nbn co a big fail so far

Note that the writer is an ALP man.

What a disaster NBN is becoming.


NBN Co fails on target rollout

by: Kevin Morgan
From: The Australian
August 07, 2012 12:00AM

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BROADBAND Minister Stephen Conroy's reluctance to share the National Broadband Network's new corporate plan is in sharp contrast to his usual enthusiasm for spruiking the NBN. After sitting on the plan for weeks, he's due to release it tomorrow. His reluctance is understandable given it can only highlight the massive failure to reach any of the initial plan's goals.

The initial plan was released in December 2010 by Julia Gillard. That plan is now in tatters despite the fact before its release the Prime Minister's Department paid corporate advisers Greenhill Caliburn $1.1 million for an initial 11 days' work to vet the plan.

The subsequent report said: "Greenhill Caliburn believes that, taken as a whole, the corporate plan for the development of the NBN is reasonable."

Why then, if costly advice said the plan was reasonable and implicitly realistic, has NBN Co missed the targets set by that plan for mid-2012 by a huge margin? Could it be that NBN Co and its head Mike Quigley simply aren't up to the job?

Based on its original targets, NBN Co has achieved only 9 per cent of its rollout target for homes passed by fibre and 3 per cent of the planned connections where customers are hooked up to broadband. Based on its initial estimates, by June this year 317,000 households should have been passed with fibre and 137,000 homes actually connected to a broadband service. In reality, fewer than 25,000 homes had been passed and fewer than 4000 connected.

Those figures are for existing suburbs and fibre to new estates. When the figures are broken down, it is obvious this isn't just a debacle but an abject failure by NBN Co, especially in new (greenfield) housing estates. In late May, Quigley told Senate estimates: "As of the last week or so a bit over 300 services have been turned on - activated - in greenfield areas ... and there are probably three or four times that quantity of lots that have been passed."

So less than 20 months after predicting that 172,000 greenfield premises would be passed and 132,000 connected, 0.6 per cent of the coverage target and less than 0.2 per cent of the active service target have been met.

Quigley has ready excuses. He has suggested the greenfields' failure was due in part to changes in the policy in late 2010. What he hasn't acknowledged is that NBN Co signed off on the original policy, which subsequently proved unworkable, despite advice in the $25m McKinsey NBN implementation study, which cautioned strongly against making NBN Co responsible for fibre to new homes.

And although the delays that have emerged in the rollout to existing suburbs are nowhere near as severe, 20 per cent of this year's target has been realised. Again, according to Quigley, it is not NBN Co's fault.

Quigley largely blames the protracted negotiations with Telstra over the $11 billion deal, which delayed access to the Telstra ducts.

That explanation is a furphy. As Telstra recently told the joint parliamentary committee overseeing the NBN, it had an interim agreement to give NBN Co access.

But perhaps what is of real concern is the fact Quigley, an industry veteran of 30 years, much spent at the highest levels, badly misjudged the time it would take to negotiate the Telstra deal. It is also of some concern that he failed to understand that serving up to 90,000 new homes a year with fibre was way beyond the competency of a start-up company.

NBN Co and the government have thrown money at the new developments problem to little effect. In May last year, NBN Co announced a $100m deal and a month later Quigley told the estimates committee: "the contractual arrangements with our greenfields supplier Fujitsu is working well. For this fiscal year (2011-12) we expect to pass approximately 65,000 lots and connect approximately 40,000 premises." As noted, about 1000 were passed and 300 connected.

So for the first time in 25 years, there are waiting lists for new telephone services. In many estates, homeowners are being provided with an interim mobile service by Telstra. Without a hint of irony, Quigley told the May estimates that NBN Co was "advising Telstra that they may receive requests for interim telephone services while the (NBN) network is being completed". Many new homeowners will have a long wait.

Similarly, homeowners in existing suburbs look set to be disappointed despite the fanfare that accompanied the Prime Minister's announcement in late March of the three-year rollout plan that would see "work under way or complete in areas containing over 3.5 million homes and businesses".

The reality is that little is happening. Contractors who signed up for hundreds of millions of dollars' worth of construction contracts 12 months ago have been sitting on their hands. As the joint parliamentary committee's recent report noted: "Importantly, the NBN Co is incurring contractors' late fees as a result of delays."

In effect, contractors are being paid to do little and even nothing because NBN Co cannot schedule the promised work.

But if NBN Co is failing dismally on delivering the fibre promised to 93 per cent of homes, it is at least making progress on its wireless and satellite services for the other 7 per cent.

That's because NBN Co has little active involvement in building either. These have been fully contracted out, albeit at considerable cost. The average capital cost of the wireless and satellite services will be about $14,000.

Given each service will yield less than $300 a year in revenues, these rural services will require ongoing annual subsidies of at least $3000 a year per service.

In contrast, Optus and Telstra are building far faster new-generation mobile networks at a cost in the hundreds of dollars, not thousands, for each customer.

The initial corporate plan was NBN Co's prospectus. Officers of a listed company that failed in similar fashion would be subject to severe sanctions but such is the importance of the NBN to the Gillard government that NBN Co is not accountable and can just rewrite history with a new prospectus.

We await it with interest.

Kevin Morgan was the ACTU member of Kim Beazley's advisory committee on telecommunications.

http://www.theaustralian.com.au/national-affairs/opinion/nbn-co-fails-on-target-rollout/story-e6frgd0x-1226444256903