NBN shift to FttN a 'colossal mistake' that will burden Australia: Former NBN CEO

Former NBN Co CEO Mike Quigley has lashed out at the politicised NBN multi-technology mix, saying that if the original FttP plans had been retained, the network would have cost AU$45 billion.
Written by Chris Duckett, Contributor

Australia is going to be bearing the consequences of the decisions made by former Communications Minister and now Prime Minister Malcolm Turnbull upon the Coalition coming to government in 2013, when it switched the National Broadband Network (NBN) to fibre to the node (FttN).

Speaking at the University of Melbourne on Wednesday Night, former NBN Co CEO Mike Quigley labelled the use of copper in the network a "huge miscalculation".

"The Coalition has put their faith in what has turned out to be a short-sighted, expensive, and backward-looking MTM plan based on copper," Quigley said.

"The nation is going to be bearing the consequences of those decisions for years to come in higher costs and poorer performance in an area that is critical to its long-term future."

Upon being elected to government, the NBN moved from a rollout where fibre to the premises (FttP) would constitute 93 percent of the network to its so-called multi-technology mix (MTM), which reduced FttP to 20 percent of premises, and replaced it with FttN to make up 38 percent of the network and HFC to cover 34 percent of all premises.

Turnbull also commissioned a number of reviews into the NBN, which, as widely expected, sided with the Coalition's approach.

Quigley struck out at the assumptions underpinning the reviews, which saw claims that the cost of Labor's original NBN would be more than double the AU$45 billion that NBN Co said it would cost in 2013.

"To believe that the original FttP deployment would have required a peak funding of somewhere between AU$64 billion and AU$94 billion, you have to make totally unrealistic assumptions about take-up rates and ARPUs [average revenue per user], assumptions that have proven to be wrong," Quigley said.

"You then have to distort per premises capex numbers, and finally you have to ignore the improvements in technology that are driving down costs, increasing productivity, and reducing build times for FttP everywhere else in the world.

"What is clear is that every forecast regarding the NBN that the Coalition has made, for which there is now data, whether for their own MTM or for the original FttP plan -- every one of them has been wrong."

According to the former NBN Co CEO, a 93 percent FttP network would have cost AU$45 billion and been a money spinner for the government.

"Because the upfront capex is high, but ongoing operation costs are so low, once you've built the network, this is a huge cash-generating machine," he said. "It's hard to get your head around the amount of money this company would've spun off because the operating costs are so low.

"What that money could then do, it could either go back to the government to pay back the equity, or it could be reinvested. And the way it could be reinvested is to keep pushing the higher-capability technologies further, deeper into the network."

Quigley said it is not too late to shift the NBN back towards its original vision -- something that Labor pledged to do last week -- but the change would have to be managed.

"While it is impossible to turn back the clock on the MTM it is still possible to make changes to the current direction, without introducing another major disruption," he said. "Changes that will get us closer to building the right network for the long term."

Echoing sentiments from Labor, Quigley said he expects the current rollout to finish in 2022, due to issues with the HFC network.

Under the Coalition government, NBN renegotiated its AU$11 billion deal with Telstra, which allowed to NBN take ownership of Telstra's copper and hybrid fibre-coaxial networks.

Quigley said there was a very good reason why Telstra hailed the renegotiated contract.

"A mandatory requirement in that original deal was Telstra taking responsibility for ensuring everything they provided to NBN Co was fit for purpose," Quigley said.

"This insistence by NBN Co that Telstra take responsibility for the quality and performance of the facilities they delivered was one of the reasons it took a long time to finalise the deal. But it was the only way that NBN Co could ensure that it -- and the Australian taxpayer -- would not incur unknown and unbudgeted costs.

"That deal was subsequently renegotiated after the Coalition came to power, and unfortunately under that new Telstra deal, those protections have been diluted. This has resulted in a reduced cost exposure for Telstra, but an increased exposure for NBN Co."

In November, a leaked document revealed that Optus' HFC network is "not fully fit for purpose", while a leak in December said the cost to replace or repair the legacy copper network would amount to AU$641 million.

This was followed in February with the release of a document showing the rollout was seriously delayed and costing more to connect each premises. In subsequent leaks, documents appeared saying NBN had been working with smaller kit that is cheaper and removes the need to deploy fibre distribution hub cabinets, and that the government's preferred fibre-to-the-node rollout was delayed in 40 areas.

Addressing these cost blowouts, Quigley reiterated comments from last year that FttP was not responsible for the increasing cost of the NBN.

"All of the cost increases associated with the MTM are a consequence of underestimating the costs and deployment timing of FttN and HFC in the April 2013 MTM policy document," Quigley said on Wednesday. "They have nothing whatsoever to do with the previous FttP plan, nor the previous NBN management.

"In the same way as the original MTM costs and time estimates were a fiction, so too are the Coalition's estimates for the costs and timing of completing the original FttP-based NBN."

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