Sneaking out quietly while the Labor government was tearing itself to shreds was another slippage in the timetable for the rollout of the national broadband network, capping a horrible week for Stephen Conroy.
It was Conroy’s attempt to bulldoze the controversial media ‘’reforms’’ through federal parliament at breakneck speed which backfired in spectacular and humiliating fashion, brought the seething tensions within Labor to a head and could have led (and still could) to Julia Gillard losing her position. Kevin Rudd’s unwillingness to break a promise isn’t going to end the tensions generated by the fear of a Labor wipeout at the election.
Even before the ham-fisted and provocative attempt to ram the media bills through parliament failed, Conroy had already suffered an embarrassing backdown in relation to a different issue.
Prospective bidders in the government’s ‘’digital dividend’’ spectrum auctions were supposed to lodge 10 per cent deposits on the $3 billion reserve price he had set for the auction this week, with final payments due soon after the auction process next month even though the spectrum won’t be handed over until 2015.
This week Conroy announced that final payment would now be delayed until mid-2014. With Vodafone already announcing it wouldn’t bid for the most valuable 700 MHz spectrum, and Optus threatening to withdraw because of the reserve pricing and payment terms there was a risk that Telstra would be the only bidder.
That’s embarrassing for the man who boasted last year that he was in charge of the auctions and if he told the telco chief executives to wear red underpants on their heads they’d be wearing red underpants on their head. The executives, given the events of this week, would have some obvious retorts to that arrogant line.
Now his pet project, the $44 billion national broadband network, which last year pushed its 2021 completion date back six months, has suffered a further three months setback to its scheduled rollout.
Where its corporate plan said it would pass 341,000 premises by June 30 this year, it now expects to have passed only 190,000 to 220,000 premises. (That corporate plan, through no real fault of NBN Co, had already been heavily revised down relative to the original schedule because of the time it took for NBN Co and the government to negotiate their deals with Telstra.)
NBN Co’s Mike Quigley remains confident that NBN Co could still achieve the June 2021 completion date by extending the planned peak phase of the rollout but that peak is well past the federal election.
The way Labor is disintegrating long before then Malcolm Turnbull will have halted, or at least slowed, the deployment of the NBN as he prepares to shift it from a fibre-to-the-premises network to a fibre-to-the-node network.
In that sense the latest setback for NBN Co, which Quigley says was due to its contractors progressing work more slowly than forecast because they had been unable to ramp up the number of construction workers on the ground required, is a positive for Turnbull’s plans. The smaller the network the less costly it will be to transition the rollout to a fibre-to-the-node network and the less complicated the inevitable negotiations with Telstra.
It should be noted that while Telstra is adamant it won’t sacrifice any of the $11 billion of net present value it estimates the current deal with NBN Co and the government will generate over time a change of government would initially delay and reduce the infrastructure and infrastructure payments from NBN Co to Telstra but leave it with larger cash flows from its existing copper network for longer.
Given that a FTTN network could be rolled out faster than FTTP it is also probable that in the medium term Telstra would receive more cash earlier than it would under the existing arrangements – which means more net present value.
It is quite conceivable that a FTTN network could cost the taxpayer considerably less than the current NBN (which it would) but still deliver the same value to Telstra shareholders because of the combination of Telstra’s ‘’natural hedge’’ – its ownership of the copper network and the cash flows from it – and the bringing forward of payments because of the faster rollout of Turnbull’s network relative to Conroy’s.
The NBN was supposed to be a major electoral plus for Labor in need of positives as it lurches its way towards the September election. Instead the Coalition can use the further delay as another example of the government’s inability to execute anything effectively, including its leader.