NBN Co to miss June fibre target

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NBN Co to miss June fibre target

Three month delay.

NBN Co has downgraded the number of premises it expects to pass with fibre by the end of June to between 190,000 and 220,000.

The company responded to mounting speculation over delays to the rollout by revealing it would not hit its previous forecast to pass 341,000 premises with fibre by June 2013, forecasting it would take an additional three months to do so.

"I want to be very clear that NBN Co is taking accountability, and as the CEO I am committed for recovering the delay," CEO Mike Quigley said.

"We are of course frustrated by the delay. We set targets believing we would achieve them, but we have now acted to recover the shortfall."

The target of 341,000 premises passed consisted of 286,000 in built-up areas ("brownfields") and 55,000 in new housing estates ("greenfields").

Under the revision, NBN Co now expects to pass between 155,000 and 175,000 brownfields premises, and between 35,000 and 45,000 greenfields premises, by the end of June.

Quigley sought to frame the importance of the delay in the scheme of the project, noting that it ultimately did not affect the network's planned completion in 2021, nor the cost of construction.

"This is a three month delay at the start of a decade-long project," he said.

"And as you all know it is at this stage of the project, at the beginning, that you normally hit this type of short-term ramp-up issue.

"And although we're disappointed, we also have to keep it in perspective."

No labour shortages

Quigley said NBN Co's premises passed targets are based on forecasts by its four construction partners Syntheo, Silcar, Transfield and Visionstream.

“The problem is we are just not seeing the ramp up of construction workers on the ground that would be needed to deliver these targets,” he said.

“This lack of mobilisation, combined with some of our contractors recently lowering their forecasts, has led us to make the judgment call to reforecast our end-of-year projections.

“That is why we have taken immediate action to address the delay.”

Quigley said the delay was "not about labour rates ... [or] shortages."

"There are enough workers in Australia to build this network," he said. "It's about our contractors putting the right people in the right place at the right time."

Quigley said there had been signs over the past two months that NBN Co might have trouble reaching its June 2013 premises passed target.

"Over the last, I'd say, month or two, it [was] becoming increasingly evident that the rate of mobilisation and the numbers of people we're seeing on the ground, the amount of metres of duct that's being put in the ground, the metres of cable that's being hauled, wasn't sufficient for us to have confidence that we would get to the numbers that we had forecast," he said.

"At some point you have to make a call on that. You have to make a judgment call."

Quigley said the company required Board approval before it could go public with news of the downgrade.

He said the construction team had walked the NBN Co Board through an "internal analysis" today prior to the downgrade announcement.

Quigley noted some initiatives that NBN Co is pursuing to immediately bring the project back on track.

He indicated that NBN Co and its construction partners are immediately seeking to employ about 80 fibre splicers.

"We're [also] using some internal people as a short term Tiger Team for doing splicing which we will drop in to particular areas," he said.

Taking over NT

NBN Co confirmed it would directly manage the rollout of the fibre network in the Northern Territory and hire 200 new workers following the exit of construction partner Syntheo this week.

Quigley said he would be visiting the Northern Territory himself within the next few weeks to see how things were going.

He said the move by NBN Co to take over construction in the Northern Territory was agreed mutually with Syntheo, so that Syntheo could focus on Western Australia and South Australia.

"You shouldn't read into this that NBN Co is becoming a construction company," he said.

In February, Quigley publicly fingered Syntheo for a downwards revision of the premises passed figure. He said at the time the company had run into a range of issues in the Northern Territory which forced it to drop down its forecast. 

No legal manoeuvres

Quigley refuted any suggestion that NBN Co would pursue legal remedies against contractors that had not met their own forecasts or contractual goals.

He said it is "simply incorrect" to say there is impending legal action against any existing contractor, indicating that invoking such rights would likely stymie further progress of the network.

"In making this announcement we have of course reserved all our legal and contractual rights," Quigley said.

"But I want to also emphasise that our aim is to work cooperatively with our construction partners and get this network built.

"'I'm not going to comment on the legal technical issues of breach or not breach. What I'm saying is they clearly had forecasts which some of them are not now meeting, but we're in discussions with them, as you would expect."

Aside from Syntheo, Quigley refused to be drawn on which other contractors had missed contracted numbers and by how much.

"I really don't want to start dissecting it," he said. "I don't want to break it down into separate construction partners.

"They're all committed to the project. They're all working hard on the project, and some of them are having a few more start-up problems than others, and we're working cooperatively with them.

"While they are having some start-up issues, they're just that."

Coalition slams downgrade

Opposition communications spokesman Malcolm Turnbull was quick to brand the downgrade announcement timing — 30 minutes before a Labor caucus meeting over a potential leadership spill — as "cynical".

"NBN Co CEO Michael Quigley has cynically used Labor's latest leadership crisis to 'take out the trash' and avoid scrutiny of this announcement," Turnbull said.

He also disputed Quigley's assertion that the short-term delay would not have longer-term impacts.

"The Coalition is justifiably sceptical of these claims and the timing of this announcement shows that the NBN Co is attempting to minimise scrutiny of it," Turnbull said.

"Every time the NBN Co has missed its target it has responded by making the hockey stick of its ramp-up ever more steep.
 
"As every month goes by with disappointing roll out figures the "ramp up" in the out years gets steeper and steeper."
 
Cherry-picking
 
NBN construction contractors are cherry-picking where they will and where they won't do the rollout, said Mark Gregory, senior lecturer in electrical and computer engineering at RMIT.

"You’re getting a real problem with essentially what are going to be blackspots where the contractors will say 'No, too hard,' and leave it for someone else.

"It's going to come back to bite NBN Co."

Gregory questioned Quigley's refusal to detail contract clauses that may impose penalties on contractors for missing key deadlines.

"Deadlines are going to be missed, areas are going to be missed, so we'll end up with more holes than we have with the copper network."

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