Dear Bill Morrow,
Hopefully you have adjusted to wearing heat resistant underwear by now as it will certainly come in handy on the days when you think that sitting on Mount Vesuvius couldn’t be any worse than your seat behind the big desk at NBN Co.
There is a sense of anticipation that your extensive corporate experience in leadership positions at Japan Telecom, Vodafone UK, Clearwater Corporation and most recently at Vodafone Hutchison Australia will provide you with the knowledge and skill set required to take the National Broadband Network forward.
Vodafone -- a success story?
So let’s start with your efforts to save Vodafone Hutchison Australia from a rather ignominious death. Trying to fix a company that missed the boat on one of the biggest and most profitable periods of expansion in the history of the Australian telecommunications industry couldn’t have been easy.
While internal reorganisations and cost-cutting usually do the trick under normal circumstances, Vodafone was haemorrhaging customers, with numbers falling from 7.5 million to 5m in the period between 2010 and November 2013.
Rebuilding the tainted brand was going to be a major effort and it was the decision by Vodafone Australia’s owners to tip in a substantial sum for a network rebuild that ultimately gave the carrier a fighting chance to rise from the ashes.
The news that a new 4G network was being built, along with slick marketing campaigns and a significant effort to develop an improved relationship with the media, have by and large brought the Vodafail saga to an end.
But key to the turnaround was the message that customers could now trust Vodafone’s network -- plus they got a temporary data allowance boost and reduced global roaming charges. The decision by Vodafone to be first-mover on global roaming charge reductions was unexpected but welcomed by most Australians. Here’s a company that wants customers to be satisfied.
But ultimately, where will Vodafone go? The temporary data allowance boost will end and customers will remember that Vodafone is a single product company that is unable to offer the increasingly prevalent cost-effective product bundles being offered by Telstra and Optus.
Vodafone’s future is to either merge with the likes of iiNet or TPG, or to embark on an expansion beyond being a single product company. The NBN offers an opportunity that Vodafone must not miss if it is to survive.
Mr Morrow, some might think that you moved to NBN Co before the gloss of what had been achieved at Vodafone wore off. But really the truth is that you had achieved all that could be done at Australia’s smallest mobile cellular company, with the help of a large cash injection and no remit to expand the product offerings beyond mobile cellular.
NBN Co offers you a unique opportunity to step into a national telecommunications infrastructure upgrade project at a time when the world has begun the 'gigabit broadband race'.
What an opportunity -- the possibilities are boundless. Or are they?
Burdens that won’t go away soon
Unfortunately the government has stipulated in the April 8 Statement of Expectations that public equity capital is to be limited to $29.5 billion -- somewhat less than the $43bn needed to build the network -- and this means that increasing NBN customer numbers will be vital for NBN Co’s viability.
Meanwhile, the former government appears to have 'locked in' up to $38bn on NBN-related spending commitments. How this will affect the shift to the government’s multi-technology mix NBN 2.0 is uncertain, but we do know that Telstra and Optus will want their slice of the pie irrespective of what happens, and you would be forgiven if you started to wonder what NBN Co was really doing, and for whom.
The Telstra NBN Co agreements 2011 and 2014 will be a drain on the cash flow, but there appears to be no way forward for the MTM NBN 2.0 without Telstra’s support.
And what will the Telstra Foxtel deal amount to when NBN Co tries to turn Telstra’s HFC network into a wholesale product? Will Foxtel still retain the bandwidth that it is guaranteed now? And what about the minimum customer number guarantee and associated minimum income?
Or are the conspiracies being talked about on social media about a special deal with Telstra and Foxtel to keep international competitors out of Australia by building a network not suitable for their high-quality high bandwidth service true?
This week you told us that there was higher-than-expected demand for broadband in regional and remote areas requiring a new plan that boosts the number of fixed-wireless base stations by 1300 to a total of 2700, and that additional radio spectrum would be needed for the fixed-wireless expansion.
Time to pick up the phone and call your shareholders to remind them that they're sitting on 30MHz of the 700MHz band that was not sold at the Digital Dividend auction.
The only other option is to lease spectrum adding another large red entry to NBN Co’s bottom line and raising a red flag with supporters of a lean and mean NBN who will wonder why NBN Co is leasing spectrum when the government has ample available.
Possibly Vodafone will give NBN Co spectrum to share or lease for free if NBN Co gives Vodafone access to NBN Co fixed-wireless base stations around the nation.
I’m sure Vodafone’s new CEO Inaki Berroeta was the first on the phone to give you this idea when he heard that NBN Co was hard up, and I’m sure that the Vertigan Committee review will support the additional mobile cellular competition created by Vodafone’s network piggybacking on NBN Co’s fixed-wireless base stations.
And if that's not enough to worry about, there is always TPG. There does not appear to be anything on the political horizon that will stop TPG cherry-picking high-value customers by ramping up its fibre-to-the-basement rollout.
The NBN Co/TPG situation has the all the hallmarks of a film noir, in which NBN Co will have to enlist the help of Humphrey Bogart to tail TPG’s FTTB rollout teams and then dispatch its fibre-to-the-premises rollout teams to beat TPG to the punch on high-value customers.
But can NBN Co compete with the low-cost plans offered by TPG over its FTTB network? The unnecessarily high NBN Co CVC price means that the cost of NBN connections will remain uncompetitive. TPG knows this and will continue to ramp up its FTTB rollout as a result.
So many problems but so far none of them relate to the people that really matter -- consumers.
Customer satisfaction matters
It would be wrong to jump on the Coalition’s bandwagon without knowing fully what you are in for. If consumers aren’t happy with their connections and the level of service they stand to receive, the resulting backlash could potentially make Vodafail look like a small ripple in a very large pond.
Customers will quickly learn that download speed means nothing if NBN Co can’t deliver a network with reduced congestion, greater reliability, significantly improved upload speeds and improved quality of service.
NBN Co has previously published network design rules in December 2001 in support of the Special Access Undertaking, an Initial Roadmap last updated in July 2013, and information about business services that provide clear guidance that NBN Co was not only building an access network with improved connection speeds but one that also included key design criteria that would ensure customers were satisfied with network performance throughout the day.
And the flow-on from this approach would be a spotlight being shone on the access seekers providing poor customer performance by 'throttling' traffic and failing to adopt the key NBN technology improvements that include a maximum capacity utilisation of 70 per cent, including backhaul, reduced congestion, four traffic classes and improved quality of service.
Customers need to know what the MTM NBN will look like, so it’s time that your planning group published updated network design rules that provide clear and unambiguous guidance on what will be built for $43bn.
Customers will also appreciate some of the positive engagement demonstrated during your time at Vodafone coming their way. There needs to be a hotline for customers to call if they have NBN-related problems. Yes, it’s true that retail service providers should be the first point of contact for their customers, but this does not stop people blaming NBN Co for problems during the rollout in the first couple of years after they get connected.
And how about engagement with communities that want to install the FTTP themselves? NBN Co could commit to running fibre past premises if the local community will do the premises installation themselves. All that NBN Co would need to do is to mail out kits, as was done in one European country.
Why not offer multi-dwelling units the option of FTTB or FTTP if they will complete the premises installation themselves? There are many body corporates that would be proactive and positive about the opportunity.
And there is nothing like engaging with Universities, TAFEs and high schools to improve an organisation’s image. What about an annual broadband technology challenge?
And lastly, it’s important that NBN Co take a proactive role in arguing that the NBN should be used to provide retail service providers with the opportunity to launch Wi-Fi networks, connections to buses, trains, planes, boats, motor homes and caravans, and increase mobile cellular competition.
It would be easy to lose sight of the NBN customers and to simply dismiss customer satisfaction as the retail service providers’ problem, but this would be wrong. NBN Co must engage with the public to ensure there is a positive perception of the NBN.