Turnbull's UK NBN template turns sour

Turnbull's UK NBN template turns sour

Summary: A delay of two years, coupled with a £207m cost blowout, has left the UK's rural broadband programme in an unenviable position.

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For many years, Australia's Shadow Communications spokesperson, Malcolm Turnbull, has called upon the local media to pick up the phone and hear what BT is up to with the UK's fibre-to-the-node (FttN) rollout. After this weekend's revelations, perhaps Mr Turnbull will be reconsidering his journalistic guidance.

Broadband in the UK is divided into two initiatives: An open-access, wholly privately funded network rolled out by Openreach, the wholesale infrastructure arm of British telco giant BT, which will deliver broadband to two thirds of the UK and service 19 million premises; and the publicly subsidised rural broadband programme that covers the remaining third of the population, and aims at 90 percent coverage.

A report on the rural broadband programme by the National Audit Office was released over the weekend, and the report did not make for happy reading. The UK's taxpayer-subsidised rural broadband rollout has been delayed by two years, and the public purse will suffer a cost blowout of £207 million on top of £1.2 billion of subsidies set aside for the rollout.

The UK Department for Culture, Media and Sport, which oversees the rollout, estimated in its 2011 business case that the private sector would need to pay 36 percent of the program's total projected funding of £1,547 million to reach 90 percent coverage of the population.

"Following the negotiation of contract conditions, the department now expects suppliers to provide only 23 percent of overall funding, £207 million less than it modelled in its 2011 business case," said the report.

"Contributions have varied between 38 per cent and 15 per cent of funding for each local area. Local bodies have provided greater contributions than expected, with total coverage slightly increasing to an estimated 92 percent."

Four areas will not obtain the stipulated 90 percent coverage target, with the report saying that "funding allocations may require some revision if the ministerial target is to be met".

"Any inaccuracies in the funding allocations may reflect the difficulty faced by the department in identifying the scale of intervention required in 2011 before commercial plans were known, and in forecasting the cost of delivery."

The original deadline of May 2015 will have only a 20 percent rate of completion, with nine of the 44 projects that make up the rural rollout expected to be completed by that date. The cause of such delay? A six-month delay in the process to receive EU funding.

To add to the morasses, reports surfaced last year that accused BT of inflating costs and passing them onto local councils.

"The Department [for Culture, Media and Sport] identified BT as overcharging for project management costs by £3 million in one area, and made BT remove the identified costs from that bid," said the report. "Some local bodies reported that they valued the department's support in checking bids."

Due to confidentially clauses, councils are not allowed to disclose or compare deals made with BT in order to see whether they are being taken for a ride.

BT is competing alone for the rollout contacts, after its only competitor, Fujitsu, was allegedly placed on a supplier blacklist, and did not place bids for a number of projects.

It's quite a warning to Australia's National Broadband Network (NBN) for what could happen should the nation follow the British blueprint.

The speed that the UK is aiming for is 24Mbps, which is slightly below Turnbull's stated target of 25Mbps by the end of the first term of a Coalition government.

Although the UK had a six-month wait in obtaining EU funding for its project, Turnbull would have to renegotiate any existing arrangements with Telstra. Telstra is known to play hardball, and it's a toss-up over which entity would be harder to deal with: The EU bureaucracy or the Thodey-led telecommunications juggernaut.

Throw in some asbestos pit remediation delays, and the sheer size of the challenge to complete an FttN rollout across Australia in a three-year window begins to crystallise. If Turnbull's exemplar for broadband success in the UK cannot achieve reasonable results, why should the Australian public expect that we could do any better mimicking the project?

The UK experience shows that any claims that Turnbull makes about FttN rollouts being less susceptible to cost blowouts and schedule extension should be viewed with a healthy dose of cynicism.

There is no magic bullet to fix the budget and schedule problems that inevitably occur on large infrastructure projects.

In fact, Australia may head closer to the UK experience than initial inspection may reveal. ZDNet understands that approaches have been made by a large Australian telco to gauge the interest in having the company take over construction of the NBN should a Coalition government take office.

Should that happen, the government would be wise to heed the advice of the UK National Audit Office, which pointed out the issues with trying to obtain value for money in an economy with a sole supplier.

"BT did not provide the department with the detailed model, citing commercial confidentiality and a high degree of complexity. This makes it difficult for the department and local bodies to gain transparency over the level of costs included in BT's local bids.

"Several local bodies we consulted told us that they do not understand the costs included in bids or whether variations from the reference cost book were justified, although others valued the reassurance the department offered through its bid comparisons."

Such is the situation in the UK, that a village in Oxfordshire got together and engaged a private company in order to enjoy the same broadband as the rest of the UK.

Let's hope that Australian rural towns will not have to resort to the same tactics to enjoy the communications of the 21st century.

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

About

Chris started his journalistic adventure in 2006 as the Editor of Builder AU after originally joining CBS as a programmer. After a Canadian sojourn, he returned in 2011 as the Editor of TechRepublic Australia, and is now the Australian Editor of ZDNet.

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Talkback

38 comments
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  • "Less susceptible"

    Given the reduction in challenges for FTTN it is less susceptible. Even pit remediation is reduced.

    BT FTTN network is a great story for FTTN proponents. The UK govt's regional program
    as bad a the Australia result (so far unaudited); wireless network a disaster.

    However we should be critical of all these programs. Govt projects continue to fail on a massive scale; cost and timelines tend to be ridiculously optimistic. The Liberal's timetable is very aggressive.

    Unsurprisingly the private delivery model was successful; a lesson for many. Not sure why Chris thinks this isn't something worth resorting to here.
    Richard Flude
    • Of Course The Private Sector Is King

      Never a cost/time/quality blowout on a private project.

      http://mobile.news.com.au/business/resource-mega-projects-hit-by-8bn-cost-blowout/story-e6frfm1i-1225984773758

      Come on Richard, Project management is hard! The article above contains the same issues stated by NBN co without the additional issue of intense political pressure applied by both those for and against.
      Yettie79
      • Risk & reward taken by shareholders

        In context; the resource blowout for hundreds of billions of dollars worth of projects. Companies recognised the increase costs and continued to spend money (until recently) because of the perceived reward.

        This is a govt project promising taxpayers a 7% return; laughable.
        Richard Flude
        • Agreed

          And get this. The Liberals are even worse. They have a plan that costs the government almost the same money. But it's for old technology that will need to be replaced very soon. So it doesn't even have as much time to for the pay off. And there are some blind ideologists who think it's a great idea. Sigh. It just shows you how stupid some people can be.
          Pilfer-52cec
          • NBNCo is a disaster

            You can't keep going around claiming either FTtN or total coalition cost around the same or NbnCo remains on track.

            Such a position ignores reality.
            Richard Flude
          • Coalition policy will worse

            True enough: even if the construction cost of the current NBN blew out by $10b. It would still cost the taxpayer less^ than the coalition plan.

            If you look at the coalition fine print, they're writing off all investment made before the current election and are aiming for an above-inflation ROI (not IRR!) for to rest of their up to $28.5b.

            Simple maths indicates that NBN Co has a *lot* of room to blow their budget before it even come close to costing more than the coalition alternative.

            ^ Actual long-term total cost to taxpayer, not headline capital cost that ignores operating costs & revenue.
            arccc
          • Nice Strawman

            I didn't say they cost around the same amount. I said they cost the government around the same amout. Since most of your complaints are that the government can't afford it, well, the government are making a very similar contribution.
            I also never said they were on track. They are not, they are behind.
            At least if you want to answer someone, answer what they said.
            Pilfer-52cec
          • Obviously that is not the case

            It is now delusional to believe the Labor NBnCo plan is at all defendible. The costs to taxpayers will have to be far greater than planned, we'll know how much when audited.
            Richard Flude
          • So the Coalition plan is exempt from blow outs?

            All the scenarios Turnbull applied to FTTH and more could apply to FTTN. Why are many costs, copper, remmediation, no contingency put aside. Why are they all ignored?
            I am sure if NBNCo were audited by someone appointed by Turnbull that they would report all sorts of things. If Labor appointed someone to audit a Liberal FTTN rollout I am sure they would find it was rotten to the core.
            Really, makes no difference to me. None of this will make FTTN anything other than a short term bandaid and a waste of money.
            Really. All this cost, rollout delays, etc, you spout all the time is just a smoke screen to cover up the Coalition policies overriding failure. It is obsolete before it's complete and will need replacing immediately. There will not be 25Mb to everyone in Aus by 25Mb. You live in fantasy land Flude. Are you such an incompetent CIO you are so clueless on technology?
            Pilfer-52cec
        • Government Is Not A Business

          You might struggle with this one Richard as it has been pointed out to you repeatedly but "THE GOVERNMENT IS NOT A COMPANY" so their matrix into what is acceptable would be quite different to that of a company. They are looking at the enabling of our economy as well as the increased efficiencies for the delivery of public services.

          From a companies cost benefit analysis these points are irrelevant and would reflect your comment about the 7%.

          Now here's the point again Richard, from a GOVERNMENTS perspective increasing our OVERALL GDP and delivering public services more efficiently/effectively CERTAINLY IS HIGH on a governments cost benefit analysis. The 7% is to ensure that the project is cost neutral over the long term so that it doesn't COST TAXPAYERS ANYTHING.

          The Coalition policy will cost Australia, 29b to implement a network that WILL be redundant and overloaded at it completion. (Again you have been given SHIP loads of examples published by cisco and others to prove this).

          Fiber on the other hand is good for 60-80 years and its speeds will be suitable for its lifespan.

          READ WHAT PEOPLE ARE WRITING AND RESPOND INTELLIGENTLY.
          Yettie79
    • "More Susceptible"

      "Given the reduction in challenges for FTTN it is less susceptible. Even pit remediation is reduced. "

      Actually, there are more challenges to deploying a VDSL2 network than deploying a GPON network. I have yet to see proof that there will be less pit & pipe remediation required for an FTTN network.

      In fact, there may be more work required as:

      a) the pit & pipe needs to be cut into: a dirty task & if cutting into lead shielded cable in asbestos pits, this could take months & many specialist techs
      b) the level of remediation is an unknown. If Turnbull does want to deliver 25Mbps baseline speeds, much (if not all) of the copper needs to be replaced. 0.21mm - 0.40mm copper is way below the 0.60mm+ required to get the nice shallow VDSL2 fallof.
      c) there will still be massive amounts of remediation required between the cabinet & the exchange to install the fibre to that point.

      Lifting your arguments from Turnbull's "policy" doesn't create for good discussion as all of Turnbull's arguments have been shown to be false.

      I have worked & written on ICT for some time, the biggest problem is that many people are just seeing the LNP's policy in a vacuum. There are many factors that can & will delay an FTTN deployment and/or increase costs. While some are similar to FTTP (asbestos pits, negotiations, etc), much of the delays/increases in cost cannot be predicted with FTTN due to the lack of data out there.

      I remember when I was assigning cable at Telstra, much of the larger (0.60mm+) copper only exists in main pairs (the ones Turnbull is discarding) & rural long lines with loading coils & the like on them. I really don't know how Turnbull expects to deliver 25Mbps, on time & on budget, on a network that is barely able to handle ADSL2, let alone VDSL2.
      sortius
  • I'm not surprised. FttN is a disaster waiting to happen. I look forward to the inevitable excuses from Turnball apolgists;-)
    Hubert Cumberdale
  • Reduced, How?

    "Given the reduction in challenges for FTTN it is less susceptible. Even pit remediation is reduced."
    How is it reduced? FTTN uses the part of the network in the poorest condition, the last mile, and dumps the parts of the copper that HAS been properly maintained, the trunk routes.

    Every joint between the node and the customer is likely to require attention during the life of FTTN necessitating their pits remediation at some point. At best you move the expense from Capex to Opex. At worst, you lose the benefits of scale by not being able to do them all at once.
    Goresh
    • Because the copper isn't remove

      The last few hundred metres the hardest; including into the premises.

      Many FTTN projects; all shown the benefits of cost saving and faster deployment.
      Richard Flude
      • Shame this isn't one of them

        And they are all rollouts done by the incumbent. LOL, the only reason to try it here would be if you were stupid enough to believe they would just give you the copper and it would magically fix itself so you didn't have to budget for anything like that. Sort of like you and the Liberals
        Pilfer-52cec
      • Nonsense

        "Many FTTN projects; all shown the benefits of cost saving and faster deployment."

        With none of the benefits. the last few hundred meters are the most important. The most we can expect to see is 25Mbit/s. Despite the vast investment that will be required anyway under a FTTN plan. The only thing that can truly be said of the Liberal plan is that it suffers an absolute lack of vision.

        The Australian taxpayer is effectively going to pay billions of dollars for a service that it effectively already has. And to whom will the money go? The Incumbent Telecom provider who has done such a great job so far? The Liberal plan is little more than writing a blank publicly funded check for Telstra to construct its dream futuristic infrastructure that stops at the cabinet at the bottom of the street. Meanwhile other nations already offer fibre to the premises and I hate to be the bearer of bad news but Australia's one trick pony economy needs to diversify. Selling rocks to China just won't cut it in a digital age.
        Kosmos Agamemnon
      • From your own team Richard

        http://www.fionanash.com.au/Media/MediaReleases/tabid/84/articleType/ArticleView/articleId/213/LABORS-RURAL-FRAUDBAND.aspx
        Yettie79
  • Examples please?

    Point to one? The 'shining star' was BT in the UK. Previous to that was NZ... and we saw what happened there. So. What else can you point to as examples of 'cost saving and faster deployment'.

    Well?
    Kam-80d87
    • AT&T in the US and BT in the UK

      Both demonstrate the speed and cost advantages of FTTN; it isn't even controversial.

      The rural broadband program in the UK has is the issue (sound familiar), citing lack of competition (yep) and funding delays (read the report link provided).

      BT's OpenReach (2/3rds) a great success; on target and on budget. You can listen to Phil's interview (surprising little coverage given he's a regular ZDNet contributor;-):

      http://phildobbie.com/main/podcasts/crosstalk/item/1083-fibre-to-the-pom
      Richard Flude
      • Been there, done that.

        I interviewed Mike Galvin for my NBN feature a few months ago. He didn't say anything to Phil that he didn't tell also tell me then.

        You can see my feature here:

        http://www.zdnet.com/nbn-fibre-to-the-world-7000012385/
        Josh Taylor