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NBN nixes dark fibre talks as subcontractors protest pyramid contract model

NBN has said it does not see a cost-effective way to lease dark fibre from existing telcos.
Written by Chris Duckett, Contributor
Image: Chris Duckett/ZDNet

The company responsible for running the National Broadband Network has ended its consultation on whether to procure any existing dark fibre for enterprise connections, saying it is not cost effective.

The consultation was kicked off at the start of 2020 as Australian enterprise telcos complained of NBN overbuilding existing networks.

In an update posted last week, NBN after receiving quotes from six parties covering 31 sites as a proof of concept (PoC), and a mixture of fibre to the basement, fibre to the node, and fibre to the curb, said it was not impressed with any of them.

"There is no evidence to suggest that an industry-wide procurement model for third party dark fibre connections to deliver wholesale enterprise services would be commercial or operationally feasible based on current NBN build costs, available third-party footprint, operational timelines and SLAs. Therefore, NBN will be concluding the consultation at this time," it said.

NBN said in a number of cases it would need to conduct build activity to connect third-party fibre in-building, and many responses said that meeting NBN's service level agreements would "prove challenging". It added that a majority of sites were in areas where the company had the lowest cost to upgrade connections to fibre.

"It is clear that the indicative prices received ... were not commercially viable options for NBN," it said.

"A key reason for this is that the cost to procure a dark fibre connection from a third-party provider involves a mix of upfront and ongoing recurring charges where NBN's build cost only involves a one-off upfront cost."

However, as its analysis was purely a desktop calculation, NBN conceded it might be able to get lower rates if the process would have led to actual usage.

"It appears that several respondents quoted retail level prices for dark fibre services which are typically among the most premium offerings available at a retail level," NBN said.

"By contrast, in conducting the industry consultation NBN envisaged a procurement model that encouraged a lower cost approach from providers that desired to secure revenue from a sunk and potentially under-utilised asset in a competitive market.

"Despite this, NBN acknowledges that in a genuine commercial tender for a large number of sites the prices may result in lower quoted prices (this fact was reflected in subsequent discussions with a number of PoC participants)."

Elsewhere on Monday, Communications Electrical Plumbing Union (CEPU) has called for a Senate inquiry into "NBN Co's shambolic management and pyramid contracting scheme". It also walked off the job and conducted a car convoy to NBN's headquarters.

"NBN Co needs to scrap their dodgy pyramid contracting model, improve pay rates and ditch the shonky booking app," CEPU national president Shane Murphy said.

"Subcontractors are being forced to sign new contracts with NBN Co delivery partners which cut their pay, all whilst NBN executives paid themselves AU$77m in bonuses during the pandemic. It's infuriating."

In a recent Senate hearing, NBN faced a grilling from Labor senators over how the company ensures the contracts between prime contractors and subcontractors are compliant with legal requirements.

In response to questions, NBN COO Kathrine Dyer said the company had a "very strict" governance model.

"We're very mindful of ... the contracts that we have with them but .... it's not something that we monitor, we monitor our relationship with our contractors," she said at the time.

"We are very confident in our governance and audit process we have in place with our delivery partners that they are complying with the nature of the contracts that we have with them."

CEO Stephen Rue said NBN can direct one of its contractors to provide a statutory declaration that subcontractors had been paid, but that he wasn't aware of any breach.

"Surely, it's the obligation of the delivery partner to comply with all legislation, laws, employment law, health and safety etcetera, and our contracts with them require them to do that," Rue said.

"It is the delivery partners obligation to comply with the law."

On Monday, Murphy said technicians were having to deal with a work dispatch system that could take three hours to book work off and leave customers waiting for technicians to head to the next job.

"These technicians are highly skilled workers -- yet because of the NBN's 'pyramid style' sham contracting scheme, it's the executives and middle-men who are profiting from Australia's NBN while the people doing the work are getting get ripped off and consumers continue to suffer with substandard connections," Murphy added.

NBN said it did not expect there to be any impact on NBN operations, new connections, or network faults.

"NBN Co is aware of some issues that our delivery partners and field technicians have experienced with our recently deployed SMAX-Go mobile application for managing and logging work requests," a spokesperson said.

"We have significantly improved the app over the last few weeks to address functionality, system performance and general user experience pain-points, and will continue to modify and enhance the app in the next two weeks. We appreciate technicians' patience while we work to improve the app."

The company said it was "working constructively" with the CEPU to maintain "strong, productive working relationships".

"As is standard industry practice ... our construction and maintenance contracts place responsibility for compliance with the law and relevant legislation on our delivery partners in relation to the contracted services," the spokesperson said.

"Delivery partners are free to use their own employees or sub-contractors when fulfilling the work and maintenance outlined in our contracts with them."

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