Australian Coat of Arms

Member for Blaxland

Shadow Minister for Trade and Investment

Shadow Minister for Resources and Northern Australia 

Speech: "From Sonny Bill Williams to the Fonz - How Malcolm Turnbull made a mess of the NBN" ( CommsDay Summit, Sydney )

THE HON. JASON CLARE MP

SHADOW MINISTER FOR COMMUNICATIONS

SPEECH

“FROM SONNY BILL WILLIAMS TO THE FONZ –

HOW MALCOLM TURNBULL MADE A MESS OF THE NBN”

COMMSDAY SUMMIT

WESTIN HOTEL, SYDNEY

5 APRIL 2016

 

This Saturday is a very significant day in the history of the National Broadband Network.

It’s the third anniversary of this - Malcolm Turnbull and Tony Abbott’s famous press conference at Fox Sports with a holographic Sonny Bill Williams.

 

For anyone who doesn’t remember, that’s the press conference where they unveiled this – “The Coalition’s Plan For Fast Broadband And An Affordable NBN”.

Three years on and less than three months until the next election, this document is indisputable evidence that Malcolm Turnbull got things very wrong.

Whatever you think of what Labor did in office or the original model for the NBN, the fact is Malcolm Turnbull put forward an alternative plan to the people of Australia three years ago – and three years on it’s now clear he has failed to deliver it.

And no waffly words from the Prime Minister, or tweets from NBN Co, or columns in CommsDay or anywhere else, can camouflage that.

This is the document where Malcolm Turnbull told us how little it would cost and how much quicker he could build his version of the NBN.

He says here on the final page:

 This now looks ridiculous.  The real cost we now know is almost double that – up to $56 billion.

As I have said a number of times if you were in the private sector and you did this (blew your budget by 100 per cent) you would probably get the sack.  But that is not what has happened here.  The person responsible for this blowout is now the Prime Minister of Australia.

Three years ago this Saturday Malcolm Turnbull and Tony Abbott also made another very important promise.  They promised that if they won the 2013 election every one of us would have access to the NBN by the end of 2016.

Their words:

Three years on, that now just looks like a made up bribe.

A desperate bribe to help win an election – and justify switching from fibre to copper.

I remember when I first heard this promise I thought ‘how are they going to do this?  If they can do that it will be impressive.’

Now we know they can’t. 

Only about 16 per cent of Australians have the NBN today – that’s a long way from 100 percent.

It’s an epic fail.

As I have said a number of times, if you are still buffering blame Malcolm, because he promised you would get the NBN this year.

Now we are told that it won’t be until the end of the decade that everyone gets the NBN. I even think that is optimistic. The work we have done indicates Malcolm Turnbull’s second rate NBN now probably won’t be completed until 2022.

Where this really rubs people the wrong way is in electorates like Perth and Cowan in WA and seats like Banks in NSW, Deakin in Victoria and Bonner in Queensland.

In these electorates no one in an existing home or business has the NBN.  Not a soul.  The brownfields rollout hasn’t even started in these areas yet. And yet everyone was promised they would have 25Mbps.  It is an extraordinary breach of faith.

In other seats like Barton, Page, Brisbane, Reid and Melbourne no one has got Fibre-to-the-Node yet or HFC.

These are all battleground seats that will determine the result of the next election – and they have been dudded massively.

There are plenty of other shockers in this document that turns three years old this weekend. 

One worth pointing out is this:

 That hasn’t happened either.  On its website mybroadband.gov.au the government ranks broadband quality and availability from A to E. A is the best and E is the worst.

Given this promise you would think the parts of Australia with D or E broadband service would get the NBN in the next few years.  If you thought that you’re wrong.

We now know thanks to last year’s Corporate Plan that by the middle of 2018 there will still be almost half a million underserved premises that haven’t been connected to the NBN.  That’s not what I call ensuring “areas with poorest broadband receive priority”.

Why has all this happened? 

How did Turnbull get it so wrong?

The one word answer is – copper.

The whole policy was based on the assumption that it would quick and cheap and easy to roll out Fibre-to-the-Node.  The reality has proven to be very different.

The last two and a half years have shown that switching from fibre to copper is a lot harder than Malcolm Turnbull thought.  Let me show you.

The first thing you need to build a Fibre-to-the-Node network is access to the existing copper network.  That required talking to Telstra and renegotiating the Definitive Agreements.

Turnbull thought this would be quick.  In April 2013 he said it would be done “speedily”.

In November 2013, he said it would happen “before too long.”

In February 2014, he said it would happen “by June 2014”.

Well, it ended up taking a lot longer than that.  It ended up taking nearly two years to seal the deal with Telstra.  It wasn’t operational until June 2015.

 

Turnbull also underestimated the cost of Fibre-to-the-Node.

In his Strategic Review of the NBN he assumed it would cost $600 per home.

We know now it’s almost triple that. The 2015 Corporate Plan says it is now $1,600 per home.

How did this happen?  How did they get the cost of Fibre-to-the-Node so wrong?  This leaked document – “Integrated Operating Plan 2.0 - FTTN Review” - helps provide the answer. 

It concludes that one of the main reasons for the blowout is the original costings in the Strategic Review were based on international benchmarks from incumbent telcos like British Telecom, KPN and AT&T.

These telcos built Fibre-to-the-Node networks themselves. They owned the copper networks, they had established and working IT systems to manage them, they had existing workforces to operate and maintain them, and they could focus their roll out on high density and profitable areas.

NBN Co doesn’t have any of these advantages – and that helps explain how Turnbull got the cost so wrong. 

Another thing he underestimated was the cost of fixing the old Telstra copper network to make Fibre-to-the-Node work.

I remember being berated about this by Malcolm Turnbull two years ago when I questioned how much it would cost to fix the copper.

He said it had been: “taken most carefully into account… and very conservative assumptions have been taken”.

This was his conservative assumption then - $55 million.

And this is what we now know the real cost is - $783 million.

 

The cost of fixing the old copper network has blown out by more than 1,300 per cent.  So much for conservative assumptions. 

And keep in mind, the only reason we know this is because of documents leaked out of NBN Co.  The government isn’t willingly giving this information up.

So Turnbull underestimated how long it would take to get the copper off Telstra and how much it would cost to build Fibre-to-the-Node.

He also underestimated how long it would take to build it.

Turnbull said he would have Fibre-to-the-Node rolling out “at scale” across the country by the middle of 2014.

 

That hasn’t happened either. 

Two months ago Bill Morrow confirmed in Senate Estimates that Fibre-to-the-Node is still not rolling out at scale.

Last month a leaked document from NBN Co revealed some of the problems with the Fibre-to-the-Node rollout.

According to this leaked document they were supposed to have rolled out Fibre-to-the-Node to 94,000 homes (under the MIMA contracts) by 12 February.  They got nowhere near that.  According to the leaked document they only hit 29,000.

 

The reason – massive delays in design work being done by Tata in India and problems connecting to the electricity network here Australia.

 

Since then NBN Co has dismissed this and said everything is hunky dory.  That’s just not true.

Yesterday two more documents leaked out of the bowels of NBN Co.  They reveal that not a single Fibre-to-the-Node area built by NBN Co under its own steam has been completed on time.

The first 40 Fibre-to-the-Node areas being built by NBN Co are all behind schedule.  Every single one of them.

This isn’t the only problem with the Fibre-to-the-Node rollout.  There are plenty of others.

As you have probably heard, in the trial sites where Fibre-to-the-Node has been switched on in the Hunter, the Central Coast and Bundaberg customers have been complaining about contention problems. 

In the afternoon when kids get home from school people are complaining that their internet speeds are now slower than they were with ADSL.

Here’s just one example. This is Max Taylor from Gorokan. He had Fibre-to-the-Node connected to his home more than three months ago. He ordered a 100 Mbps service.  He told my office in an email a few weeks ago that he was receiving speeds as slow as 226Kbps during peak hours. 

This is what he said in the email:

 

He was switched over to Fibre-to-the-Node more than three months ago.  Whatever the cause of this is, whether it’s RSPs not buying enough CVC provisioning or not, it’s not good enough.  It’s certainly not good enough for the government and NBN Co to just blame RSPs. Which is what’s been happening until today.

Today I see Bill Morrow has acknowledged the CVC issues that NBN retailers are facing.

I am glad. When we were in government we said that CVC prices should fall in real and nominal terms as data use grows.

It’s a pity the policy announced today wasn’t announced last year. It might have helped avoid the problems Max Taylor and a lot of other fibre-to-the-node customers have faced.

On top of this problem another leaked document the other day revealed that in Fibre-to-the-Node areas a dropout rate of up to five times a day is deemed “acceptable”, according to NBN Co’s internal standards.

We also found out recently how many nodes NBN Co is planning to build, how much new copper NBN Co is planning to buy and how much it will cost in electricity bills to make them work.

The answers are – more than 30,000 nodes, more than 10 million metres of new copper (that’s enough by the way to get from here to Russia) and $60 million in electricity bills every year (just to run the 30,000 nodes).

All of that of course – the nodes, the new copper, the repair work on the old copper and the electricity bills – wouldn’t be necessary if NBN Co was rolling out fibre.

Malcolm Turnbull’s response to this has always been that Fibre-to-the-Node is much cheaper to roll out.  Well now even that argument has evaporated.

We now know, thanks to more leaked documents from NBN Co, that if the Government wanted to they could roll out fibre all the way to the driveway out the front of people’s homes for almost the same cost as Fibre-to-the-Node.

As we know now, last year NBN Co trialled a new type of fibre infrastructure in two Fibre to the Premises areas in Ballarat and Karingal in Victoria.

NBN Co calls it “skinny fibre”.

This is it here.

 

The results of the trial were extraordinary.  It virtually eliminated the need for civil construction work in the local fibre network -that’s between the fibre distribution hub and the pit out the front of your house.

NBN Co has now admitted that this has cut the cost of Fibre-to-the Premises by at least $450 per premises.  The leaked document indicates it is more than that. 

But that admission alone is very important.  It means that all the numbers Malcolm Turnbull and Mitch Fifield have been sprouting about the cost of going back to Fibre-to-the-Premises are wrong.

The cost of Fibre-to-the-Premises is coming down.  Just like it is in New Zealand.  Just like it has in every country it has been rolled out.  Just as was predicted years ago in NBN Co’s 2012 and 2013 Corporate Plans.

As a result of these leaks, NBN Co has now conceded that the cost of rolling out fibre to the pit out the front of your house is now almost the same cost as Fibre-to-the-Node.

The difference is currently about $400.  According to NBN Co Fibre-to-the-Node is now $1,600 per home and the cost of Fibre to the pit out the front of your house (Fibre-to-the-Distribution-Point) is $2,000 per home.

The capex is a bit more.  The opex is a bit less – remember no nodes, no extra copper, no extra copper maintenance, no electricity bills.

And remember this doesn’t count the cost of coming back years later and rolling out more fibre in Fibre-to-the-Node areas.

The big difference is what the customer gets.  And the difference here is massive.  Fibre to the driveway provides download speeds that are up to ten times faster than Malcolm Turnbull’s Fibre-to-the-Node network.

Given this – if NBN Co can roll out fibre to almost your front door for almost the same cost as Fibre-to-the-Node and give you much higher speeds – why aren’t they doing it?

Remember this controversial comment by NBN Co Director Simon Hackett a year ago:

 

Well we don’t need magic.  We have got the evidence. 

The cost of Fibre-to-the-Node has tripled.

The roll out of Fibre-to-the-Node is behind schedule.

Where it has been switched on it is not working properly.

And now the final nail in the coffin - we find out that NBN Co can roll fibre all the way to the front of your house for almost the same price as Fibre-to-the-Node and give you internet speeds that are up to 10 times faster.

Fibre-to-the-Node should be stopped as soon as possible (without slowing down the rollout) and at the very least roll this out or even better Fibre-to-the-Premises.

I am pretty sure this is what senior management at NBN Co want to do.

I think this is what they have wanted to do ever since this was first discussed with the NBN Board 12 months ago.

The only reason it hasn’t happened yet is politics.

Because the government knows if it ditches Fibre-to-the-Node it would be humiliating for Malcolm Turnbull.

It would be proof he was wrong.  And as we know our Prime Minister is a bit like Fonzie from Happy Days – he can never admit he is wrong.

He might not be able to admit it, but all of the leaked documents that have flooded out of NBN Co over the last few months prove it.

They prove the policy released three years ago this Saturday has been a failure and Fibre-to-the-Node has been a mistake.

When the Abbott/Turnbull Government was elected two and a half years ago, Australia was ranked 30th in the world for internet speeds.  We are now ranked 60th.

We are now behind most of Europe.  We are behind most of Asia.  We are behind the US and Canada and New Zealand.  We are even behind, Romania, Russia, Poland and Slovakia.

If that’s not enough to convince you that Fibre-to-the-Node is a bad out of date policy let me offer one final piece of evidence. 

This is not a leaked document. 

This is from that original election policy.

In a background paper attached to the policy Malcolm Turnbull gave an example from the United States to justify his plan to roll out Fibre-to-the-Node.

He gave the example of Verizon and AT&T. 

In the early 2000s those two telcos went down two very different paths. Verizon built Fibre-to-the-Premises and AT&T built Fibre-to-the-Node.

In the policy document Turnbull claimed that AT&T made the right decision because they were making as much money as Verizon and it cost less to build.

Well guess what AT&T are doing now?

In December last year they announced that they are going back where they built Fibre-to-the-Node and they are building Fibre-to-the-Premises.

The same thing is eventually going to have to happen here in Australia.

Only it will take a Labor Government to do it. 

(Ends).