Conroy’s incompetence sets Telstra up for another taxpayer funded bonanza
At yesterday’s hearing of the Joint Standing Committee on the NBN, the NBN Co chief executive Michael Quigley was unapologetic about the NBN Co’s failure to seek the right to use any part of the Telstra copper customer access network so that it had the option to deploy a fibre to the node (FTTN) network design in the future as a means of cutting the spiralling costs of the fibre to the home (FTTH) network design to which it is currently committed.
To recap: the gigantic cost of the NBN is a consequence of the decision to build an entirely new customer access FTTH network. Were the network being built in an economically rational way, the fibre would extend to the furthest economically viable and technically necessary point in the network and no further. As very high speeds are able to be delivered over copper if the distance between the end of the fibre and the customer premises is reasonably short, a fibre to the node, or fibre to the curb network design can deliver the required outcome in terms of bandwidth speed but at a fraction, at least half, of the cost of a fibre to the home build. As Alcatel-Lucent notes in a 2007 Technology White Paper “But the economics of FTTN are hard to resist, given cost points that can be 50% or less than those of PON.” (meaning the Passive Optical Network of FTTH)
Under the terms of the Telstra/NBN deal being currently negotiated, the NBN will pay Telstra about $9billion in net present after tax value terms in return for it decommissioning (and thereby rendering valueless) its copper customer access network.
However, as the deal is currently contemplated, if NBN Co, or a future government, were to redesign the NBN so as to build a fibre to the node network at least in part, the NBN Co would be required to negotiate with Telstra to use a part of the copper customer access network it has already paid Telstra to decommission. More billions out the door.
At the hearing Mr Quigley acknowledged that if the NBN Co wished to use a part of the copper customer access network it would have to renegotiate with Telstra. He said that he had not sought to acquire the right to use a portion of the Telstra copper because the Government had not told him to do so, and in any event, it would be complex. No doubt, many of us thought as we listened to him, it was simpler to drop a few more billion of taxpayers’ money.
It is quite incredible, mind boggling really, that a Government would pay a private company $9 billion to decommission a network asset but not reserve for itself, as part of the deal, the right to use as much of that network as it chose.
But that’s the real world – and unless there is a change of direction on the part of the Government, the Telstra/NBN deal will not simply deliver Telstra a $9 billion windfall but in addition set Telstra up to receive more billions when inevitably a future Government, Liberal or Labor, seeks to redesign the network topography in a way that reduces the crippling capital cost of the fibre to the home design without compromising the promise of universal very fast broadband.
Mr Quigley’s testimony yesterday leaves the ball in Senator Conroy’s court. Is he going to give NBN Co a direction to act in a commercially rational way and reserve the right to use some or all of the copper network it is paying Telstra to junk? Or is it going to continue to set Telstra up for another big pay day when, inevitably, a more rational, cost effective approach to network design is undertaken?