Michael Sainsbury
August 29, 2016

Telstrafication of the NBN grows

TelcoLand

Telstrafication of the NBN grows

Ziggy Switkowski: The Telstrafication of the NBN has picked-up pace

Malcolm Turnbull and Ziggy Switkowski’s ever-moving, ever-changing NBN Co has released its 2017 Corporate Plan.

Once again, the company has bombarded readers with so many numbers that it’s hard to sort  the wheat from the chaff.

While it is always better to have more than less information from companies that have shareholders – or in NBN Co’s case, taxpayer/owners – it’s not an uncommon practice to bury important detail in a sea of numbers.

This is especially the case where there is a high level of uncertainty and risk to the forecasts, as there certainly still is with the government-owned NBN.

That’s the reason that some media outlets fell for the ‘NBN reduces peak funding by $2billion’ headline number. But the truth is that this number is like all NBN Co’s forecasts; they change, often quite significantly, every year.

The company has continually gotten its revenue forecasts very wrong. Funnily enough it’s the reverse of the usual corporate forecasting error. They are much bigger than previously forecast, and are now closer to those the company made under previous management that the Coalition has been trying to discredit.

This means that getting a grip on the real state of NBN Co’s finances into the future is like trying to catch a falling knife.

Dig a little, too, and the latest corporate plan from NBN Co, Mr Turnbull’s $50 billion-plus ‘multi-technology mix’ network, screams from every page. The ‘Telstrafication’ of the so-called national broadband network under the chairmanship of former Telstra chief executive Mr Switkowski continues apace.

Because for all the world, the company’s network plan for 2020 looks an awful lot like Telstra’s would have before the injection of the NBN project into Australia’ fraught telecoms sector.

It is a hodge-podge mix of technologies, all replete with their expensive information technology back-ends and their ever rising and falling risk profiles.

Before the NBN, Telstra was already beginning to deploy greenfields rollouts of fibre-to-the-premises.

It knew then what the NBN under former mobile executive Bill Morrow has finally figured out: That for greenfields projects, fibre-to-the-premises offers a better business model than copper based broadband services (which will, eventually, need replacing).

The latest figures show the greenfields FTTP is the cheapest per premises technology in the NBN’s increasingly invidious (Telstra like) 'multi-technology mix' at $2,100 premises.

That’s cheaper than the $2, 400 per premises the much vaunted slower fibre-to-the node which was supposed to significantly lower the network’s costs but has resulted instead in a massive capital cost blow-out by at circa $10 billion.

Of course, like many things with MrTurnbull and Mr Switkowski’s NBN, we don’t actually really know, yet how much it will cost. The FTTN network also comes with a far heftier maintenance bill due to the extensive amounts of copper used, for example.

Greenfields FTTP is also cheaper than the $2, 300 per premises to connect those on Hybrid Fibre-Coaxial network (and one senses from management commentary that this will rise) which is at the centre of the latest unresolved problems for NBN Co.

The HFC network has seen more Telstrafication in the shape of a $1.6 billion contract handed to Telstra for the benefit of its shareholders – that’s on top of the government/NBN’s initial payment to Telstra for its HFC and copper networks.

So bad has the HFC cost blowout been that NBN has been forced to admit it will now dump customers who were originally targeting to get faster HFC cable. They will be downgraded to FTTN, its high rise twin fibre-to-the-basement or the new kid on the block FTTdp.

FTTdp you ask? That’s fibre to the distribution point, once known as fibre–to-the-kerb. It sounds promising enough – although why not take it all the way the way to the home – but former NBN boss Mike Quigley has warned that its largely untested on a commercial level.

As a result, and like the HFC, that could mean another cost blowout. But not, at least, until next year’s plan.

All that being the case, why is NBN lowering the number of FTTP premises in favour of more expensive to deploy technologies?

Political expediency can be the only answer. Like Telstra, the NBN has inevitably become completely politicized, so much so that it would be remiss not to note that the NBN corporate plan emerged only days after further “raids” by the Australian Federal Police.

There are myriad issues unanswered such as whether the AFP has any jurisdiction over the NBN, along with whether parliamentary privilege has been breached.

Not to mention the irony of a Prime Minister who made his career defending a whistleblower in the Spycatcher case, trying to save what’s left of his reputation by prosecuting the same sorts of people.

NBN is still reticent to publicly admit – and its 100 per cent shareholder the Federal government certainly isn’t – that the appetite of Australians for increasing volumes of data is rising inexorably.

Such an admission would not quite gel with pushing customers onto very inferior broadband services.

This has been starkly underscored by Telstra’s announcement in recent weeks that it will spend $3 billion on its own networks to cope with the increasing demand for internet traffic.

Things change quickly at Ziggy Switkowski’s NBN Co – anyone in telecoms game will tell you that a year is a short time in TelcoLand.

The technology SNAFUS and backflips keep coming. That’s the unseen, uncosted, problem with a ‘multi-technology mix’, as any Telstra engineer will tell you.

And so it has come to pass that Mr Morrow has admitted that NBN’s objective is no longer offering as many Australians as fast as possible broadband speed.

It is, in effect, no longer really a nation building project, just a best effort sort of network ,operated under short term financial goals (to satisfy who, one might ask?) Again, that sounds awfully like Telstra.

So the question is, why is the Australian taxpayer footing a $50 billion plus bill – many billions of which remain unfunded – for a more or less replica of Telstra’s wholesale network?

Maybe Telstra should be handed a contract to manage the whole darn thing. It could well be cheaper.

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