Gabrielle Chan theguardian.com, Thursday 12 December 2013

Strategic review blames cost blowouts and poor management as government breaks promise to deliver NBN by 2016

Communications minister Malcolm Turnbull claims the Coalition's NBN election policy was 'written without access to experts'. Photograph: Lukas Coch/AAP Image

The Coalition government has massively revised its plan for the National Broadband Network, breaking a promise to complete the first stage by 2016, after a strategic review found cost blowouts and poor management.

Under the new Coalition plan, the NBN will be completed with a mix of technologies containing just 26% fibre to the home, will cost almost $12bn more to complete and will take four years longer than promised by the Coalition before the election.

The revision follows the results of a scathing strategic review of the current financial and construction position of the network by the Coalition-appointed management of NBN Co.

The communications minister, Malcolm Turnbull, said the Coalition’s election policy was based on the assumption that NBN Co would meet its own forecasts, but the review marked the end of “heroic forecasts”.

“Our [election] policy was written without access to experts and information within the NBN Co and we assumed they would be further ahead than they were,” Turnbull said.

Labor immediately released an NBN Co review given to the Coalition government on 20 September, which advised the Coalition would be unlikely to achieve its promised speed of 25mb/sec due to various contractual and technological obligations faced by the network.

“It shows that Malcolm Turnbull’s second-rate network will not cut it,” Labor’s communications’ spokesman Jason Clare said.

However Turnbull ridiculed the review, saying the former management had not managed to get any forecasts right under Labor.

The Coalition has revised its own projected costs of the NBN from $29.5bn promised during the election campaign to $41bn, though the minister committed to limiting its equity investment in NBN Co to $29.5bn. The rest will be funded by debt.

The government has appointed a panel of experts to conduct an independent cost-benefit analysis of broadband and a review of the regulatory arrangements for the NBN. It will be chaired by former treasury secretary and businessman Michael Vertigan, with director of the Australian Industry Group Alison Deans, economist and NBN critic Henry Ergas and regulatory consultant, telecommunications expert and economist, Tony Shaw.

The panel has been established to provide independent advice on the economic and social costs and benefits of different broadband technologies.

The NBN was announced by the Rudd government in 2009 and the corporate plan predicted the network would have passed 1.1m homes by 30 September this year.

According to the review released on Thursday, the NBN had passed 227,483 homes by that date, of which 153,977 can be connected.

The review found the network would take four years longer (until 2020) to complete under the Coalition’s revised multi-technology plan, but under Labor’s fibre to the premises plan, the NBN would not be finished until 2024.

Turnbull said the review found the NBN was in a “fundamentally worse position” than Labor had disclosed, with construction behind time, financial returns overestimated by $13bn to 2021, a lack of infrastructure experience in NBN Co staff, a “corrosive internal culture” and lack of commercial rigour.

The Labor model being rolled out is 100% fibre. The Coalition’s new model, now described as a Multi-Technology Mix (MTM), will include 26% fibre to the premises (FTTP), 44% fibre to the node (FTTN) and 30% hybrid fibre coaxial (HFC), which uses both optical fibre and coaxial cable for the delivery of pay TV, internet and voice services.

“I have always said fibre is great technology but it takes a lot of time and costs a lot of money,” Turnbull said.

The minister said the increase in internet demand did not necessarily mean a lot more speed was required, as suggested by supporters of the FTTP model to every home.

“Just because people take up more services on the internet doesn’t mean they necessarily need a lot more speed,” Turnbull said.

“There has been a correlation between increased demand to increased line speed. While there is a connection, it’s not linear connection.”

NBN Co executive chairman Ziggy Switkowski said the bottom line of the review was that an alternative to the existing model could be delivered sooner and cheaper. The new chief was critical of the culture inside NBN Co, describing decision-making as decentralised and not co-ordinated.

“The biggest issue is a commendable and tenacious commitment to the [original] corporate plan but a failure to recognise reality is moving so far away, then a failure to take action,” he said.

Switkowski said the new model would be a mix of existing technology as well as other future technology platforms that may emerge and resembles the architecture of systems in other advanced economies.

“Our calculations confirm that it is economically more efficient to upgrade over time than to build a future-proof network in a field where fast-changing technology is the norm,” Switkowski said.

But Clare said under the Coalition’s plan, capacity would be met as soon as it was built.

“Three years ago Tony Abbott said Malcolm Turnbull’s job was to demolish the NBN,” said Clare. “Then they promised to keep the NBN. This issue is a bit like Medicare. The government knows it’s too popular to destroy but they are doing almost everything they can here to destroy it, which means we are getting a second-rate NBN.”

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Coalition’s NBN to cost $12bn more and take four years longer | Technology | theguardian.com