By LAURIE PATTON | 16 October 2019
Earlier in the week Telstra chair, John Mullen, conceded the company must accept some of the blame for our flawed National Broadband Network due to its ‘recalcitrance’ back in 2007/2008 when it submitted a petulant bid that didn’t meet the requirements of the government tender to build a nationwide network. However, he then went on to attack the project, in particular drawing attention to NBN Co’s decision to compete more activley in the so-called ‘enterprise’ market – the provision of wholesale rather than retail products.
It’s all very well, if not ironic, for Mr Mullen to complain about a company offering a competitive service but let’s not forget that one of the biggest impediments to NBN Co’s financial performance, and thus its overall success, is the extremely generous terms of the deal the Coalition did with Telstra when Malcolm Turnbull followed Tony Abbott’s instruction to ‘destroy’ the NBN and opted to buy access to Telstra’s old copper wire network and its ageing Pay-TV cables.
In my view, NBN Co ought to consider renegotiating the deal with Telstra over access to their ‘pits and pipes’ and in return agree not to compete in the enterprise market. And Telstra should repair the damage it caused by negotiating in good faith – for Australia’s sake.
As Mr Mullen observed, “whether we like it or not, the NBN is here to stay”. Having admitted that it failed to submit a genuine bid to build the broadband network the least Telstra should do now is help fix the NBN.
NBN Co is reaching a crisis point. It is haemorrhaging money and it is slowly but inevitably going broke. Moving harder into the enterprise market is symptomatic of a quiet panic as management realises the mess they’re in due to the poor technologies they’re rolling out to the domestic market.
Forty percent of their ‘ready to connect’ premises have not signed on in part because potential customers are far too sceptical about the product. Revenues are therefore well below what’s needed to complete the rollout and to deliver the required financial return to the government.
Assuming the rollout is completed on schedule in the middle of next year (I don’t) NBN Co will owe the Government somewhere around $20 billion which it has had to borrow in order to finish the job. The Finance Department told a Senate Estimates committee they don’t believe NBN Co will be in a position to repay the debt when it falls due.
They also have a serious costs issue. The deal the Government did to access Telstra’s assets heavily favouring the telco is just one of the problems, albeit at the core of the dilemma facing NBN Co. As I’ve noted before, FTTN (fibre-to-the-node) is heavily reliant on the old copper wires and is technically incapable of delivering 21st Century broadband speeds. It is also highly unreliable, as so many NBN customers have reported to the ACCC and the TIO. NBN Co will have to find billions of dollars to replace FTTN. Experts, including Internet Australia chair Dr Paul Brooks, say this will need to occur within 5-10 years of completion, preferably before then.
The decision to re-use Telstra’s Pay-TV (HFC) cables was also flawed. It’s costing far more than was budgeted to convert the system to deliver high speed broadband. As an example, in my area they are ripping out HFC and replacing it with fibre-to-the-curb.
Instead of continually whinging it would be sensible for Telstra (and the other telcos) to work with NBN Co and help devise a rescue plan that benefits everyone. And the Government needs to talk to the Opposition about a bipartisan solution. So far Paul Fletcher has just recycled Mitch Fifield‘s speech notes. They didn’t convince anyone when Fifield was the communications minister and they only sound hollower now.
Being stuck with inferior broadband is holding back the nation – economically and socially. Dumping a full-fibre fixed-line NBN network in favour of the so-called multi-technology mix (MTM) model has seen us fall from around 30 in global Internet speed rankings to a dismal 62 right now . Sydney has slipped six places to 23rd among the world’s best cities for start-ups. Research by Sydney University has found that in our biggest cities there’s a 50 percent chance you’ll be stuck with an inferior broadband connection.
I tried to warn Mr Turnbull that he’d been given flawed advice but my efforts were thwarted. If the Government still can’t see the need to intervene our last hope is the industry accepts, as Mr Mullen rightly points out, that the NBN is a fact of life – and it needs help.
(Laurie Patton is a former CEO / Executive Director of Internet Australia, the NFP peak body representing the interests of Internet users and a chapter of the global Internet Society. He was previously a journalist and media executive.)