It’s been a tough few weeks for the Prime Minister’s record on the national broadband network (NBN), though you might have missed it amid all the talk about “innovation” and “the ideas boom”.
Back in April 2013, then shadow communications minister Malcolm Turnbull unveiled a plan to bury Labor’s fibre-to-the-premise (FTTP) NBN with a three-word slogan: Fast. Affordable. Sooner.
Cost blowouts and delays had turned Labor’s nation-building exercise into a political disaster. Fibre would have meant internet speeds light-years faster than copper, but at a price. The opposition’s promise of an NBN delivered years sooner and $60 billion cheaper – with 25Mbps download speeds to all Australians by 2016 – sounded unbelievably good.
But two years on, most of Turnbull’s August 2013 election promises are broken. His “multi-technology mix” NBN, which uses a mix of technologies including old Telstra copper cables and Telstra and Optus hybrid fibre coaxial (HFC) cables (the kind used for Foxtel connections), faces many of the problems that dogged Labor, and is arguably more politicised than it was then, with one expert describing the NBN company’s relationship with media as “adversarial”. Advertisement
The 25Mbps by 2016 is not going to happen, and the overall completion date is now 2020 (originally 2019). Peak funding costs have blown out three times: from $29.5 billion before the election; to $41 billion following the Coalition government-commissioned Strategic Review; to a range of $46 billion to $56 billion in August this year.
Now, thanks to recent media leaks revealing the costs to upgrade the copper and HFC networks, many are beginning to question whether Turnbull’s revamped NBN was the cheaper, quicker option. First came Fairfax Media’s leak showing parts of the Optus HFC network, which NBN paid $800 million for, were “not fit for purpose”. (NBN originally paid Optus to decommission the network in 2011 under Labor, but Turnbull opted to upgrade it and use it as part of the MTM.)
The leaked document showed the HFC network would require up to $375 million to fix, and would cause NBN to miss its 2017 and 2018 connection targets.
A week later came a document in The Australian showing a 10-fold blowout in remediation costs for Telstra’s copper nodes, totalling $641 million.
To many industry analysts, none of this was surprising.
“Here in Australia [HFC is] quite old and hasn’t had as much maintenance done on it as perhaps some countries overseas,” explains Mike Quigley, who was chief executive of NBN under Labor. “That’s the reason we didn’t use it [under the original design].”
The NBN company says it accounted for scenarios like these in its latest corporate plan: that’s what the broad cost estimate range is for. But according to the warnings, these were not contingencies so much as inevitabilities.
Telecommunications analyst Paul Budde believes Turnbull ignored good advice on the state of the networks for political reasons, and “only surrounded himself with friends who all had the same sort of view on the NBN”.
Budde is concerned that the NBN’s mix of “second-rate” technologies, which lag significantly in speeds compared to fibre-to-the-premise, will leave the NBN vulnerable to competition from private players like Telstra, which is investing heavily in its fixed-wireless network.
“If the NBN is no longer super duper, the next thing obviously is others [telco providers] are going to step in [and offer quality of service that the NBN is not delivering],” Budde says. “That will massively undermine the core business model [of the NBN], no doubt about it.”
The operational costs of the mixed technologies are also higher thanks to a more complex IT network, plus electricity to power copper nodes and copper maintenance costs. And some telco providers are not happy with the complexity of managing different technologies on the network.
“Instead of spending our time innovating for customers we’re spending it on interfaces with NBN,” says one senior telco executive.
“It’s turning out to be a bit of a shoddy, delayed, ‘sticky tape and rubber band and gaffer tape’ solution. We’ve got a more complicated process of lesser quality with difficult upgrade paths and added cost on telcos, which at the end of the day translates to added costs for consumers.”
With delays and costs mounting – renegotiations with Telstra to use its copper took months longer than expected, with the fibre-to-the-node part of the rollout getting under way only in September this year – the original full-fibre plan is looking increasingly attractive to some.
The University of Melbourne’s Rod Tucker, who advised Labor on implementing its NBN, argued in The Conversation that if NBN had in 2013 hired the extra 1000 construction staff it finally did in 2015, a full-fibre NBN could have been completed as soon as 2021, but with the benefits of a faster network with lower operational costs and higher revenue.
Quigley told Fairfax he stood by the last peak funding estimate under his tenure of $45 billion published in 2013, for the fibre-based model, which he said could have been completed one to three years after the multi-technology model.
Turnbull and present communications minister Mitch Fifield stick on message in the face of criticism.
“Suggesting an all-fibre network could work out to be cheaper than the MTM is fanciful,” Fifield told Fairfax. “Any claimed savings in operating costs would be minuscule when compared to billions in extra debt or taxpayer funding required during construction,” he said.
Speaking on ABC TV’s 7.30 this week, Turnbull dismissed the leaks to The Australian on copper remediation costs as “simply not true”, pointing to figures in the NBN’s current corporate plan, which show Labor’s NBN would cost nearly $30 billion more and take six to eight years longer to build.
He said continued assertions in the face of “facts” were “remarkable”.
But are they?
The figures Turnbull quoted detail the prospective costs of returning to a fibre-to-the-premise model; not what it would have cost to stick with fibre to begin with.
Budde and Tucker have openly questioned NBN’s “desktop analysis”, which produced the figures and is separate from the MTM estimates. Senator Fifield rejected a recent attempt by fellow Senators to have NBN release details of the modelling, citing commercial in confidence.
An NBN spokesperson told Fairfax it was not NBN’s role to “do a cost comparison of a hypothetical all-FTTP build to completion vs MTM is not a role for NBN”, but stressed “any such figures would need to take into account NBN’s experience in building to more than one million homes”.
“The debate on costs estimates, particularly about operational expenditure vs capital expenditure over the long term, ignores the most important fact that people would wait years longer for fast broadband,” the spokesperson said.
“An NBN that is wholesaling broadband sooner to more customers means benefits to the community and revenue to create a sustainable company that can invest in upgrades as the market demands.” NBN chief executive Bill Morrow did not agree to an interview.
Some journalists say there is increased resistance from the NBN company under Turnbull when information is sought, despite pre-election promises to the contrary. Technology blog Delimiter has described an “extraordinary display of open spin” when NBN does talk.
RMIT University’s Dr Mark Gregory, a prominent commentator on the topic, says current NBN management is “stonewalling everyone” and creating an “adversarial” relationship with media because it is “trying to hide all the bad news”. “There are no facts coming out of NBN Co, no transparency,” he says.
Wherever the facts emerge, even Labor now concedes it will cost too much to change course again. Its policy now is to keep parts of the MTM, increasing the fibre footprint where possible.
There also remain unanswered questions about how a bigger fibre-to-the-premise rollout would deal with the problem of asbestos in old Telstra pits and pipes, which was a costly – and dangerous – hurdle to the initial fibre rollout.
Michael Malone, founder of Perth-based internet service provider iiNet, says the NBN’s problems were cemented when Labor failed to get bipartisan support for the project in the first place, and let it become a “political plaything”.
He still believes fibre-to-the-node will be cheaper and faster, and that controversy around the state of Telstra’s copper has been “definitely over-hyped”.
“[With fibre-to-the-premise] you’re literally going to have to dig up everyone’s front yards, driveways, footpaths, cross roads; fibre to the node avoids 90 per cent of that,” he says. John Lindsay, previously chief technology officer at internet service provider Internode, says Turnbull’s great achievement will be actually having saved the NBN once the Coalition swept into office.
“I [personally] know lots of the [Coalition] party faithful, and among those people there was a huge amount of scepticism about the NBN,” Lindsay says.
“Malcolm convinced them that in fact the best thing that could possibly happen to their Telstra shares was keeping NBN very much alive.” Note: This article has been updated to include comments from NBN and to clarify that NBN’s $800 million payment to Optus for its HFC network was originally made to decommission the network under the former Labor government.