full opinion/analysis by Renai LeMay
26 September 2013
If Malcolm Turnbull is serious about making sure all Australians quickly get access to affordable, high-speed broadband, there is one man he must consider appointing to the board of NBN Co: The entrepreneur who was instrumental in bringing Australians broadband in the first place. Australia’s own Gordon Freeman; a giant who looms large in the telecommunications annals; an outside-the-box innovator; the thinking man’s NBN board director. Internode founder Simon Hackett.
It seems to be almost a daily occurrence at the moment that the mainstream media canvasses new names for executives who should be appointed to help steer the troubled affairs of the National Broadband Network Company.
Although Communications Minister Malcolm Turnbull hasn’t formally confirmed the appointment, pretty much everyone at this point expects that, despite his abject lack of recent or historical experience actually deploying telecommunications networks, former Telstra and Optus CEO Ziggy Switkowski will be appointed sometime next week to lead NBN Co’s board and management team as executive chairman.
With this supposed pillar of stability (who exited both his former telco roles under questionable circumstances) in place, other names are being thrown up in supporting roles.
When it comes to the role of permanent chief executive (a position which also carries with it a board role) to replace NBN Co’s retiring leader Mike Quigley, The Australian newspaper has suggested names such as former Seven executive Rohan Lund, departed NBN Co head of construction Patrick Flannigan and long-time Optus chief Paul O’Sullivan. The Financial Review has canvassed options such as executives from Telstra, BT and New Zealand telco Chorus. And now that Turnbull has asked NBN Co’s board to resign, the speculation has begun about non-executive board directors as well. Today ex-Leighton chief Wal King had his hat involuntarily thrown into the ring.
The constant speculation about NBN Co is endlessly fascinating, because it actually does really matter who leads NBN Co, at both a board and an executive level.
If you examine the history of NBN Co during its first few years, what you see is that the company’s leaders have clearly put a stamp on the company’s approach to every aspect of its business. Its first leader, the engineer-by-training Mike Quigley, very likely set the tone for the company’s long-term culture. In its first four years, NBN Co has become renowned for being a centre of technical excellence and for employing some of the nation’s greatest engineering talent; but also for displaying a degree of naivity at times when it comes to the political and commercial reality which it operates in. NBN Co’s technology choices have been peerless; its ability to navigate the broader ecosystem and actually get its rollout job done has been less than spectacular.
Then too, NBN Co’s board has definitely put its stamp on the company. From an external perspective, its first chairman, investment banker Harrison Young, appeared to display a markedly hands-off approach to the company he was responsible for keeping accountable; appearing to let its executive team more off the leash than the Coalition would have preferred, given its ongoing series of missed rollout deadlines. The ongoing intervention of then-Communications Minister Stephen Conroy into the process may have had something to do with Harrison’s approach. By all accounts, Conroy was far from the hands-off shareholder minister that NBN Co’s board might have preferred him to be.
NBN Co’s short-lived second chairman, former McKinsey consultant and partner Siobhan McKenna, appeared to drastically tighten the reins on Quigley, attempting to bring a higher degree of commercial accountability to NBN Co; but by the time McKenna took office, such efforts were too little, too late to keep NBN Co’s highly delayed rollout on track.
In this context, to move towards resolving its corporate issues, what NBN Co needs most right now is a combination of two types of leadership.
At the board level, as Turnbull has accurately pointed out, NBN Co desperately needs executives with deep experience with telecommunications network construction and operation, as well as executives experienced in the construction industry itself. And it needs a strong chairman with such experience to be able to coordinate board advice and apply a strong degree of pressure and accountability to NBN Co’s executive team. McKenna showed signs of being able to deliver such outcomes; but always lacked the industry experience to give the executive’s oversight of NBN Co real clout.
At the executive level, what NBN Co needs right now is, to put it bluntly, a whip hand.
By most accounts, NBN Co’s founding chief executive Mike Quigley has done an extraordinarily good job with the company. As I wrote upon the announcement of his retirement, given the magnitude of his task in establishing NBN Co and the acid political environment in which he did so, Quigley’s accomplishment with NBN Co has been incredible:
“… it’s very hard not to argue that Quigley hasn’t given it his absolute damndest with the NBN over its first four years of life. And it’s also very hard not to argue — considering the unbelievable complexity of his task — that Quigley has done an amazing, superhuman job, with little complaint, and bearing all the slings and arrows that outrageous fortune has slung at him.
I would argue, and I’m not alone, that if it were not for Mike Quigley, the project would not have come anywhere near like this far. What the executive has accomplished with the NBN is close to being unprecedented in Australia’s history, and there are very few executives of any kind who could have pulled it off under the conditions he did.”
However, with NBN Co established and having close to 3,000 staff, billions of dollars of network equipment and construction contracts signed, and having learnt a great deal about the difficulties of deploying fundamental telecommunications infrastructure, what it needs now is not a visionary engineer like Quigley. It needs an extremely cold-hearted, bloody-minded, brutal dictator who can pull the project sharply into line and, through sheer force of will, accelerate it to the point where it is rapidly delivering on its network rollout. Nothing matters more, right now, than getting Australians better broadband. NBN Co has never been able to deliver on its rollout targets: Its next CEO will need to make that the company’s main priority.
An experienced board coupled with a whip hand chief executive: That’s what NBN Co needs right now. However, it will also need one more thing which it has historically lacked: Innovative thinking. And this is where Simon Hackett comes in.
If you examine the past history of the NBN project, what you’ll find is an extraordinary inflexibility on the part of the Labor Governments overseeing it, in terms of the network’s rollout style. From its absolute focus on fibre to the premises at all costs to its rigidity with respect to points of interconnect and even its ‘outside-in’ network rollout paradigm, NBN Co’s rollout has so far been guided by a series of decisions which have, at times, made little logical sense.
The Australian Competition and Consumer Commission, for example, ignored persistent arguments that setting a large number of points of interconnect to the NBN would lock smaller ISPs out of competing for work on the infrastructure. The result? Massive consolidation of the ISP industry down to just a handful of players.
The Labor Government, in another example, ignored NBN Co’s request that it be allowed to consider so-called ‘fibre to the basement’-style deployments so that multi-dwelling units such as apartments could receive better broadband faster. The result? A huge proportion of premises technically “passed” by the NBN’s infrastructure can’t actually connect yet to the infrastructure.
The Government’s decision, stimulated by several key independent MPs during the 2010 election, to pursue an outside-in network deployment model, has meant that many sparsely populated rural areas has received the NBN first, despite the fact that the NBN rollout could have reached more Australians faster by focusing on built-up cities. And private companies like TPG and OPENetworks are already trying to eat NBN Co’s lunch in some of those areas, with their own rollouts.
The interesting thing is that Hackett has been one of the sole voices in the telecommunications industry to raise these issues ahead of time. And when he has raised issues to do with the NBN, he has usually proved himself able to predict the future ahead of time.
As early as December 2010, Hackett was warning that the PoI issue would cause massive headaches for smaller ISPs and a dramatic consolidation of the industry; and the executive turned out to be completely right. In September 2011, Hackett warned that if the Coalition won the 2013 election and changed NBN Co’s model, there would be a much greater impetus for other ISPs to deploy their own fibre, which is precisely what is happening now with TPG.
In October 2011 Hackett called for ownership of Telstra’s copper to be transferred to NBN Co as part of its deal with the telco, arguing future Federal Governments may want to use the infrastructure to build hybrid fibre to the node networks. This precise model is being discussed by Telstra and NBN Co right now.
And even though Hackett has formally relinquished ownership of the company he founded and led to national prevalence, Internode, the executive still maintains one of the most prescient voices in the industry. In July this year, Hackett outlined a series of measures by which NBN Co could cut its costs and bring its pricy FTTP rollout more in line with the Coalition’s FTTN-based alternative. NBN Co will be examining precisely this situation when it conducts a strategic review of its operations, to be presented to Turnbull for examination.
Yes, when it comes to NBN Co and national broadband policy, Simon Hackett has proven that he really does know what he’s talking about, on almost every front. Where NBN Co has been wrong, where the Government has been wrong, Hackett has almost universally turned out to be right in his predictions about the future of the project; a fact which has not escaped the attention of the telecommunications sector.
It is precisely this kind of deep insight which NBN Co needs on its board right now. Sure, it needs bankers, lawyers, construction experts, and executives who’ve worked for telcos much larger than Internode, which never attained the size of an Optus or even a TPG before it was bought by iiNet. But it also needs those such as Hackett, who are outside the box thinkers who are not afraid to say what very few other people are thinking; executives with deep insight and abiding interest in NBN Co and the future of Australian telecommunications in general.
There are also other reasons to argue that Hackett would make an ideal board director for NBN Co. For starters, there is the rather obvious fact that Hackett has now largely left the telecommunications industry, apart from his directorship of iiNet and his large tranche of iiNet stock. The executive is not enmeshed in its day to day dramas any more as he used to be, since the iiNet acquisition of Internode. But he retains a deep familiarity with the sector stemming from his background.
Would Hackett’s iiNet shares place himself in a conflict of interest situation re sitting on NBN Co’s board? Most people would argue so, and I am in no doubt that NBN Co and the Government would require Hackett to quit iiNet’s board and perhaps sell his shares before joining NBN Co’s board. That shouldn’t be too hard — Hackett already sold a huge boatload of his iiNet stock in August.
However, personally, as long as Hackett quit iiNet’s board, I wouldn’t see his iiNet shareholding as an impediment. After all, NBN Co is a wholesale telco, not a retail ISP, and retail ISPs are important stakeholders in its success. As long as he recused himself from any decisions which would affect iiNet specifically (and not just retail ISPs in general), I would not regard it as inappropriate for a highly ethical executive like Hackett, a man of integrity, to maintain his iiNet stock while also sitting on NBN Co’s board. Hackett’s deep experience and ability to predict telecommunications industry dynamics stems directly from his past retail ISP history. It would be farcical to suggest that Hackett discard all associations with that history.
Then, too, Hackett is already a multi-millionaire many times over, courtesy of iiNet’s $105 million buyout of Internode. Does anyone really believe Hackett would be incentivised to make a few extra quid through pushing iiNet’s case on the NBN Co board? I don’t believe so. In actual fact, I think it might be useful if he did, given how likely it is that the board is to be stacked with former Telstra executives. Ziggy Switkowski probably knows next to nothing about retail ISPs like iiNet; having Hackett to balance out the former Telstra and Optus CEO would likely be a very good idea, iiNet shareholding or not.
Hackett is also well-versed in key areas of NBN Co’s business. The executive has worked on the deployment of fibre networks to serve Internode’s backhaul needs, as well as rural wireless networks in South Australia. He has implemented IP telephony solutions, video delivery solutions (for example, FetchTV) and collaborated constantly with other ISPs, particularly backhaul players like PIPE Networks. He is familiar with telco billing systems, operational systems, commercial agreements, and so on — virtually every area of the telecommunications and ISP businesses.
Hell, despite the fact that he’s not directly managing Internode any more, Hackett still spends a great amount of his time on sites such as broadband forum Whirlpool, correcting misconceptions about the industry and providing background information. Last week’s topic was the VDSL standard, an issue very much in discussion at the moment courtesy of the Coalition’s FTTN NBN model. This guy cares about this stuff. It’s been his life for more than two decades.
And Hackett also has a very strong interest in the broader digital economy which both Labor and Coalition Governments expect will eventuate from the rollout of the NBN in any iteration.
Right now, for instance, the Internode founder is ploughing money into a new venture, Base64, which is expected to be a technology startup incubator and physical location in Adelaide. Hackett’s interest in bringing other innovative technologies to Australia, such as Tesla’s electric cars, is well-known. The executive is even interested in the intersection of art and technology; as evidenced by Internode’s support for various initiatives in South Australia such as Adelaide’s Fringe Festival.
In many respects, it’s hard to imagine why the Coalition hasn’t already canvassed Hackett to be a NBN Co director. The executive is one of the most respected executives in Australia’s telecommunications industry; a consummate technical and business professional who was instrumental in bringing broadband competition to an industry strangled by Telstra; an executive has a passion for, and interest in, virtually everything that NBN Co does and has been able to predict the outcomes of the company’s moves ahead of time, courageously voicing his opinion despite NBN Co and various politicians trying to shout him down.
As with journalists, the role of board directors is not to say comforting things to people in powerful positions. The role of directors is to bring all their skills to the board table and speak all the truth that they know, no matter how uncomfortable, for the benefit of the organisation they represent and its stakeholders. They are wise, disciplined, outspoken counsellors that aim to stop good organisations going off the rails.
It’d be hard to find a better description than this for Simon Hackett, who’s been a wise counsellor to Australia’s telco industry for several decades. And if the Coalition is going to stack NBN Co’s board with past Telstra executives, it’d be nice to see a little energy and variety added to the mix — for example, someone who has spent the past couple of decades wrestling Telstra to get better broadband outcomes for all Australians.
Give Simon Hackett a call, Minister Turnbull. I positively guarantee you won’t be disappointed. The only thing the Coalition might need to be concerned about is that Hackett might eventually end up running the whole show. But then, that outcome has worked out fantastically for Australia in the past.