news NBN chief executive Bill Morrow this morning broadly confirmed analysis by his predecessor Mike Quigley showing that the up to $15 billion blowout in the NBN company’s costs was due to the Multi-Technology Mix imposed by Malcolm Turnbull, in a move that appears set to increase the pressure on the Government over the issue.
In August this year, the NBN company revealed the project’s funding requirement had blown out by between $5 billion and $15 billion compared with the Strategic Review conducted by NBN Co executives in late 2013 after Malcolm Turnbull became Communications Minister.
In August, Turnbull stated that the new cost estimates — including the multi-billion-dollar funding blowout — were based on the fact that the NBN company now knew more about deploying high-speed broadband than “anyone else” in Australia. “All of that information and experience,” the Minister said, had led to its revised funding estimates.
Turnbull accused the previous management of the company — led by chief executive Mike Quigley — as being incompetent when it came to its financial modelling.
However, in an interview with the ABC’s Background Briefing program last week, Quigley stated that the cost blowout was in fact due to the Multi-Technology Mix imposed on the NBN by Turnbull. This model reuses the ageing copper and HFC cable networks owned by Telstra and Optus and is technically inferior to the original near universal Fibre to the Premises (FTTP) model instituted by Labor.
Quigley also released an extraordinarily detailed document detailing the financial basis on which he had made the claim. The document can be downloaded online here in PDF format.
Speaking at the NBN company’s quarterly financial results briefing this morning, Morrow stated that the increase in the NBN company’s peak funding costs was explained at the August press conference detailing the NBN company’s latest financial results and corporate plan.
“We talked about the $8 billion cost that caused that … it mostly related to the two new technologies that we’re using,” he said, referring to the HFC cable and Fibre to the Node rollouts highlighted by Quigley.
Morrow said from the NBN company’s point of view, the cost increase was “perfectly understandable”.
When the NBN company conducted its Strategic Review in late 2013, he said, the company had not conducted “in-fill trials” for the two new technologies — meaning that it did not have a full picture of their cost. The company has since refined its model, Morrow said.
However, asked point blank whether Quigley’s analysis was “right or wrong”, Morrow said he didn’t “want to comment on a paper that’s been written by someone who’s not as close to the detail or the facts”. “There’s nothing new out there today,” he added.
“I rely on our own analysis here, and I think the company’s down a pretty good job with being able to predict where we would land,” the executive said, noting he believed the NBN company had been “prudent and responsible” in its forecasting.
The NBN company’s blowout may not end up being as large as $15 billion, with the company having previously put a range of between $5 billion and $15 billion on the cost increase. Morrow noted this morning that the company had put a ‘range’ on the increase.
In his analysis, Quigley wrote: “It is time to stop trying to blame the previous Government and management for the problems with the costs and timing of the MTM and admit that the cost to role out HFC and FTTN and the timescale that would be needed were grossly underestimated by the Coalition.”
Image credit: NBN company