Senate Select Committee raises concerns over NBN Co’s strategic review

27 Mar 2014

A Senate Select Committee tasked with investigating Australia’s National Broadband Network (NBN) project has claimed that a strategic review published in December last year by NBN Co, the company overseeing the project, was ‘deficient’. With the committee saying it had published an interim report due to ‘significant concerns with the accuracy and reliability of the Strategic Review’, it has argued that assumptions and conclusions set out in NBN Co’s study were ‘unreliable in the case of all examined scenarios’, while also claiming to have found financial manipulations and other irregularities, including with regard to: the exclusion of AUD4 billion (USD3.64 billion) in ‘business as usual’ architecture savings; the rollout schedule; assumptions related to the unit costs for the fibre build; the addition of a third NBN satellite to the report without any direct explanation; and ‘overly pessimistic’ revenue assumptions.

In addition, the committee said it equally strong concerns about the reliability of assumptions underpinning the multi-technology mix (MTM) that the revised NBN project is looking to follow. As per the state’s revised plans, in place of connecting 93% of the population to superfast broadband services via fibre-to-the-premises (FTTP) technology, it had revealed in December 2013 up to 50% of premises in the fixed-line footprint would be served by fibre-to-the-node or basement (FTTN/FTTB), with up to 26% covered by FTTP and the remainder serviced by hybrid-fibre coaxial connections. Among the issues raised by the interim report regarding such plans were: that the financial model for the MTM was was built using mostly international benchmarks and estimates, rather than field data; that operating expenditure for the MTM is expected to be significantly higher than for a fibre network; that ‘limited speeds and product capabilities’ available on FTTN are expected to result in reduced revenues compared to a full fibre rollout in the fixed line footprint; and that the MTM will need to be upgraded, a fact acknowledged by NBN Co’s review, though no costs for such upgrades were outlined.

In making its recommendations, the Senate Select Committee firstly said that NBN Co should submit a revised Strategic Review that provided ‘transparent assumptions and corrects deficiencies and distortions’. This review, it said, should provide details on only two scenarios, those being: an optimised FTTP rollout that ‘adopts the technology changes and other management initiatives outlined in Scenario 2, together with a plan to address identified industry capacity constraints; and a revised MTM that is based on actual costs for FTTN and HFC derived from discussions with Telstra, Optus and vendors, while this scenario should also include all costs to undertake the flagged upgrades to 100Mbps by 2023, 250Mbps by 2028 and 1Gbp by 2030. Prior to submission, it added that the Strategic Review should be scrutinised and verified by an independent advisor engaged by the Department of Communications and the Department of Finance. In the meantime, the committee said that NBN Co should continue and accelerate the roll out of the FTTP network while further analysis is undertaken.

There has been some controversy over the committee’s report, however, with iTnews revealing that Liberal members of the committee – including senators Zed Seselja, Anne Ruston and Dean Smith – had lodged a 28-page dissenting opinion that accused former communications minister Stephen Conroy, himself part of the working group, of ‘contempt’ during the hearings. Further, it was alleged that Mr Conroy had ignored requests by the government to call certain witnesses, with the Liberal politicans claiming the publication was ‘grossly misleading and untruthful’. ‘It is the sincere hope of Coalition senators that this Committee can more effectively focus its work and lift its standards of conduct going forward,’ they were cited as saying in relation to the matter.

Australia, NBN Co,

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