NBN Co raised scrapping HFC with govt two years ago

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NBN Co raised scrapping HFC with govt two years ago

But discussions never went beyond informal stage.

NBN Co took an informal proposition to the government to scrap HFC in favour of fibre-to-the-curb around two years ago, but did not receive any further “directive” to pursue it.

What did or didn’t happen at a discussion between Communications Minister Mitch Fifield and NBN Co CEO Bill Morrow formed the basis of much of a two-hour senate estimates hearing on Tuesday afternoon.

The line of questioning by Labor senators Anne Urquhart and Deborah O’Neill attempted to shed further light on multi-technology mix decisions made around fibre-to-the-curb (FTTC) technology.

Morrow has previously said that NBN Co studied flipping four million premises in the FTTN footprint over to FTTC, but that the idea was rejected because it would have been too expensive.

Now, it has been revealed that a larger range of scenarios were discussed, all of which were aimed at trying to secure a larger role in the network for FTTC.

“If this new tech is so fabulous, how much would it cost to use only this new technology and how long would it take to only use that tech in lieu of FTTN and HFC?” Morrow said.

To abandon or keep HFC 

Both Fifield and Morrow repeatedly denied attempts to frame the discussion as a exploration of options “to abandon HFC” altogether.

Morrow, however, eventually conceded that scrapping the HFC network and replacing it with FTTC "was one of the options" canvassed at the meeting.

"Not as a proposal being recommended by the board but a discussion around if [the government] wanted to do this," he said.

The NBN project has had repeated problems with the HFC networks it bought from Telstra and Optus.

NBN Co was forced to abandon most of the Optus HFC network in late 2016, flipping those 700,000 premises into the FTTC footprint.

This week it shifted up to 440,000 more premises out of the Telstra HFC footprint into FTTC, and has not ruled out further moves.

The latest rollout shift came after weeks of industry speculation that what’s left of the HFC build could be abandoned due to performance issues which have seen a sales freeze on HFC connections since late last year.

It now appears that even bigger shifts in the multi-technology mix have previously been broached but never pursued.

'Blue sky' dreaming

Morrow and Fifield also played down the importance of the discussion.

“We’re always presenting to the board different mixes, different options. We sometimes take that to the Minister for consideration,” Morrow said.

“Two years ago is a long time for memory recall but I do recall a discussion [around] if the government wanted to have more of a singular type of technology, a FTTC type of technology, here are the consequences, here’s how much longer people would have to wait than they would otherwise, and here’s how much more peak funding we would need to be able to deliver that.

“It did not meet with the statement of expectations so we continued on the path that we’re on.”

Fifield said the discussion was “entirely unremarkable”.

“NBN Co periodically - and as a matter of good professional practice - ‘blue sky dream’ about evolving technology, economics and what that could potentially mean for the practical application of the MTM mandate,” Fifield said.

“That’s something NBN Co do from time to time and have done. It would be entirely unremarkable if we had those sorts of discussions because that’s what you would hope NBN Co should be doing.

“What I say to NBN Co during such discussions is you should feel absolutely free to examine these sorts of different scenarios, but to do so not only within the MTM mandate but the other elements of the mandate which are to complete the NBN by 2020 and within the funding envelope.

“What we have on the ground - in planning, design and construction - is the product of that.”

Fifield said that if FTTC had fit the mandate, it would already have been adopted on a much broader scale than now.

“If NBN Co was of the professional opinion that the deployment of more FTTC made sense and could have been done while still completing the rollout by 2020 and within the funding envelope, then that probably would have occurred,” he said.

Morrow made it clear that although he “liked” FTTC, he simply could not make it work on a large scale within existing policy constraints.

“Just to make it clear I like FTTC technology, I like how it balances not having to dig up someone’s front yard, I like how it pulls fibre further down the street, I like the flexibility it gives in terms of the operating support that’s needed,” Morrow said.

“But it is more expensive than HFC and some more dense areas of FTTN, and it takes us longer to do that than with some of these other technologies.

“[Also], I believe the government is saying [the NBN] has to remain a user pays business model meaning we have to make a slight profit - very modest - off of what the users are willing to pay for our services.

“If we added to the cost of building this network out and we delayed the revenue we would not be able to justify charging people for that incremental cost and suddenly this is not a business model that holds together and it becomes financially irresponsible.”

Morrow suggested that policy decisions around the NBN could also be made on “social” rather than purely economic grounds, were the government to rejig its priorities.

“There could be other government policies over the top of that that are more social in nature - but that’s not my business or call,” he said.

“So I respect if the government says they can’t [reneg] on the user pays model… with the remit we have now I can’t advocate for FTTC [more] because I can’t get the cost down or timeframe down to be able to deliver it according to the user pays model.”

High-level costs

How serious the discussion on FTTC’s future got was a matter of considerable conjecture.

Labor was able to extract that NBN Co took “high level estimates” of what it would cost to go all-in on FTTC to the government for the discussion.

Morrow said the estimates were put together by then chief strategy officer Brad Whitcomb, CFO Stephen Rue and Morrow himself, “with a lot of technical support behind that”.

Other executives as well as the NBN board were said to be have been across the nature of the discussion around FTTC’s future.

Morrow said that what was put to the government was not a “presentation” per se, nor did it constitute any formal proposal that had been vetted by the NBN board.

“I think [the word] presentation is putting a whole lot more formality to it,” Morrow said.

“There are discussions all the time between NBN Co and the government at a high level which don’t constitute concrete, formal propositions to government,” Fifield added.

Morrow said more due diligence would have gone into what was discussed, had a more formal proposal been required.

“If we were actually recommending a massive shift like [scrapping HFC], we’d be expected to have great detail around timing, cost, areas and things,” Morrow said.

“That’s a second stage. It’s not this first stage you would do.

“If there was an interest to spend more and take longer with FTTC then we would have taken that step but we never got that far.”

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