A free kick for Turnbull on the NBN

Whatever the reasons behind Mike Quigley's call for an industry study of NBN technologies, he's looking downright politically flaky. And he's doing no favours to Stephen Conroy.

What was Mike Quigley thinking on Friday when he backed the idea of a industry-group study to reassess the technologies underpinning the NBN?

He reportedly told an American Chamber of Commerce audience in Sydney that "NBN Co welcomes and supports a study being considered by the Communications Alliance into the potential pros and cons of a range of policy and technology options and their impact on the future of the NBN."

And it got worse for communications minister Stephen Conroy, who for four years has been adamant that his fibre-to-the-premises network is superior to the 'patchwork' approach the Coalition wants to put in its place.

The Australian reported Quigley as saying: "None of this is too late to talk about ... You could deploy tens of thousands of cabinets and do fibre-to-the-node, that's not out of the questions either. It could create some complications and there are some questions about who would be best placed to do that but, no, I wouldn't say it's too late."

Sound pretty patchy, and in political terms downright flaky.

It didn't take shadow communications spokesman Malcolm Turnbull long to dissect the comments. He posted a blog later that day saying: "This is the most bizarre twist yet ... even more bizarre because Mr Quigley has made the announcement without obtaining the agreement of the [industry group] Communications Alliance to commission the inquiry.

"For almost four years, ever since Labor’s $50 billion fibre to the premises NBN was announced in April 2009, the Coalition and many others have called for an independent, transparent review of the options for delivering fast broadband to all Australians ... Throughout this period Mr Quigley and the government repeatedly and scornfully dismissed such calls."

It looks as if the Communications Alliance will not be conducting such a study, however, as key member of the group, Optus, has said it will not support it.

The bigger question, however, is why an industry group representing carriers and ISPs is best placed to re-evaluate the NBN anyway. As Turbull said in this blog post, surely an independent body such as the Productivity Commission or Infrastructure Australia would do a better job.

So at the time of writing, Quigley's motivation is unclear. It seem highly unlikely his instructions came from Conroy's office – which was reluctant to give much response when contacted over the weekend. A spokesman for the minister told Business Spectator only that "the government held a tender for a fibre to the node network, but none of the proposals were considered value for money" – yup, we knew that – and that "following advice from the expert panel and a number of government agencies, the government decided to proceed with a future-proof fibre to the home network."

But if the reported Quigley quotes are accurate, what the NBN Co boss has in mind is not future proof at all. Fibre to the node, which uses existing copper last-mile connections to homes (which dramatically cuts the cost of the rolling out 'very fast broadband'), cannot easily be upgraded to FTTP, because the same 'digging up lawns' or laying fibre through apartment blocks has to be done to replace the old copper.

This is the key difference that allows Malcolm Turnbull to claim, in approximate terms at least, that his plan will be a quarter of the cost of the NBN, and rolled out in a quarter of the time. Download and upload speeds would be less, of course, but Turnbull argues that the 100 Mbps (potentially rising to 1 Gbps) that FTTP can deliver would just not be used by most punters.

With Conroy's office largely silent at the time of writing, it's a mystery as to why Quigley would open this can of worms.

One Labor source suggested yesterday that Quigley is confident any study would agree with the original expert panel – that is, would recommend the full-cost fibre build in preference to a patchwork build that would later have to be overbuilt with fibre.

This has a hollow ring in political terms. Yes, Turnbull has made some ground promoting his mixed NBN approach, but the expensive version is still popular with voters. If voters accept Conroy's logic, why raise the issue at all?

Another possible motivation from the Labor side is that a switch to a part fibre, part copper system would save money at a time when Wayne Swan's razor gang is looking to cut any expenditure possible. Again, however, this just doesn't stack up – the NBN is being built with borrowed money raised through government bonds, and as such is largely off-budget.

The only on-budget impact is the financing costs of those bonds. Australians don't own the NBN, so much as rent it from investors who hold those bonds – not, at present, an expensive enough line in the budget to warrant cost cutting. With around $10 billion committed, and at a 10-year bond rate of 3.4 per cent, the 'rent' would be about $340 million, or $15 a year for every citizen. Not enough to save the federal budget.

More is sure to emerge this week about what Quigley intended. A signal to the market as to what might happen under a Coalition government, perhaps?

Whatever his reasoning, the Coalition is probably much happier with Quigley today than is his current boss, Stephen Conroy.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles