Deja vue all over again: the new NBN

Laura Tingle reckons the arrival of Turnbull’s NBN Strategic Review is deja vu all over again:

The raw politics of this is that, no matter how much the Coalition can complain that it has been left to clean up a Labor mess, a mickey mouse broadband network is now a mess that it owns and has insisted it will put its own stamp on. The cost of this decision is that we have to go back to the start to redesign NBN Co itself; the technological platform of the broadband system, the competition regime and a myriad of contracts.

This will take time.

There is going to be a cost benefit analysis and a review of NBN regulation. There will be changes to procurement strategy, renegotiation of deals with Telstra and Optus, of the special access undertaking lodged with the ACCC, reviews of NBN Co’s fixed wireless and satellite programs, a corporate plan, possible legislative and regulatory changes to access multi-dwelling units and utility infrastructure.

Tony Boyd spells out some of the detail. Significantly, the ‘multi-technology mix’ (MTM) is going to mean that

the entire NBN network technology management system will have to be redesigned. The IT systems will have to be changed and operational processes will have to be modified to support copper, HFC and FTTN.

The Review suggests that the Labor plan would have cost $73 billion rather than $44 billion and would have taken until 2024 to complete. Perhaps worse still, the revenues were revised downwards so the the rate of return would be 2.5% making it impossible to keep off budget.

It should be noted here that Labor communications shadow Jason Clare hotly disputes the findings, saying that the new report was written by Turnbull’s mate to give him the report he wanted. Clare has his own report, written by the NBN experts Turnbull sacked.

Turnbull’s report also has some inconvenient truth for him. His plan would see some 90% of premises reached by 2019, rather than 100% by 2016 as promised in the election. Furthermore the cost has escalated from $29.5 billion to $41 billion. But then up 50% will still have to make the connection at their own expense. The technology mix is expected to be 20 to 26% FTTP, 44 to 50% FTTN and 40% HFC.

David Braue pretty much puts a bomb under the Strategic Review with a series of articles based on a leaked copy of the briefing that was to form the ‘blue book’ for the incoming LNP government. You might say it is the third version of the truth, and an extremely inconvenient one at that.

It’s a must-read summary of his critique which fundamentally questions the viability of the LNP proposal.

For example, LNP ideology has deemed that there should be compatition in the provision of telecomms infrastructure. The advice was that NBN needs to be a monopoly to provide the revenue to make the rest of the build possible, and to create the capacity for cross-subsidising rural areas that will never be profitable.

Hence NBN will need to go hell for leather to grab prime customers rather than build the network rationally and fairly. They will have to do this while redesigning the network and negotiating new deals with telecomms, the ACCC etc. Their cherry picking competitors will have a much cleaner run at capturing premium customers in the main population hubs.

Meanwhile equity and universality will be nowhere to be seen. Firms and service providers, for example in education and health, will not be able to assume universal access, even when the network build is complete.

Braue concludes:

Indeed, NBN Co identified 12 major issues that the Coalition Government would have to remedy – each of them incredibly complex in its own right – within the next 18 months or so if it wanted to have any hope of meeting its objectives.

Not even Turnbull’s Strategic Review can change the reality of the NBN, which is that changing the direction of Australia’s largest-ever infrastructure project not only involves massive change and unknown risks – but could, by virtue of its own technological limitations, prove unable to deliver enough revenues to justify being built in the first place.

The new government may have chosen to ignore the well-considered advice of the very people that built one of Australia’s largest telecommunications carriers from the ground up in just four years – the same people it will task with building its technically inferior alternative NBN – but it now faces an uphill struggle to deliver a functionally limited NBN that will already be outdated by the time it’s complete.

This government has shown itself far better at destroying than at building. Indeed, it looks like deja vue all over again.

11 thoughts on “Deja vue all over again: the new NBN”

  1. “CHANGING the culture at the NBN Co will be crucial to turning around the nation’s biggest infrastructure project, Ziggy Switkowski has declared after releasing a damning review revealing the project would have cost $73 billion and missed its deadline by three years under Labor’s plan.

    The strategic review of the National Broadband Network found that if the rollout had continued under Labor’s model, it would have needed $29bn more in peak funding than the $44bn forecast because of cost blowouts and revenue targets that were never achievable. And capital expenditure was on track to spiral upwards to $56bn rather than the $37bn in the NBN Co’s corporate plan.”

    Everyone bitching about the NBN reminds me of cargo cultists. Yes I would love a Ferrari but I do not expect the government to buy it for me. And the costs listed above are the current estimates. As someone who has worked on big projects – you should probably double that figure again and you might get somewhere close to the real price.

    So, you want to implement a you beaut IT system, you should consider that you need to get some revenue to fund it, so where do you implement first – I know, let’s put it in Tasmania and New England. Perfect, they should all be clamoring for the service and we will connect at least 0.001% of the population after 4 years.

  2. Big Bob @ 1 – I think the Coalition would be feeling pretty pleased with themselves at this stage.

    They are on the way to re-shaping this country while telling us all that there will be no shocks. No surprises!€*#%]£

    Closer to the election they will roll out the barrel. A big one. Full of pork crackling, crisp, salty and bubbling.

    Who will be able to resist?

  3. Sceptic,

    I once thought there might be some overarching plan to change Australia – I don’t believe there is.

    They are just a bunch of dunderheads – State Liberal incompetents dancing on the Federal stage.

    They can’t actually build anything – even their own ideological designs – as they don’t possess the ability to do anything without turning it to crap.

  4. This brouhaha has already diminished the aura of Malcolm Turnbull so perhaps Abbott is not feeling too unhappy about it. The danger for the Coalition is that it adds to an accumulating tally of botched policies and inept political moves. And that will eventually, and inevitably, determine whether this government is re-elected.

  5. Big Bob – funny isn’t it that dunderheads would be preferable.

    I am not at all sure you are right though. Only time will tell.

  6. Sorry Bolter, but that comparison doesn’t work. I have no expectation, not does anyone, that the gov’t should buy me a car, but I do expect the infrastructure on which to drive it. So much for ‘open for business’.

  7. Close it down, sell it to telstra. This half baked solution isn’t worth spending public money on.

  8. The presented arguments against the Liberals also implies that Labor was underestimating costs.Simply whose experts are right,doesn’t persuade me that the Liberal lies are less meritorious.I have a memory they were opposing the NBN all along as too costly! However it is also true,if they do not remedy some of their political gambling points,they will not be able to use it as pork,and it will be deadly for them and this nation.What I also feel is going on,and there are already signs of this,that the physical and mental limitations of health in the political sphere and elsewhere are emerging.The cost of all this is plaguing the mind.This political competition isn’t worth it to both LIB and LAB. I seem to recall excessive bile being used by non political combatants in the process of continuing to support the NBN as concept.To sell it to Telstra,is to sell it to arseholes,who don’t provide much of a service,just like Banks and all the fan club users of Keating’s Deregulation.

  9. Bolter @ 2:
    The concept that a regime must make a profit – or at least not make a loss – on each and every one of its undertakings belongs back in the days Viking fleets and marauding barbarians. A thousand years later, the second most important function of a regime is to provide SERVICE and that usually means Service that the private sector cannot – or will not – provide.

    Looking for any Revenue at all out of major public infrastructure, such as NBN, is downright primitive and stupid. The flat-earthers who dreamed up the mysterious and magical “profits” out of the NBN should have been sacked on the spot; it is clear they did not understand the first thing about major public infrastructure. (The same goes for the economics witch-doctors who have simple blind faith in privatization).

    Major infrastructure – if diligently planned, built well and intelligently managed – creates wealth across the whole economy, it doesn’t just make piddling short-term profits in a teeny-weeny section of it.

    Some that newly-created wealth comes from innovations that arise only after the major infrastructure comes into existence and hence cannot be easily factored into any narrow thinking on return-on-investment; some of it comes from the unexpectedly collapsed costs of using much of the existing technology and that cannot be factored in either.

    Anyway, this is late 2013 and my quaint valve-driven internet has failed me 6 times this afternoon. I’m less than two hours away from a major city with everything that opens-and-shuts yet my internet service is far inferior to that which I saw in the rural backblocks of a former soviet-bloc country nearly a decade ago.

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