news Communications Minister Malcolm Turnbull and NBN Co have declined to formally respond to specific and ongoing allegations raised by the Opposition and other commentators that evidence shows NBN Co’s Strategic Review published last year is based on “flawed and unreliable” premises that undercut the Coalition’s case for radically overhauling Labor’s NBN project.
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).
Early last week 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. Former Communications Minister Stephen Conroy said that the report showed there were 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
The Coalition’s dissenting response to the Opposition’s statements on the issue is also contained in the committee’s report. However, the dissenting response did not specifically address any of the points made by Labor with respect to NBN Co’s Strategic Review. Because of this, Delimiter directly invited Turnbull and NBN Co to respond to the specific allegations.
It initially appeared that Turnbull’s office was putting together a response to the specific allegations. However, it does not appear as though those plans have gone ahead. The Minister’s Office has not responded to several requests to respond to the specific allegations raised by the Senate Committee report.
Similarly, NBN Co declined to respond to the specific allegations raised by the report. Asked about the issue, the company issued the following statement:
“The Strategic Review was conducted by NBN Co with the assistance of expert advisors. These advisers were selected by the company as part of a standard procurement process. It was not conducted by the Government nor by people “hand-picked” by the Government.”
“The review analysed a series of alternative deployment scenarios for the NBN. The company’s preferred option, which resembles the architecture of similar broadband rollouts overseas, will deliver access to fast broadband to Australians sooner and at less cost to taxpayers. The company stands by the findings of the Strategic Review which will help inform the company’s forthcoming Corporate Plan.”
Delimiter pointed out to NBN Co that the company’s statement that its Strategic Review as not conducted by people “hand-picked” by the Government was inaccurate. The development of the Strategic Review was directly overseen by JB Rousselot, who was appointed as the company’s Head of Strategy and Transformation in October 2013, shortly after Turnbull was formalised in the role of Communications Minister.
Crikey reported as early as June that Rousselot was being set up for a role at NBN Co by Turnbull. Rousselot has a deep personal 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. It has also been reported that Rousselot and Turnbull jointly own a yacht.
In addition, Delimiter pointed out to NBN Co that the company’s statement did not address the specific allegations made by the Senate committee’s report, and invited the company to clarify its position. NBN Co did not respond to the request.
The Senate committee’s report last week does not represent the first time NBN Co’s Strategic Review has been criticised for containing what commentators have alleged was a selective version of the truth.
In several articles following its publication, telecommunications commentator David Braue pointed out a number of inconsistencies in the Strategic Review, including some of the same issues which were raised in the Senate Committee’s report.
“We have a Strategic Review, framed and paid for by the Coalition government, that says a network nearly half comprised of FttN services – it is important and fair to remember that one-quarter of Australians will still get higher-revenue FttP under Scenario 6 – will generate revenues nearly twice as high as an FttP-only model by 2021,” wrote Braue at the time. And then he added: “The Strategic Review does not talk about the period between FY2021 and FY2025 because it knows that those years will see the technological limitations of Scenario 6 become increasingly evident.”
In another article, the commentator pointed out that the Strategic Review selectively quoted from research on various telecommunications access technologies conducted by a French thinktank. “… the Coalition’s spin machine is working overtime to lend legitimacy to justify a pre-ordained conclusion – no matter what its implications,” Braue wrote.
As I wrote last week:
“… in the points outlined by Conroy in his media release this week and included in further detail in the committee’s report, Labor has made a series of very specific allegations which, if true, call into question the fundamental basis on which NBN Co’s Strategic Review was put together, and its legitimacy as a document guiding the future of the project.
If these allegations can be shown to be correct (and bear in mind that their architect, Senator Conroy, has the deepest knowledge of the project possible, having set it up from the start and overseen it for the better part of five years), then the justification for the Coalition to pursue its Multi-Technology Mix approach to the project will be significantly undercut.
If the Coalition and/or NBN Co do not respond to these specific allegations, then, again, the legitimacy of the MTM approach to the NBN will be significantly undercut.”
It’s not a surprise that Turnbull and NBN Co are unwilling to discuss the specific allegations being made against NBN Co’s Strategic Review. A close reading of the document, as Labor and other figures such as Braue have undertaken, appears to show that it is full of holes. Even a cursory examination such as I and others have undertaken shows that one of the options in the Review would allow a full FTTP rollout to be undertaken with only modest cost and timeframe implications.
But of course, these are truths which the Coalition and NBN Co is not interested in hearing right now. The NBN Co Strategic Review only actually exists in order to cast a thin veneer of credibility over a Coalition broadband policy which was decided years in advance. One need only go back over Turnbull’s statements over the past three years to see his explicit focus on the HFC cable networks being re-used and the FTTP rollout shifted to Fibre to the Node.
Responding to the specific allegations raised by the Senate committee last week would only draw unnecessary attention to that fact and prolong media coverage of the issue. So of course Turnbull and NBN Co have already withdrawn into their shells.
The only problem of course, is that the issue as a whole is not going to go away. The Australian public organically wants a full FTTP rollout across Australia. And even this specific issue regarding the NBN Senate Select Committee’s report is not going to go away easily. I hope to have further analysis of the specific allegations being made over the next week. Let’s keep on discussing the credibility of NBN Co’s Strategic Review. Because its credibility goes to the heart of the credibility of the Coalition’s Broadband Network plan itself.