NBN announcement cost AAPT $1 billion: ex-CEO

Summary:Paul Broad, the former CEO of AAPT and fierce Labor NBN critic has claimed that the project cost his former company AU$1 billion.

Ex-AAPT CEO and long time critic of the Labor National Broadband Network (NBN) model, has claimed that the announcement of the national fibre rollout cost his former company and Telecom New Zealand investors AU$1 billion.

Labor's National Broadband Network policy for fibre to the premises for 93 percent of all Australian premises came at the price of infrastructure-based fixed line competition, with the government paying out Telstra and Optus to transfer their customers over to the NBN from their existing fixed line networks, and implementing new legislation preventing companies from rolling out new high speed broadband networks in parallel to the NBN, and thereby undercut the funding model for the NBN.

At the time, the Australian Competition and Consumer Commission's then-chairman Graeme Samuel endorsed the NBN policy to the point of being labelled an "NBN cheerleader" by Communications Minister Malcolm Turnbull.

Speaking at the Economic and Social Outlook conference last week with Turnbull and other NBN critic, economist Henry Ergas, Broad said that Samuel's announcement of support for the NBN was "one of the saddest days of business" for him when running fixed infrastructure provider AAPT.

"Look, I think it was one of the saddest days of the business I had when that announcement was made by Graeme, and he became a great supporter of it," Broad said.

"I don't think it was a lack of power, I think there was commitment on his part to support it and the rest of the industry were completely dumbstruck."

AAPT at the time had fibre networks in a number of Australian CBDs and dark fibre investments across Australia, which now adds up to 14,000 kilometres of fibre. Broad said the NBN policy decision cost AAPT AU$1 billion.

"We had in value terms, it cost us about a billion dollars. The value structure on that day was about a billion dollars and most of that was out of the good investors of Telecom New Zealand at the time."

Broad left AAPT in 2011 to head up Infrastructure New South Wales , and in late 2013, ISP giant TPG announced it would buy AAPT from Telecom New Zealand for AU$450 million; Significantly lower than the AU$2.2 billion Telecom New Zealand paid for the company in the peak of the dot com boom in 1999.

During the panel discussion, Turnbull said he would not judge the ACCC on its regulatory decisions, but said that when the ACCC decided to allow the former government's NBN policy to proceed they were not experts in the area of telecommunications policy.

"They are not a firm of consulting engineers. They're not a telecommunications business. They've got no expertise in this area at all, yet they gave that advice, and even more improbably, the government relied on it," he said.

"And when you talk to former ministers in the Rudd Government and Gillard Governments, they really did rely on it — and it says a lot about their naivety that they did, I must say. But there it is. And we are now living with the consequences.  And that's the job we've got, getting the NBN back on track, and we are doing so.

"But, boy, there has been a lot value destroyed — we'll get a good outcome, but it'll end up costing many, many, many billions of dollars more than it ought to have done."

TPG has already announced plans to now use AAPT's dark fibre infrastructure to roll out fibre to the building in 500,000 apartments across capital city CBDs to directly compete with NBN Co on the infrastructure level which will test the new Coalition government on the NBN competition policy. The Australian reports today that TPG has already encountered issues with obtaining permission from building owners to install equipment in their buildings for the services.

In an interview with The Saturday Paper, NBN Co chief executive officer Bill Morrow said that the ACCC is still investigating the issue, but NBN Co doesn't want TPG to be "knocked back" from what it is doing by the regulator.

"A win is not TPG getting knocked back. I don't want to stifle competition. My objective here is solely to point out that there is a business model that NBN is based on that does not necessarily account for that sort of competition coming in, because of this cross-subsidy market," he said.

"And so a win in my view is either a change of that model by the government or a clear delineation that we are not going to have a construction competition for a period of time while the NBN is being built … That was something set by the government before my time. My job is to point out that we may have a problem and to be responsible with taxpayer money."

Should the ACCC allow TPG to compete against the NBN in profitable inner-city areas, the product and pricing model for the NBN would have to change, with NBN Co allowed to drop its prices in areas where TPG and others are operating to compete with the commercial operators. The NBN is operated with cross-subsidised pricing, meaning that any changes to the pricing in metropolitan areas will need to be made up with higher prices in regional and rural Australia where there is less demand. Such a change would likely require government subsidies in regional areas to keep prices at the same levels today.

Topics: NBN, Australia, Government

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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