NBN committee demands strategic review redo

The Senate Select Committee investigating the National Broadband Network has questioned the financial assumptions made in NBN Co's strategic review that resulted in an unreliable costing model for the fibre to the premises rollout.

The Labor-Greens majority NBN committee's interim report, released last night, said there were "significant concerns" with the accuracy of NBN Co's strategic review released late last year. The committee is chaired by Labor senator Kate Lundy, and includes three Labor senators — including former Communications Minister Stephen Conroy, three Coalition senators, and Greens senator Scott Ludlam.

The reassessment of the existing rollout of fibre to 93 percent of Australian premises failed to include AU$4 billion in business as usual incremental savings outlined by former CEO Mike Quigley shortly after his departure, but were included in what NBN Co called a "radically redesigned FttP", the report said.

The assumption that there would be a delay in the completion of the network defied the current rollout run rate, the report said, meaning that AU$11.6 billion in revenues are removed, and AU$13 billion in peak funding is added to the FttP model.

The committee said that the current run rate, and the June 2014 target of 357,000 brownfields premises passed was "lowballed" to give NBN Co a target it could not fail to meet, and to provide support to the extra three years added to the FttP model.

The model in the strategic review also includes the assumption costs for a third satellite which was not planned for, but does not include the associated revenue with this satellite.

The committee said that the "radically redesigned" FttP rollout detailed in the review comes closer to estimating the cost of the existing NBN rollout. 

The committee also said the cost of the multi-technology model that includes hybrid fibre-coaxial networks and fibre to the node has underestimated the operating expenditure that will be required to maintain the existing copper network, as well as the IT costs for integrating the HFC networks.

The lack of high end products on the FttN network would also reduce revenues for the NBN, the committee said.

Overall, the committee said that the strategic review was less reliable than NBN Co's own corporate plans, and said that the review "does not comprise a sufficient information base for the NBN Co board or the minister to adopt an alternative deployment path for the NBN".

The committee recommended a revised strategic review looking only at the FttP and multi-technology mix models, and in the meantime, NBN Co should continue the FttP rollout.

The report stated that the multi-technology model would see fibre deployed in places which high revenue potential, while FttN or HFC would be used in areas with lower revenue, and this was not appropriate for a rollout by a taxpayer-owned company that should be correcting market imbalances.

The report also called for NBN Co's governance to be investigated to determine how the strategic review was signed off in its current state, and NBN Co should begin to provide information to the public on where construction had begun for the rollout on its website.

Report 'grossly misleading'

The three Coalition senators on the committee labelled the majority report as "grossly misleading" and accused Labor of creating a falsified version of the report for the Coalition, and only provided the full 140-page report to the Coalition one hour before it was published.

This version was "replete with misrepresentations" and "self-serving recommendations".

The minority report said that the committee had become "highly politicised" and "at times farcical face-saving exercise where Senator Conroy has sought to distort the history of the NBN and deny or disguise his direct personal culpability for massive economic damage to a crucial input industry."

The Coalition senators were not allowed equal time to question witnesses, and Labor and Greens MPs had subject witnesses to "frequent bullying and hectoring", according to the Coalition, in such a way that was unparliamentary. Other witnesses requested by Coalition members to appear were not contacted, according to the minority report.

"This is crudely self-serving conduct deeply at odds with Westminster-derived governance, and more akin to the parodies of democracy common in the Eastern Bloc prior to the fall of the Soviet Union," the report stated.

The Coalition senators said they hoped to "lift the standards" of the committee in the future.

"There are important questions for the Committee to examine – including those around how fast broadband can be delivered to Australians sooner, at lesser cost to government and at prices which are affordable for consumers, and a separate set of questions about why the NBN project under Labor's oversight failed so disastrously."

The committee's next hearing is scheduled for Friday.