“From out house to in house” (The NBN Rebooted Conference)

SPEECH

“FROM OUT HOUSE TO IN HOUSE”

THE NBN: REBOOTED CONFERENCE

SWISSOTEL, SYDNEY

TUESDAY, 18 NOVEMBER 2014

***CHECK AGAINST DELIVERY***

 

Introduction

On the day Gough Whitlam died I did an interview on the Today Show.

I was asked by Karl Stefanovic about Gough’s greatest achievements.

I told him what my parents told me. It wasn’t universal health care or free university. It was sewerage.

Gough Whitlam sewered the western suburbs of Sydney and other parts of the country that until then had to rely on a septic tank or an outdoor thunder box.

Why? Why was this so important to my parents? Well if you have ever had to go outside in winter in the middle of the night to go to the loo you would know why.

Now I know what you are thinking. Is he going to make some coarse analogy between Malcolm Turnbull’s Multi Technology Mix and out houses?

No I’m not. I am going to make another point.

When Whitlam first started talking about the federal government getting involved in sewering suburbs he was sneered at by his political opponents and by the media.

The Prime Minister at the time, John Gorton, said Whitlam sounded more like a Shire President than an aspiring Prime Minister.

The Sydney Morning Herald in its1969 election editorial derided what it called:

“Mr Whitlam’s dizzy vision of a paternal, centralist Government in Canberra deciding the education of children in New England and the correct line of a sewer in Bankstown.”

It has said very different things in the last few weeks.

In its editorial the day after Whitlam died, the Herald praised the man who it said:

“brought schooling to the masses and sewerage to their outer suburban homes.”

How things change. Whitlam’s sewerage program is not sneered at anymore. It is considered essential infrastructure. A utility. It is hard to imagine life without it.

But it would not have happened, not as fast, without Whitlam.

Now let me take you to March 1995 when Michael Lee and Paul Keating launched the report, Networking Australia’s Future.

There is a line in the speech that Keating gave when he launched the report that will ring true to a lot of people here. He said:

“We have to decide, as from now, that access to the national information infrastructure will be no less a general right than access to water, or public transport or electricity.”

National information infrastructure – as important as water or electricity.

In other words a utility.

President Obama said something similar last week – when he urged the FCC to reclassify broadband service as a utility.

I asked Michael what people said when Keating made this statement 20 years ago. He told me people laughed. I don’t think there are many people laughing now.

People get it – and they want it.

People have the same expectations they have of other utilities. They expect clean water out of the tap, power at the flick of a switch, a flushable toilet inside the house, and super fast and reliable broadband.

Last year I made the point that my party was flogged at the last election, but I suspect very few people voted Liberal because of their broadband policy. They voted for them in spite of it.

And despite all the best efforts of Malcolm Turnbull to demonise the NBN, people still want it. And they still want fibre.

The best evidence of just how popular it is is this – the Government hasn’t changed its name.

It’s rebranded and rebadged almost everything in the last 12 months. Even some Ministers and Departments have been given different names. But not this. Not the NBN.

They might have gutted the NBN, but they haven’t changed the name. And why? Because they know Australians want it.

Just like Medicare, they know it’s too popular to totally destroy.

Broken Promises

This conference is focused on what it calls – solving the Multi Technology Mix puzzle.

To do that it’s first worth having a look at what has happened since the last NBN Rebooted Conference a year ago.

Since then there have been a lot of broken promises and a lot of reviews – but not a lot of work on building the NBN.

I said at this conference last year that my main criticism of the NBN under the last government was the roll out was too slow. 12 months on it’s still too slow.

At this same conference last year Malcolm Turnbull said a “realistic” and “genuinely achievable” target was 450,000 brown field premises passed by 30 June.

Well that didn’t happen. They missed that target on 30 June. It’s now 18 November and they still aren’t there.

In May, Ziggy Switkowski said NBN Co needed to pass 100,000 premises a month every month for the next eight years to hit their target. We are still a long way off that. In the past month NBN Co managed about 23,000 premises— that’s Australia wide.

In Tasmania, according to the weekly rollout stats, the number of brownfield premises passed has gone from 38,338 in May this year to 38,345 by 6 November. That’s a massive increase of six. One home a month.

One of the most interesting things in the Corporate Plan released yesterday is the table on page 51.

It shows NBN Co is also falling behind the targets set out in the Strategic Review.

The table sets out the equity funding profile for the next few years. Interestingly it’s dropped.

It’s dropped by about $1 billion in FY14 and by another billion in FY15 – compared to what is in the Strategic Review.

When this happened under the last Government, Malcolm Turnbull said it was a “clear admission” the rollout was behind schedule. And he was right. I think you will find the same thing is happening here.

They are behind schedule – the schedule they set for themselves.

The rollout is just one of a number of broken promises in the last 12 months.

One of the defining features of the Abbott Government is the number of promises it has broken. Everything from health to education, to the ABC.

And the NBN is no exception.

The big one is the promise they made that everyone would have access to 25 megabits per second by the end of 2016.

Three weeks after last year’s conference that promise was ditched.

They also promised they could build the NBN with a peak funding amount of $29.5 billion. That’s also hit the wall.

The promise that the negotiations with Telstra would be done by the middle year hasn’t gone too well either.

Nor has the promise to be open and transparent.

I remember in Opposition Malcolm Turnbull used to say the last Government was “more secretive than the Kremlin”.

When he became the Minister he promised to “liberate the management of NBN Co to tell the truth”.

He told the Parliament “the Government’s commitment is to be completely transparent”.

Well that hasn’t happened.

Industry consultation processes that used to be conducted publicly are now being conducted in secret.

We still don’t have a rollout plan. Most Australians don’t know what sort of NBN they are going to get – or when they are going to get it.

The Minister is also still refusing to release in full his incoming government brief—the frank and fearless advice provided by the Department of Communications on the Coalition’s policies.

And the only reason the Corporate Plan was released yesterday (after sitting on the Minister’s desk for six months) is because last month the Senate passed a motion ordering him to table it.

So much for transparency and openness.

Review Paralysis

As I said earlier, in the last 12 months there have been a lot of broken promises and a lot of reviews.

In fact we have had almost as many reviews or inquiries into the NBN in the last year as there have been into who killed JFK.

What’s worse though, is most have been full of errors or old ideology or just plain old political payback.

First off the rack was the Strategic Review. The Minister told the conference last year that this would be “an exercise in truth telling”.

Well that didn’t go so well. A Senate Committee found that it was unreliable and contained “financial manipulations and other irregularities.”

If you don’t believe the Senate Report think about this – even the hand picked team that wrote the Cost Benefit Analysis said the Strategic Review contained errors.

Remember the Strategic Review said the cost of rolling out fibre is going up. But leaked documents from NBN Co show that’s not right.

In September leaked NBN Co documents revealed that in Melton Victoria the NBN Co team had rolled out fibre to an FSAM (Melton 10) 50 per cent cheaper and 61 per cent faster than in comparable suburbs in Victoria.

This contradicted everything the Government had said until this point and everything in the Strategic Review.

NBN Co’s first reaction was to deny there even was a trial in Melton.

Then a few hours later they issued a statement retracting that, admitting it was true, and saying they were rolling out fibre even cheaper and quicker in other FSAMs.

The next review was the Broadband Availability & Quality Study. This resulted in the website myBroadband, which has also been criticised for mistakes and inaccuracies.

A survey of 800 people who tested their internet speed found that in most cases it was more than 25 per cent slower that the estimate on the website.

Next was the Scales Review. I am sure you read what Graeme Samuels said about it a few weeks ago. Here are a few priceless gems:

“The Scales review… is fundamentally flawed in its evidence base… [and] factually wrong on the role of the ACCC…. As a consequence he has been insulting and offensive to the remarkable intellect that constituted the expert advisors engaged by the previous government to advise it on all aspects of the NBN.”

Then there was the Governance Review, that even a current member of the NBN Board disagreed with and said was “unsupported by the facts”.

The most extraordinary reports though are the Cost Benefit Analysis and the final Vertigan Report on regulatory reform.

The Cost Benefit Analysis is that bad even the CEO of NBN Co questioned it’s conclusions. Remember it’s the report that said the average family would only need 15 megabits per second by 2023.

To show you how off the mark this is, yesterday’s Corporate Plan said 62 percent of NBN Co’s end users are already ordering speeds of 24 megabits per second or more.

The final Vertigan Report is that bad even Malcolm Turnbull rejected it. The minute it was released he rejected most of its recommendations.

So 12 months on – a lot of reviews, but not a lot achieved.

We have had eight reviews – that have cost about $12 million – and we haven’t learnt much more than what was in the Coalition’s election policy.

It has been an expensive and unnecessary distraction.

The focus on these reviews has contributed to the slow roll out of the NBN. But it’s not the only reason that progress has been so slow in the last 12 months.

Not So “Modest” After All

The other reason is this – the government has under-estimated the scale and the complexity of shifting from FTTP to MTM.

In their 2013 election policy the Coalition assumed that it would take four quarters (one year) for activity at NBN Co to “fully reflect changed policy”.

That assumption has proven to be very optimistic. Four quarters have come and gone.

We are now into quarter number five and still a long way from activity at NBN Co fully reflecting changed policy.

The main reason for that is this – there is still no deal with Telstra.

Remember Malcolm Turnbull said this would be “quick”. He promised it would be done by the “middle of the year”.

In August last year he told Alan Kohler:

“The reason I am very optimistic is that the changes to the Definitive Agreements are relatively modest. They simply require us in practical terms to get access to D side copper. Everything else is the same. Nothing else changes.”

Reality has proved very different.

Now we are told it might be done by Christmas. David Thodey has said it “maybe beyond Christmas”.

Why is this taking so long?

One of the reasons I suspect is Telstra is trying to protect itself.

Under the current Definitive Agreements they have a natural protection.

As Grant Samuels told Telstra shareholders back in 2011:

“There is an important natural protection as Telstra shareholders will continue to operate its copper network and HFC networks in the areas not covered by the NBN.”

Under the MTM Telstra loses this protection – so it is seeking to protect itself on other ways.

You can see this in its 2014 Annual Report, which says:

“Telstra’s continued ownership of [its network] did provide Telstra with some protection in respect of future changes in the NBN project. As part of the current negotiations, Telstra is seeking to agree other contractual mechanisms which are designed to protect Telstra against future changes in the project”.

The deal is also made more complicated by what TPG is doing, by changes that need to be made to legacy IT systems and the risks inherent in the migration process.

These are not “modest” changes. As the Minister finally conceded yesterday, they are very complex.

The government also doesn’t have the bargaining power the last government had.

The last government had a stick. A pretty big stick. Telstra could make a deal or it would be prohibited from participating in 4G spectrum auctions and be forcibly functionally separated.

The current government doesn’t have a stick – just an election policy. Which is why people like Paul O’Sullivan have said recently that current delays:

“send all the signals of an incumbent looking to maximize leverage and try[ing] to force the government to give it more incentives to play along.”

What these are we will have to wait and see.

A deal will be struck. But even when it’s done there is still a lot to do.

There’s the deal with Optus and ACCC approval.

There’s the contract to maintain and upgrade the old copper network.

There are new construction and equipment contacts that have to be inked.

New product sets have to be finalised.

A reworked Migration Plan and a Special Access Undertaking need to be approved by the ACCC.

And there are also possible changes to regulations and legislation.

Even the Corporate Plan released yesterday could only provide financial and rollout targets for the next seven months, saying that “future outcomes…carry high levels of uncertainty.”

So much for the assumption the project would fully reflect changed policy in four quarters.

Issues that lie ahead

So what lies ahead?

This conference is about solving the MTM puzzle.

Here are a few things to look out for in the year ahead.

The first obviously is what will Telstra get out of the new deal. If it isn’t money, what is it?

Second is the three year plan.

Last week the Minister said NBN Co would release its three year plan early next year.

That needs to provide a lot more information than we got yesterday. It needs to include a three year rollout plan.

People want to know when they are going to get the NBN and what sort of NBN they are going to get.

Hopefully it will also confirm the government is going to roll out the NBN to underserviced areas first.

Again I am going to quote what the Minister said at this conference last year.

He said “addressing these underserviced areas first is a key objective of our NBN policy”.

I hope we see this in the three year plan – because it’s not happening at the moment.

I was in the Hunter last week where the FTTN pilot sites have recently been announced. It covers a number of towns and suburbs in the Hunter. But Thornton isn’t one of them. That’s despite the fact that the myBroadband website shows that much of it is rated as E—the lowest quality rating.

It has close to the worst broadband access in the Hunter.

While I was there I heard the story of a nurse, who lives in Thornton. She can’t get ADSL. So she uses a dongle. It’s so bad she apparently has to get up on her roof to down load her roster.

The Minister promised at this conference last year to rollout the NBN to places like this first. I know this isn’t easy. But he promised he would do it. He’s not doing it now. He needs to do it in the three year plan.

Third. Look out for the new NBN Tax.

The last Vertigan report recommended that NBN Co be allowed to charge developers for the cost of installing fibre in greenfield developments, and allow developers to pass this on to new home owners.

Malcolm Turnbull rejected most of the recommendations in this report – but not this one.

If this happens it will be another broken promise. The government promised no new taxes.

It will also be very unfair. It will mean if you buy an existing home you don’t have to pay anything extra for the NBN. Your taxes pay for it. But if you buy a new home, you will have to pay for it twice.

Other things to look out for include:

  • the cost of upgrading and maintaining the copper network
  • the cost of the fibre-on-demand product
  • the cost and complexity of the changes required to NBN Co’s OSS/BSS because of the MTM model
  • How the two HFC networks will be combined and whether they will be genuinely open access
  • And just how NBN Co is going to compete with TPG and other existing fixed networks.

Conclusion

Back to Whitlam.

Neville Wran the former Premier of NSW once remarked:

“it was said of Caesar Augustus that he found Rome brick, and left it marble. It will be said of Gough Whitlam that he found the outer suburbs of Sydney, Melbourne and Brisbane unsewered, and left them fully flushed.”

That’s not exactly true. Whitlam’s sewerage program didn’t achieve it’s ultimate objective to connect every Australian home to modern sewerage services.

Why? Because it was terminated by Malcolm Fraser in 1977. Sound familiar?

By then most of the sewerage program had been rolled out. But Malcolm Fraser’s Government didn’t finish the job. That was left to others.

37 years on another Malcolm is doing the same thing.

All we are getting is a half completed – second rate network.

It will do the basics, but not everything you want or will need in the future.

Australia deserves better.

And it will eventually get it, but not by this government.

And when that day comes I am sure we will look back on this project like we now look back on the Whitlam sewerage program.

And think of fibre to a box in the street as archaic as a toilet in the backyard.

MEDIA CONTACT: RYAN HAMILTON: 02 9790 2466