Thanks Petroc. And thanks Grahame and the team at CommsDay for inviting me to speak today.
It’s great to be back at another CommsDay Conference. This is the sixth I have spoken at in the last two years. The first was an NBN Rebooted Conference in late 2013 – just after the last Federal Election.
In that speech I gave my first impressions of the NBN project – what we got right, what we got wrong, and the challenges that awaited the new Minister for Communications and the new Government.
It’s now the business end of the season. Two years on and we are closer to the next election than the last one – and today I want to give you my thoughts on where I think Malcolm Turnbull got the NBN project right, where he got it wrong, the lessons we can draw from that, and give you a bit of an insight into the policy work that I am doing and what we will do if we win the next election.
Let’s get started.
GETTING IT RIGHT
Here are a few things I think Malcolm Turnbull and NBN have got right.
First are the consumer-focussed initiatives such as the Migration Assurance Policyand the Medical Alarms Register.
Both of these initiatives will improve the switchover process from the existing network to the NBN. The Medical Alarm Register in particular is a good one—it willhelp identify vulnerable Australians who need support in the move to the NBN.
The quarterly results briefing is another good initiative. These results briefings have proven to be useful updates on NBN’s progress.
The continuation of the build drop program—begun under Labor—is also welcome. It’s helped to improve the connection process as the NBN is rolled out.
There are a few others but I will save those for another time.
The list of what they have got wrong is a bit longer.
GETTING IT WRONG
The big one is cost.
Malcom Turnbull promised before the last election that he could build his second rate version of the NBN for $29.5 billion. He said at the time his assumptions were “conservative”. That’s now proven to be hopelessly wrong.
As the Corporate Plan revealed a few weeks ago, that number has now blown out from $29.5 billion to up to $56 billion. Almost double.
The irony here is Tony Abbott broke a lot promises, including doubling the deficit, and he got the sack. Malcolm Turnbull also broke a lot of promises, including doubling the cost of the NBN, and he gotpromoted.
The other big thing Malcolm Turnbull got wrong is how long it would take to build his second rate version of the NBN.
He promised that everyone would have access to the NBN by the end of next year. He said everyone would have access to at least 25 megabits per second by the end of 2016.
That’s not going to happen. They are way behind that target. The NBN won’t get to everyone now until at least the end of this decade.
So the cost has doubled – and the time to roll it out has doubled.
The IRR has also tanked. Two years ago Malcolm Turnbull promised an internal rate of return of up to 5.3 percent. That’s now down to between 2.7 and 3.5percent.
This means that taxpayers will get a much lower return on the $30 billion they will invest in this project.
Malcolm Turnbull also promised to prioritise the rollout of the NBN to underserved areas “first”. In other words,to roll out the NBN to the worst areas first. It’s a worthy promise. A good ambition. But again his actions haven’t lived up to his words. The Corporate Plan reveals for the first time that in three years there will still be about half a million homes in Australia with terrible internet access still waiting for the NBN.
The other thing Malcolm Turnbull got wrong was the Cost Benefit Analysis. Hepromised to get Infrastructure Australia to do this. That didn’t happen either. It was done instead by critics of the NBN and former Liberal advisers.
On the plus side, Malcolm Turnbull has now changed his mind on the satellite program. In Opposition he said they were a waste of money. Now he is calling them a “game changer”. I am glad he has changed his mind. But I suspect it’s a good thing for regional Australia that Labor signed the contracts before the last election—otherwise the first satellite might not be in orbit right now.
The real mistake though is the decision to build a network that might cut it for the next decade or so, but won’t meet the needs of Australians in the long term.
To see that you only have to look at the recent decision of AT&T, the largest telco in the United States, to roll out more Fibre to the Premises.
Explaining their decision to the FCC, theysaid:
“Demand is growing for faster broadband speeds than AT&T, or anyone else for that matter, can deliver with FTTN… harsh competitive realities were the principal driver of AT&T’s 2014 decision to accelerate its long term upgrade strategy to extend its fiber deployment all the way to the premise.”
AT&T are not the only ones doing this. Verizon has signalled it will shut down its whole copper network and move to fibre. Google also is rolling out fibre.
In our region, South Korea, Japan, Singapore all have fibre networks. Across the ditch, New Zealand already has Fibreto the Node—now it’s replacing it with Fibre to the Premises.
Two years ago Australia was ranked 30thin the world for average peak connection speed. We are now ranked 47th.
Singapore is ranked 1st. South Korea 3rd. Japan 4th.
The US, Canada and most of Europe are ahead of us—even Romania, Russia, Slovakia and Poland are ahead of us.
But despite all of this, here we are – in the middle of the stream switching horses – switching from building a Fibre to the Premises network to an MTM – A Multi Technology Mix.
WHY THIS HAS HAPPENED
Just over 150 years ago Abraham Lincoln made a now long forgotten speech where he accepted the nomination of the Republican Party to run for a second time.
But in that speech he said something which has lasted across the ages. He talked about the importance of notswapping horses when crossing streams.
The MTM is a costly monument to this metaphor.
As I said at the NBN rebooted conference last year, Malcolm Turnbull underestimated just how hard, just how difficult, it would be to switch from buildinga Fibre to the Premises network to building his MTM.
The Abbott/Turnbull Government has now been in power for just over two years. In that time, almost 800 thousand premises have been connected to NBN’s fixed line network. Almost all of them are Fibre to the Premises.
That’s a good thing. But why? Why has this happened? Why are almost all of them Fibre to the Premises?
It’s not because they wanted to build Fibre to the Premises. It’s because they had to.
According to their election policy, the rollout of Fibre to the Premises inbrownfields was supposed to end in mid-2014.
The negotiations with Telstra to buy back the old copper network were supposed to be finalised by then, but they weren’t finalised until mid this year. It took a year longer than expected.
As a result the Fibre to the Node network is now more than a year behind schedule. Malcolm Turnbull promised it would be rolling out at scale a year ago. It still isn’t.
The HFC network is also a long way behind schedule. We were told in the much vaunted Strategic Review that 2.61 million homes would be connected to the NBN via HFC by the end of next year.
The Corporate Plan now reveals that they expect to hit less than a third of this target.
The cost of the IT systems to run all these different networks has also massively blown out. We were told when the Strategic Review was released almost two years ago that it would cost an extra $180 to $290 million. We are now told it will cost almost an extra billion dollars.
All of this has happened for two reasons.
One—because Malcolm Turnbull ignored Lincoln’s lesson.
Two—because after deciding to change horses mid-stream, he did it based on a dodgy policy and bad advice.
They did it based on this document – The Coalition’s 2013 Election Policy.
This is the one that said they could build a second rate NBN for $29.5 billion and provide access to everyone across the country by the end of next year.
And they did it based on this document—the Strategic Review—which said the cost of the MTM would be $41 billion.
This is the report that I remember, at that first NBN Rebooted Conference, Malcolm Turnbull promised would provide “hand on heart true, realistic and achievable options prudently costed and scoped on which we can make weighty decisions”.
Well, now we know it was wrong as well.
Both policy documents that this second rate NBN is based on were hopelessly wrong.
It’s not a great story. It’s a bad story.
The myth that somehow Malcolm Turnbull has “fixed” the NBN is just that. It’s a myth.
So when he says, as he did in his first press conference as Prime Minister, that he is going to adopt the same approach he took to the NBN to governing Australia, all I can say is I hope not.
What can we expect next on the MTM?
At the moment if you want to know when the NBN is coming to your town or suburb the only thing you can use to check is the public 18 month rollout schedule—which provides no specifics about whether a particular address is included, or whenservices will be available.
For a long time we have been promised a three year rollout schedule—explaining what type of network people are going to get and when they are going to get it. I am told that will now be released this Friday.
Ahead of that though, we already have some detail on what the next three years are supposed to look like.
The Corporate Plan says they plan to connect more than 7 million premises to the NBN fixed line footprint over the next three years.
This is what it looks like on a graph.
Interestingly it stays pretty flat and easy to achieve for the next 12 months—coincidentally when the next election is due.
And then in about 12 months’ time itsuddenly takes off.
They are planning to connect more than half the country in just two years.
Petroc called this “ambitious” and “daunting” in CommsDay a few weeks ago.
It looks to me like a ramp Evel Knievel couldn’t jump.
I don’t think this is realistic. I don’t think this is achievable. It looks extremely political. It looks like a ramp up for an election campaign rather than a construction project.
Remember the success of a lot of this depends on the state of the copper network.
In the Corporate Plan NBN revealed that they still don’t know how good or bad the copper network is. At page 51 of the plan they say: “the quality of this network is not fully known”.
We also still don’t know how much NBN has budgeted to maintain it. To repair it. Or replace it.
But what we do know is this.
I have been talking to some contractors in the field recently to get a feel for how good the copper network is – and how much of it needs work or needs to be replaced.
They have told me that NBN’s working assumption is that 10 percent of copper pairs in Fibre to the Node areas will need remediation.
But in places like Newcastle and the Central Coast, closer to 90 percent of the copper pairs have needed work.
In some places the copper is so bad it has to be replaced.
Replacing old copper…with new copper.
One contractor told me in Newcastle and the Central Coast 10 to 15 percent of the copper lines are having lengths replaced.
And this is not just happening in Newcastle or the Central Coast. Another contractor told me in Campbelltown in Sydney that NBN has had to recently replace almost 3 kilometres of old copper with new copper.
This is the real MTM – Malcolm Turnbull’s Mess. Massively over budget, behind schedule, a raft of broken promises, an unrealistic roll out plan that doesn’t ramp up until after another election, and dodgy copper that needs to be fixed or is being replaced with more copper.
So where to from here?
In a Senate Committee recently NBN revealed that they had already trialled Fibre to the Curb—or Fibre to the Distribution Point.
As you know this involves bringing the fibre all the way to the pit nearest your house. Basically to the driveway, leaving just the lead-ins.
NBN has also recently revealed that they are about to trial G.Fast in the lab.
I think it is likely that sometime between now and the next election the new Minister will announce that NBN will be rolling out Fibre to the Curb—using G.Fast.
And when he does this, remember this – this won’t be evidence of “agility” or “innovation” or “technology agnosticism”.
It will be evidence that Labor was right and Malcolm Turnbull was wrong.
Or as NBN Director Simon Hackett once more crudely put it – that “FTTN sucks”.
DEVELOPING OUR POLICY
Finally I want to say a few things about the work I am doing to develop Labor’sNBN policy that we will take to the next election.
This is not an easy or simple task. The mistakes Malcolm Turnbull made in his election policy in 2013 are evidence of that. It requires a lot of due diligence, and I am doing that.
To help make sure we don’t make the same mistakes Malcolm Turnbull made, I have written to the new Minister for Communications asking him to provide me with the NBN Corporate Plan’sunderlying assumptions, if necessary on a confidential basis.
I have also asked him for NBN’s full 12 quarter integrated deployment plan. I know some people in this room have it. I don’t. We haven’t been given access to it.
The new Minister recently said that NBN has nothing to hide.
If that is true, if the government and NBNhave nothing to hide, and they want a serious, considered policy debate they should provide this information to the Opposition.
In that first speech I made at that NBN Rebooted Conference two years ago I said “fibre is the end game“. My view hasn’t changed.
In that time no one who works in this sector has told me that is wrong. No one has told me that they think copper will still be a key part of our broadband network decades from now.
But here is the challenge if we win the next election. I can’t fix the mess this government has made with the flick of a switch or pull out every node or stop all the work NBN is currently doing without potentially causing more problems and wasting a lot of sunk investment.
That’s the challenge. It’s Lincoln’s lesson. If anyone thinks I can just click my fingers the day after the election and we can go back to the way it was they will be disappointed.
But I make this important point. The Australian Labor Party is the party that conceived and started building the NBN. A fibre NBN.
We are the party of fibre. The Liberal Party is the party of copper. They sold it. They bought it back. And now they are replacing it with new copper.
Decades from now I am sure we will look back and wonder what this debate about fibre and copper was all about. And that’s because the network we will be using will be essentially a fibre network.
Fibre to the Node will be gone. It’s not a question of if this will happen. It’s when it will happen and how it will be done.
And the party that will do it will be the Australian Labor Party.
So let me make this point very clearly today – if you vote for the Labor Party at the next election you will be voting for more fibre.
For more details you will have to wait until a bit closer to the next election.
But don’t worry. I don’t think it’s that far away.
Media Contact: Ryan Hamilton 02 9790 2466