NBN rates too low for Syntheo: Turnbull

Shadow Communications Minister Malcolm Turnbull has said that the price NBN Co wanted to pay Syntheo to construct the fibre network in South Australia and Western Australia was not enough, but he has not promised that contractors will be paid more under his National Broadband Network (NBN) policy.

Late yesterday, NBN Co announced that it had reached a mutual agreement with joint Lend Lease and Service Stream construction company Syntheo to not renew contracts worth over AU$300 million to construct the fibre NBN in South Australia and Western Australia.

Syntheo had already pulled out of the Northern Territory earlier this year, handing back the construction work to NBN Co.

It came as stories have mounted over subcontractors that are working for construction partners being paid below the expected rate for the work, and, in some cases, not receiving payment on time.

Communications Minister Anthony Albanese said today that the end of the agreement between the two companies was "normal business practice", and that the NBN remains on schedule and in line with expected costs.

"Contracts come to an end, and when they come to an end, you get a new contractor," he reportedly said in Brisbane.

Turnbull told reporters in Sydney this afternoon, however, that it was a sign that contractors are not being paid enough.

"It shows that if you pay contractors at rates that do not enable them to make a margin, they're not going to work for you for very long," he said.

"You've got to pay contractors at the rate they will work for you. You can't propose rates that people can't make a living working for you, which is the experience they're having at the moment."

He said that the proposed pay rates show an "air of unreality" about the NBN.

"If this were a private company, the directors would have been all gone, the management would have been fired, and they would have had the auditors — if not the administrators — in, trying to clean up the mess," he said.

But Turnbull would not say whether under his policy proposal — which would see the majority of the fibre-to-the-premises network scaled back to a fibre-to-the-node network — contractors would be paid more.

"The approach we are proposing to take is involving much less civil works, so it doesn't involve digging holes in everyone's front garden, drilling holes in their walls, digging up every street," he said.

"It is much more economical in terms of labour and civil construction generally."

Turnbull also claimed that NBN Co has hired far fewer contractors than it initially expected. He said that in a "devastating admission" today, Albanese said there are only currently 4,500 contractors working on the NBN, whereas Turnbull said that NBN Co mentioned in the most recent estimates hearing that 7,500 contractors were expected to be working on the project by the end of June.

"There are 3,000 fewer people working for the NBN Co today than they thought was going to be working for it by June 30," he said. "That explains one of the causes for the NBN Co missing its targets, so many contractors walking off the job [and] not being able to make a margin, for subcontractors not being paid, and for the rollout schedule being so far behind."

The transcript from that estimates hearing, however, does not include any mention of the 7,500 contractors figure.

Syntheo joint owner Service Stream today came out of an extended trading halt and announced that as a result of the ongoing issues with Syntheo, the company expects to report an earnings loss of more than AU$30 million for the 2012-13 financial year in its fixed communications division.

Turnbull called the press conference today, taking issue with Prime Minister Kevin Rudd's claim that the Coalition's policy would see people disconnected from the NBN, and that connecting to Labor's NBN is free.

Turnbull said that connecting to the NBN will require customers to sign up to plans with an ISP under either policy, and said his policy would see the NBN completed faster.

"Kevin Rudd should be held to this, he must clarify that, he must apologise for misleading people, and he must start telling the truth."

Turnbull said he is keen to debate Albanese on the NBN during the election campaign, but said he has yet to hear back from the minister. Turnbull said Rudd could send any of the ministers in his Cabinet to debate him on the NBN.