Turnbull ignores looming NBN disaster as Scales weighs in

Turnbull ignores looming NBN disaster as Scales weighs in

Summary: Smug Liberals will embrace Scales' assessment of Labor's NBN as vindication of their own position – but they're ignoring the double disaster towards which Malcolm Turnbull is steering the effort.

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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 has been shooting white elephants, but his own policy decisions won't end well.
Turnbull is still contesting the 2013 election but he should take aim at his own looming NBN policy disasters. Image: Public domain

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?

Topics: NBN, Broadband, Government, Government AU, Australia, IT Policies

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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Talkback

33 comments
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  • Never send first reactions about an issue with emotional involvement

    This article is a clear example why one needs to sleep on some things, or have a competent editor to achieve the same result.

    The overdone emotional language and metaphors piled on top of each other make it clear that the author is not an objective observer. Cutting the unnecessary verbiage out would have made the article more authoritative and shorter.
    csomole
    • Sometimes first reactions ought to be heard, but that said...

      Perhaps you could lead by example and ignore what you consider to be invective and address what you find to be factually incorrect?
      Modeski
    • Cutting the unnecessary verbiage out would have made the article...

      ... more authoritative and shorter?

      So short bullsh.t is better than a well argued longer analysis? Ah yes, I remember, "stop the boats, get rid of the carbon tax and destroy the NBN"... that works
      btone-c5d11
    • If you can't play the ball...

      ...play the man, hey csomole?
      Tinman_au
  • Bias

    Wow, bias attack article much? Perhaps a course of journalism 101 is in order.
    adam@...
    • Do you mean...

      Do you mean 'biased'? It's a bit iffy to point out errors in others' work if you're not sure of the difference between a noun and an adjective.

      That aside, is there anything specific that you object to, other than tone? Turnbull has destroyed Labor's NBN not for the best interests of the country, but purely because his ideology prevents him from admitting that Labor could ever do anything right.

      IMHO, retarding the progress of the IT industry in this country, and damaging our economy, purely in the name of politics, is worthy of a little invective, and David Braue is to be lauded for saying what so many of us think. Let's not forget the ad hominem attacks Turnbull has seen fit to dish out on Mike Quigley, Stephen Conroy, Kevin Rudd and others in the past.
      Modeski
    • Biased?

      No, it's about time a reporter called a spade a spade and stood up to the bullies. Turnbull will probably attack him like everyone else who has pointed out what utter excrement his policy is. Hopefully unlike with News Ltd and ABC, etc, he doesn't have any power to inflict damage to his career.
      Pilfer-52cec
  • Mr Thodey has his duties as director of Telstra

    Mr Thodey is bound by law to extract maximum value for shareholders, not do favours for Mr Fraudband.
    Telstra will fight tooth and nail for every cent of value through every court in Australia and will appeal every lost decision.
    I will still be waiting for my 25mbps ADSL connection in 2016 as will almost all Australians. It will have been 18 months since the election before the negotiations with Telstra begin and the first FTTN trials start, no chance of wiring up the whole of Australia in the following 18 months.
    He would have been a lot better off making the obvious decisions needed to get the FTTH broadband system running smoothly and at a lower cost.

    The scales report is correct in it's assertion that the NBN could have been better done by an incumbent Telco.

    Mr Fraudband should end the current agreement with Telstra and replace it with separating Telstra into 2 companies one "Telstra" which will be solely a network builder and operator that charges equal wholesale rates to all ISP's, the second "Bigpond" a retail ISP. Shareholders in the original "Telstra" would get one share of each of the new companies for each of the current Telstra shares they own. The mobile network would move to the retail ISP "Bigpond". The new Telstra would manage the satellite service selling space to retail ISP's.
    The new Telstra would then get the NBN assets and be paid $1500 for every house passed by NBN fibre to the home (home means front street access, retail ISP's would be required to run all cable on private property and install house termination equipment). 12 million properties at $1500 means total Government expenditure of $18 billion.
    Whilst installing the street cabling the wholesale operator "Telstra" would also be required to install WiFi routers on telegraph poles they pass so retail ISP's could sell routed WiFi access to small users/WiFi accessed basic telephonic services for those that do not want or cannot afford a cabled NBN connection after the withdrawal of copper infrastructure.
    Households could do some of the work of the ISP's digging the cabling ditches and installing the cable and conduit for the ISP's technicians to install termination equipment.
    The new "Bigpond" and all retail ISP's would complete all work on private property including MDU's at the householders expense.
    Legislation would be needed for MDU's to have annual meetings without proxies to decide cabling issues (perhaps government could offer finance to MDU's).
    This system would be subsidised to a degree by Government but the householder costs of setup on private property would be built in to the ISP's contract rates.
    Pensioners WiFi access phones could also be subsidized.

    The basic principle of this system is the public infrastructure build will be subsidised and work on private property paid for by the consumer.

    Mr Fraudband appears to have less of clue on how to rectify the 3rd world broadband issues in Australia than his predecessors.
    Kevin Cobley
    • the NBN could have been better done by an incumbent Telco.

      Well they had plenty of time, under Howard, then Rudd. Conroy called tenders, if I am correct, as Howard did on numerous occasions. NO one came to the party. Telstra said back in 1990's that the copper was crap, needed to be replaced with fibre. Nothing happened. In fact worse, the copper was allowed to deteriorate more


      The private sector was not interested.
      fehowarth@...
  • If you find yourself in a hole, stop digging

    All infrastructure projects will involve large sunk costs. The NBN cannot be rewound. It cannot be cancelled or destroyed.

    Abbott committed to "demolishing the NBN" back in September 2010 because at that time the NBN could be safely stopped before any irreversible action (damage?) had occurred.

    Too late to stop the NBN behemoth now.

    Since the NBN is in deep trouble, one emergency course of action, from the taxpayers perspective, is to suppress competition by TPG.

    If a patient is at risk of dying and the only way to save the body is to cut off the leg then the doctor must go for amputation.

    It's a sad and desperate option, I know, but all of this could have been avoided if the Labor government had done its homework - like carrying out a cost benefit analysis.

    Strangely enough, Mr Braue, I don't recall you writing any articles from 2009-2013 criticising the Labor government for not doing a CBA on their $73 billion (initially $41 billion) investment. Why is that?
    KingForce
    • Hiya!

      The Whirlpool troll pays ZDNet a visit. Welcome. I see you're here in you usual capacity as a desperate defender of the LNP. How will you twist the story today to defend your beloved party?

      "All infrastructure projects... out a cost benefit analysis"

      Well, not point in address that. Anyone giving it more than a glace can see that is just dribble.

      "I don't recall you writing any articles from 2009-2013 criticising the Labor government for not doing a CBA on their $73 billion (initially $41 billion) investment. Why is that?"

      Why is it that you keep using the $73B figure when Fletcher has admitted the assumptions made to inflate it to that figure were wrong and it should have been more like $56B?

      Any comment on why Malcolm's plan went from $15B to $29B to $43 to... whatever it is once the Telstra deal is done in about a year? Even with the bogus $41 to $73 figure they are orders of magnitude closer than Captain Copper.
      Pilfer-52cec
      • Strategic Review is there for everyone to read

        The SR is a public document and each person can judge for themselves if their conclusions are credible.

        "Any comment on why Malcolm's plan went from $15B to $29B to $43 to... whatever it is once the Telstra deal is done in about a year?"

        Labor have left a legacy of sunk costs and contract commitments that cannot be reversed. Turnbull says that had an FTTN project started from scratch it would have only cost about $20 billion in total.
        KingForce
        • Pre election promises

          So Turnbull's
          "Fully Costed $29b everyone to 24Mb by 2016" was an absolute lie.
          Lets do some maths if it was started from scratch.
          50k nodes Turnbull said we would need.
          If Turnbull got access to the copper day one after the election and 3 year to complete.
          So Turnbull's plan would be to connect 48 Nodes a day or 9600 premises a day to reach that target by 2016
          JasonKent
        • Rubbish!

          "The SR is a public document and each person can judge for themselves if their conclusions are credible."

          So, you are still ignoring where Fletcher has admitted the SR was inaccurate so you can use inflated numbers. Typical.

          "Labor have left a legacy of sunk costs and contract commitments that cannot be reversed"

          More garbage claims. You claim it, Turnbull uses that line in interviews. But even his "independant" SR shows it for the lie it is.
          Pilfer-52cec
        • The SR was a Telstra initive

          The guy that wrote the SR / CBA is a Telstra executive. Like all of Turnbills apointments to NBN.
          So to say its for everyone to read is a joke as it was written for Turnbill to support his agenda.
          Mudrat70
    • Turnbull's folly

      Turnbull given brief by Abbott to destroy NBNCO. That says all, IMHO. Not interested in what is good for the country. Now Turnbull has a disaster left on his hands, that is, and cannot go anywhere.
      fehowarth@...
    • Because a CBA...

      ... is a market based exercise in futility, cant and bias...
      btone-c5d11
    • Will Turnbull follow his own 'cash for report' recommendations?

      A criticism of the report was that the Labor Govt relied on advice from the ACCC. Advice which was apparently unfounded.
      The issue? Using FTTN as a stepping stone towards future FTTP. If Turnbull is going to use this as an issue to attack the previous Govt, then he has no option but to ensure that his CBA includes a full, detailed, and unbiased assessment of the same. Otherwise he leaves himself open to being branded an unmitigated hypocrite.

      My bet is that the transition from FTTN to FTTP and it's costs/benefits will be largely ignored. Simply because it will be too hard to manipulate the figures to produce a result favourable for Turnbull's MTM.

      Well, it will be his legacy. What's really distressing is the perception that he really doesn't give a shit about consumers. The everyday people in this country. He's just looking after his high profile and wealthy mates.
      Tailgator
      • My guess

        My bet is Malcolms CBA will leave out any payment to Telstra for the CAN, which will effectively make the whole thing a pointless exercise.

        It'll also ignore the productivity/social differentials between different builds.

        The Liberals have form when it comes to flawed assumptions, ignored facts as if they don't exist and repeating fallacies over and over until they become embedded as canon.
        Tinman_au
    • Why is that?

      KingForce
      Why is it OK then for Turnbull to go ahead with his FTTN without waiting for that "essential CBA"?
      Perhaps its time to cease listening to Turnbull's empty rhetoric & commence judging him by his actions (or lack thereof) instead?
      grump-a1eeb