Australia

Plenty of twists left as the NBN rollercoaster rolls on

The National Broadband Network project has finally limped across the finish line, completing a 10-year construction process hindered by ideological and economic constraints baked in from the start.

Its lengthy gestation shouldn't come as a surprise given the project's ability to attract controversy and criticism, some of which is likely to stick around for some time to come.

The idea of a taxpayer-funded makeover of the entire telecommunications infrastructure, to the tune of $51 billion, was always going to generate criticism, not just from those opposed to heavy-handed government intervention but also those worried about the sheer scale of the project.

Concerns about whether the government business enterprise, NBN Co, would be up to the task of handling the construction challenges and do the job at a pace that allowed the benefits of the NBN to be seen by the public, were present from day one.

And as it turns out, they were well justified.

Making more than 11.7 million premises ready to move over to the NBN proved to be far more complex than expected, irrespective of the technology changes implemented by the Coalition government in 2013.

With 99 per cent of the rollout now complete and NBN Co's construction division already cut loose, members of the original team assigned to building the NBN have mixed feelings about how things have panned out.

Mike Quigley. Former CEO of NBN, is adamant that the current network doesn't deliver value for money.

Mike Quigley. Former CEO of NBN, is adamant that the current network doesn't deliver value for money. Credit:Yianni Aspradakis

Mike Quigley, the first chief executive of NBN Co, says while the NBN has allowed Australians to have access to better internet, the network is not value for money or future-proofed.

“The NBN would be in a much stronger position today if they had not changed to a multi-technology mix,” he says.

“If they had put in fibre, they would have a more valuable network with a much lower ongoing operating cost with much higher performance, which means their revenue-generating capacity would have been much greater.”

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NBN Co's former chief technology officer, Gary McLaren, says the lack of bipartisan policy was a critical problem for the project, leading to multiple problems when securing construction companies to help with the rollout of the network.

"It's a huge lesson if you are looking at it from policy terms," McLaren says. "There was very little certainty the construction companies could bank on to be able to think about a project over 10 years because it could change very quickly from fibre to another program."

Despite its struggles, McLaren says the completion of the NBN rollout is a milestone worth celebrating. "I always had confidence that the network would be completed," he says. "Regardless of the technologies, you would've been in a similar boat around now.”

It's unlikely that the Morrison government can dwell on the achievement for too long as the NBN board has important questions that need to be answered. Crucially, it needs the federal government to outline a new statement of expectations that will set guidelines for what — and how — the next few years will play out.

"The current [statement of expectations] is looking stale and very irrelevant. I'd imagine the NBN board is crying out for a new set of expectations," McLaren says.

A difficult birth

The early years of the NBN were tainted by political debate and the federal election cycle. A failed 2008 request for proposal, which included responses from providers like Acacia, Optus and TransAct and Telstra, prompted then prime minister Kevin Rudd and then communications minister Stephen Conroy to announce plans in April 2009 for the rollout of high-tech fibre-optic cable to almost every residence in Australia by a government-owned entity.

That idea quickly shifted under the Tony Abbott-led Coalition government, which announced that the NBN's rollout would be deployed as a Multi Technology Mix model, which uses a combination of fixed-line technologies including fibre-to-the-node (FTTN), fibre-to-the-curb (FTTC) and fibre-to-the-premise (FTTP).

"We really got the NBN as it is because of the collapse of the previous model in December 2008," telecommunications analyst Ian Martin says.

"NBN 2.0 came out of that in April 2009 without much thought and consideration. It’s fair to say that was something of a stopgap at the time to get them through the 2010 election. The 2010 election resulted in a hung parliament ... if the 2010 election had been a clearer outcome, we might have got a more considered model."

More than a decade on, the NBN remains a political sore spot.

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Communications Minister Paul Fletcher still insists the Coalition turned around a “failing project” that had connected only 50,000 premises under Labor. “$6 billion had been spent, every target had been missed, board and management really didn’t have deep telecommunications experience,” he says.

“We set about changing the strategy really dramatically with the multi-technology mix … There’s a lot of aspects of this that we would not have done but when we came into government, much of it was locked in.”

To this day, these ideas are still disputed by Rudd.

The upgrade equation and 5G competition

The challenges of NBN are not limited to the differing views of government. The detection of asbestos in the Telstra pipes and pits that were being leased to the NBN in 2013 also delayed rollout and there were ongoing issues due to the complexity of hybrid fibre-coaxial upgrades.

The NBN has also battled with reconciling two objectives — the government's ambition for NBN Co to become a profitable private entity and existing efforts to provide a social good and reduce the digital divide that exists across Australia. Telco providers such as Telstra, Optus and Vodafone have previously condemned NBN Co for operating as a competitor.

By the end of 2020, NBN Co expects 11.8 million premises to be connected and will seek to roll out over the next year a small remaining number of “complex” connections that have been hampered by construction, legal and environmental barriers.

NBN Co chief executive Stephen Rue says the company will turn its focus to investing in the network and "evolving technologies", the specifics of which will be outlined in the new Corporate Plan to be announced later this year.

"As a nation, we would have been in a very different position if we hadn’t rolled out the network with the speed and agility that we did," Rue says.

“With the initial build of the network complete, the company is transitioning to a customer-focused service delivery organisation, which will be our blueprint for how we are going to continue to lift the digital capability of Australia in the future."

NBN Co also has $4.5 billion available in its corporate plan for upgrades over the next four years, and has secured $6.1 billion in a private sector debt raising, a significant proportion of which will be available for investing in network improvements.

Communications Minister Paul Fletcher says the NBN has proven itself during the pandemic and that future upgrades are all part of the plan.

Communications Minister Paul Fletcher says the NBN has proven itself during the pandemic and that future upgrades are all part of the plan.Credit:Janie Barrett

The conflicting objectives of the NBN will become more apparent as it moves towards privatisation. For instance, if the NBN turns its focus to upgrading its network, it will need to make a decision on who gets upgraded first. To fulfil its social objectives, upgrades could be prioritised for rural communities that have slow internet speeds and poorer technology. But if it is considering revenue targets and becoming cash-flow positive, it may need to upgrade the FTTC and FTTN connections in the affluent suburbs where there is a better chance of customers paying more for higher internet speeds.

Fletcher says upgrades to increase access to the highest-speed connections — like those promised by Labor — will depend on demand for the premium packages. “The fact that the rollout is ubiquitous has … meant that there is now a baseline speed that is available to everybody. And that’s the platform from which a lot is able to happen,” he says.

NBN Co will also examine the demand for 250Mbps and 1000Mbps connections, especially as retailers drop prices for the top-tier packages. According to Fletcher, 60 per cent of people are choosing the mid-tier 50Mbps packages, including 59 per cent on FTTP, 61 per cent of FTTN and 62 per cent on hybrid fibre-coaxial cable connections. But McLaren says there is no incentive for the NBN to invest in upgrading its networks because it is a monopoly.

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“Monopolies don’t invest, they try to restrict supply to maximise profits," he says.

“If you start from that principle, the only way you can get any investment is from the government mandating it and as a result probably having to fund it."

NBN Co needs to raise its average revenue per user to $49 a month but there are several factors hindering this. One is that the biggest NBN reseller, Telstra, does not offer high broadband speeds to customers on FTTN or FTTC connections, because it is not convinced the access technologies are good enough to deliver.

“[That's] a constraint," Martin says. "In order to solve that, they’ll need to work out what’s the best way to upgrade those technologies."

The full-fibre endgame

While many users won’t require high-speed connections right now and the network has held up during the pandemic, Quigley says the network was intended as a long-term investment to be used for decades to come. “Would it have taken a little longer to build the FTTP network? Absolutely, yes. Would it have taken a lot more money? No,” he says, pointing to the experience of the Chorus rollout in New Zealand, where costs of the fibre rollout dropped dramatically over time.

Quigley says policymakers at some point in the future will inevitably have to bite the bullet and address all the “junk” FTTN connections that use copper for the last stretch.

“At some point, you're going to have to go back to the original plan and build an FTTP network. Unless you just abandon the whole idea of having ubiquitous broadband in Australia,” he says.

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