Turnbull's NBN claim over Telstra copper is not supported by logic

It’s great to see that, despite the pressure of an election campaign and a near-ceaseless stream of media appearances, Malcolm Turnbull may have lost his grip on logic but still has his sense of humour.

One must assume he was joking, after all, in a Sky News interview in which he not only decided that Labor's NBN will now cost "upwards of $100 billion" – but in which he picked an old chestnut out of the fire by once again claiming that Telstra is going to simply hand over its copper network for a Coalition government to do with it what it will.

“We’re not proposing to pay them anything,” he said (video here, skip to 4:50). “Telstra already has an arrangement with the NBN Co, a contract in fact, whereby they are being paid about $1500 for every premise as it is cut over to the NBN and they decommission their copper network.”

If that’s the setup, here’s the punchline: “Their copper network in the context of an NBN world is of no economic value,” he continued. “It can’t be used anymore, so I’m very confident that we can acquire access, ownership if you like, of the last mile copper for no additional payment.”

It’s not the first time Turnbull has argued this curious point, which flies in the face of both logic and everything we know about how private enterprises work. But it’s only when you consider the internally contradictory nature of his argument that you realise that Turnbull’s entire FttN policy continues to be based on the assumption that Telstra will simply hand over its copper network.

The problem, of course, is that Turnbull’s statement is both correct and incorrect – but mostly the latter.

Turnbull’s theory is only correct if you’re talking about Labor’s NBN....FttN is by definition impossible to execute without reliance on Telstra’s copper network. So how can Turnbull's plan still involve paying Telstra $1500 for every premise it disconnects from the very same network on which that FttN network will rely?

It is correct, of course, in arguing that Telstra’s copper network “is of no economic value” without any connected customers. When everybody has been transitioned to an alternative network that doesn’t touch Telstra’s copper, well, of course it has no economic value and its maintenance would be an unwanted cost for Telstra.

The thing is: Turnbull’s theory is only correct if you’re talking about Labor’s NBN – the one that shifts everyone onto a separate fibre network where Telstra’s copper is no longer needed.

Once you try to implement a FttN policy, however, it is by definition impossible to execute without reliance on Telstra’s copper network. So how can Turnbull be claiming that his FttN plan would still involve paying $1500 for every premise the company disconnects from the very same network on which that FttN network will rely?

This makes no sense at all. The Coalition plan intrinsically relies on that copper and will in fact change the fate of that copper network – giving it a stay of execution and, I would say, suddenly giving it economic value again.

Turnbull spoke of Telstra’s “very significant vested interest” in having the NBN built, but that doesn’t mean it wants the NBN built any sooner than absolutely possible: as long as the rollout is delayed, Telstra continues to rake in billions from landline services that it has already throttled back to maintenance mode. If the NBN takes an extra five or ten years, Telstra will still get its money under its $11b deal with the government – and, under the current plan, it will retain the copper, to do anything or nothing with as it pleases.

Sure, Turnbull may be talking tough in order to prevent Telstra from getting too cocky when a Coalition government sits down at the negotiating table to execute what he has previously termed, what was it, “slight adjustments” to the current agreement with the government. But he also comes across as being either incredibly optimistic – which he may be – or completely naïve, which we all know he is not.

This then begs the question of how a presumptive communications minister can so confidently go on national TV and say, with a straight face, that he believes Telstra will simply hand over ownership of its network to anybody.

Piled on top of previous indications that he will suborn Australia’s pay-TV infrastructure for his own NBN cause, statements like this should be sending warning signals to an industry that has already struggled enough to cost-justify new network investments. Clearly, Turnbull’s Frankenstein NBN vision is going to require a few compromises of the traditional pro-business Coalition mentality as he applies pressure in just the right places to deliver the outcome he wants.

Forgetting the industry landscape under a Turnbull ministry for a moment, I suspect such a concession by the board of directors would pave the way for a massive shareholder lawsuit. The market doesn’t tend to like it when companies give away core assets for nothing.

Unless they are simply annihilated at the polls, expect Labor and the Greens to mount a strong opposition against every single change Turnbull moves to make to Labor’s NBN. And why wouldn’t they? With the rollout already underway, they have nothing to lose by delaying Turnbull’s NBN vivisection for as long as possible.

I considered this scenario in depth earlier this year. The fact that it’s still a live part of Turnbull’s election stumping suggests that he has either indeed already all but negotiated a favourable deal with Telstra’s leaders – which will introduce its own probity concerns – or that he is simply hoping his self-assured stance and dogged determination will help him sneak this one past a public that hasn’t been made to care enough about the fine details of either party’s NBN platform.

More broadly, however, Turnbull’s statements highlight something that voters really must be aware of as they head towards the polls: he may paint it out like a walk in the park, but Turnbull’s projected rollout timeframes are already optimistic enough without having to allow for more ridiculous delays of the type that Labor has already experienced.

And I’m not talking about actual rollout delays, which are a function of project management and resourcing deficiencies that Turnbull apparently already has completely under control.

No, I’m talking about things outside of the government’s direct control – for example, the molasses-like process of pushing NBN Co’s special access undertaking (SAU) through the ACCC; the painfully long negotiations with Telstra that delayed the entire NBN rollout; the three-month (likely longer) wait for the Coalition’s cost-benefit analysis and updated business plan.

Let’s not forget the dogged opposition that a Labor opposition would surely mount against any of Turnbull’s changes: unless they are simply annihilated at the polls, expect Labor and the Greens to mount a strong opposition against every single change Turnbull moves to make to Labor’s NBN. And why wouldn’t they? With the rollout already underway, they have nothing to lose by delaying Turnbull’s NBN vivisection for as long as possible.

All of these will introduce further delays to the project. Turnbull may like to pretend that his policy will be smooth sailing, but – barring a miracle – if he approaches the transition to FttN with the kind of ignorant optimism he showed on Sky News, he and all of Australia are likely to be sorely disappointed once the electioneering is over and the real work begins.

What do you think? Do you like Turnbull’s chances? Will Telstra really just hand over its network? Or is he simply oversimplifying what will in fact be a painfully difficult process?

Video of Turnbull's appearance below; skip to 4:40 for his NBN comments.