The NBN is now Malcolm's Mess

The NBN’s returns, as forecast in the leaked draft corporate plan, depend on it being a socialist-style monopoly wholesaler. Now Malcolm Turnbull has to purse his lips and find some way to deal with that.

Watching the new Minister for Communications, Malcolm Turnbull’s performance yesterday, one was forcefully struck by the thought that the NBN is now his, quickly followed by a second realisation that sometime in the past two weeks he has been struck by the same thought, which would, in turn, have been quickly followed by: “Oh Shit”.

The NBN is a complex government-owned, ubiquitous monopoly wholesale broadband network, connecting earth’s least populated continent, on a very tight business plan, that is running about as far behind schedule as a normal house renovation – that is, it’s more or less on track.

It’s not a mess yet but oh boy, it could be. And it would now go down as Malcolm’s Mess, which perhaps explains the tightness of the ministerial lips yesterday and why the key exhortation in his first “Statement of Expectations” to the NBN board, whose “offers of resignation” he has requested, was: “Keep Calm and Carry On”. As if.

The 2013-2016 draft NBN corporate plan, not released publicly but leaked yesterday to your correspondent and others, is 140 pages of terrifying, mostly incomprehensible detail. It describes an infrastructure project that, to the untrained eye, looks basically impossible (Turnbull pops the bubble of broadband nirvana, September 25).

The document revises the forecast revenue down by $1.4 billion because of the three-month rollout delay, but the forecast internal rate of return is still 7.1 per cent.

That return relies on this statement on page 21 of the document: “Subject to a limited number of exceptions, Telstra has agreed that it will use the NBN FTTP network exclusively as the fixed line connection to premises in the NBN Fibre Footprint for a 20-year period from commencement of the Definitive Agreements. That means following the Disconnection Date in respect of Rollout Region, Telstra will… only use the NBN FTTP Network to provide fixed line carriage Services to End-Users’ premises…”

It goes on: “Typically all households and business will migrate off the copper and HFC Networks within 18 months from the date on which NBN FTTP services are first available in their community.”

Later the document says: “NBN Co’s systems are being designed to provide an experience for Service Providers that is as close as possible to owning their own network.”

In other words, the NBN’s forecast return of 7.1 per cent, something only a government would be satisfied with, depends upon it being a monopoly wholesaler – a socialist throwback in which the State owns the means of communication.

And now it’s Malcolm Turnbull’s socialist throwback.

Coalition policy, for which it has both a mandate and an obligation, is based on the more contemporary notion of competition.

As the full-stop-rich policy document (Hope. Reward. Opportunity. Fast. Affordable. Sooner.) says: “Competitive and free markets have driven innovation and cost reductions in telecommunications since the early 1990s. The Coalition will remove or waive impediments to infrastructure competition introduced to provide a monopoly to Labor’s NBN.”

The change that matters with the change of government is allowing Telstra not to migrate all of its customers to the NBN, and allowing firms like TPG Telecom to connect the most profitable parts of the cities to its own wholesale fibre networks.

It is a matter of ideology. Malcolm Turnbull is right: the technology doesn’t matter – FTTN will be fast enough, and if the 7.1 per cent IRR can be improved with more copper, it should be done. And who’s on the board doesn’t really matter, as long as they are sentient beings who know how to recruit and govern.

What matters is whether it’s a wholesale monopoly. If it’s not, best to cancel it now while we still can.

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