full opinion/analysis by Renai LeMay
14 October 2013
The National Broadband Network project has abjectly failed every construction target ever set for it, its rollout has slowed to a deadly slow crawl, and even its founder, former Communications Minister Stephen Conroy, has admitted the previous Labor Government drastically underestimated the amount of work involved in delivering it. It’s time to admit NBN version 2.0 is dead and that the project desperately needs to be radically reshaped yet again.
If there has been one constant refrain in Australia’s technology community over the past four years; one dominant opinion, one consistent meme, it has been that Labor’s Fibre to the Premises-based National Broadband Network policy, constructed by a new company, NBN Co, is inherently the right path for the long-term upgrade of Australia’s telecommunications infrastructure.
Throughout that period, as the FTTP vision given life by then-Communications Minister Stephen Conroy and Prime Minister Kevin Rudd in April 2009 and raised through infancy by founding NBN Co chief executive Mike Quigley came under sustained and massive attack from most sides of politics, the media and even sections of the business community, that one belief has remained incredibly strong: A proud frigate battering its way through turbulent seas; a lonely flag flying high above deeply troubled waters.
Labor’s defeat in this year’s Federal Election, bitterly disappointing though it was to proponents of an all-fibre NBN, merely appeared to fan these long-running flames of passionate support for the party’s NBN vision. You need only look at the 260,000 signatures calling for new Communications Minister Malcolm Turnbull to support Labor’s policy, the $40,000 raised by pro-FTTP NBN activists in a matter of days to lobby Turnbull to do so, or the ongoing level of antagonism the Liberal MP attracts online daily to see this fact in action. The Coalition might have won the election, but it by no means won hearts and minds when it came to its NBN policy.
Alternatively, another route to viewing this passion in action is to examine the hysterically over the top reaction when any independent expert dares to suggest that the Coalition’s preferred Fibre to the Node technology could be successfully deployed in Australia as an alternative.
It happened when your writer wrote, in April this year, that the Coalition’s NBN policy, although admittedly inferior on every count, represented a “sensible” alternative to Labor’s more ambitious NBN vision. It has happened on countless occasions when analysts such as Informa’s Tony Brown have quietly noted the fact that very similar FTTN strategies have been used internationally to great effect. And it happened last week when consulting firm GQI used the Financial Review to publish a preview of research which showed FTTN might deliver better outcomes in Australia than many had been predicting — that for most Australians, speeds of close to 100Mbps were indeed viable over FTTN infrastructure.
“Viable smiable, the change from FTTP to FTTN is one of the stupidest decisions ever made by an Australian Government,” wrote one angry commenter on Delimiter in relation to the GQI study. “Can we stop trying to market FTTN favourably, as under every measure today it is patently inferior to the FTTP that started to be installed by Quigley’s NBN Co.”
Another commenter continued along the same lines, ranting: “Again these clowns reference European deployments whilst failing to state that the copper is not the same (often better quality, never worse quality) than Australian copper. These idiotic ramblings of Turnbull about vectoring somehow magically doubling the speed of VDSL is just too much. It’s been done to death that vectoring doesn’t improve the speeds, but Turnbull wants to continue along the lines of vectoring will sort out any and all problems.”
And a third added: “Once again, they ignore ‘The Elephant in the Room’: Telstra’s fragile and thinner copper [customer access network]. What speeds are achievable on the BT network will be non-viable in Oz due to the thinner copper, plus the fact that Telstra has not really maintained the copper to the required spec for quite some time. As you say, why bother? FTTN is just a massive waste of money, and will be a continuing money-pit of maintenance. Do it right, do it once …”
However, despite all the outraged bluff and bluster that accompanies any article merely seeking to debate the future of the NBN, significant new information is continually emerging which starkly displays the fact that it is simply not viable for the NBN project to continue on its current path. The project must, it absolutely must, be changed significantly if it is to survive at all, let alone meet any of its long-term goals of improving broadband connectivity in Australia. Sure, FTTP is technically superior to FTTN. But that doesn’t matter a whit, because NBN Co is continually proving it is unable to deliver FTTP under its current model. The evidence speaks for itself.
NBN Co may be forced to change its rollout style. It may be forced to change its construction partners. It may be forced to change its management. It may be forced to change a whole swathe of things. But those changes must be considered, and must be considered now. Because the current model, in all its complexity, has been given enough time to show it just does not work.
If this sounds like an extraordinary statement, consider for a few moments what we commonly understand the term “project failure” to mean, viewed from a traditional project management perspective.
In general, modern project managers like to look at six different types of what the industry refers to as “constraints” upon projects, these being their schedule, budget, scope, quality, risk and resources. If the project bursts through pre-determined thresholds set in any of these six areas, then it may start to be considered a “failure” in one or more senses — especially to the extent that it starts to negatively impact other projects or stakeholders beyond its remit. This star is drawn from A Guide to the Project Management Body of Knowledge, considered the modern bible of the project management industry and published by the Project Management Institute based in the United States.
if you want a more detailed explanation of the concept, I like this detailed post examining project failure on DZone. It’s a software developer site, and written by a software developer, Thoughtworks Studios’ Robert Diana, but the concepts apply equally to project management in the software space as well as massive fundamental infrastructure projects like the NBN.
The key thing to understand here is that what this six prism gives project management practitioners is a real-world, multi-faceted lens through which to view the success or failure of important projects they are working on. The aim of any project should be to largely keep the project within the bounds of this triangle, without blowing its gasket in any one area, or many areas.
Traditionally, many people tend to think of project success or failure based only on the initial scope of a project. So, for instance, if you consider the NBN for a moment, what we see is that most people tend to think primarily of the future success of the project through the ‘scope’ lens. Many Australians will consider the NBN project a “success” if it is able to successfully deliver on its original aim of delivering superfast broadband to most Australians in the form of an almost universal fibre to the premises deployment, irrespective of how long it takes, how much it costs, or who gets hurt along the way.
This is the dominant view which you tend to get on technical forums such as Delimiter and Whirlpool. Readers daily argue on these sites that the only important benchmark in terms of the NBN’s delivery is whether or not its fibre rollout successfully replaces Telstra’s ageing copper network. And they won’t accept anything less than a full-fibre rollout.
However, unfortunately viewing the success of the NBN — or any project, in fact — through the ‘scope’ lens alone — is not useful, as it tends to produce a one-sided view of projects.
It’s also important, for example, to define project success or failure by the other constraints. If a project delivers on its scope, for example, but does so at a massively higher cost than was originally anticipated, as is common for large technology projects, then this could still represent project failure — especially if it caused dire financial consequences for the organisation concerned. a good example of this situation was caused when Queensland Health massively botched its payroll systems upgrade to the tune of more than $1 billion over budget.
The payroll system is more or less functional — but the project blew its budget by huge amounts, diverting funds away from primary healthcare areas and contributing to Queensland’s Labor political administration losing power. That’s pretty much the definition of failure.
Similarly, if a project was successfully delivered, but a decade too late, that would be clearly classed as a failure. If a project starts to soak up much more resources than expected (for example, staff, material resources and so on), that too could contribute to a definition of failure. If a project was delivered on time and on budget, but with a high defect rate, then the ‘quality’ of its delivery could be considered to have contributed towards a project failure definition, and so on. Failure to deliver the project as a whole is not the only way projects can fail.
Now, as a commentator, I’ve consistently taken the stance over the first few years of the NBN project’s life that many of the project’s early failings were understandable and even predictable, given the scale of the project, being Australia’s historically largest and most complex infrastructure initiative, dwarfing other efforts such as the Snowy Mountains Scheme or the construction of the Sydney Harbour Bridge.
However, if you examine a number of revelations with respect to the NBN over the past year, it becomes readily apparent that the project has not just coming close to failing to meet one or more of its previously defined standards for the six constraints I mentioned earlier: It is abjectly failing to meet its own standards on virtually all of them, and perhaps most importantly, it’s just not moving forward with anything close to its required degree of speed.
Perhaps the most visible way in which the NBN project is failing is in terms of its schedule. Its original corporate plan, published in December 2010, contained the stated aim of passing some 1.2 million Australian premises with fibre by the end of June this year. By August 2012, primarily due to delays caused by negotiations with Telstra, that figure had shrunk to 341,000. NBN Co actually delivered just 207,500.
Then, too, those are only the start of the delays. In September, as the Coalition took power after that month’s Federal Election, it was revealed that NBN Co had revised its fibre rollout forecasts down two more times this year since an initial downward change in March, with the company now projecting that only 729,000 premises will be passed by its fibre by the end of June 2014, a little over half of what it was projecting in August 2012.
But wait, there’s more!
This morning the Financial Review reported (and Delimiter verified) that NBN Co would also miss its targets to the end of December, with NBN Co currently adding only 83,700-odd new fibre premises in three months — or about 910 premises a day. Its rural wireless network construction is similarly delayed.
In short, right now, the NBN is just not being delivered, virtually at all. We like to talk about NBN Co’s “rollout”, but on any meaningful scale, the network is, in fact, not being rolled out. I repeat: The NBN rollout has hit skid row right now. Its rollout has almost completely stalled, with NBN Co beset by contractor problems, issues with asbestos in Telstra’s network infrastructure, problematic council approval processes for wireless towers, and more. As I wrote as early as March this year:
“The first and most pressing issue that is confronting the NBN right now is that Labor and the management of NBN Co itself appear to have drastically underestimated the complexity and effort which will actually be required on the ground to deploy this largest and most complex of telecommunications networks.
… The NBN is still a wonderful dream; wonderful enough that anyone from overseas who visits Australia tends to praise it as a fantastic undertaking that they wish their own government had undertaken.
But let’s be real about this: For the foreseeable future, the NBN is going to remain just that — a dream. The NBN is not coming to your house or business any time soon, and in the next five or so years Australia can expect the current disgraceful level of political infighting about the project and delays in its rollout to continue. This dreadful situation is not going away any time soon, and neither are the problems with your broadband connection. So get used to the dropouts.”
These extensive and ongoing delays are also linked into a wider and very systemic, society-wide risk which the substantial delay of the NBN project is pulling Australian industry and the community as a whole into.
For starters, it’s important to realise that the NBN policy Labor has been implementing since April 2009 is not the first of its kind. Version 1.0 of that policy was a much more limited, $4.7 billion private/public partnership version which Labor took to the 2007 Federal Election, but which subsequently failed, after the Government was not able to satisfactorily enlist the participation of industry in the effort. This effort itself came after several years of bickering between Telstra and the Howard-era Federal Government over a potential Fibre to the Node-based upgrade to Telstra’s copper network, of the style successfully pursued in the UK by British incumbent telco BT. And even that came after the failure by the Howard Government to structurally separate Telstra into retail and wholesale arms, a move which would likely have led the new wholesale division of Telstra to start upgrading its copper network.
The NBN policy was designed specifically to address what the Labor Federal Government of the day saw as a failure by the telecommunications industry to resolve its own issues, when it comes to the rollout of fundamental infrastructure. This, in essence, is the role of the Government in these cases — to prop up industry in cases where it can’t prop itself up, so that essential services can continue to be delivered to the community.
If, as a project, the NBN had been succeeding, then this would have resolved the risk of the lack of any progress in terms of Australia’s broadband capacity. However, because the project has not been succeeding, a bigger risk raises its head: That that eight year period in which various NBN policies had been proposed could have been all for nothing, because the NBN didn’t end up solving Australia’s telecommunications infrastructure woes. This is particularly troubling, because in the interim period, if the NBN had not existed, other telcos could have deployed some of their own infrastructure. Hence, a failing NBN does not only entail the loss of its projected benefits for society; it also entails the loss of the opportunity cost of any potential alternatives that could have been developed, if it had not existed.
Similar complaints can be made when it comes to the other project management benchmarks. In terms of its talent, NBN Co is a company packed with 3,000 of Australia’s most experienced and talented workers, especially from the telecommunications industry and it is tying up national construction firms left and right. But it has very little to show for such a huge inhalation of resources, and it’s not likely it’s going to be able to show much any time soon. NBN Co’s rapid growth as a company illustrates again that the previous Labor Federal Government dramatically underestimated the complexity of the project; its size and ‘block’ on construction resources is both a symptom of underlying problems as well as a cause of others.
Evidence that NBN Co is not delivering on the scope of what it had promised to do can be seen that the company has frequently been claiming publicly this year that its fibre network has “passed” a certain number of premises, despite the fact that around one third of those premises NBN Co claimed to have passed cannot actually connect to its infrastructure, due to the complexity of deploying fibre to separate apartments in blocks of units, or separate business offices in office blocks, for example. NBN Co is just not delivering what it says it is: Its deployments are not “feature-complete” in that they do not meet the project’s original scope and bring broadband all the way to premises for many users. Even while it is failing to meet its project schedule, even NBN Co’s claimed successes are not truly successes; because its work on these areas is far from done.
In terms of its ‘quality’, NBN Co has also notably been suffering problems. In April, the Financial Review revealed the company was being forced to re-do portions of its fibre rollout in some areas, for instance, because of the incompetence of its contractors. “In one instance, up to 15 per cent of fibre cables in the northern Canberra suburb of Crace have to be redone,” the newspaper reported at the time. This, again, is a disturbing sign that NBN Co is not capable of delivering on its stated goals.
There is one bright spot in the six pointed star of project management constraints: There’s not a huge amount of evidence that NBN Co has blown its budgets, and it does have a hefty contingency reserve for this kind of eventuality. However, it does seem likely that the company’s failure to roll out its network in any kind of timely fashion will have some impact on its customer revenues, and hence its ability to return its invested capital to the Government. The Government cannot keep plowing money into NBN Co at its current rate; and the company’s inability to meet its targets damages its ability to repay that money on an timely basis.
When you view the NBN project as a whole through this project management prism, what you see might surprise you. This is a project which has never even come close to meeting any of its rollout targets, and which is now revising those targets almost on a monthly basis. Even when it does roll out infrastructure, its deployments often don’t yet meet the project’s original scope, in that the company is not dealing well at all with multi-dwelling units such as apartment blocks. It also has suffered faults in its rollout and had to re-do segments, and meanwhile it’s tying up construction resources and high-level telecommunications engineering expertise nationally.
The NBN is not just “late”. It does not just have “contractor problems”. It does not just have “faults”. What it does have is systemic project failure. It has issues in every area of its operations; and taken together, those problems reflect an overwhelmingly strong argument that the project is headed straight down the failure path. It has already failed to a very large extent, and if it is not radically altered, it will continue to fail harder and with worse consequences.
In addition, there is a much wider and more important risk that the project’s failure is bringing forward: That NBN Co’s lack of ability to deliver the project makes real the opportunity cost of the alternative. Without an NBN policy, Australia’s telecommunications industry would have had to invest in its own fundamental infrastructure over the past six years — at least to a certain extent. There is no doubt Australia would have seen more rollouts of fast broadband similar to the fibre to the basement rollout TPG recently revealed. The failure of the NBN project, like the realisation of a debt, makes that cost real and adds it to Australia’s books.
In short, because the NBN project has failed, we also missed the chance to take advantage of the next best option.
Where the NBN project as a whole needs to go from here is relatively obvious: In short, much of its entire underlying model needs to be completely re-thought and the project rebooted and heavily modified. This isn’t just an evolution of the process; it’s pretty much an entirely new project, because everything is up for scratch once again. The clock starts now on the Coalition’s version of the NBN. Labor’s version failed; now, unfortunately, we can’t go back. Something still needs to be done.
The Coalition Federal Government desperately needs to get Telstra involved in constructing the project, at a minimum, as I have previously argued at length, with its current construction industry contract model failing it completely and some in the industry describing NBN Co as being ‘at the mercy’ of the construction firms.
It desperately needs to open its options to Fibre to the Basement models, and very likely Fibre to the Node. It desperately needs to order NBN Co to abandon its ‘outside in’ rural to the cities rollout schema and start deploying in the most populated areas first. If the Coalition is serious about maintaining Australia’s HFC cable networks, it desperately needs to develop legislation to allow more HFC deployments into MDUs such as apartments. In some areas such as Tasmania, a full Fibre to the Premises-style rollout may still go ahead, but even in that case, drastic measures will be needed to get the rollout back up to speed.
It also desperately needs to get new management into NBN Co, especially at the board level, to wrench the troubled company back on track. It should specifically be listening to experts such as Internode founder Simon Hackett, who have a swathe of similarly innovative ideas which could help cut the rollout’s costs and speed.
But the Coalition already knows all of this; and in fact already has most of this on the way.
With this article I am really targeting my thoughts less at politicians and more at the popular industry understanding of the project. It’s perception. It’s important for people to realise that things cannot go on as they have previously; because that model has just not worked. It has failed; the NBN project has failed, and it’s not the first time. Labor’s first attempt at an NBN policy failed after 2007; its new policy has failed in the years following 2009.
Even Labor has acknowledged this fact, at this point. In one of his first wide-ranging speeches since leaving the post of Communications Minister earlier this year, last Friday Stephen Conroy finally admitted the previous Labor Government had “clearly underestimated” the NBN FTTP challenge. I don’t agree with News Ltd’s spiteful dig at the Minister following his admission; but I do agree that the Government didn’t pay enough attention to keeping the NBN on track; and may have even taken steps during the election campaign to deliberately obscure how bad things truly were with the rollout, by not releasing NBN Co’s latest set of rollout figures.
We’re about to enter what I like to call NBN 3.0. It’ll be a project in the same clothing as the previous two incarnations of the NBN and with many of the same aims, but with radically reshaped underpinnings, almost to the extent that it’ll be unrecognisable compared with either of Labor’s original NBN visions. Well, let’s hope the Coalition can get the model right third time around. Because if there’s one thing that’s become clear, it’s that Australia is not good (at all) at developing and implementing good broadband policy. We desperately, urgently, need to get better. We simply cannot afford to fail at this again.