Turnbull ignores looming NBN disaster as Scales weighs in

The most tragic thing about today's release of the government audit of Labor's national broadband network (NBN) program is not its contents but the fact that Malcolm Turnbull will, as everyone knew he would, believe it – and ignore the fact that he has instigated an even bigger policy disaster in the making.

Turnbull's callous and ongoing disregard for reality will surely see him feting the report's findings on the evening news, while using its preordained findings to obscure the fact that he has already shot himself in the foot with his white-elephant gun – and, in so doing, wound back the prospect of real industry progress by a decade.

First, the policy disaster. We all figured out some time ago that Turnbull was desperate to get on with his version of the NBN without regard for the cost-benefit analysis (CBA) that he believes all Labor governments should undertake before committing to major infrastructure investments.

Labor's NBN, which Turnbull's own Strategic Review confirmed could have been built for around $7 billion per year and delivered a major driver for economic growth, has been predictably rubbished while the Coalition's $5.5 billion per year paid parental leave scheme, a bald-face vote-buying exercise that remains a high-water mark of Abbott government hypocrisy, is apparently exempt from such considerations because, as Turnbull is quoted in the AFR as saying, “it's not infrastructure”. As if that makes it OK.

But let's not go there right now. Let's go here instead: even as he continues fighting the 2013 election by smugly tabling yet another study rubbishing Labor's handling of the NBN, public and media ennui has meant Turnbull has largely escaped scrutiny for what will surely stand as his biggest policy disasters yet.

Even as he continues fighting the 2013 election by smugly tabling yet another study rubbishing Labor's handling of the NBN, public and media ennui has meant Turnbull has largely escaped scrutiny for what will surely stand as his biggest policy disasters yet.

These, of course, are twofold. The first, of course, is the decision to violate Liberal Party dogma by launching a baldfaced, anti-competitive and anti-private industry attack on TPG Internet's efforts to roll out its own infrastructure.

Labor may have been clear in its vision that NBN Co needed to be a monopoly, but after years of campaigning against that vision Turnbull has lost all credibility by directing NBN Co to systematically stamp out any industry competition.

As if his aimless policy platform weren't already bad enough, Turnbull has already put the pieces in place for his own personal Waterloo by prematurely commencing NBN Co's fibre-to-the-node (FttN) rollout with a so-called 'trial' delivering 2005-era broadband to a population roughly equivalent to that of the city of Newcastle.

These absurd semantic acrobatics are designed to mask the fact that Turnbull has now officially begun building his own vision of the NBN, without the benefit of a CBA or any of the reasoned, measured analysis that Scales has called for. This is rank hypocrisy but, even worse, it has undone years of negotiating progress by putting the future of Australian telecoms firmly in the grasp of Telstra once again.

The aforementioned shot to the foot has come as Turnbull – who seems to believe he's doing something progressive by getting on with the FttN rollout – has simply played into Telstra's hands by giving the company the clearest indication yet of the true value of its copper access network (CAN).

This, you will recall, is the network that Turnbull seriously believed would be given to the government at no cost after “slight adjustments” to the Telstra Definitive Agreement negotiated by the previous government. Yet with the FttN trial now announced, Turnbull has proved to Telstra that the copper network has significant remaining value.

Basic maths suggest that if the company can get $150 million from the government to deploy FttN to 206,000 premises, and if Telstra's network reaches 10 million endpoints, that full deployment of FttN over Telstra's network would be worth $7.275 billion to the company – and that's without actually selling the network.

Turnbull – who seems to believe he's doing something progressive by getting on with the FttN rollout – has simply played into Telstra's hands by giving the company the clearest indication yet of the true value of its copper access network (CAN)... the network that Turnbull seriously believed would be given to the government at no cost after “slight adjustments” to the Telstra Definitive Agreement. 

Correct me if I'm wrong, but there's a rather large gap between zero and $7.275 billion – and I'm sure Telstra can do the same maths, with even better accuracy. And, if we were to use those figures to extrapolate the cost of buying the actual network, perhaps using the six-times-earnings rule of thumb from the NBN Strategic Review – we get a suggestion that the full purchase price of Telstra's copper might be around $43.65 billion.

Hmmmm. A $43 billion network investment. Something about that number sounds familiar. And while I readily admit that figure piles assumption upon estimation and is likely to be incorrect in practice, it highlights the way that things could well work out if Telstra decides to dig in and drag the government over the coals as it works to renegotiate its Definitive Agreement.

Telstra now knows its network does indeed have commercial value – and it's significant, especially since the current government's broadband vision is entirely predicated on that network. If Turnbull still honestly believes the company won't fight him tooth and nail to extract that value, he might as well resign now.

Back to Scales' report, which reads as an indictment of process and execution more than an indictment of Labor's vision. And, on many points, the report is completely correct: Labor did indeed start up a company and task it with two core, massive goals – namely, to build a modern communications infrastructure and to free it from the distorting, disproportionate influence of Telstra.

Labor did set aggressive targets, and for whatever reason – Stephen Conroy blames the contractors, not entirely incorrectly, although there were other issues too – it took longer to get the project off the ground than was optimistically expected.

Even Labor now admits that it could have managed the rollout better, but in the vision stakes there is still a strong argument that it had a much better idea of what it was trying to do than Turnbull does now. Nobody had ever before done what Labor attempted to do, and this degree of difficulty needs to be honestly incorporated into any assessment of the project's past performance.

However, rather than fixing Labor's execution and delivering a modern infrastructure in a more efficient way – as the Scales report would suggest is ideal – Turnbull's decision to progress with a retrograde rollout and a newly-empowered Telstra reflects just what a policy disaster the NBN has now become.

The thing is: with the Abbott government nearing a year in power, Turnbull really must stop blaming Labor and start accepting responsibility for his own missteps. If he doesn't tighten his grip on Telstra, and pull back his attack dogs, his legacy will be as the communications minister that demolished not just one NBN, but two of them.

What do you think? Is the Scales report correct? What can Labor learn from it? And what should Turnbull do with it?