Update on the NBN.
Quigley gives Turnbull a serve!
Ex-NBN boss pins cost blowout on Coalition
The added complexity of the Coalition's mixed-technology version of the NBN is solely responsible for the recent blowout of up to $15 billion in the total cost of the project, according to former chief executive Mike Quigley.
In an unpublished paper written last month, titled Exploding Malcolm Turnbull's Myths, Mike Quigley picks methodically through the figures contained in the NBN's most recent Corporate Plan 2016, which was released in late August.
The corporate plan revealed that the total projected cost of the NBN had blown out again from the $41 billion estimated in the December 2013 Strategic Review, to between $46 billion and $56 billion.
When the mixed-technology NBN was first proposed by then shadow communications minister Malcolm Turnbull in April 2013, it was meant to cost $29.5 billion, and to deliver download speeds of 25 megabits per second (mbps) to every home and business in the country by the end of 2016. The Strategic Review confirmed those promises were unachievable.
The Coalition's mixed-technology network introduced two new technologies to the NBN in an attempt to deliver a cheaper, faster rollout using upgrades to existing pay TV cables and copper phone lines, trading off the faster download and upload speeds that came with the Labor government's rollout of fibre-optic cable to more than 93 per cent of homes and businesses in the country—the so-called fibre-to-the-premises (FTTP) model.
Under Labor's original plan, the other 7 per cent of premises—mostly in rural and regional Australia—would get fast broadband from either fixed wireless or satellite technologies. The Coalition has persevered with these two technologies and the first 'Sky Muster' satellite was launched recently.
It is the extra cost of integrating the upgraded pay TV or hybrid fibre coaxial (HFC) cables, and the copper-based fibre-to-the-node (FTTN) technology, that has caused the second blowout in the cost of the mixed-technology NBN, according to Quigley's paper.
The paper analyses the difference in the costs of various parts of the NBN between the 2013 Strategic Review and the 2016 Corporate Plan, and finds in round figures that the cost of rolling fibre to existingpremises fell from $14 billion to $11 billion, the cost of rolling fibre to new premises fell from $3 billion to $2 billion, and the combined cost of the fixed wireless and satellite components of the rollout fell from $6 billion to $4 billion.
The cost of the transit network—the backbone of the NBN—was virtually unchanged at $1.5 billion, up by only $100 million. This leaves the HFC and FTTN networks as the only possible cause of the blowout, Quigley writes: '[HFC and FTTN] are the real culprits of the $15 billion increase. Not previous management, not inadequate financial systems, not hidden costs in the FTTP rollout. Mr Turnbull has consistently talked up the cost and time taken to roll out an FTTP network and talked down the costs and time to taken to roll out FTTN and HFC.
And now the chickens are coming home to roost.'
Quigley points to the delay and extra expense involved in the Coalition's renegotiation of the definitive agreements with Telstra, and the associated hit to revenue, as well as the higher operating expenses of the mixed-technology network, as major drivers of the cost blowout.
'It is time to stop trying to blame the previous government and management for the problems with the costs and timing of the Multi-Technology Mix and admit that the cost to roll out HFC and FTTN and the timescale that would be needed were grossly underestimated by the Coalition. That is why we are now seeing a $15 billion increase from the Strategic Review and a $26.5 billion increase from commitment in April 2013,' he writes.
Quigley also takes aim at criticisms that, during his time as chief executive, the NBN made wildly optimistic assumptions about the likely revenues from the FTTP rollout, and failed to properly account for its costs. Quigley's paper shows that NBN's current assumptions about take-up rates are unchanged from 2013, and the average revenue per user at $40 a month is tracking ahead of the $36 a month forecast in 2013. 'History has proved that NBN Co was, if anything, conservative in its forecasts,' he writes
On the cost side, Quigley addresses the prime minister's criticisms of the NBN's previous accounting regime, which suggest that the cost per premises of installing fibre to the home was vastly understated under Labor at between $2200-2500, and should have been more like $4300-4400.
'Mr Turnbull has continued to compare the cost per premises reported under the "old" methodology with the cost per premises now being reported under the "new" methodology without mentioning that this is not comparing like with like,' Quigley writes.
The main differences between the new and old accounting regime are to do with the capitalisation of leases over Telstra's pits and ducts, and internal labour. 'Far from being a difference of over $2,000 per premises (or 80 per cent) as implied by Mr Turnbull, the true like-for-like difference is closer to $500 (or about 10-15 per cent).' That $500 difference in cost per premises, Quigley writes, is due to a one-off settlement of outstanding claims last year by NBN's construction partners, and higher ongoing contract rates—both of which he would have refused.
http://www.abc.net.au/radionational/pro ... on/6905082
In the mix?
Check what technology (if any) from Turnbull's "Multi Technology Mix" is in store for your household/business address on the NBNCo 3 Year plan.
http://www.nbnco.com.au/connect-home-or ... dress.html