news Communications Minister Mitch Fifield has rejected detailed analysis by former NBN CEO Mike Quigley that the up to $15 billion blowout in the NBN company’s costs revealed in August was due to the Coalition’s Multi-Technology Mix model; but without providing contrary evidence to show how Quigley’s analysis was incorrect.
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. Turnbull accused the previous management of the company — led by CEO Mike Quigley — as being incompetent when it came to its financial modelling.
However, in an interview with the ABC’s Background Briefing program several weeks ago, 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.
Following the release of the ABC program, 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 an NBN forum event held yesterday in Sydney by Communications Day, Fifield rejected Quigley’s analysis.
“I am sure you are aware of the heightened scrutiny of the Corporate Plan and peak funding forecasts over recent weeks,” the Minister said. The full speech — in which Fifield tackles a number of subjects with relation to the NBN — is available online.
Fifield said it was “important to place such opinion in its appropriate context”.
“Even critics acknowledge that the multi-technology mix will see fast broadband reach communities sooner and at less cost than the alternatives previously considered,” the Minister said.
“Headline-grabbing terms like ‘blowout’ take little account of the multitude of financial projections and operating parameters that underpin peak funding estimates. Some elements have gone up, while others have decreased compared to the assumptions that were used in the 2013 Strategic Review.”
“Clinging to what might have been in some parallel past takes no account of the billions already spent on the NBN, and indeed, of the revenue foregone given the underperformance of the early years.”
However, Fifield said, one thing was “abundantly clear”.
“Any reduction in operating costs claimed for an all‐fibre network would be miniscule when compared to just the interest payments on the extra investment required for such construction,” he said.
“And while we are on the topic of cost, I do want to highlight that NBN’s understanding of the true costs associated with the network build has improved as the rollout has progressed.”
“It is only because of the thorough review process undertaken by the company, as requested by the Government, that we know that the estimated cost of rolling out the network has increased, for both an all-FTTP and multi-technology mix rollout.”
Fifield pointed out that the NBN company had calculated in its Corporate Plan published in August that reverting to an all-fibre rollout plan for the NBN would cause the company’s peak funding to balloon to as much as $84 billion.
“Not only would the company be saddled with negative cash flows out to the horizon but the construction phase would not end until 2026 and potentially as late as 2028. In such a rapidly evolving sector it’s hard to imagine what user demand might look like more than decade from now,” he said.
However, the Minister did not directly address Quigley’s detailed analysis, and did not provide any evidence for why the former NBN CEO’s specific claims were inaccurate.
Quigley’s document examines the five major cost elements of the NBN that are common to Labor’s original version of the NBN and the Coalition’s revised plan.
In each of these elements — FTTP brownfields and greenfields, fixed wireless, satellite and the transit network required to connect cities and regions — Quigley compared the NBN company’s original costings during his tenure at the company to costings contained in the two major documents released under the company’s Coalition management — the November 2013 Strategic Review and the August 2015 Corporate Plan.
In each of these cases, using the raw figures, Quigley found that the NBN company’s estimates had not varied significantly over the past few years, meaning that costs in these areas would not account for the up to $15 billion blowout disclosed in August.
Quigley’s analysis appeared to be a coldly forensic examination of the NBN company’s various financial disclosures.
In comparison, Fifield did not go into detail to explain his view for why criticism of the NBN’s cost blowouts, such as Quigley published, was inaccurate. The NBN company has also not published analysis showing why Quigley’s analysis is inaccurate.
Delimiter has contacted the office of Senator Fifield to invite the Minister to provide further evidence for why Quigley’s analysis is incorrect, and will publish any response in full.
Do I expect Minister Fifield to either respond directly to Quigley’s analysis, or provide substantial evidence for why his own view of the NBN’s finances and costs is inaccurate? No, I do not. It would be unseemly — and, from the Government’s point of view, unnecessary — for Fifield to do so, and Fifield is nothing if not composed and assured. He does not want to get into a debate on the nitty gritty details with Quigley.
However, that does not mean that Fifield should not back up his views with facts, if he is truly interested in debating this topic in the public interest. Quigley has done so, and in detail: If Fifield expects his views on NBN costings to be treated with the gravity that Quigley’s are, then he must necessarily provide a similar level of detail and evidence.
The NBN debate is an extremely detailed one: Headline claims without granular evidence attached rarely carry sufficient weight to make an impact on the debate.
Image credit: Parliamentary Broadcasting