Slowly but surely, Communications Minister Malcolm Turnbull is destroying Labor’s vision for a comprehensive, high-bandwidth National Broadband Network.
Turnbull has made a series of announcements this week. Eloquent as ever, he addressed his usual charm to the complex topic of the National Broadband Network roll-out. But whatever the rhetorical flourishes, Turnbull’s announcements bode ill for the future of Australian broadband.
In opposition, Turnbull’s task was to nullify the NBN as a vote-winner for Labor. He did this by attacking Labor’s plan, attacking the government-owned company rolling it out, NBN Co, and personally attacking the people in charge, including former NBN Co boss Mike Quigley. Turnbull had plenty of ammunition: NBN Co was running behind on its ambitious schedule, and it was not always as transparent as a public company should be. Most of all, Turnbull attacked the lack of a cost-benefit analysis. Time and again, he claimed the whole thing was a giant boondoggle, claiming a Coalition government would deliver a decent network sooner, and more cheaply.
As soon as he got his feet under the desk as Communications Minister, Turnbull got to work dismantling Stephen Conroy’s legacy. He fired the NBN board and ordered a bunch of reviews; Quigley, who could read an opinion poll, quit before the election. Coalition-friendly telco veteran Ziggy Switkowski was installed as the new chairman, and businessman Michael Vertigan was asked to run a cost-benefit analysis on the NBN’s options.
As news of those reviews start to filter out, we’re beginning to see what the Turnbull NBN will look like. Yesterday, for instance, Turnbull announced that he and Finance Minister Matthais Cormann had issued a “statement of expectations” to NBN Co. The statement directs NBN Co to embrace a mix of technologies, in contrast to the previous plan of rolling out high-speed fibre directly to the premises of millions of Australian homes and businesses.
The new plan will see the NBN cobble together a network from the NBN’s existing fibre, Telstra’s copper network, plus wireless, plus the old Telstra and Optus hybrid-fibre coaxial cable (HFC). Turnbull is calling this a “mutli-technology mix”. The network will deliver speeds of “at least 25 megabits per second to all premises”. All this will have to be done for no more than the $29.5 billion of taxpayers’ money already invested by Labor.
“The Statement is consistent with the Government’s view that rather than imposing technological constraints on NBN Co, politicians are better placed telling the company what objectives it should pursue, and how much Government money they have to achieve them,” Turnbull told industry types at the CommsDay Summit yesterday.
You may not have noticed, but this is a broken promise. In April 2013, at the whizz-bang launch of the Coalition’s NBN policy, Tony Abbott and Malcolm Turnbull promised a network delivering 25mbps by 2016, and 50mbps to 90 per cent of the country by 2019. Yesterday’s statement of expectations still has the 25mbs in there, but no dates are attached. Instead, the Australian public is promised the rather more elastic deadline of “as soon as possible.”
Turnbull’s longstanding critics in the tech media have made merry with the announcement. ZDNet’s Josh Taylor pointed out that the decision was going ahead without waiting for the findings of the Vertigan Review, “despite years of sledging Labor over its decision not to conduct a cost-benefit analysis”.
Renai LeMay at Delimiter was blunter. “Hypocrisy!” he thundered. “How can the Minister possibly justify the Government’s decision to go ahead with the ‘Multi-Technology Mix’ for its broadband project, when it has not completed a cost/benefit analysis into the project?”
It’s a fair question, but one suspects Turnbull won’t lose too much sleep thinking up an answer. Turnbull can argue he has a mandate to implement a cheaper NBN roll-out, and that mixed technology was always part of the plan. The 2016 deadline, always ambitious, is apparently just another non-core promise.
Switkowski, however, is a man with slightly bigger headaches. The most painful is what to do about the enormous $11 billion deal that Stephen Conroy struck with Telstra, for 35 years’ access to Telstra’s ducts and pipes.
Switkowski and Telstra’s David Thodey are currently locked in tricky discussions, in which NBN Co is seeking to renegotiate the terms of the agreement. As well as the copper, Switkowski wants access to Telstra’s HFC cables. Telstra, for its part, wants more money, but might be prepared to part with the HFC in return for NBN Co taking on the huge maintenance costs of the copper network. To say the negotiations will be difficult is an understatement.
Switkowski also has to grapple with nimble commercial competitors, like tech entrepreneur David Teoh of internet service provider TPG. TPG has recently announced plans to roll out its own fibre to 500,000 customers living in apartment and office towers in the big cities. By cherry-picking high value customers in this way, TPG could blow a hole in NBN Co’s entire business plan, which relies on universality to cross-subsidise the huge cost of rolling out a national network in regional and remote areas.
You can’t blame Teoh for the fibre grab: TPG’s strategy makes perfect business sense. As a commercial entity, it need only care about the interest of its shareholders. NBN Co, on the other hand, must balance the public interest against commercial considerations. The only thing that can protect it from this kind of competition is sound regulation that locks out TPG and the other telcos, stopping them from stealing its best customers.
Regulation makes the free-market types in the Coalition uncomfortable. But there is no way around it if the NBN model of a single national wholesaler selling to private broadband retailers is to be realised. The alternative — to let the market rip — will almost certainly see the NBN wholesale model fail.
Switkowski recognises this. “If anybody else comes in now and starts cherry-picking existing customers,” he told the ABC’s Ticky Fullerton this week, “not only does it confront the economics of NBN, which as you know are already quite marginal, but it also upsets the anticipated industry structure.” Switkowski reiterated the need for structural separation if the industry is to progress: the NBN has to be a wholesale monopoly.
Whether the government can bring itself to put aside its hatred of red tape to ensure the NBN’s survival is another matter. Vertigan has been asked to report back to Turnbull early on whether the TPG roll-out should be allowed. “I’m not going to pre-empt the findings of the Vertigan Panel on this matter,” Turnbull told the CommsDay Summit, “but we and the NBN Co are very alert to it.”
Labor’s Communications spokesperson Jason Clare is keen to highlight Turnbull’s broken promise. “The people of Australia might not have liked the Coalition’s second rate NBN plan, but they were told they would get it by 2016,” he said in a media statement. “They won the election and then broke their word.”
Clare is right. The Coalition never seemed to really get the NBN, but it did get that it was popular with voters. Now he’s in office, Turnbull’s national Broadband Network is starting to resemble the old historian’s joke about the Holy Roman Empire: neither national, nor broadband, nor much of a network.