associated with factors such as NBN Co’s contract with Telstra set in.
The Government said these factors were offset by the fact that the total capital cost for the NBN was “significantly less” than the $43 billion originally announced by the Government in April 2009, and the delay was less than the nine-month delay expected to have been caused by the lengthy negotiations around the $11 billion deal NBN Co has signed with Telstra to transfer its customers onto the NBN infrastructure and gain access to Telstra’s infrastructure.
The corporate plan also highlights the fact that NBN Co is on track to meet its goal of having commenced or completed construction of its fibre network to some 758,000 premises nationally by the end of December this year, and maintains the NBN’s projected internal rate of return on its investment of being slightly above 7 percent per annum, as revenues are also planned to rise along with the capital expenditure. In addition, the plan highlights the fact that the NBN project has hit a number of key targets over the past few years, such as finalising the Telstra deal and a similar one with Optus and executing construction contracts for every state and territory in Australia and across all of the network technologies planned to be used in the NBN.
However, Turnbull said the NBN project was “falling disastrously behind every benchmark the Government has set for it except one — the amount of taxpayers’ money being spent”. “Senator Conroy today released a revised NBN 2012 Corporate Plan showing costs are higher and NBN Co needs more investment from the Commonwealth than previously stated – yet the NBN fibre network is now projected to reach only one in four of the 1.3 million households the previous 2010 Corporate Plan estimated would be able to connect to the network by mid-2013,” said Turnbull in a statement yesterday available online, in which he also included the table below to demonstrate what he said were the blowouts.
“Labor’s original plan for the NBN in 2007 promised only $4.7 billion of taxpayers’ funds would be needed to finish it. Today’s forecasts show the operating and capital costs of the NBN from now to 2021 have blown out by $4.6 billion in the past two years alone. Even more insulting to taxpayers is the forecast that while NBN Co is yet to meet a single one of its targets, the budget for ‘indirect’ operating expenses – primarily staff costs – has more than doubled, from $3.7 billion to $7.8 billion.”
“NBN Co may not be able to put together a budget or roll out a network, but it knows how to take care of itself.”
Turnbull said since the NBN connected its first customer onto its network in June 2010, the project had been connecting customers to its fibre network at an average rate of about six per day. But to meet its targets, this rate would have to increase by more than one thousand fold to around 6,000 per day by 2016, he said. “Senator Conroy admitted that the original 2010 Corporate Plan should no longer be taken seriously – due to policies imposed on the NBN and decisions taken by the NBN,” said Turnbull. “And yet, we are to believe that if re-elected, Labor’s project will perform even better than originally thought.”
“It’s time Senator Conroy had a serious conversation with the Australian public and admitted that houses needing broadband upgrades the most have not been prioritised. The NBN needs to be directed to be given a definitive budget that it must stick to. And the Productivity Commission should be asked to conduct a thorough cost benefit analysis to assess the most efficient means of upgrading Australians’ broadband as quickly as possible.”
Turnbull’s statement is a flawless exercise in selective examination of NBN Co’s corporate plan. While it’s hard to dispute any of the individual statements which the Liberal MP has made as being factually incorrect, in total they appear to present an extremely misleading view of the NBN.
Take Turnbull’s linkage of the $4.7 billion allocated for Labor’s original NBN plan back in 2007. This proposal — which would have seen fibre rolled out only to neighbourhood cabinets, instead of all the way to premises — was cancelled by Labor and replaced with the much more ambitious current NBN plan, then budgeted at $43 billion. Why? Because the panel of experts who appraised private sector bids to be involved in that project found that there was no suitable bid, and that the FTTN project should not go ahead. For Turnbull to link that project with the current NBN project but not mention this is disingenuous.
Secondly, Turnbull has implied that NBN Co has doubled the amount of money it’s spending on its staff costs, and he’s walking a fine line here where he almost accuses NBN Co of nepotism in paying its staff too much.
To my mind, this is entirely inappropriate, and it’s hard to see how the Shadow Communications Minister can possibly justify this kind of claim. I am even finding it hard to find in the NBN corporate plan where the $7.8 billion figure has been drawn from. The closest I can see is on page 77 of the report, where NBN Co provides a breakdown of operating expenditure over the decades the project will be active. There isn’t a total sum for indirect costs, but there is an “other” row which we can take to be indirect costs. If you tally it up it comes out higher than $7.8 billion.
However, this is a highly detailed page, and if this is where Turnbull has drawn his indirect costs figure from, then I would say he has not provided a sufficient level of detail to make his claim that NBN Co is spending too much on its staff. What would be the right amount to spend on staff for a national broadband network? Does Turnbull have an opinion? Because this is a very complex question, and not one easily answered in a throwaway line in a press release, based on a high-level figure from a complex business plan.
Turnbull is also correct that NBN Co’s rate of customer sign-up has not been very fast. But that’s pretty much to be expected — we’re talking about a decade-long project here, in which it takes years to bed down infrastructure. The complexity of the task involved should be illustrated by the fact that it appears to have taken the best part of several years just to finalise NBN Co’s negotiations with Telstra over the shutdown of the company’s existing fixed infrastructure and the transferral of its customers onto the NBN.
With the rollout of the NBN, we’re talking about nothing less than the reformation of Australia’s entire telecommunications sector. The planning for this project has been immense, and to boil it all down to a headline figure of how many customers have been connected — especially just months before the NBN starts connecting a quarter of a million customers to its fibre network — is disingenuous. In a year’s time, the NBN’s fibre will have been rolled out past hundreds of thousands of customer premises, with a million more on the way over the succeeding year.
Turnbull mocks NBN Co’s rate of network deployment, and points out that the company will need to increase its rollout speeds to pass some 6,000 premises per day to meet its goals. But he doesn’t acknowledge that this is actually precisely what NBN Co is planning for — in fact, during peak years, it will come close to hitting 7,000 premises per day.
As with any gargantuan, nation-wide exercise involving billions of dollars and tens of thousands of people, the NBN is a complex project which has been slow to start — and there is some valid criticism to be made that the Government didn’t plan as well as it could have to begin with. However, Turnbull has completely ignored the fact that all of that planning has now been done and the NBN is now in full ramp-up phase. The rollout is happening now, and the corporate plan shows that.
If Turnbull were an honourable politician, he would acknowledge the strengths and successes of the NBN project, as well as criticising its weaknesses and failures. But in his statement yesterday, he did not. He simply nitpicked tiny tidbits of the NBN’s new corporate plan for criticism without addressing the overall situation. Frankly, I consider this kind of behaviour below the Member for Wentworth, and I have to acknowledge I am disappointed to see an intellectual of his stature stoop to such a level. Why isn’t Turnbull looking at the big picture here, instead of tiny details which don’t tell the whole story?
Image credit: Office of Malcolm Turnbull