NBN Co rolls out a new contract template

NBN Co is setting up a new template with its construction partners and the old ways of measuring and rolling out the NBN are finally being put to rest.

NBN Co has unveiled its latest gambit to get the National Broadband Network (NBN) rolled out as quickly as possible, with the company radically restructuring its relationship with its construction partners.

It’s a task that former Telstra executive and current NBN Co chief operating officer Greg Adcock has been assiduously trying to get on top of and the latest proclamations, courtesy of NBN Co chief executive Bill Morrow, have been on the cards for some time.

NBN Co is striving to inject a level of consistency into the construction project, which will be particularly welcome when it comes to completing the fibre-to-the-premises (FTTP) footprint of the network.

With the regulatory machinations yet to play out fully, Morrow has told The Australian that construction partners will be subject to new contracts, which will include a range of new incentives and penalties.

The new construction contracts will include an emphasis on reducing reliance on subcontractors, with the companies asked to hire more workers to complete the FTTP rollout, The Australian reports.

Mr Morrow added that construction partners will be also strongly encouraged to adopt a "build-drop" method, a move that should presumably put the issue of premises passed versus premises connected to rest.

There will be exceptions, of course, but the idea here is to create a template that the construction partners can now adhere to.

Metrics and forecasts

Metrics matter when it comes to gauging just how the effective the FTTP build has been so far -- or just how much catching up Adcock and his team have to do.

NBN Co has been making slow but steady progress on the FTTP network, and the company’s latest communique extols that it has exceeded nearly every major forecast set by its Board of Directors for the first time.

“At 30 June 2014, the network had been made ready for service for 658,000 premises, we had activated more than 210,000 homes and businesses and had made substantial steps in our transformation strategy,” NBN Co said.

With more than 380,000 brownfield premises ready for service and 105,000 services now activated, there’s certainly cause for some optimism. However, critics would contend that there’s no reason for over-optimism -- especially when the original goal posts were shifted. In November last year Communications Minister Malcolm Turnbull flagged that the number of premises passed by fibre by June 2014 would be 450,000. That number was subsequently revised down to 357,000 by the time the strategic review was released.

According to NBN Co, under the old measurement the company would be closer to 422,000 premises passed as of the end of June -- close, but not quite what Turnbull had originally promised. As the construction contract revamp illustrates, the old way of measuring and doing things is finished.

The problem -- as Adcock has routinely pointed out -- is getting the premises connected, and the measures outlined by Morrow add substantial certainty to the construction process.

Measures such as build-drop or getting primary construction partners to rely less on subcontractors was not entirely out of the picture during the previous NBN Co regime. In August 2012, Morrow’s predecessor Mike Quigley said that NBN Co was keen to move from a “demand-drop” mode -- where fibre is first run in the designated rollout area and then connections are added to homes once orders have been made for connections -- to a “build-drop” mode. However, it’s understood that there was no standard procedure baked into the construction contracts; while some fibre was taken straight to premises, there were other areas were the fibre just went to the kerb.

NBN Co has now decided to mandate build-drop as its modus operandi, and that should at the very least finally put the 'premises passed' metric to bed. And while it may mean more capital expenditure on NBN Co’s part it will be more efficient over the long term.

Completing the FTTP and the fixed-wireless footprint as quickly as possible is in the best interests of NBN Co and the Coalition, because greater challenges lie ahead.

The fibre-to-the-node (FTTN) process is just getting started and the Telstra-NBN Co pilot may not provide a complete picture of how the FTTN rollout may play out. The nodes -- their size, their visual impact on our streets and the power demands involved -- will be subject to much scrutiny and throw open the potential for protracted complications with construction teams, power providers and councils.

Meanwhile, the HFC component is still on the back-burner and is unlikely to figure until negotiations are completed with Telstra and Optus.

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