NBN Co board 'lacked dirt under the fingernails': KordaMentha

The latest government review into the management of NBN Co under the former government has said the NBN Co Board of Directors lacked the operational experience required for the company, did not acknowledge key issues facing the company, including the issue of unserviceable premises.

The report (PDF) from analyst firm KordaMentha was tabled in Parliament this evening and is the latest of the six reviews commissioned by the government into the National Broadband Network (NBN) since coming to government in September last year.

KordaMentha said that while all board members appointed to NBN Co between the establishment of the company in 2009 and the election of the Coalition government in 2013 were "skilled and experienced" they had a "lack of dirt under the fingernails" in operational experience required for NBN Co.

Highlighted as exceptions were the company's former executive director Doug Campbell, who the report said had relevant experience given his history in working as a senior executive at Telstra, as did his replacement Clement Dougherty. Diane Smith-Gander, who is on the board for NBN construction company Transfield, was found to have relevant skills for construction, but the board excluded her from discussions about the brownfields fibre to the premises rollout due to the conflict of interest with her involvement in Transfield.

The report said that former CEO Mike Quigley only had experience from his time at vendor Alcatel and while this was "a useful perspective" it was "not the same as direct experience from within a telecommunications company."

There was "no evidence" Quigley was set key performance indicators (KPIs) as part of his role, outside of delivering to NBN Co's corporate plan, and because Quigley opted to not participate in NBN Co's short term incentive program for bonuses, there were no short term KPIs for the CEO, according to the report.

The report also found that NBN Co's work between 2011 and 2012 resulted in an "incredible" workload for the NBN Co board, with 590 board papers in 2011 consisting of 8,000 pages worth of reading.

KordaMentha also claimed that NBN Co viewed communication with the Finance and Communications departments as "annoying interference" and argued that all primary formal and informal communication between the two shareholder ministers should be through the NBN Co board, and not the CEO. KordaMentha said this was "an ongoing area of frustration for the NBN Co board" during Quigley's time with the company.

In a response to the draft report included in KordaMentha's report, nine previous and current NBN Co board members, including Siobhan McKenna, Brad Orgill, Diane Smith-Gander, and Harrison Young "generally disagreed" with the report's findings, stating that a number of the findings were "unsupported by the facts", with due diligence and care taken. A culture of continuous feedback was cultured by the board, they said, and they did not seek to avoid discussing issues with the government.

"We interacted as required with the shareholder ministers and other department officials. The board often received their written instructions and they on occassion attended board meetings."

In his own response, Quigley said the report relied heavily on the NBN Co strategic review, which overlooked cost reduction measures he had identified and implemented prior to leaving the company that would have prevented cost and time blowouts in the NBN rollout as claimed in the strategic review.

He said that NBN Co was not frustrated by being under the political microscope but there was frustration among senior management about the "deliberate distortion of facts".

In rejecting the claims of his lack of experience in operating telecommunications networks, Quigley said that in his time as CEO of Alcatel USA, AT&T appointed the company as its integrator for the fibre to the node IPTV rollout.

Service Class 0

KordaMentha found that in 2011, NBN Co had developed the different service classes used to describe the availability of NBN services at a particular premises, including the Service Class 0 and Service Class 1 descriptions that counted a brownfields premises as being "passed" by the fibre network, even though that premises couldn't order a service from a retail service provider.

Although the class had been developed, it was not mentioned in any of the NBN corporate plans, or quarterly reports, and this "obscured the true progress of the network rollout and potential future revenue because of the work required to bring Service Class 0 and 1 properties to a state where an active service could be sought by the end user."

Quigley also rejected this in his response, stating the "premises passed" definition was the industry standard.

The report said that the board was not provided updates on serviceable premises until March 2013.

Since the election, Communications Minister Malcolm Turnbull has sought to add what he has said is vast industry experience to the NBN Co board and executive team, including the appointment of former Telstra CEO Ziggy Switkowski as chair, and former Internode founder Simon Hackett as a board member. The government has also appointed a number of former Telstra executives to the executive team at NBN Co, and nabbed Vodafone Australia's CEO Bill Morrow as Quigley's replacement in April.