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Recently published documents suggest Australia's national broadband network (NBN) roll-out is likely to waste A$29bn (£15.3bn) – and it is encountering significant problems and could have been rolled out far more cheaply.
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Former communications minister Malcolm Turnbull, who became prime minister in September 2015, spent years in opposition attacking the former Labor government's original A$43bn NBN plan, which would have run fibre-optic services to 93% of Australia's 12 million homes and businesses.
After Australia's 2013 federal election he became communications minister and set about systematically dismantling the previous plan. He claimed that his alternative – a multi-technology mix (MTM) complementing legacy copper and cable networks with new fibre, wireless and satellite services – would see the network completed years sooner than Labor's plan and at a much lower cost.
But recent indications suggest neither goal will be met. Turnbull's early estimates put his MTM in the high A$20bn range but this figure soon crept up to an official estimate of A$41bn, which in August 2015 was adjusted upwards to A$56bn. More recently, a leaked document suggested fixing the government-acquired copper network would cost up to A$640m more than expected.
With government contributions capped by Turnbull at A$29.5bn, the rest of the funding for the project was always intended be sourced from private markets. Yet the ability to attract investment in the MTM's technologies won't have been helped by a PricewaterhouseCoopers assessment that, despite costing A$56bn to build, the MTM NBN will be worth just A$27bn by fiscal 2024-25.
Those figures – extrapolated from the Turnbull-initiated Vertigan Review panel – suggest something that BuddeComm telecommunications analyst Paul Budde said “is nothing new”. Budde said the report confirmed that the MTM strategy was “a shambles".
"And the sad thing is, of course, that people predicted this,” he said.
MTM critics urge strategy review
Many predicted that iterative improvements in the original fibre rollout would decrease the cost per premises of deploying a network – a premise that was ridiculed by Turnbull but supported last year by NBN Co founding (and since retired) CEO Mike Quigley, in an extensive and detailed analysis of the original strategy.
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With a recently leaked internal document highlighting significant problems in the MTM rollout – and another detailing unreleased tests of a multi technology/local fibre network (MT-LFN) roll-out technique that halved the costs of deploying fibre – some are calling for a rethink of the current strategy, given that its costs have now far exceeded the initial price tag for a completely new network whose fibre design would have opened up new markets and been more attractive to investors.
Putting aside the question of how the government can hope to convince investors to funnel A$26.5bn into a legacy telecommunications network with limited design characteristics and a forecast return of 50 cents on the dollar – and the fact that failure to do so will force a massive government write-off of its investment – Budde said the fiasco may well weaken the government's position in the country's upcoming federal election.
Turnbull's position in the balance
Although he has been riding surging popularity polls, Turnbull's position going into the 2016 election – the first time he will face the electorate as prime minister – won't be helped by the escalating perception that he has delivered an MTM disaster engineered for political reasons.
“Every single engineer in the world that I've spoken with has scratched their heads” when the MTM strategy of retrofitting the copper network nationwide was explained to them, Budde said.
“Nobody has done that and nobody is ever going to do that because it's one of the most stupid things to do. And if more issues around the NBN are not going to be resolved, you'll have problems with an election as Turnbull will start losing more and more support.”
NBN Co has repeatedly maintained that the roll-out remains on schedule and that it will meet the company's deployment targets, with 8 million premises expected to be connected by 2020.