How the Coalition destroyed the NBN

MichaelWest.com.au has published interesting analysis explaining how changes implemented by the Coalition when it came to power in 2013 have wrecked the National Broadband Network (NBN):

The real rot started with the “strategic review” of the NBNCo plans initiated after the 2013 election…

The review predictably concluded that the latest corporate plan was too optimistic and would be too costly…

The MTM strategy was a euphemism for a mixture of technologies which would rely on the existing copper network (owned by Telstra) and HFC (Hybrid Fibre Coaxial, owned by Optus and Telstra), in effect throttling “last mile” access by using out-dated technologies.

The justification for the change was the contention that the original plan would cost $64 billion+ (remember that figure) versus the original estimates of $41 billion. The revised corporate plan released in 2014 had the total cost of the network at $43 billion…

The just released corporate plan reveals the reality of the MTM strategy. The total cost will be $51 billion when the roll-out is completed by the end of 2020. Add to that $3 billion in revenue loss in comparison to the 2014 plan. Add a further $10 billion (at least) which will be required to upgrade the network to be able to deliver the speeds originally planned and the total is $64 billion.

In short – Abbott and Turnbull were right, the network would indeed cost much more than planned, because they delivered to Australia a substandard network at that same predicted cost. All in the name of party politics.

To be fair, the problems with the NBN have been a long time in the making.

First, the Howard Government’s privatisation of Telstra gave it control of the fixed line telephone network, which competitors were forced to rent for access. The NBN was designed, in part, to fix this structural mess, and this came at great taxpayer expense. In 2011, the Government agreed to pay $9 billion in instalments for Telstra’s fixed line customers to migrate across to the NBN.

Second, and as mentioned above, former Communications Minister, Malcolm Turnbull, abandoned plans to build a fibre to the premise (FTTP) network across the majority of the country, instead replacing it with a multi-technology mix that included previously retired copper cabling. This change was marketed as a cost-saving move. However, the huge amount of rectification works required quickly saw the price tag for the NBN surge from an expected $30 billion to around $50 billion.

The upshot is that taxpayers have been left with a $50 billion dud network that costs customers more than the old ADSL service it replaced, and is generally no faster. And to bring it up to standards would cost taxpayers potentially tens-of-billions of dollars more.

The NBN has become a cautionary example of infrastructure done badly. Policy makers should, therefore, take pause before answering the calls for government to quickly ramp up infrastructure projects to boost the economy.

Comments

  1. Trying to make sense of all this… you steal $1 billion and you go to gaol for a long time. You waste billions in tax payer money (whether deliberate or not) and you get what? some kind of Ambassador role in the future?

    • Correct. Turnbull and Abbott have wasted, either deliberately or for reasons as mundane as political point scoring, the most staggering amount of tax payer money that history will see for a very long time.

      Yet both have now moved on, free to do whatever, with no personal responsibility.

      They should both be in jail.

      The true cost of the Turnbull Abbott nbn will rise every year, the fiber network will still need to be built. All the legacy MTM crap will need to be overbuilt. It is simply inevitable.

    • The original $44.1B, you mean? It was actually on-budget for the last year or two (after a ~$4B change a couple of years prior). The major issue was that they were about six months behind at the 2013 election, but the crazy thing is that the media were reporting on the project as if it were massively over-budget. At that time it wasn’t.

      It was bizarre, because before Turnbull changed the management, the reports with actual cost figures were released in full, but the media made it seem as if the Coalition’s ‘estimate’ that it should cost $96bn was more reliable than the actual numbers coming out from the real rollout. It later came out that the numbers the LNP were using pre-election was literally just made up and had always just been a lie, but the media (outside the tech press) very interestingly was very quiet on that…

    • Absolutely. Thank you for the common sense.

      What really happened was that the coalition government realised that implementing the FTTP NBN per Labor’s vision was going to cost well north of $100 Bn, yet cancelling it was politically unpalatable. So what we got was a “Potemkin Village” NBN, still costly (and obsolete on arrival!) yet “delivering” on the political promise of broadband for all.

      Both sides of politics share responsibility for this debacle – it’s unfair to sheet home blame to just one side, even if their decisions were poor.

      On a more positive note the regional mobile wireless and remote area Sky Muster services do at least appear to have somewhat reduced the digital divide.

      I doubt real lessons will ever be drawn from NBN as both politicians and armchair pundits alike seem unwilling to look beyond individual political allegiances to get to the real truths.

  2. The old ACCC ‘fixed’ the Telstra monopoly issue by forcing Telstra to open up their copper, and also fixed a price on access. This is how you deal with a natural monopoly.

    The new ACCC could have done the same for fibre optic to the home, but it didn’t. Instead, it destroyed the entire industry by mandating the number of POI that exclude all small players. That means there will eventually be only 3 ISP in Australia. Futhermore, by blocking the merger of Vodafone and TPG, it will eventually lead to a duopoly in Australia.

    • I’m pretty sure the ACCC is not all that independent. Too much looks like protecting the great Jon Howard legacy, the Telstra share price, and all them ma and Pa investors. I reckon the LIbs have their hand up the ACCC clacker.

      Oh no’s we can’t have a TPG Voda merger.

      Really? Who else is going to give Telstra a run for their money? Optus gave up trying years ago.

  3. I attended a liberal party “meeting” at parliament house prior to the 2013 election that’s agenda was to discuss the NLP response to the NBN plan.

    It was run by the then new advisor to the NLP ( an ex optus exec ) who made statements that I can paraphrase as ” The ALP caught us wrong footed with this proposal and the NLP response needs to destroy any ALP credibility and remake the NBN as an NLP solution even if that means implementing it twice”.

    He as much as admitted the FTTP solution was more appropriate, cost effective and future proof but in order to appear to save money and get faster results they needed to push to re-use existing technologies like the Optus HFC cable ( must still have had shares in Optus ).

    I only attended the meeting at the insistence of a friend who was an active party member. He insisted they had a good plan and I really needed to listen to it and I would understand the issues. He never mentioned the NBN again…. He has also left the party since as well….

    • You mean that Optus HFC, which telco experts were warning was not fit for purpose, before NBN ended up acquiring it and wasting almost a year trialing, only to give up and declare it wasn’t fit for purpose?

      Yeah, that Optus HFC…