Quigley pins Turnbull NBN cost blowout on MTM delays: Report

Former NBN Co CEO Mike Quigley has defended the NBN's original fibre-to-the-premises rollout, saying the government must admit it grossly underestimated the cost and time it would take to shift to the multi-technology mix.
Written by Chris Duckett, Contributor

The real reason for the company rolling out Australia's National Broadband Network (NBN) now needing potentially AU$56 billion in peak funding to complete its rollout are not the technologies put in place by Labor, but rather those ushered in under former Communications Minister cum Prime Minister Malcolm Turnbull, former NBN Co CEO Mike Quigley has said.

Speaking to ABC Background Briefing, Quigley said the inclusion of fibre to the node (FttN) and hybrid fibre-coaxial (HFC) in NBN's plans have resulted in an ongoing "tragic underestimate" of the company's costs.

On Monday, the national broadcaster released a document reportedly written by Quigley in September, entitled Exploding Malcolm Turnbull's Myths [PDF] that discusses why the cost of the so-called multi-technology mix (MTM) NBN has increased by AU$15 billion.

According to Quigley, the delays in deploying FttN and HFC technologies have had more impact on NBN's bottom line than the technology cost estimates.

"The reduction in HFC and FttN paying customers between 2015 and 2018 can be expected to have a significant impact on NBN Co's revenues -- thus contributing to the AU$15 billion increase in total funding required," the former CEO said.

"It is time to stop trying to blame the previous government and management for the problems with the costs and timing of the MTM, and admit that the cost to role [sic] out HFC and FttN and the timescale that would be needed were grossly underestimated by the Coalition. That is why we are now seeing a AU$15 billion increase from the Strategic Review and a AU$26.5 billion increase from commitment in April 2013."

Quigley also refuted claims from Turnbull that a pure fibre-to-the-premises (FttP) NBN would take until 2028 to complete.

"For that to be correct, one has to assume that for the next 13 years, NBN Co will roll out just 12,300 premises per week on average. Fewer premises than it regularly passes each week today," he said.

"It is almost certainly true that an all-FttP NBN would take longer to complete than its inferior MTM counterpart. But it would likely only be longer by one to three years."

In his paper, Quigley defended the pay rates to contractors from NBN Co under his tenure. In 2013, the New South Wales Business Chamber said it had received complaints over "extremely poor" pay rates for constructing the fibre network.

"One particular contractor from the Sydney region advised that since the cancellation of the cabling tender process more than 18 months ago, there has been extremely poor rates of work for contractors, as well as a lack of communication between the NBN and contractors about when work opportunities of this nature will actually be made available," the chamber said at the time.

Quigley said in his paper that the new NBN management put in place under Malcolm Turnbull "acquiesced to demands" from construction contractors.

"The claims settlements and rate increases in 2014 may have been expedient for new management in order to 'clear the decks' and motivate construction partners to continue working on an FttP rollout that was now scheduled for termination," he said.

"But whether those settlements and rate increases would have been necessary in a continuing (indeed, accelerating) FttP rollout we will now never know. What is certain is that, having once agreed to higher rates, NBN Co would find it harder to bring them back down again."

While scathing of the costs and time needed to switch to HFC, Quigley was not as harsh about the HFC technology. He said that if done well, NBN's planned HFC upgrade could work.

"The two technologies that can carry high bandwidths are fibre to the premises and HFC," Quigley told the ABC. "The money that's spent on HFC, you could say it's not been wasted."

With all that has happened since he left NBN Co, Quigley said a return to NBN's original plan could not happen.

"Given all the decisions that have been made, the rollouts that are happening, the deals being renegotiated with Telstra, you just can't unscramble that omelette."

His comments mirror those from Shadow Communications Minister Jason Clare, who said last month that a return to Labor's 2013 framework for the network would not be possible.

"I can't fix the mess this government has made with the flick of a switch or pull out every node or stop all the work NBN is currently doing without potentially causing more problems and wasting a lot of sunk investment," Clare said.

"If anyone thinks I can just click my fingers the day after the election and we can go back to the way it was, they will be disappointed."

Although he would not reveal Labor's NBN plans that they would take to the next election, Clare promised to deliver more fibre than the government.

"Fibre to the node will be gone. It's not a question of if this will happen. It's when it will happen and how it will be done," he said. "If you vote for the Labor party at the next election, you will be voting for more fibre. For more details, you will have to wait until a bit closer to the next election."

Clare also said at the time that he expects NBN to begin deploying fibre to the distribution point (FttdP) and use G.fast to carry the signal over copper.

G.fast trails conducted by NBN have seen the company reach throughput speeds of 800Mbps over a 100m copper line, and 967Mbps on a 20m line.

UK telecommunications carrier BT recently announced that it has been able to reach a throughput of 5Gbps with G.fast on 35m two-pair copper cable, and 1.8Gbps over 100m using two-pair copper.

In Senate Estimates last month, NBN admitted that it planned to spend AU$14 million on acquiring 1,800km of copper to be used in the MTM network -- enough to last the company five months.

"It's 100-pair and 200-pair type cables, depending on the size of the node," NBN CEO Morrow said. "It's about, on average, 350 metres of copper per node in the FttN environment."

Using the company's numbers, that equates to enough copper for over 5,100 nodes.

NBN said it needed the copper to run between its nodes and pillars.

"There's a feeder copper cable that goes into our neighbourhood entry point, where a pillar stands up out of the street, usually near the footpath," Morrow said. "We want to access that pillar, because it has a distribution network that goes to each one of our homes. Now, we want to access it with our optical technology that we're delivering with fibre to the node, but ... if it is across the room or down the block, we have to put copper to be able to get to that node."

During the hearing, Morrow said some customers were cancelling orders to purchase an FttP fibre extension after seeing the speeds possible on FttN, and that only 37 people out of a potential 1 million have taken up the option to purchase a 1Gbps service on its FttP technology.

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