full opinion/analysis by Renai LeMay
21 October 2013
analysis NBN Co’s Strategic Review will be conducted by a cluster of ex-Telstra executives with prior personal connections to Communications Minister Malcolm Turnbull and the Liberal Party, supported by external consultants. Does anyone still believe the result will be independent, objective and ‘technology-neutral’?
If you believe the rhetoric which Communications Minister Malcolm Turnbull has been uttering over the past several months with respect to the wide-ranging Strategic Review of NBN Co’s future which is currently being carried out by the company, you probably would have the impression that it is designed to be independent from the political process, be carried out by the company itself, and will provide an objective view of how NBN Co can best roll out super-fast broadband to all Australians as soon as possible.
The aim of the Strategic Review, to be conducted over the next several months, is two-fold. Firstly, it will seek to ascertain how much funding and how long it would take to complete the NBN rollout under its current specifications (Labor’s predominantly Fibre to the Premises model), as well as evaluating alternative rollout paths, such as the Coalition’s preferred Fibre to the Node model or even a Fibre to the Basement style in built up city areas where apartments are the norm.
“It’s intended that the review will be conducted by the company,” Turnbull said in a press conference late last month. “So it will be owned, if you like, by the board of the NBN Co and owned by the company. But it obviously will have the input of experts and advisers. But it’s not my intention to have a firm of consultants produce a review that is not owned by the people that then have to live with it and execute it.”
At the time, the Minister added: “As I have said to NBN staff today, I’m not interested in getting information that people may think will conform to my particular political agenda – whatever they may imagine that to be. We want from NBN Co. nothing more or less than the plain unvarnished facts. So this strategic review is going to be a very, very rigorous and objective exercise in getting to the facts of the matter.”
Turnbull also declared in the same press conference that he was determined that the new Coalition Government was completely open to using different technologies in the NBN rollout, despite its previously stated preference for the Fibre to the Node model, which the Minister demoted in his press conference to “an example” of how the NBN rollout could be deployed.
“… let me say again, as I’ve said to NBN staff today, I am – and the government is – thoroughly open minded, we are not dogmatic about technology; technology is not an ideological issue, we are completely agnostic about it,” Turnbull told journalists at the event. “What we want to do is get the best result for taxpayers and consumers as soon as possible.”
In addition, Turnbull has been very vocal about the fact that he wants to get more executives into NBN Co who actually have network infrastructure rollout experience.
“Personally I don’t think he was the right choice of the job,” the Member for Wentworth told a Sydney community meeting about the NBN in September 2012, referring to outgoing NBN Co chief executive Mike Quigley. “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.” And then, this year, on 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.”
However, if you examine the actual appointments which have been made by both Turnbull and NBN Co itself to assist with the review as well as its early processes, what you’ll find is that it appears very unlikely that any of three ideals Turnbull has has outlined for its Strategic Review will be met. At this point, it appears very unlikely that the NBN Strategic Review will be independent from the political process, primarily carried out by NBN Co itself or provide an objective view of the way the project can be rolled out in future.
The first and most obvious impediment to an independent and objective review is the first major appointment which Turnbull made with respect to NBN Co. In early October, the Minister appointed former Telstra and Optus chief executive Ziggy Switkowski to be NBN Co’s new executive chairman.
The problem with Switkowski’s appointment to this task is twofold: Firstly, the executive has had little direct experience in the deployment of telecommunications networks. In addition, the executive has been reported to have close links to Turnbull’s own Liberal Party.
Switkowski only served as Optus chief executive for a year in the late 1990’s, in a period in which Optus had predominantly finished deploying its HFC cable network. The executive served at Telstra for half a decade through to 2004, but Telstra did not engage in significant network construction activities similar to NBN Co’s rollout, during that period.
During Switkowski’s time at Telstra, the only substantial hard fixed-line telecommunications construction efforts the company was involved in included laying international submarine cables, and backhaul fibre rollouts connecting regions, both of which are qualitatively different from the street by street access network construction which makes up the bulk of NBN Co’s work. The company’s main network work, apart from these piece jobs, was actually the ongoing maintenance of its copper network.
Switkowski also exited both companies under acrimonious circumstances. His departure from Optus came prematurely and in the middle of corporate chaos associated with the company’s investors, and the executive was asked to leave in December 2004 by Telstra’s then-board, led by chair Donald McGauchie. Part of the problem was Switkowski’s bad relationship with McGauchie, who had taken the chair role in April that year. But part of the problem was that Switkowski, with aborted plans to buy newspaper group Fairfax and TV channel Nine in the picture, had not been able to articulate a clear future direction for Telstra.
Since Switkowski’s departure from Telstra in 2004, he is not known to have held a role in the Australian or global telecommunications sector.
However, according to the ABC, Switkowski’s “Liberal Party connections run deep”. In addition, the executive does have publicly acknowledged links with the Coalition administration in power in the current Federal Government. It was then-Science Minister Julie Bishop who appointed Switkowski chairman of the Australian Nuclear Science and Technology Organisation in March 2007 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. Bishop is now Foreign Minister.
To be fair to Switkowski, the executive has also been appointed to roles — such as the chairmanship of the Australian Centre for the Moving Image — under Labor governments. However, his most high-profile roles have come about due to Liberal administrations.
Two other appointments reportedly made over the past several weeks also call into question the independence of NBN Co in conducting the review. Last week the Financial Review reported that former Telstra executive JB Rousselot had been appointed to assist Switkowski with NBN Co’s review. In addition, this morning the newspaper reported that former Telstra executive Justin Milne had also been appointed to assist Switkowski with the review.
Both executives can be characterised by the fact that they are both long-time personal associates of Turnbull, as well as having little to no experience in the deployment of telecommunications infrastructure.
JB Rousselot was most recently the executive director of digital media and IPTV at Telstra, a position from which he departed in May 2013. Prior to that position, Rousselot held a number of other senior positions in Telstra over a period of a decade, including a post as executive director of Telstra’s Media division. Before this period, the executive was chief executive of IP telephony startup Interline, as well as working in investment (in the Australasian Media and Communications Fund), as well as working as a consultant at Booz Allen and in entertainment (Disney).
However, it is perhaps certain other aspects of Rousselot’s career which NBN observers will be most interested in. Crikey reported in June (in an article which predicted the appointment of both Milne and Rousselot to help Turnbull reshape the NBN) that Rousselot has a deep history with Turnbull, having formerly worked both at OzEmail, which Turnbull helped found, as well as Turnbull’s own boutique advisory firm Turnbull and Partners. “The French-born Rousselot … was reportedly inspired to move to Australia after meeting Turnbull on a skiing trip,” Crikey reported. However, in none of those roles did Rousselot work directly on deploying fundamental network infrastructure of the type NBN Co is rolling out.
Like Rousselot, Milne has no direct experience deploying telecommunications networks of the kind used in the NBN, and is also known as a close personal associate of Turnbull. The executive was chief executive of early Australian ISP OzeMail from 1999 to 2002, in the years immediately after it was listed on the NASDAQ and the Australian Stock Exchange with Turnbull’s assistance (Turnbull helped fund and run the company throughout the 1990’s). Turnbull sold his stake in OzEmail for $57 million in 1999 as the company was bought by US telco WorldCom.
Subsequently, Milne went on to work in senior positions at Telstra, leading the company’s BigPond ISP division and also, later, its media division, throughout the years until May 2010, when he left the telco. However, in none of those roles did the executive directly work on significant network infrastructure rollouts at Telstra.
Even though the pair’s OzEmail connection was back in the 1990’s, Milne has retained links to Turnbull over the past decade. For example, Milne was one of the speakers at a forum held by the Liberal MP in August 2010 in the suburb of Paddington in his electorate on Labor’s controversial mandatory Internet filter policy, which Milne was also personally against.
In addition, Milne is known to be a supporter of the Coalition’s FTTN model. In April this year, the executive told Business Review Weekly he would choose FTTN over FTTP because it was “orders of magnitude” faster (in terms of time to rollout) and cheaper to deploy.
“FTTN is a vastly more sensible idea than FTTP – FTTP is ridiculous overkill and underlying the ideas behind FTTP is a lack of understanding of the internet,” Milne said at the time. In addition, at the time, the executive supported the idea that Telstra should be brought back in to speed up the NBN rollout. “Nobody has the capacity that Telstra has to engineer networks and that is just a fact because they currently provide the network to most of Australia,” reportedly Milne said at the time.
The Financial Review reported this morning that Milne was “also a front-runner for a place on the NBN Co board”.
The final nail in the plank of the argument that NBN Co’s Strategic Review will not be independently conducted by NBN Co itself is the use of consultants. Although Turnbull stated in his press conference in late September that it wasn’t his intention “to have a firm of consultants produce a review that is not owned by the people that then have to live with it and execute it”, in fact NBN Co has already gone out to the market seeking consultant assistance with the review.
“As part of the Strategic Review of the rollout of the National Broadband Network, NBN Co today issued a request for proposal for consultancy services to support the review process,” the company said in a media release issued last week. “The invitation has been extended to a select number of consultants. The results of the tender will be announced in the coming week.”
When it comes to the setup of NBN Co’s Strategic Review, as is so often the case with Malcolm Turnbull, the rhetoric unfortunately does not match up with actual events occurring on the ground.
The Communications Minister originally pledged that NBN Co’s Strategic Review would be put together by NBN Co’s own staff and not consultants, that it was designed to be independent from the political process, and that it would provide an objective view of how NBN Co could best roll out super-fast broadband to all Australians as soon as possible.
However, in actual reality, the Strategic Review is being put together by three former Telstra executives who have close connections to the Liberal Party and Turnbull personally, at least one of whom has already publicly stated that he supports the Coalition’s Fibre to the Node-based policy over Labor’s Fibre to the Premises option, and with the assistance of external consultants.
What’s more, it appears as though Turnbull has had these appointments in the works for quite some time. The appointment of Switkowski to the post of NBN Co executive chairman was reported many months before it actually took place. Similarly, Crikey reported as early as June that Rousselot and Milne were being set up for roles with NBN Co. At the time, Turnbull denied any commitments had been made to anyone. However, the appointments of Milne and Rousselot have certainly eventuated.
Telecommunications analysts such as Paul Budde have interpreted Turnbull’s recent comments as the Minister having given NBN Co “the opportunity to save the current NBN”. “It is now up to NBN Co to make changes to its plan that would allow it to continue the project, under the existing specifications but in a much more effective and efficient way,” wrote Budde last month. But, given the influence Turnbull has wielded in setting up the Strategic Review to start with, it’s hard to believe that this could be the end result.
As a politician and as a speaker, Malcolm Turnbull has charisma. He does tend to research his portfolio deeply before making decisions. However, the Member for Wentworth, as we’ve seen in the appointment of Ziggy Switkowski to lead NBN Co, in the canvassing of potential board members for the company, and now in the setup of NBN Co’s Strategic Review, can also be incredibly hypocritical, his actions belying his noble words.
Turnbull promised Australians an independent review of NBN Co’s future, put together by the company itself. But that’s not what we’re getting. Instead, the process has already been compromised by a cadre of Turnbull cronies with little telecommunications infrastructure rollout experience, coupled with consultants. Anyone who still believes the end result of Review will be unsullied by those factors could be best described as being extremely naive.