NBN truths and assumptions

Pie in the sky assumptions are par for the course when it comes to the NBN but how much of it is optimism and how much political spin?

“Steady as she goes” was NBN Co’s message to the Parliamentary Joint Committee on the National Broadband Network in Sydney last Friday, in a day of hearings that pitched NBN optimists against the sceptics and a lot of well scripted corporate messaging.

Apart from the occasional tiff between Labor Senator Doug Cameron and the opposition’s communications spokesperson Malcolm Turnbull, a pair who wonderfully imitate the two grumps from The Muppet Show -Statler and Waldorf, the day was mostly a sedate exercise in various groups getting their messages across.

Leading the charge was NBN Co boss Mike Quigley whose straight bat performance was worthy of Geoffrey Boycott, as he blocked any attempt to draw him into commenting on the Coalition’s broadband plan or the opposition’s claim the current project may end up costing more than $90 billion.

The only snick through to the slips was when NBN Co’s chief technology officer Gary McLaren had to face Turnbull bowling questions around the cost benefits of using the existing telephone wires in larger apartment blocks.

McLaren conceded the company had researched this cost saving measure that communications minister Stephen Conroy had just a few days earlier described as “a disgrace”.

The latest from NBN Co

Rather than argue the merits or otherwise of the Coalition plan, NBN Co’s management were much more interested in emphasising that the project will be completed within the $37 billion price tag and by the forecast 2021 completion date.

Now, such optimism may seem far-fetched but pie in the sky assumptions are pretty much par for the course when it comes to the NBN. Still, the latest figures released by NBN Co do provide some positives.

Quigley’s confidence is based on the company meeting their revised rollout targets along with installation costs falling and take-up rates now reaching the levels predicted in the original 2010 business plan.

As Technology Spectator has discussed before, poor take up rates will hurt the project’s revenue projections so the news that customers are connecting to the network at the expected rate is good for taxpayers and the company’s management.

The take up rates vary across the country with Kiama in NSW’s Illawarra and Willunga in suburban Adelaide reporting nearly 60 per cent acceptance while residents of Kingston Beach and South Morang, on the outskirts of Hobart and Melbourne respectively, are signing up at a faster rate than expected.

The choice of early rollout locations in Tasmania seems to have affected the earlier NBN statistics with Scottsdale and Smithton in the state’s north having abysmal connection rates in the low teens while in the south Midway Point is creeping up to one third connected.

Adding to Quigley’s optimism is that customers are taking the more expensive higher speed plans with nearly a third of customers choosing the fastest 100/40 plans as opposed to only 18 per cent forecast in last year’s business plan.

However, the NBN Co boss wouldn’t be drawn on how much these changed figures would affect the company’s cash flow projections as both he and chief operating officer Ralph Steffens emphasised they would like to connect more premises before making any firm predictions on higher revenue figures.

Steffens also explained how Australia’s NBN has achieved lower fibre connection costs than New Zealand’s Ultra-Fast Broadband network (UFB) by using Telstra’s infrastructure rather than laying its own conduit.

Falling costs of installation are also helping NBN Co’s cashflow as the company is now estimating the installation costs are now at the estimated $1200 cost per premise passed as economies of scale and the learning curve is scaled.

Construction complications 

The biggest risks to NBN Co’s optimism are the construction contracts. The handing back of the Northern Territory contract by the Lend Lease-Service Stream joint venture Syntheo in March was a clear warning that all is not well with those agreements.

The dysfunction on the construction side of things was aptly displayed at the hearing, when Lend Lease’s chief operating officer for construction and infrastructure, Dale Connor, appeared on behalf on their Syntheo Joint Venture.

Connor’s statement that he can only reply for Lend Lease, not Syntheo or Service Stream, meant he couldn’t enlighten any of the committee or the public on the contractor’s ability to perform, in light of its failing to deliver the Northern Territory contract.

“Lend Lease are committed to working with NBN Co under the Syntheo joint venture to deliver the passive fibre rollout in South Australia and Western Australia” was the corporate line Connor resolutely stuck to and that platitude left neither the committee nor taxpayers any wiser as to what went wrong in the Northern Territory. 

Who can you trust?

Whether Syntheo can actually deliver the work it has been assigned to do remains unclear. For now, we will just have to take the company's word for it. Trust, or lack thereof, has been a consistent theme in the NBN debate.

Quigley's assertion that the current NBN will be delivered on time and on budget is astounding and it's unlikely that the public is going to buy that line. Having said that, the Coalition's NBN assertions are on equally shaky ground, so expect to see plenty of chopping and changing from Turnbull after the election.

Committee member and Greens Senator Scott Ludlam raised the question of trust at a press conference outside the meeting, “I do still have have real concerns about the degree to which the rollout timetable has slipped.”

“It still seems to me extraordinary that as late as December last year we were being told everything was fine and then all of a sudden the rollout of the fibre to the premises is up to between fifty and sixty per cent behind schedule,” said Ludlam.

 “All we were really told today is ‘trust us.’ I don’t think we take these things on trust anymore, but on data.”

That data is going to be closely watched over the next few months in the run up to the election. Committee chair Rob Oakeshott pressed both the NBN Co management and relevant department heads on whether the company’s corporate plan could be trusted.

Australian taxpayers should depend upon the NBN Co corporate plan being the project’s source of truth. However, in the run up to the Federal election we can expect that truth, like many others, to be sorely tested regardless of the optimism or corporate spin.

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