NBN BUZZ: A year of progress

The NBN has made considerable progress in 2011 but there is still plenty on the plate for NBN Co and the government.

A year of progress, but plenty to do in 2012

Communications minister Stephen Conroy and NBN Co boss Mike Quigley will head into 2012 with a considerable amount of satisfaction, given that 2011 has undoubtedly been a year of progress for the NBN. The critical $11 billion deal with Telstra was finally secured in October, NBN legislation was pushed through by the Gillard government after a marathon session in the upper house of the senate. Most importantly, concrete steps were also taken to make the network more tangible through the launch of commercial services in October and the release of the 12 month rollout plan.  This time last year the pundits were busy dissecting the NBN business plan, while some of the underlying issues still remain the overall focus has shifted as the NBN begins to takes shape.  

However, the satisfaction of getting the NBN off the ground will be somewhat tempered by the fact that there are a couple of issues, regulatory and otherwise, that still need to be resolved in the new year. The hefty price tag of the network and the potential for cost blowouts will continue to generate headlines, while the fifth version of NBN Co’s Special Access Undertaking (SAU), which lays out the  regulatory and pricing framework for the next 30 years, is yet to get  the final tick of approval from the Australian Competition and Consumer Commission (ACCC). For that matter, Telstra’s structural separation undertaking hasn’t been given the official blessing either.

The one glaring blot in the NBN story this year is that NBN Co has failed to meet its original rollout timetable, had they done so they would be in a much stronger position. Now, some of the objectives in the original target were perhaps overambitious to begin with but the time taken for the passage of legislation and the torturously lengthy negotiations with Telstra didn't exactly help the matter. 

According to Ovum research director and telco analyst David Kennedy, the original targets set by NBN Co were very much critical path targets.

“Basically, if everything has gone right then NBN Co would have met its timeline, but that’s not the nature of reality.” he said.

He adds that the biggest challenge for the government and NBN Co next year is to sell the NBN message more effectively.

“The government has passed all the legislation and put into place all the policy they need to get the network rolling out. It’s an operational matter now and they need to start promoting the applications of the NBN; and start building public support.”

While the NBN has been a hot topic for the cognoscenti, the public attitude to the network is still pretty ambivalent and the best way to make them believe is to give them a first-hand glimpse of the benefits of the NBN. As for the business community, I suspect that it is pretty tired of the cheap politicking on the subject and would very much like to get to a point where they can start planning for the impact of the NBN.

The launch of the $32.5 million dollar network operations and testing facility in November was a good start and get ready for a major charm offensive from the government and NBN Co in 2012.

The political circus

The political point scoring from both parties may be starting to grate but it did provide plenty of entertainment, with Conroy and his counterpart Malcolm Turnbull locking horns form time to time. Perhaps the most important event on that front was the release of the Coalition’s NBN policy which finally provided some clarity on just what alternative the opposition has up its sleeves. The coalition strategy is a combination of fibre-to-the-node (FttN), HFC and wireless technology all working together to provide a comparable but cheaper broadband service to all Australians. This three pronged approach was first dealt a massive slap by Citigroup analysts and then recently dismantled byConroy. As mentioned earlier, the political focus for the government is justifiably starting to shift and there many who reckon that Turnbull’s efforts to shake things up have been a tad disappointing.

However, it could well be that Turnbull has said all that he can say on the matter and can’t really add anything meaningful until the federal elections roll in. We still don’t know when that is but the timing will have an impact on the coalition’s NBN policy. An early election next year still makes Turnbull’s three pronged model viable but if the elections are held at the end of 2013 the opposition will have to adjust its policy given that a lot of fibre will be in place by then and a lot of the contractual commitments firmly locked in .  

Regulation flurry

Back on the regulatory issues, there was a flurry of activity from the ACCC in the last couple of days. The regulator is seeking submissions into Telstra’s resubmitted structural separation undertaking (SSU) and has released a consultation paper on NBN Co’s access undertaking. The inquiry into the Wholesale ADSL market is underway and the watchdog has also revoked a ruling which exempted Telstra from providing a range of wholesale services at more than 200 exchanges.

The interesting thing about the removal of the exemption is that it highlights just how far the relationship between the ACCC and the Telstra has changed this year. In years past, the watchdog’s decision to reregulate the prices the telco charges its rivals for access to its copper network in certain locations would have raised a clamour from Telstra, however, the NBN has changed all that.

The reregulation comes at a cost to Telstra’s revenue and earnings but with $11 billion dollars, possibly more, hanging in the balance, it’s is a hit that the telco is willing to take to get the SSU passed. That SSU is almost certain to see the light of day early next year and what we will see is the Wholesale ADSL inquiry wrapped up pretty quickly. That will be good news for NBN Co, although Ovum’s Kennedy tells me that there is an element of over exaggeration with regards to how much impact this is having on NBN Co.

“I see no evidence that NBN Co is delaying its rollout, they are simply pushing ahead on the assumption that this will happen and I think that is the correct assumption,” Kennedy says.

It really is the best strategy for NBN Co to follow because the more fibre there is on the ground makes the NBN a fait accompli.

Wrapping up

In other NBN related news this week, Leighton Holdings subsidiary Visionstream has picked up another NBN deal, this time from Ericsson. Ericsson's sealed a $1.1 billion contract with NBN Co to maintain and operate the network for decade in July and the Swedish giant has now subcontracted the work to construct the fixed wireless component of the NBN to Visionstream.  The latest win for Visionstream follows the $19 million contract it secured directly from NBN Co to build the first stage of the transit network last week. Meanwhile, Vodafone has dipped its feet into the fixed-line market, connecting 12 customers in Armidale, NSW to the NBN. It’s the mobile operator’s first trail in the space and the move was picked up by Conroy, who was happy to sell it as a massive vote of confidence for the network.

Well, that pretty much covers it for NBN BUZZ this year and we will be back on January 12. It’s been a busy year on the NBN front and hang on for the ride in 2012.