NBN announcement cost AAPT $1 billion: ex-CEO

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.

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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, Government, Australia

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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13 comments
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  • Loudmouth uber rich dude looses as billion.

    Who cares if this creep looses his money, I'm very happy to see the anti NBN forces loose as much as possible. Pity Murdoch, Turnbull couldn't loose a few billion.
    Kevin Cobley
    • You obviously didn't read the article!

      Quote "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."

      It didn't cost HIM a cent! (Unless he had shares in AAPT/TCNZ - and probably did) But the real people who got screwed were the AAPT/TCNZ investors - the mums and dads that had shares! The little people that the Labor plutocrats bleat about "supporting" and "its for them".

      Conroy had a bright idea, costed it on a napkin and then Krudd announced it. Then to protect it, they had to destroy any competition. Oh, and we had to roll it out to the least profitable areas first so it could lose as much money as possible!
      rowan.evans@...
      • seriously?

        "Conroy had a bright idea, costed it on a napkin and then Krudd announced it. Then to protect it, they had to destroy any competition. Oh, and we had to roll it out to the least profitable areas first so it could lose as much money as possible!"

        We had to roll it out to the people that need it most mate. We all whine about the government not looking after us, but how is it a bad thing that people who have no internet or unreliable internet get the best infrastructure first? And as for cost, you do realize it's not a cost but a capital expenditure that has a return on investment right?

        I'm sure you live in a lovely area with fast ADSL2+ (hell even decent ADSL1) or you don't use the internet for your work or only occasionally, but some of us seriously cannot expand our businesses or create work for people because of the unfit state of the current infrastructure.

        Try to see all perspectives. The only "cost" as you put it has come with Malcolm now steering the boat. VDSL FttN is a complete waste of money with bugger all return because of Australia's ignored infrastructure (copper) being in a dismal state and he's trying to get up to 100Mbps out of it somehow. Now there's a waste of taxpayers money.

        When he came to power as comms minister, if he was not going to complete the FttP roll out, I'd rather he just scrapped plans altogether and save the 40 odd billion he's now pissing up a tree.
        Ramrunner-5dd3e
        • Cost/Benefit anaylsis???

          If you look at the figures announced by NBNCo, most of the uptake of the NBN is NOT in fibre, its in satellite and wireless, because of servicing the country areas.

          I'm in a cr@ppy ADSL area, with bad copper that drops everytime the humidity goes over 75% and, yes, I DO use the internet for work, via VPN.

          But I have structured my work such that data is cached and only transmitted at need.

          The point I was driving - and you have missed - is that the fibre cable rollouts would have been far more cost effective in the urban areas (more people per sq mile) and more takeup per metre of cable, thus more revenue to boost the later stages of rollout than to rollout to areas where the break-even is years away, thus requiring more and more govt investment.

          What NBN are you on? Fibre? Satellite? Wireless? Are you getting 100Mbps down? What are you using it for?

          Reality has to be introduced into the debate otherwise sanity will never prevail.
          rowan.evans@...
          • Reality?

            "Reality has to be introduced into the debate otherwise sanity will never prevail."

            The reality is that the NBN wouldn't even exist if companies like AAPT/Telstra/Optus/TPG had actually invested in infrastructure properly Australia wide.

            The reality is broadband in Australia is crap unless you live within 1km of an exchange.

            The reality is those companies are now paying for their laziness/greed...
            Tinman_au
        • Napkins are a good thing

          Don't forget Vinton cerf sketched the architecture and design of the Internet on a napkin
          epaslv
      • Finally Turnbull Tells the Truth for Once!

        "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."

        He's obviously describing his destruction of the FTTH network & the eventual costs to the taxpayer to remendy the dog's breakfast he's presently creating in order to maintain Rupert's loyal support for the LNP.
        grump-a1eeb
  • Its not cherry-picking if NBN is not available

    I live less than 3km to the CBD, and NBNCO cannot tell me if I will receive fibre optic cable any time in the next 10 years - but they will go crazy if TPG offers services to areas that they have been ignoring. NBN had no plans to service most of South Melbourne, Albert Park or Port Melbourne until TPG stepped up and started offering fibre services. Telstra is not investing because they are waiting for NBN, and the community just keeps paying and waiting.

    NBN has already spent billions .... and what have we seen for that investment ?

    NBN complain about the poor adoption rates. What did they think would happen when they chose to deploy fibre to Bacchus Marsh, instead of densely populated and highly tech literate areas like inner-suburban melbourne.

    The corridor from South Melbourne, through Southbank, Albert Park, Port Melbourne and St Kilda has a high concentration of digital media creators, music and publishing creatives, and professionals working from home.

    NBN's engineering management and market develop leave a lot to be desired.

    The design and planning for NBN has remained unchanged for ten years ... but technology has rapidly shifted. By the time NBN is fully deployed it will be based on 20 year old technology and still will not be available in inner Melbourne.

    Great job !!!!!!
    bztdarryl
    • How about using facts

      Most of the investment has been in national fibre backbone to allow the NBN to be built

      Takeup of the NBN is massive compared to other countries most new networks get 15% takeup NBN is getting between 30% - 50% and will have 100% at 2 years after it is installed.

      Fibre has been used since the late 70's for network connectivity and it is still the fastest and most reliable connection available for 40 years it has been the gold standard why will that change now?
      ajbau
  • Sovereign risk and BS

    The NBN announcement put Australia back 20 years from a regulatory perspective and increased sovereign risk leading to less investment. It was not only TPG that got hit but many many other small companies that provided many jobs in the sector - and diminished Australia as an investment destination in the eyes of investors - who wanted to put money in a country where they reverse fundamental policy (in conflict with their own Competitive neutrality policy) with the Government making and continuing a massive investment in a competing company. For whatever reason - maybe he is trying to claw some of that investment back - Turnbull has continued this policy and ought to hang his head in shame. It is not only against policy but also morally wrong.

    Josh - I am not sure why you word the TPG issue "as allow to compete". Industry was in the sector first - go an read up on article re WHome and many others from at least 10 years back. More correctly word "further stifle private enterprise" or "allow NBN Co to use tax$ to compete against the private sector".
    Rossyduck
    • TPG

      TPG and the whole telecommunications sector sat on its hands for 10 years and did nothing and if we left it as it was they would still be doing nothing because they don't want to do anything.

      Now that the NBN has come along they are saying how they were going to do this and that what a load of crap if there was no NBN they would be sitting back doing nothing as they did before.

      There is one simple truth Telstra MUST be separated by any means necessary.
      ajbau
    • ??

      You state they put small companies out of business, I doubt it. Telstra has taken legal action against some of its resellers and closed them down, not the NBN.
      For years the telecommunications industryu was self regulated lol, now the ACCC & ACMA are doing the right thing.
      Telstra has had the copper network since about 1912 when it was the former PMG. So Telstra has done nothing except keep it maintained since then.
      TPG (I use to work for) & would never use their service, just try to cancel an account & you will be billed again and again as they are bad at customer service). You forget the biggest thing, if you allow only 1 company into a basement of a building you are stuck with that company for the next 20 years as they own the service or you go and install your own which will not happen as TPG will have an contract with the body corporate. So how is that competition.
      Companies could have easily built their own FTTP since the 1990's but they have not. Optus built their own in major cities, however once outside of Sydney Melb they do not exist and use Telstra lines. So to claim the NBN cost them $1 billion is crap.
      Also NBN is a wholesaler and not a retallier, so they would build the entire network than any company can come along and sell to whoever they liked. NBN has bought iiNet fibre in ACT and will now open it up to others to supply services, this is competition.
      Mudrat70
  • Ah dear old duckster...

    ... aka Malcolm/Henry/Tony/David... the carpetbaggers friend!
    btone-c5d11