Zapping NBN Co for cash

The NSW government's comments about the rollout increasing power prices reek of opportunism, and an oversight from NBN Co could see the rollout fall behind schedule.

The NBN story was dominated this week by the fracas between NBN Co and the New South Wales state government, which somewhat overshadowed the hearing of the Joint Parliamentary Committee on the NBN in Canberra. However, the hearing did hold one revelation – NBN Co is yet to sign any contractors on to connect multi-dwelling units (MDUs) to NBN fibre.

NBN, NSW bust up

The war of words was initiated by NSW’s finance and services minister Greg Pearce, who was quick to paint an evocative scenario of consumers slugged $400 million through higher electricity prices, courtesy of a recalcitrant NBN Co. This is of course great fodder for media but the alarmist intent of Pearce’s release was perhaps designed to disguise the opportunism on display by the NSW government.

The operative word here is opportunism because let’s face it every state government wants the NBN, this just boils down to how much the state government can squeeze out of NBN Co. Interestingly, while other states have been willing to play ball at $30 to $40 per pole, the NSW government is pushing for somewhere in the vicinity of $140 per pole. While the real cost of access might not be accurately reflected in either of the price points, given that build and maintenance costs are probably higher in NSW, the disparity between NSW and the other states warrants an explanation from state premier Barry O'Farrell.

Without the benefit of this explanation, the NSW government’s seemingly benevolent intention to protect residents from higher power prices looks more like a cynical cash grab and a prime example of obstructionist grandstanding by a cash-strapped government.

Communications minister Stephen Conroy wasted little time in making that point and NBN Co has unsurprisingly invoked Commonwealth powers to deliver an ultimatum to the state-owned electricity network owner Ausgrid, giving it 28-days to come to the table with a fair price. After two years of negotiations it has finally come down to deadlines and the distinct prospect of a lengthy court battle.

All of which will do quite nicely for the O’Farrell government when it comes to scoring some cheap shots against NBN Co and the Gillard government. The extra dough, provided NBN Co is willing to budge on price, will also no doubt be welcomed gleefully.

Running behind on MDUs

Apart from the access argy-bargy with the NSW, NBN Co was keen to put its best foot forward at the Joint Parliamentary Committee on the NBN in Canberra this week. And it almost did. NBN Co boss Mike Quigley said the rollout of the NBN was on schedule and it was on track to pass 286,000 homes and businesses by June 2013 as stated in its corporate plan released in August.

This confidence was however, tempered by the revelation that after almost 18 months of negotiations NBN Co is yet to sign on a contractor to take the fibre to apartments and townhouses, or as NBN Co likes to call them MDUs. 

NBN Co’s chief operating officer Ralph Steffens was at pains to point out the complexities of connecting MDUs to the NBN but the fact that there is no firm contract in place gives some cause for concern.

Steffens is absolutely right about the unique issues related to MDUs and that there is no single solution to fibre installation in units. However, is this revelation an admission of a lack of foresight on the part of NBN Co? Has the focus on building the fibre backbone led to the MDU issue put on the backburner? I would like to think not but with so many Australians living in apartments and given the known complexities associated with MUD methodology, it would have been a safe bet to assume that NBN Co would pour significant resources into the issue. NBN Co hasn’t even picked a contractor to go into the MDUs and that raises the grim prospect of the rollout falling behind schedule.  

The conversation between the contractor and the body corporates needs to be happening in earnest, and it needs to be happening now. The absence of a contract raises a justifiable question mark around NBN Co’s unbridled confidence about hitting the rollout targets.

Who's calling the shots - Abbott or Turnbull?

The MDU contract, or the lack thereof, ideally presents an open goal for the federal opposition to sink the boot into NBN Co. While shadow communications minister Malcolm Turnbull did take up the opportunity his protestations continue to be overshadowed by the comments of his leader Tony Abbott. The opposition leader has over the course of the last two weeks promised to pause the Labor NBN and bandy the usual line about how much money Labor is wasting on the project. This continued focus on destroying the Labor NBN is now increasingly at odds with what Turnbull has been saying. The shadow communications minister’s comments, by and large, have centred on delivery and technology while his leader is seemingly preaching to the converted with his rabblerousing missives about the NBN white elephant.

Perhaps it is this dissonance that has prompted Stephen Conroy to land a cheeky punch yesterday, with his call for Australians to ignore Turnbull and instead look to Abbott to get an idea of what the Coalition has in store for us.  

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles