NBN Co's Technology Change Program nothing more than a rip-off

In Business Spectator NBN Co's Technology Change Program is shown to be little more than window dressing to provide substance to the Prime Minister Malcolm Turnbull's shallow promise that FTTP would be available to those that want it.

Read the full article below

Nine months since its launch NBN Co’s Technology Change Program (TCP) initiative is starting to look a lot like paltry window dressing, designed to substantiate Malcolm Turnbull’s promise last year to facilitate a mechanism for access technology upgrades.

Our request for NBN Co to identify any Area Switch or Individual Premises Switch applications that have proceeded beyond the feasibility study estimate phase was declined, so it’s unclear just how many premises or areas on the path to an upgrade. NBN Co has been rolling out Fibre to the Premises (FTTP) now for about four years and greenfield FTTP rollouts are ongoing. However, when it comes to brownfields estates several councils and people in these estates contend that their experience with NBN Co on TCP has been less than satisfactory.

As pointed out in a previous article, Nathan Forest Community Association (NFCA) representing residents in the Nathan Forest estate near the Gold Coast in Queensland is from a technical sense a prime candidate for a FTTP upgrade under the TCP because the relatively new estate has a system of large ducts running past premises for a television distribution system.

Unfortunately, the community has had a tough time so far getting anywhere.

On October 16 the NFCA received a feasibility study estimate from NBN Co for an FTTN to FTTP upgrade. The estimate was $429,000 to $495,000 (including GST).  For the 124 premises in the estate the estimated cost per premises (CPP) would be $3460 to $3992.

The NBN Co Corporate Plan 2016 (PDF) states that the weighted average cost per premises (CPP) for brownfields FTTP is $3,700 and FTTN is $1,600. The Nathan Forest estate contains 124 lots equating to approximately $458,800 for FTTP and $198,400 for FTTN, excluding the infrastructure lease cost of $700 that applies to both technologies. The final cost to the NFCA for brownfields FTTP should be approximately $260,400 or $2,100 per premises.

After the NFCA queried NBN Co’s brevity, the confusing language used in the feasibility cost estimate and why there did not appear to be a deduction for the cost of installed FTTN in the estate, a NBN Co representative wrote back stating that the feasibility study estimate was an "accurate portrayal of the differential in cost of providing FTTN and FTTP to Nathan Forest Estate."

The Nathan Forest estate has 124 premises and NBN Co was given this number, yet after the NFCA has queried the feasibility study estimate for the third time an NBN Co representative wrote "please note that our FTTP Area Switch cost estimation of $429,000 – $495,000 is based on 168 premises. The exact premise count will be determined during the design phase. The premise count would have bearing on the final incremental build cost."

As it turns out NBN Co provided a feasibility cost estimate based on 168 premises rather than actual number of 124 premises in the estate, adding an extra 35 per cent to the CPP estimate.

Taking the extra premises out of the equation would bring the estimate down closer to the average CPP identified in the Corporate Plan 2016 and there’s no reason for the installation cost in the estate to be higher than the CPP average in a brownfields estates, because it has its own large duct network available.  It would seem that the higher than average CPP appears to be a common response from NBN Co when providing feasibility study estimates to Area Switch applicants.

Similar experiences with NBN Co have occurred for the Burnie Council in Tasmania, a state that was promised FTTP but under the Coalition government is now getting  Fibre to the Node (FTTN) technology. Burnie Council has proceeded with a TCP application in an effort to provide FTTP in the central business district to boost business productivity but has had a similarly bad experience with the feasibility cost estimate and this makes it hard to decide whether to proceed with the design and quote after paying NBN Co nearly $50,000.

The Gleneagles estate NBN Committee representing 389 premises the estate in Kambah ACT also proceeded with a TCP application after 41 per cent of premises supported the move in an online poll in May 2015.

On August 11, 2015 Turnbull wrote to the Member for Canberra Gai Brodtmann and stated that “on June 26, 2015, Mr Ulrich [Gleneagles estate representative] was advised that it was not practical for NBN Co to proceed with an Area Switch application under the ‘Technology Choice’ program, as not all property owners wished to participate in the proposal. This would not comply with ‘Technology Choice’ policy, which requires all premises in an area to be included.”

That statement is at odds with what NBN Co has told the NFCA, which is that for an Area Switch application to proceed the applicant would be required to cover the entire cost for the TCP and not all property owners would be required to be participants in the application.

However, Turnbull’s remark does highlight the difficulty that any brownfields estate would have to face, that is the likelihood that not all property owners would be interested to pay for FTTP and those who want FTTP would need to  cover the cost  for the entire estate.

TCP confusion 

The confusion about what is actually occurring with the TCP extends within NBN Co as well. A question to NBN Co’s media team about the possibility of retail service providers (RSP) offering plans that incorporated Area Switch and Individual Premises Switch outcomes led to NBN Co adding a statement to the Individual Premises Switch webpage - NBN Co “will welcome the ability for Service Providers to apply on behalf of their downstream customers to facilitate an Individual Premises Switch at the end of 2015. Contact your phone or internet service provider to enquire about their participation in this program.”

A follow-up question to NBN Co about extending RSP participation to Area Switch applications brought the response “currently we have not contemplated area switch applications from RSPs” yet the NFCA received a response from an NBN Co account manager for TCP applicants stating “we are currently working with nbn [NBN Co] RSP’s to allow them to participate in the Technology Choice Program. Please liaise with your preferred service provider in respect to their involvement in Technology Choice for both Individual and Area switch.”

In an effort to gain some clarity about the feasibility cost estimate received from NBN Co the NFCA put in a complaint with the Telecommunications Industry Ombudsman (TIO)asking for an independent review and a more precise feasibility cost estimate. The TIO responded to the NFCA on October 28 stating that “NBN Co Ltd is a wholesaler and not considered a telecommunications provider. The only time the TIO can investigate complaints about NBN Co is if there is physical damage to a dwelling in the process of installation. Because we can only handle complaints about providers that are members of the TIO scheme and, your complaint is not regarding damage to a dwelling, we cannot consider your complaint and will not be taking this matter further.”

The TIO’s position regarding NBN Co is wrong because NBN Co is entering into commercial contracts under the TCP for the provision of telecommunication infrastructure with property owners and incorporated bodies representing groups of property owners. The NBN Co contracts include payment of the Goods and Services Tax (GST) which is a fair indicator to most Australians of a commercial arrangement between parties where one party is providing, in this case, a service for the installation of telecommunications infrastructure.

If the NFCA and other applicants to the TCP cannot make complaints to the TIO then who can they make an administrative complaint to given that NBN Co is a government business enterprise? It appears the only avenue for the NFCA is to take the expensive and time consuming path of having the matter investigated by the Queensland Civil and Administrative Tribunal (QCAT).

Evidence so far would suggest that NBN Co’s TCP is little more than a half-hearted attempt at providing an upgrade channel, with applicants subjected to a barrage of discouragement and information that is of little practical value. 

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