Quigley fights back on NBN costs

In Business Spectator the fight back by former NBN Co CEO Mike Quigley highlights the dodgy figures being used by the Prime Minister Malcolm Turnbull to justify the second rate NBN being provided under his watch that will ultimately be far more expensive than an all fibre fixed-access network and delivered years after it should be.

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Former NBN Co boss Mike Quigley is back and the man who rather gamely took on the challenge of getting Australia’s biggest infrastructure off the ground has more than a few things to say.

Quigley has broken his silence by adding to the discontent circulating around the Coalition government’s Multi-Technology Mix (MTM) National Broadband Network (NBN). On theABC Radio National Background Briefing last Sunday, Quigley highlighted how the figures in NBN Co’s Corporate Plan 2016 show that the delays and cost blowout of up to $15 billion are the result of the Coalition government’s decision to change how the NBN would be rolled out.

He supports his assertions with a detailed analysis contained in a report titled “Exploding Malcolm Turnbull’s Myths”, which unsurprisingly seeks to dismantle Malcolm Turnbull’s ongoing assertions that NBN Co’s current performance is to a large extent hindered by how the company was run under the auspices of Quigley .

According to Quigley, the delays and extra expense introduced during the renegotiation with Telstra, the associated slow-down in revenues and the higher operating expenses for the MTM NBN are some of the major reasons for the latest cost blow-out.

His major criticism centres around the government’s decision to enter into a one-off settlement in 2014 of outstanding claims by NBN Co's construction partners, and higher ongoing contract rates. Quigley states that he would not have agreed to the construction partner’s demands and the resulting extra cost of about $500 per premises is the “true like-for-like difference” between the FTTP rollout costs before the election and what NBN Co is faced with now.

Quigley state that “far from being a difference of over $2,000 per premises (or 80 per cent) as implied by Mr Turnbull, the true like-for-like difference is closer to $500 (or about 10-15 per cent).”

In an earlier interview with the ABC, Morrow indicated the accounting regime employed at NBN Co before the last election had effectively hidden the true cost of the FTTP rollout that is reported in Corporate Plan 2016. Morrow stated that “it's not an increase in cost. In fact, it's probably a more accurate reflection of the cost.”

In response Quigley writes that “It wasn't a complete shambles at all. We had four years of being reviewed on a very regular basis by a number of auditors, the Australian National Audit OfficePwC, you name it. Never, ever once did we get any significant problems. Our measurements of our costs [were] different, by the way, to how NBN Co is choosing to measure today, but they were absolutely valid and the audit reports prove that.”

To further strengthen this claim Quigley points to the forensic audit of NBN Co’s accounts that was carried out by Korda Mentha as part of the Strategic Review commissioned by Turnbull in late 2013 which found “no material issues”.

The current NBN Co management team continues to be evasive when responding to questions put to them at the Senate Select Committee on the National Broadband Networkand now that Quigley has responded to Turnbull’s excessive criticism there's likely to be a renewed focus by the Senate Select Committee on the actual reasons behind the rollout delays and cost blowouts currently occurring at NBN Co.

The copper based technologies being used in the MTM NBN are more expensive to operate than an all fibre access network and there will be a need for the Hybrid Fibre Coax (HFC) and Fibre to the Network (FTTN) components of the network to be upgraded at significant cost before the NBN rollout is completed. And in what appears to be a political partisan approach NBN Co has maintained a constant stream of promotional media releases and blog posts about how the copper-based technologies would be upgraded “at some time after the 2016 election” without providing the details of how this would occur, when and what the costs for the upgrades would be. The smart money will be on NBN Co delaying upgrades until after the NBN rollout being completed which fits in with the Coalition government’s objective to disaggregate the NBN and sell it off as soon as possible.

NBN Co’s efforts to muddy the waters can be seen to be an expensive ongoing effort to stave off the effects of the growing criticism about the MTM NBN from industry and academia.

Emeritus Professor Rod Tucker recently gave a presentation that provided details about why the MTM NBN would be slow, expensive and obsolete before it is completed and in a related blog post by telecommunications analyst Paul Budde he labelled the G.Fast technology being heavily promoted by NBN Co as an upgrade pathway for the obsolete FTTN as “more hype than reality” and that “it is highly unlikely that G.Fast will see mass deployment.”

NBN Co has taken great pains to remain mute about the new Fibre to the Premises (FTTP) technology called Next Generation Passive Optical Network 2 (NG-PON2) that could turbo-charge the NBN and will be available for deployment in early 2016. Already major Telcos in the USA and other nations have announced they will immediately begin to deploy NG-PON2.

The entry of Quigley into this fray adds a new dimension to the NBN debate. While he’s justifiablty motivated to redress some of the accusations tossed around by his opponents, Quigley could potentially prove to be a thorn in Turnbull and Morrow’s side.

Turnbull may well have to respond to Quigley’s criticism and in doing so he has a rare opportunity to weigh up the political cost of proceeding with the slow, expensive and obsolete MTM NBN. The tactic of blaming former governments for any manner of thing is run of the mill in Australian politics, but the derogatory remarks thrown at the former NBN Co management team have been unusually excessive. It's looks like Quigley is finally keen to return fire with some invectives of his own.

Mark Gregory is a senior lecturer in the School of Electrical and Computer Engineering at RMIT University.