news Senior figures in the Federal Labor Party have teamed up to deliver a broad swathe of evidence that they believe shows NBN Co’s Strategic Review is based on “flawed and unreliable” premises and was in fact designed by Communications Minister Malcolm Turnbull to constitute a “pre-ordained political outcome”.
Under Labor’s previous NBN policy, some 93 percent of Australian premises were to have received fibre directly to the premise and the remainder satellite or wireless, with a new government wholesale monopoly set up in the form of NBN Co to both deploy and operate the network. The model was directly aimed at delivering Australians the best possible national fixed telecommunications network, while also resolving long-term structural problems in the sector such as the vertical integration of former national telco monopolist Telstra.
However, NBN Co’s Strategic Review published in December last year changed the paradigm, with the company recommending (and the Coalition supporting) a vision in which up to a third of Australian premises will be served by the existing HFC cable networks of Telstra and Optus, with Fibre to the Node and Fibre to the Basement used in other areas not already covered by Labor’s FTTP approach. Satellite and wireless is to be used to cover some rural and regional areas as under Labor’s previous plan. This new model is known as the “Multi-Technology Mix” (MTM), or “the Coalition’s Broadband Network” (CBN).
Yesterday the NBN Senate Select Committee, which is controlled by Labor and the Greens, published an extensive 194 page interim report into its initial findings regarding the revamp of the project. You can download the report here in PDF format.
In separate statements made in Parliament and through media releases late yesterday afternoon, several Labor figures involved in the Communications portfolio used the release of the report to attack the Government’s credibility on the broadband issue.
In a statement, former Communications Minister Stephen Conroy, who instituted the NBN policy when in Government, said that the report revealed that NBN Co’s Strategic Review was “deeply flawed, outlining for the first time the financial fiddles that Malcolm Turnbull has made to make his inadequate broadband network stack up”. According to Conroy, there are seven major problems with NBN Co’s Strategic Review, including:
- The review assumes a delay in the time taken to complete Labor’s fibre build that is at odds with NBN Co’s current run rate, but is used to strip out $11.6 billion in revenues and add $13 billion to peak funding
- The review excludes approximately $4 billion in ‘business as usual’ architecture savings from Labor’s fibre build, which were signed off by previous NBN Co management
- It assumes higher costs for the fibre build would add $14.4 billion in capital expenditure, a claim which is at odds with evidence from NBN Co and the Department of Finance and does not allow for normal and reasonable build efficiencies
- The review includes overly pessimistic revenue assumptions for the fibre build that do not reflect existing strong demand for NBN services, or the high data usage patterns of Australians using the NBN and ignore demand for important elements of broadband quality, particularly reliability and upload speeds
- The review adds a third satellite to NBN Co’s deployment, without direct explanation and with a launch assumed at such a time (FY2021) to include costs but exclude revenues from scenario comparisons
- It includes scenario comparisons which include costs and revenues for the Multi Technology Mix build at assumed completion, but exclude revenues worth $15 billion from a fibre build after 2021
- It acknowledges that the MTM model will need to be upgraded, but then refuses to outline the costs for these upgrades, dramatically reducing the real cost of the MTM
“Malcolm Turnbull’s financial manipulations add billions to Labor’s NBN, while hiding from the public the real cost of his inadequate alternative,” said Conroy. “When announcing the Strategic Review, the Minister said: “I just want the plain unvarnished facts. We do not want spin. We do not want the company to tell us what they think we might want to hear.”
“The Committee has confirmed that the NBN Strategic Review was undertaken by personnel and advisors hand-picked by the Minister, with no independent scrutiny or verification of its final report. This stands in stark contrast to the 2013-16 NBN Co Corporate Plan, which was based on signed contracts and independently audited by KPMG and Ernst & Young. It appears that the Strategic Review has delivered a pre-ordained political outcome – the Minister has been told exactly what he wanted to hear. This is no way to spend $40 billion of taxpayers’ money and it is no way to plan a broadband network for all Australians.”
The report of the Senate Select Committee made a number of core recommendations with respect to the CBN project: Namely, that NBN Co should be directed to continue and accelerate the existing FTTP roll out while it completes a revised Strategic Review (free of political interference from Turnbull) and that the revised Strategic Review should be scrutinised and verified by an independent advisor at arm’s length from Government and NBN Co.
The report further recommended that governance processes that resulted in the appointment of key NBN Co board members and management staff should be investigated to determine how the Strategic Review was produced and signed off by the NBN Co Board and the Minister; that Turnbull and NBN Co should implement concrete measures to improve transparency and accountability, as promised by the Coalition before the election; and that the Senate amend the Terms of Reference to enable ongoing Parliamentary oversight of the CBN.
In separate statements, Senator Kate Lundy and Shadow Communications Minister Jason Clare expressed similar sentiments.
“These clear manipulations should not be used as the basis for the Coalition to dump Labor’s NBN and justify its own inadequate $40 billion broadband network,” Lundy said with respect to NBN Co’s Strategic Review. “The Minister should swallow his pride and accelerate Labor’s Fibre-to-the-Premises network until such time as a revised Strategic Review that provides transparent assumptions and corrects deficiencies and distortions is submitted and verified by an independent advisor.”
“The Government should get on with building the NBN instead of wrecking it.” Clare said.
The Government’s response to the Opposition’s claims will follow in a separate article.