news Malcolm Turnbull earlier this week made several statements on Alan Jones’ breakfast show on 2GB radio which the Communications Minister is aware are false, repeating incorrect information he had previously broadcast on the ABC’s Triple J several weeks ago and failing to correct incorrect information broadcast by Jones himself.
In an extended interview with Jones on Tuesday morning (available in full online), Turnbull stated that the difference between the $41 billion cost model entailed under Labor’s previous all-fibre National Broadband Network model and the Coalition’s so-called ‘Multi-Technology Mix’ model was “$32 billion”. “It we’d persevered with Labor, it would have taken years later and cost $32 billion more,” the Minister said with respect to NBN Co’s broadband rollout. Jones himself also made similar comments.
Turnbull made very similar comments on Triple J several weeks ago, stating that NBN Co’s Strategic Review published last year “concluded that if we had continued with Labor’s all-fibre rollout, it would have taken us four more years to complete it, and $73 billion”. The Communications Minister added: “In order to get the project done within an affordable cost envelope, we needed to be able to give the company the flexibility to use different technology, and that is the MTM model — $41 billion — $32 billion cheaper.”
However, NBN Co’s Strategic Review document, which Turnbull has read and is familiar with, directly contradicts some of Turnbull’s statements.
Page 17 of the document (available here in PDF format) contains a table displaying the various scenarios which NBN Co has examined in its effort to meet the new Federal Government’s objective of being able to deliver high-speed broadband to all Australians. There are six options, ranging from the ‘Optimised Multi-Technology’ mix preferred by the Coalition (using a mix of Labor’s preferred Fibre to the Premises technology, as well as the technically inferior Fibre to the Node and HFC cable options) to Labor’s existing policy, which is standardised on Fibre to the Premises.
The first problem with Turnbull’s statement is that the Minister has conflated government investment with expenses, alleging that the Coalition’s MTM policy is “$32 billion cheaper” than Labor’s.
However, the table makes clear that in almost every scenario, NBN Co would actually make a modest return on the Government’s investment in the project, ranging from 1.7 percent to 5.3 percent. This means that the Coalition’s MTM policy would make slightly more money than Labor’s FTTP option — but neither will, in the long-run, cost the Government anything. The money will be recouped through monthly broadband subscriber fees.
Basic accounting standards, which Turnbull is aware of from his history as an investment banker (he was managing director of Goldman Sachs Australia from 1997 to 2001) hold that there is a key difference between invested capital, which may make a return or a loss, and an expense, which is defined as a cost against incoming revenue. As different types of money they are treated very differently for accounting purposes.
Several years ago the Parliamentary Library of Australia produced a definitive statement on this exact matter, noting that the Federal Government’s capital invested in NBN Co could not be listed as an expense on the Federal Budget. Turnbull is aware of this document and explicitly acknowledged this treatment of the Federal Government’s capital investment in NBN Co in a small note published at the end of an article in August 2012.
The only case where NBN Co would not make a return on the Government’s investment, according to the company’s Strategic Review, is in one revenue projection case for Labor’s original FTTP policy; but even then it would be expected to make only a modest loss — meaning the project would still not be listed as an expense for the Federal Government, and the Government would take only a small hit to its finances.
Other elements of Turnbull’s statements are also inaccurate.
Turnbull stated that the Coalition’s version of the NBN would be $32 billion cheaper than Labor’s. However, the table makes it clear that if Labor’s all-fibre FTTP policy was radically reworked, and the Government funded the capital entirely itself, Labor’s FTTP policy would cost $54 billion, rather than $73 billion — just $15 billion more than the Coalition’s version.
It is also believed that the value of NBN Co’s infrastructure at that point, being an all-fibre build rather than a mix of technologies — would make the company worth significantly more as an going concern in the long-term, because it would not need to invest further capital to upgrade its fundamental optic fibre network for a period estimated between 50 and 100 years. NBN Co executive chairman Ziggy Switkowski has stated that portions of the MTM Mix option would need upgrading within as short a period as five years.
Turnbull also failed to correct several statements made by Jones himself which were highly misleading to listeners.
Jones pointed out that in late May, some 19,000 premises in early stage NBN rollout zones across Australia would have their previous connections to Telstra’s copper network switched off, due to the terms of the $11 billion contract between Telstra and NBN Co. Those areas already have access to the NBN’s technically superior fibre infrastructure, and so there is no need to keep the copper network running on those areas.
Jones alleged that this would mean residents and businesses in that area “could be left without landline phone services next month”.
However, what Jones did not tell listeners, and what Turnbull did not correct the host on, is the fact that residents and businesses in NBN areas will not be left without fixed-line telecommunications services after May, as the host claimed. In actual fact, premises in those areas will receive vastly superior fibre broadband services, which directly supercede the previous copper services and add a great deal of functionality.
The radio shockjock implied that residents in the early stage NBN rollout zones would be suffer because of the disconnection. However the truth is that the fibre replacement services are so desirable that they positively impact property prices in the affected areas as residents and businesses from other locations seek to relocate to take advantage of the significantly upgraded services offered on the NBN. 60 percent of the affected premises have already signed up for NBN plans.
Instead of correcting Jones on the issue, Turnbull said that the previous Labor Government had not done enough to make people aware of the switch-off and focused on the miniscule percentage of the population who use medical alarms connected to Telstra’s copper network and whose devices may not work after the switch-off. However, there are replacement options for such devices on fibre networks, which typically offer greater functionality.
In addition, Jones stated that “Australians never wanted this multi-billion NBN white elephant in the first place; the take-up rates prove it”.
However, ongoing polling and research has consistently shown over a three year period that Australians are overwhelmingly in favour of Labor’s NBN vision and not in favour of the Coalition’s radically overhauled approach to it, despite constant negative media coverage directed to the project. Turnbull is aware of this fact. In addition, as previous NBN Co chief executive Mike Quigley pointed out, total take-up rates on NBN Co’s infrastructure are high by global standards when it comes to fibre broadband deployments.
Turnbull’s comments on 2GB this week represent only the latest time the Member for Wentworth has consciously misled the public with relation to an aspect of Labor’s NBN policy. For example, in August 2013, during an election debate on the ABC’s Lateline project, Turnbull appeared to have made a deliberate attempt to mislead the public about the cost of connecting to the NBN’s 1Gbps fibre service, stating that such connections would cost “at least $20,000″ a month, despite the fact that the Liberal MP was aware the cost is likely to be much less.
The other side of politics has also been guilty of misleading Australians about the project.
Also during the election period, for example, then-Communications Minister Anthony Albanese appeared to have issued a media release deliberately misleading Newcastle residents about how the Coalition’s rival NBN policy would affect the area, with the Labor MP falsely stating that the NSW city would “miss out” on upgraded broadband entirely under the Coalition’s plan.
Labor MPs in general also engaged in misrepresentation when it comes to the Coalition’s NBN policy. A number of ALP election advertisements have inaccurately claimed, for example, that Liberal policy would see Australians forced to pay up to $5,000, or else they would be left “on the old, slow copper network”, while connection to Labor’s fibre-based NBN would be free. In fact, under all circumstances the Coalition still plans to provide upgraded broadband connections to all Australians not currently on the existing HFC cable networks. Copper is a feature of the Coalition’s preferred technology — but significantly faster speeds are still faster on FTTN than on existing copper networks.
I wish to post a quick note here for Malcolm Turnbull.
Minister, I know you are aware of the difference between invested capital and expenses spent to deliver a return on that capital. I also know that you are aware that NBN Co’s Strategic Review — produced under your watch — makes it very clear that this project is not scheduled to lose money or to “cost” anything, but is in the long term, under almost every scenario, scheduled to make the Government money. And yes, even in an all-Fibre to the Premises scenario.
For these reasons, I wish to notify you and your staff that I will be watching your statements in future. If you continue to allege in public that the Coalition’s MTM model for the NBN will “cost” $32 billion less than Labor’s all-fibre model (when both will actually make a return), or if you continue to ignore the “radically redesigned” FTTP model which would includes expenses of only $15 billion more than the Coalition’s MTM model (and deliver a full FTTP build in just three years’ more time), then I will write an article correcting these inaccuracies every single time.
I remind you of the Australian Government’s Standards of Ministerial Ethics document, which is published on line here in PDF format. This document states:
“Ministers and Parliamentary Secretaries hold high public office and are entrusted with considerable privilege and power. The people of Australia are entitled to expect that, in the discharge of their duties, they will act in a manner that is consistent with the highest standards of integrity and propriety.”
The document further states:
“Ministers are expected to be honest in the conduct of public office and take all reasonable steps to ensure that they do not mislead the public or the Parliament. It is a Minister’s personal responsibility to ensure that any error or misconception in relation to such a matter is corrected or clarified, as soon as practicable and in a manner appropriate to the issues and interests involved.”
It is my clear belief, Minister, that your ongoing statements regarding the different financial models for the Labor and Coalition broadband policies are misleading the public and breaching these Ministerial ethical standards. Therefore, as a journalist I consider it my duty to point that out, and I will continue to do so each and every time you mislead the public this way.
Upon being sworn in, Australian Ministers swear solemn oaths in sight of the nation to “well and truly serve the people of Australia”. I would remind you of these oaths, Minister Turnbull, and also remind you that these people of Australia are watching your conduct very closely. If you continue to mislead them, a day of reckoning will come. It may not come today, and it may not come for some time. But it will come.
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