In his independent audit of the public policy process behind the national broadband network, former Telstra director Bill Scales suggested there was never an internal debate about different technology options for the NBN.
He also argued the panel of experts (of which I was a member) assisting the Rudd government did not properly test advice from the ACCC about the upgradeability of a fibre-to-the-node (FTTN) network to a fibre-to-the-premises (FTTP) network, and that the panel inappropriately relied heavily on this advice in making recommendations to the government about the development of the NBN.
In my view, all of these assertions are incorrect, and this taints the credibility of the audit.
In reality, the panel spent many hours discussing and analysing the technology options and the upgrade paths, including those set out in the various proposals submitted by companies in response to the government’s request for proposals (RFP). The panel also independently evaluated other models for upgrades.
The panel, which included telecommunications experts from both industry and academia, carefully scrutinised all advice it received, and drew heavily on its combined experience. Some advice was very helpful and some was considered to be of little value.
When the ACCC tabled its advice regarding the costs of upgrading FTTN to FTTP, it came as no surprise to the expert panel that the ACCC had a view that was similar to what the panel had already concluded. Simply put the panel did not rely heavily on the ACCC advice.
A fundamental flaw with the audit process was that Scales, by his own admission, did not have access to key information, with limited access to documents associated with the panel of experts’ activities.
Members of the panel, constrained by strict confidentiality rules, were also unable to share any further information with Scales about the details of panel discussions and deliberations.
Without divulging any details, I was able to explain the situation regarding the ACCC to Bill Scales when he interviewed me for his report, but it seems he did not put much weight on my comments.
Scales seems to have missed the point that upgradeability was an important issue from the outset of the RFP process. The RFP for NBN Mark I included many requests for information from proponents about how they proposed to future-poof their networks by providing upgrade paths from FTTN to FTTP.
It even suggested a 2020 time frame for this upgrade. The consideration of upgradeability and its costs was one of a number of factors that fed into the “value for money” criterion for evaluating the proposals.
In one part of his report, Scales suggests the ACCC ignored a key report by Analysys Mason, which shows that the cost of FTTP is around five times the cost of FTTN. But a little bit of information can be dangerous.
What Scales seems to have missed here is that the Analysys Mason report was based on the British broadband landscape, and assumed that the copper network required for a FTTN rollout was already owned by the operator rolling out the network.
When parts of the copper network and/or the associated ducts might need to be purchased or leased, as required for Australia’s NBN, the calculus changes completely.
The Coalition’s NBN is proving expensive
Under the previous Labor government, NBN Co negotiated a deal with Telstra to provide access to Telstra’s ducts and pits, enabling fibre to be laid with fewer trenches needing to be dug. The cost to NBN Co of this access was $11 billion, and added a hefty overhead to the total cost of the NBN.
Even if we make the optimistic assumption that NBN Co will not have to pay any more than this $11 billion to access and maintain Telstra’s copper wires inside those ducts, the Coalition’s (predominantly FTTN) NBN will suffer the same $11 billion overhead.
Consequently, the factor of five difference between the cost of FTTP and FTTN given in the Analysys Mason report drops to something around two or three. By world standards, the Coalition’s NBN is turning out to be very expensive.
What has Australia lost in the transition from Labor’s FTTP NBN to the Coalition’s multi-technology mix, with a large proportion of FTTP? In my view, a big danger is that future upgrades from FTTN to FTTP will be slow and that Australia will continue to lag behind the rest of the developed world in terms of broadband access.
With such a huge investment sunk in the Coalition’s multi-technology mix NBN, there is going to be very little appetite in government to fund future expensive upgrades to FTTP. If the government sells the NBN to a commercial monopoly operator, there could be even less incentive for upgrades to FTTP. There is a real danger that Australia will remain trapped in a broadband backwater.
Rod Tucker is a Laureate Emeritus Professor at the University of Melbourne. He receives funding from the ARC and has received funding and in-kind support from a number of telecommunications companies. He served on the Rudd Governent's Panel of Experts that assisted with the development of the NBN.