news A letter tabled in the Senate by the Government yesterday has revealed that as Communications Minister, Malcolm Turnbull explicitly asked the NBN company to create information that could help the Coalition make the case that Labor’s Fibre to the Premises model was not worth pursuing.
In mid-September, former Communications Minister Stephen Conroy successfully moved a motion in the Senate which required the Government to table a number of key documents relating to the NBN company and its most recent Corporate Plan from 2016.
In his motion, Conroy sought the following documents: The ‘Operating Plan’ referred to in the NBN company’s latest corporate plan; financial and deployment forecasts for the Multi-Technology Mix model from FY2015 to FY2022, as included in the Operating Plan; the most recent ’12 Quarter Integrated Deployment Plan‘ referred to in the Corporate Plan 2016; and the high level desktop analysis of an all-FTTP fixed line deployment scenario referred to in its Corporate Plan 2016.
Lastly, Conroy also requested a copy of a reported letter from Turnbull and Finance Minister Mathias Cormann to the NBN company requesting that it prepare a high-level desktop analysis of an all-FTTP fixed line deployment scenario for the project.
In response, yesterday new Communications Minister Mitch Fifield tabled a letter in the Senate refusing to meet most of Conroy’s demands — defying the Senate’s Order for the Production of Documents. You can download the full letter in PDF format here.
Most of the material which Conroy had requested, Fifield wrote in the letter, could not be released as it contained material which was commercial in confidence. “Disclosure of this material would cause commercial harm to the Commonwealth, which would ultimately negatively impact Australian taxpayers,” Fifield wrote.
The Senate may or may not recognise a claim of commercial in confidence — such a claim is not inherently valid. Further information on this can be found in the Senate’s brief guide to procedure.
However, perhaps more interesting for those who follow news related to the National Broadband Network is that Fifield did table the letter from Turnbull and Cormann which Conroy had requested.
The letter, sent to the NBN company on 29 April this year, details a number of requests which the two NBN shareholder ministers had made with relation to the 2016 NBN Corporate Plan. The pair had received a draft of the plan, but requested modifications be made to it before it was published.
One of the key modifications which Turnbull and Cormann requested was that an explicit examination of the cost of returning the NBN to its original near-universal fibre model be included.
Turnbull and Cormann wrote that they viewed this required examination of FTTP costs as an “important counterfactual” to the Multi-Technology Mix rollout which the Coalition preferred — in short, that they wanted the NBN company to create information about the cost of returning to a FTTP rollout for the NBN so that that information could be contrasted with the cost of the MTM network.
“Shareholder Ministers believe an updated cost estimate for a network where FTTP serves the entire fixed-line footprint is a critical data point that needs to be credibly costed,” the pair wrote.
The two ministers went even further in their request, asking for the costing to be based on a fictituous FTTP model which had never previously been technically defined in the NBN company’s planning, and which they left nebulously defined.
The NBN Strategic Review, which was put together in the closing months of 2013 by new NBN executive JB Rousselot, a close personal associate of Turnbull, listed several different potential models for a FTTP rollout of the NBN, including pursuing the original model (Senario 1) and a radical overhaul to cut costs (Scenario 2).
“While it is up to the company to determine the basis for its estimate of an FTTP rollout, it may be that a Scenario 1.5 approach aligns most closely with reality,” Turnbull and Cormann wrote.
The two ministers wrote that this ‘Scenario 1.5’ should include new information gathered by the NBN company since the Strategic Review was published in late 2013, “particularly in areas such as historical and current costs per premise, the ability and distribution of productivity gains in an outsourced delivery model, competitive threats from alternative networks and technologies, achievable peak construction rates, and cumulative operating costs likely to be incurred over the build”.
“While any updated cost estimate for a FTTP rollout scenario is not expected to replicate the rogor of NBN Co’s Business Plan for the MTM rollout, it should be sufficiently robust and detailed that the company is prepared to stand behind its credibility and comparison of FTTP and MTM costs,” the Ministers wrote.
“Accordingly, we ask that the updated FTTP scenario provide each of the high-level metrics in Table 0-2 on page 17 of the Strategic Review. This updated scenario should be included in the Board-endorsed draft 2015-18 Corporate Plan that is due to us by 31 May 2015.”
The NBN company acceded to the request, and the FTTP ‘counterfactual’ did make it into the published version of the 2016 NBN corporate plan, which states:
“The high level analysis has enabled management to confirm that despite higher than anticipated cost and risk, MTM remains a superior strategy to an all-FTTP rollout for fixed line areas.
Management estimates that an all-FTTP fixed line rollout could be completed by 2026 but possibly as late as 2028, with a peak funding range of $74-84 billion (vs. $46-56 billion for MTM) depending on critical sensitivities around peak construction rates, construction and operating cost, and revenue generation. First positive free cash flow is estimated to be achieved between FY26 and FY31 for an all-FTTP fixed line rollout (vs. FY22 for MTM).”
The news represents only the latest occasion which Turnbull, as Communications Minister, sought to have information generated which could be used to criticise the former Labor Government’s near-universal fibre approach to the NBN. Turnbull also commissioned a series of reviews of the project, several of which were partially completed by analysts such as Henry Ergas who have been severely critical of the NBN’s model in the past.
The letter also reveals that the two ministers pressured the NBN board to endorse the company’s long-term financial forecasts out to 2040. The board had been reluctant to endorse the projections, due to the inherent uncertainty in the telecommunications market. However, Turnbull and Cormann urged the board to find a version it could endorse.
“… such projections are needed for Shareholder Departments to update financial forecasts that inform the Commonwealth’s budget accounting treatment of NBN Co,” the pair wrote.
Opinion/analysis to follow separately.
Image credit: Office of Malcolm Turnbull