Reckless Rudd risks another Government White Elephant (the NBN)

April 05, 2019

On 7 April 2009, the Rudd Labor Government announced that it would build the National Broadband Network (NBN) – an information 'super-highway', “the single largest nation building infrastructure project in Australian history”.

Instead of the original $4.7 billion fibre-to-the-node (FTTN) model Labor promised at the 2007 election, PM Kevin Rudd and Communications Minister Stephen Conroy announced on this day in 2009 that Australia would get a $43 billion fibre-to-the-premises (FTTP) model.

The NBN was slated for completion in 8 years (by 2017) and housed in a new “off-balance sheet” government business enterprise (GBE) called “NBN Co.” – run by trusted and loyal CEO appointment, Mike Quigley. The then Labor government argued that within 5 years of completing the build, this new GBE with its “world-class” super asset would be sold, with the proceeds benefiting all Australians.

While the $4.7 billion NBN election commitment was a thought bubble, legend has it that the subsequent $43 billion NBN plan was largely conceived on the back of a napkin (or beer coaster) on a VIP jet flight the PM was taking to Perth.

Towards the end of the chaotic Rudd-Gillard-Rudd era (4 years later, in 2013), the NBN was in trouble. Budgets were blowing out, the roll-outs were behind schedule, connection prices were exorbitant, speeds were disappointing and the Telstra pits for the cabling had asbestos.

The incoming Abbott-Coalition Government found that Labor’s unrealistic, rolled-gold FTTP model was blowing out by more than double, both in terms of cost and completion date ($94 billion cf $43 billion and late 2020s cf 2017). Their pragmatic response was to use a multi-technology mix (MTM) – including fibre-to-the-curb (FTTC) cabling and wireless technologies – to rein in costs and completion dates.

This more pragmatic approach returned the expected NBN cost back to $49 billion and its completion date to 2020, with government borrowing of $29.5 billion to help fund the venture towards commercial viability.

Today, with 5G around the corner, the NBN is looking quite short of 'world class' and a liability which the government may need to write-down and bring on-budget.

Recognise this significant event in Australian telecommunications policy by:

  • reflecting on the futility of governments and bureaucrats trying to pick winners in the fast-moving and unpredictable technological space
  • giving a tick to the Abbott-Turnbull Governments for reining in the NBN’s cost and scheduling blowouts inherited from Labor – it was never going to be easy to “polish this proverbial
  • shopping around for the best internet bundle for your household
  • commenting on our Facebook post about your experience with pre- and post NBN connections and how they compare with the cost, reliability and convenience of your current 4G mobile broadband (outside of Netflix downloading), and/or
  • sharing this Action Plan post on social media with family, friends and those you interact with over the internet.

Further details on the NBN

Current complaints about the NBN centre around disappointing internet speeds arguably little better than wireless technology (currently 4G mobile broadband, with 5G due in 2020 promising ten-times the speed). Many blame retailers purchasing insufficient capacity (bandwidth) to deliver the speeds their customers (and our burgeoning Netflix appetite) expect. Yet retailers allege their “artificial throttling” is due to NBN Co. charging exorbitant prices for capacity, is choking the telecommunications sector. NBN Co. retorts that it must charge these prices (currently providing nearly a third of its revenue) to meet government-mandated rates of return, pay back its $29.5 billion government loan and preparing for profitable privatisation proposed by both governments.

With all this finger-pointing, in late-2017, the ACCC “commenced a public inquiry to determine whether NBN wholesale service standard levels are appropriate, and consider whether regulation is necessary to improve consumer experiences.” While the inquiry was expected to conclude by end-2018, it is still ongoing with a second discussion paper issued and second round of submissions sought.

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