NBN doomed to failure: iiNet

NBN doomed to failure: iiNet

Summary: Australia's third-largest ISP iiNet said yesterday that the government's $4.7 billion national broadband network was "doomed to be a monumental failure" despite the fact that iiNet itself is a member of Terria, a consortium bidding to build the network.


Australia's third-largest ISP iiNet said yesterday that the government's $4.7 billion national broadband network was "doomed to be a monumental failure" despite the fact that iiNet itself is a member of Terria, a consortium bidding to build the network.

Michael Malone
(Credit: iiNet)

The government's process and policy was "fundamentally flawed" according to iiNet managing director Michael Malone, speaking at a hearing for the Senate Select Committee on the network. He believed there was a risk that the network wouldn't be built at all, but that even if it were, the prices would be such that most Australians wouldn't see the benefit of the $4.7 billion spend.

Malone said that the government's good intentions had become lost. "They have misunderstood the need for regulatory policy reform and mishandled the process so badly that it is doomed to failure before it's even begun," he said.

"The first priority and only test of the success for the NBN is that customers must be better off from it being built," Malone said, highlighting the over 12Mbps speeds which many customers are already achieving using iiNet DSLAMs.

"If customers end up paying more for a slower product than they are receiving today why is the Government wasting almost $5 billion of taxpayers' money?"

"This is a once in a life time opportunity to get it right. The NBN must be about delivering better outcomes for Australian consumers and a truly competitive, innovative environment. If it doesn't deliver that it should not be built," Malone concluded.

In response to iiNet's comments, a spokesperson for Communications Minister Stephen Conroy said that the government was confident that the process would deliver sound proposals.

"The Government has previously noted the strong response received for participation in the NBN request for proposals and we continue to anticipate that we will receive some very competitive proposals on November 26," they said.

However, Telstra has been threatening to pull out if the government does not rule out the inclusion of structural separation in the process. At its investor day yesterday, the telco bemoaned the lack of regulatory certainty, with CEO Sol Trujillo saying that Telstra chairman Donald McGauchie had sent a formal letter to the federal broadband department months ago requesting clarification on the situation.

Sol Trujillo at the investor day
(Credit: Suzanne Tindal/ZDNet.com.au)

"We think that we could do this well, we think that we could meet the timeline kind of constraints," he said. "But it's got to be consistent with how we operate, and changing assumptions of how we operate throws away any sense of timing, any sense of economics, any sense of do-ability. So all we're saying is look, before we bid, we have to have clarity on this, because otherwise we don't know how to bid."

There has been no formal reply, Trujillo said. "Donald McGauchie sent the letter and would like to get a letter of clarification back that specifies it," he said.

Shadow Communications Minister Nick Minchin jumped on iiNet's comments, saying Labor should abandon the national broadband network effort and instead invest in underserved areas while leaving the industry to continue its competition in metro areas.

The sentiments echoed Minchin's earlier comments on the matter during a Sydney conference this week.

"On our side of politics we do actually have much more faith in the free market and the private sector and believe taxpayers funds should be carefully targeted at areas of most critical need," he said.

"We also believe that government should be very wary of investing taxpayer's money in business ventures. That's why we got out of most of the businesses the federal government was in," he said.

Minchin called the national broadband network a simple big bang solution which he thought was only an election gimmick. "Labor based this broadband promise on just a glib election promise rather than basing it on any sound fundamental robust and realistic public policy approach," he said.

"In the lead up to the election, the government's approach was just vague and simplistic and frankly purely populist... I think it ignored reality, they provided very scant detail ... As someone who has been involved in election processes in this country for 30 years, I know when something is based on focus groups of swinging voters and that's exactly what Labor delivered," he said.

Topics: Broadband, Government AU, Telcos, Telstra, NBN

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at ZDNet.com.au as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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  • AT last!

    Terria has been exposed as the sham it is! even there own members bemoan how woeful this state of affairs has become! The only people who stand to benifit from this are kaboptus which have actively seeked to secure regulatroy uncertaininty, and to discourage investment! and to split up a great aussie icon all so they can continue there parasitic ride!
  • At last!

    What rubbish you write, how about leaving the weird propaganda out and discuss the article.

    It's great to hear Malone talking sense. This is a once in a lifetime opportunity and the regulatory environment in this country is a basket case. Structural separation of Telstra is a must if this country is to move forward. The NBN must be operated by a pure wholesaler without the murky presence of retail pressure. Telstra is consistent in taking advantage of their position and demonstrating their lack of corporate ethics. If Telstra were doing their job, there would be no need of the NBN deal in the first place.
    The NBN is about delivering better outcomes for all Australians.
  • Very agree to Simon

    Telstra, a company without corporate ethics. Howard government has done wrong in privatising T$, hopefully Rudd won't further step on that track.
  • Absolute waste of money

    Malone has hit the nail on the head. It seems every technically literate person in Australia has come to the same conclusion. The only ones yet to grasp it are the politicians. If the government has $5B from the future fund burning a hole in its pocket I'm sure there are more useful things it could be used on, rather than installing a slower-than-current network and locking Australians into decades of higher prices.
  • MHM

    well i agree with Michael's comment to a degree, but something needs to be done for all the people living in metro areas who cannot receive broadband. its all well and good saying some are achieving faster than 12 Mbit but some are stuck on 28.8K dial up or unreliable wireless. If telstra wins the tender it will be over priced if nothing is done then thousands of people including myself are stuck with no broadband. Either way things look grim
  • The impact is more than metropolitan

    Don't forget a lot of rural areas still suffer. There is no chance for T$ to amend these broadband-blind holes.
  • $8 dollar shelf company

    I would rather support Telstra than an $8 dollar shelf company like "Tierra".

    What a joke and Sydney is right on the money with his astute comments.

    DR Phil was right...Separation was an idea in the 80's and the Government passed up the opportunity when sold to 1.4 million shareholders!!!
  • MHM

    Yeah i forgot to mention rural areas but i was just highlighting the fact that if people living in metro areas cannot get good broadband then something is really needs to be done. Australia cannot afford to use $s as an excuse anymore.
  • Kaboptus cactus perhaps.

    While I do not disagree with the content of the above writings under my name I was not the Poster.
    Kaboptus (LOL) is not a word I have used.
  • You never cease to amaze me

    You have got to be kidding "Sydney", you never cease to amaze me, or should I say the persona created by the wonderful spin doctors at Telstra never ceases to amaze me...

    I hope Telstra don't win, I hope Terria don't win, this whole thing is a joke that's just going to leave us (the Australian people, sorry I had to actually state that but with so many Telstra fans/paid posts only thinking about the shareholders and not the regular Australian people who this network should be built for if at all, I thought that needed qualifying) in a worse situation that we're already in with our Broadband.

    No amount of spin from the many nameless posters under the guise of "Sydney Lawrence" is going to make anyone forget Telstra's heavy handed ransom tactics with the lead up to the awarding of the tender...

    Think about it, if this is how Telstra is behaving before they're given full control and a re-established monopoly, what will happen when they actually get it...

    Talk about bye bye competition and growth in Broadband!!
  • Metro suck on dial up or wireless

    One of the reasons many metro people are stuck on dial up or unreliable wireless is because Tel$tra wanted to make more bucks by making people use wireless and quietly discontinuing ADSL Annex L. see http://www.itwire.com/content/view/13983/1095

    Telstra doesn't have to be broken up, they just cannot be allowed to build the NBN. We rue the day this stupid idiotic government canned the OPEL deal which would have seen services being delivered NOW and competition in backhaul to allow further retail competition.

    Look at the Tel$tra antics in pricing of backhaul from exchanges. That monopoly and market abuse (remember when Sol promised 50% profit margins? - about 5 times the industry norm) prevents more ISP's investing in DSLAMS that can service larger areas without Tel$tra's artificial line noise limits.

    Tel$tra is the reason broadband is so far behind in Australia. The Likes of Sydney Lawrence can eat my shorts - skid marks first.

    This government failed the most basic public policy development phase - identifying options for how to solve the problem rather than just take on a Tel$tra initiative and make it sound like a solution for Australia's broadband woes.
  • Lets move on.

    Decision time draws close for NBN and it is time for those with primary focus on self serving agenda's to forget greed and focus on need.

    The Australian people need a NBN. The only company who can provide the NBN build is Telstra. Yes the Government could do it but I would think they would be reluctant to so do.

    The argument that a Telstra build would cause costs to be higher than others is a fabrication. Whoever builds will require a satisfactory return on their investment.

    It is time to admit that Terrier has zip hope of attaining finance. Their hope of duping the Australian Government to separate and damage Telstra to advantage themselves is a failure.

    I ask Prime Minister Rudd, Senator Conroy and Minister Tanner to avoid disaster for the Australian taxpayer and award the NBN to Telstra with the proviso that costs to consumers be kept as low as possible.
  • Thanks but no thanks.

    Anon I decline the offer to "eat your shorts" as I can understand that as Telstra continues, through honest competition, to batter opponents into submission your fear will cause more than skid-marks to appear.
  • re OPELess

    move on mate....CONROY made the right decision..lol
  • OPELless

    That is highly debatable at this point. With the current economic climate, falling $, and the need to deliver a solution that will make a ROI, it's hard to imagine that a serious viable solution could be obtained. What OPEL (if it had been built) would have done would be to provide a workable delivery solution that could be built upon in the future that would have covered the fair bulk of rural Australia, who are after all a primary goal in this task. Not to mention that had OPEL gone ahead it would already be in place, and it would have been done at a fraction of the cost to the government that the NBN will.

    Yes I know that OPEL is dead and buired, but the way things are going to the government funded NBN could (and probably should) be dead and buried as well.
  • Good idea

    Telstra to be involved in honest competition - what a great idea! When are they going to start?
  • Honest Competition?

    I was talking with one of the regional managers when our company was a customer of telstra, and he was talking about how Telstra had their own CIA - Company Intel Agency!! He described this department as one which spends its time secretly gathering confidential intel on other companies......... Honest competition you say. Pity the fool.

    There is such a thing as knowing your competition, but they go much furhter than that.
  • "True Competition"

    Like in "mobiles" when you guy's like OPTUS/SINGTEL start investing for a change instead of leaving it up to Telstra to invest!!
  • In the Nations Interests

    What a joke!! Your comments reflect Michael Egans from Tierra in that "we dont care if we win the NBN"!!

    Sydney Lawrence is right..you guys are only there to stall progress. Problem is you are holding up Telstra & the Nation waits!!

    Stop playing games Terria this is getting serious...Kevin Rudd are you listening??
  • You talk so much s__ sydney

    That's it's almost impossible to determine whether your posts are just sarcastic comedy gold, or you actaully believe the drivel you write.