full opinion/analysis by Renai LeMay
3 October 2013
Communications Minister Malcolm Turnbull has spent much of the past year telling anybody who will listen that NBN Co’s board needs more directors with actual telco network construction experience. Yet the candidates he’s appointed or been reported to have approached so far for board positions cannot claim that background, and several have close ties to Turnbull’s own Liberal Party.
In September 2012, then-Shadow Communications Minister Malcolm Turnbull made a somewhat controversial claim to a small community meeting in the Sydney suburb of Epping with respect to NBN Co chief executive Mike Quigley, who was then, and remains now, one of the most respected figures in Australia’s telecommunications industry.
“Personally I don’t think he was the right choice of the job,” the Member for Wentworth told the audience. “I’m not making any criticisms of Mike Quigley personally but [his] whole career has been working for Alcatel. … He’s never built a network, he’s never run a network. This is essentially a construction job.”
It was a criticism which Turnbull would come to make repeatedly of NBN Co’s management in the following year, extending his poor impression of Quigley towards the entire board of directors of the besieged company.
In the months from April, when the Coalition formally launched its rival NBN policy, through to July, the issue of the qualifications of NBN Co’s board came under constant attack. In early July the issue finally flared up into a full-fledged confrontation, with NBN Co’s board, led by Lachlan Murdoch lieutenant and hard-headed former McKinsey consultant Siobhan McKenna, hiring lawyers and a political lobbying firm to defend their reputation. Quigley’s retirement — ahead of a likely Coalition election victory — came as no real, surprise, but Turnbull never gave up the attack on NBN Co’s board.
In early July the Liberal MP told the ABC: “… we know that Siobhan McKenna, the chairman, who by the way has no experience in the telecoms sector, she’s never built a network or run a network, she’s a management consultant. So there’s real questions about her capacity to chair this business.” And later that month Turnbull repeated the same comments about NBN Co’s entire board, telling Lateline: “… it is remarkable that the board, which is a large board, does not have anybody on it who has either run a telecommunications business or constructed a telecom network.”
And although Turnbull was sworn in as Communications Minister several weeks ago, the rhetoric has not changed. “… telecommunications experience, management experience, experience in the construction of linear infrastructure is clearly very relevant. Those two particular backgrounds were not present among the directors of the NBN Co. the Labor party assembled,” the new Minister told journalists at a NBN press conference last week.
Now, to a certain extent, Turnbull’s claim regarding NBN Co’s board is entirely correct. Aside from Quigley, the board does lack telecommunications experience. It’s not as though the Member for Wentworth is making that claim up.
However, to an interested onlooker observing the emerging make-up of NBN Co’s new board, under new Coalition management, it must have seemed remarkable over the past several weeks how little the new Communications Minister appears to be taking his own advice in the make-up of his new board.
This afternoon, Turnbull made the first tranche of appointments to NBN Co’s board. As expected, former Telstra and Optus chief executive Ziggy Switkowski has been appointed as executive chairman of NBN Co, with several existing board members, Dr Kerry Schott and Alison Lansley, to remain on the board to provide continuity.
Delimiter has already dealt with — at length — Switkowski, the executive most people believe Turnbull had locked in six months in advance to be the company’s new chairman. A close examination of Switkowski’s corporate history reveals the executive did not oversee significant network infrastructure rollouts at either telco, exited both companies under acrimonious circumstances, and has sat on the sidelines of the telecommunications industry ever since, holding no roles in the sector for the vast majority of the past decade.
The Communications Minister was even asked about the issue during this afternoon’s press conference announcing Switkowski’s appointment, with one brave journalists pointing out to Turnbull that the executive’s tenure at Telstra had been an extremely controversial one, and that the executive had little actual experience deploying telecommunications networks.
The Member for Wentworth did not directly respond to the question. Instead, Turnbull said Switkowski had run “a very large company, Telstra”, which constantly rolled out telecommunications networks, as well as running Optus during its HFC construction period. In addition, Turnbull said Switkowski had not been appointed as “head of construction”, but as head of NBN Co as a whole, which was a very different role.
Of the two existing board directors appointed under Labor’s watch but who will continue to sit on NBN Co’s board under Coalition management, neither has telecommunications network construction experience.
Alison Lansley, appointed to NBN Co’s board in December last year, is a former partner with Mallesons Stephen Jaques, which has long been renowned as one of Telstra’s main law firms, and it can be presumed that Lansley has a good deal of experience in and knowledge of the telecommunications regulatory landscape courtesy of this Telstra engagement. The lawyer is also well-credentialed to sit on board in general, having previously served on a number of boards for organisations such as the Melbourne 2006 Commonwealth Games Corporation, the Takeovers Panel and so on.
However, Lansley has no experience with telecommunications network construction.
Widely respected former investment banker and public servant Dr Kerry Schott, who is also expected to maintain her place on NBN Co’s board under the Coalition, is similarly widely respected and credentialled.
Schott spent 15 years as an investment banker and rose to the post of leading the Australian divisions of Deutsche Bank and Bankers Trust Australia. Following those loft roles, the executive then spent five years as managing director of Sydney Water, was the deputy secretary of the NSW Treasury and also managed the NSW Coalition Government’s Commission of Audit. Schott is currently the Project Director of the proposed sale of the New South Wales government owned electricity generating plants. Like Lansley, Schott is a very solid, reliable, experienced, well-respected and well-credentialed public figure, and no doubt a fantastic addition to any corporate board.
However, like Lansley, Schott also has no experience in telecommunications network construction.
If you believe the Financial Review’s reports, and I generally do on this issue, we know of several more senior Australian commercial and political figures who have been approached to sit on NBN Co’s new board under the Coalition.
Several new names which the Financial Review added to the mix this week were Howard-era Communications Minister Helen Coonan — who retired from the Senate in August 2011, and NBN Co’s former head of construction and long-time Service Stream managing director Patrick Flannigan.
Coonan’s lack of credentials to sit on NBN Co’s board should be obvious. For starters, the former politician has very obviously never overseen any kind of network construction or operation effort, having been a barrister before entering politics. In addition the politician is a very public member of the Liberal Party and would find it extremely difficult to play an impartial role in the event of any contention between NBN Co and the Federal Government or Opposition; a situation which NBN Co has very frequently found itself in over the four since since its formation; to say nothing of the fact that any new Labor Government would likely end Coonan’s board membership immediately upon taking power.
As Labor MP Ed Husic — doubtless a candidate for the post of Shadow Communications Minister in an Albanese or Shorten Shadow Cabinet — told the AFR: “I don’t doubt Helen Coonan is very knowledgable but I do doubt this would pass the Coalition’s own test on who would be appropriate for the board.”
We must also consider the former NSW Senator’s history as Communications Minister (2004 through 2007) during the Howard era. In that period, Coonan did very little to remove the very obvious roadblocks in Australia’s telecommunications industry; failing to restructure the incumbent into wholesale and retail arms, failing to stimulate investment in competitive network infrastructure and failing to successfully balance the competing interests of a rejuvenated Telstra and its clutch of rivals so that the industry moved past its quasi-duopolistic structure.
None of this is to say that Coonan’s not already playing her part in Turnbull’s new regime.
Last week the former Liberal Senator was very vocal in her enthusiastic support for Switkowski’s looming appointment in the pages of the Financial Review, describing the executive’s tilt at buying the Nine Network and merge its Sensis directories business with Fairfax while at Telstra as “quite visionary”, despite the fact that the two media companies, and Sensis, have suffered very high profile financial problems for some time.
Did Financial Review reporter Nabila Ahmed, whose byline is also on an article two days later revealing Coonan had been approached to support Switkowski on NBN Co’s board, know of the former Liberal Senator’s candidacy at the time she quoted her gushing comments regarding the ex-Telstra chief? The mind boggles. In any case, at the very least we can certainly say that Coonan’s still a team player.
Switkowski, by the by, has his own Liberal Party links. It was then-Science Minister Julie Bishop, after all, who appointed Switkowski chairman of the Australian Nuclear Science and Technology Organisation in March 2007, as part of a Cabinet on which Coonan sat, and after the Howard Government had already commissioned the executive in 2006 to run a review into the viability of a domestic nuclear power industry. It’s a small world; Bishop is now Foreign Minister and Coonan may sit alongside Switkowski on NBN Co’s board.
“… his Liberal Party connections run deep,” wrote ABC business editor Peter Ryan last month. Indeed.
Of the other publicly reported candidates to sit on NBN Co’s refreshed board, Patrick Flannigan is the strongest candidate, having been the founding managing director of Service Stream, a service company which actually does carry out network construction and maintenance on behalf of major telcos such as Telstra.
But again there are questions to be asked.
There is no doubt Flannigan is widely respected and that Service Stream does do the sort of work NBN Co requires. However, it’s also true that there have been very few major network rollout efforts in Australia over the past 15 years, and that most of those efforts have featured wireless technology rather than the fixed-line fibre connections (FTTP or FTTN) that NBN Co is focused on. Australia’s most recent major fixed-line network deployments all the way to premises have been TransACT’s deployment in Canberra and the rollout of the HFC cable networks by Telstra and Optus in the late 1990’s.
Given the lack of network rollouts of any scale in Australia’s recent history, if Turnbull is seriously looking for executives to sit on NBN Co’s board who do have experience in the kind of network construction which the company is engaged in, he will need to predominantly look overseas for that kind of expertise. Internationally, telcos such as BT, AT&T, Verizon, Deutsche Telekom, France Telecom and others all have a deep degree of expertise in mass fibre network rollouts; it’s why the previous Labor administration hired NBN Co chief executive Mike Quigley in the first place — because the former Alcatel-Lucent executive had been involved in such deployments in the United States.
Heck, Turnbull could even poach an executive or two from Google’s Fiber rollout, which has so far hit Kansas City in Missouri, as well as Austin in Texas and Provo in Utah. Google is rapidly building a great deal of expertise in this area.
One must also question whether Flannigan deserves a second chance at NBN Co. The executive quit the company in April 2011, just two years after it was founded and a year and a half into his tenure as construction chief. And he did so under acrimonious circumstances — as NBN Co’s negotiations with a clutch of construction companies collapsed over pricing. These were the very same type of construction companies which Flannigan has spent his career working for; is it any real surprise the executive found it difficult sitting on the customer side of the fence?
There are also issues with all of the other board candidates who Turnbull has been reported to have canvassed for spots on NBN Co’s board.
Wal King, the extremely long-term chief of construction giant Leighton Holdings — which holds a giant clutch of NBN Co contracts — would appear to be a perfect candidate for a board role. The executive no longer works for Leighton but retains deep expertise in the construction industry. King is one of the most respected figures in Australian corporate life and has been around the block so many times he’d see trouble with NBN Co coming a mile off.
However, appointing King to NBN Co’s board became politically unsavoury this morning, courtesy of wide-ranging allegations of unethical corporate behaviour under the executive’s watch published by Fairfax newspapers. King today vehemently denied any wrongdoing, but the fallout from that brangle will no doubt years for corporate regulator ASIC to unravel; in the meantime, Turnbull will be very unlikely to want NBN Co associated with the issue.
Speaking today about King, Turnbull said he had been “very rigorous” with his approach of not commenting on what he described as the “orgy of speculation” about potential future board appointments for NBN Co. He noted that he didn’t want to comment on the Leighton allegations, as they had “no connection with the NBN project” and would no doubt be the subject of police attention.
Perhaps the only bright spot in the list of names reported to have been linked with NBN Co’s board is that of Chris Hancock, a former Optus and Vodafone executive who for the past decade has run AARNet, the wide-ranging and very powerful data network linking universities all around Australia. Hancock clearly has a great of experience in managing a very large, fibre-based telecommunications network stretching all around Australia. He understands the technology, he understands the commercial realities of these kinds of networks and, unlike most other candidates under consideration, he has been enmeshed in the telecommunications industry for the past decade. He’s not out of the system; he’s already an integral part of the system.
However, even when it comes to Hancock, it’s hard to make the claim that the executive has any real experience actually deploying the physical network infrastructure which makes up a predominantly access network of the kind NBN Co is building.
AARNet does operate a fibre-optic network with points of presence in every major city in Australia. However, the organisation didn’t build its network itself — it uses dark fibre deployed by former Leighton subsidiary NextGen Networks, as well as other carriers. This is a very common situation in Australia’s telecommunications industry — many companies state that they operate a national telecommunications network, which is actually based on others’ infrastructure.
So who should be appointed to NBN Co’s board?
To start with, it should be fairly obvious that Turnbull should avoid out and out Liberal Party figures such as Coonan, whose appointment to the NBN Co board will be viewed with suspicion from every side.
It’s OK to have a couple of generic legally or financially qualified directors such as Lansley or Schott, but the main focus of board appointments should be Australian and global executives who have direct experience in deploying telecommunications networks. It’s never going to be a huge problem finding Australian executives to sit on NBN Co’s board who have experience running telcos. But network construction is another issue.
In Australia, there are very limited options in this regard. We’ve previously suggested the pioneering founders of fibre company PIPE Networks, Bevan Slattery and Steve Baxter (who have very recent experience deploying fibre networks in Australia) as well as Internode’s Simon Hackett, whose knowledge of the ISP industry is second to none, and who also has a decent amount of experience in network rollouts and expertise in dealing with the NBN project itself.
But for the experience Turnbull is looking for, he really need to look overseas. The NBN is Australia’s largest ever infrastructure project and one of the most unique such projects globally. It should not be a stretch for Turnbull to be able to couple local telco talent with global network construction experience from companies such as BT, Deutsche Telekom, France Telecom, AT&T, SingTel or even Telecom New Zealand.
If the Communications Minister fails to bring such talent to Australia to assist with the NBN rollout — as all indications have so far shown he is failing to do — then NBN Co’s board may end up with precisely the lack of experience which Turnbull has so long accused Labor’s appointees of lacking. And that, as should be clear to even the Earl of Wentworth, would be hypocrisy of the highest order.