The sad, sad story of the NBN

The High Court’s decision on the citizenship woes of several members of our federal parliament came out too late for this week, so I’ll have time to work through the Court’s reasoning. In any case, I had spent some time looking at the NBN, a burden to us all, whether we are connected to it or not.

The National Broadband Network (NBN) has reappeared to the public gaze in the past ten days, as stories of an astonishing level of complaints about the service have been aired in televised news and in Parliament. These stories have at once produced a familiar blame game in Australian politics: ‘It was your idea, and it was crap,’ says the current Government. To which the former Government’s responds: ‘It was a great idea, and you have mucked it up completely.’ There are similar games in which the States and the Commonwealth blame each other for inadequacies in health and education.

In trying to set out as clearly as I can the sad story of the NBN I have to confess at once that there will be almost as many abbreviations in this essay as there were in last week’s essay about our inadequate energy policy. And I do have a declaration of interest: I don’t want the NBN anywhere near me, and I do have, courtesy of the enterprising Canberra company long ago who set it up, a FTTH service (fibre-to-the-household, sometimes, FTTP, with the ‘p’ standing for ‘premises’).

The NBN seems to have been a Kevin Rudd idea, and he used it effectively in his 2007 election campaign. It sounded good, too, as a lot of early Kevin did. Australia’s huge area, and the need to connect particularly people outside the main urban areas, meant that a national plan was needed. There were references to its being the digital equivalent of the postal service, which connects everyone at the same price, no matter where they live. Mr Rudd was good at visionary plans, but not at all good at implementing them. I don’t know to whom he listened at the time, but I would expect that those people urging caution, cost-benefit analyses and the need-to-get-the-details-right-before-rolling-the-system-out were brushed aside. He was good at brushing aside people who didn’t see the great merits of his plans. He pointed out the NBN was the sort of visionary plan Australia needed, and it would be bigger than the Snowy scheme. Last week he was back in the fray, saying that his blood was boiling at the incredible mess the Turnbull Government had made of his vision.

The original vision was three-fold: the system was to be FTTH (see above), it was to be funded by the taxpayer, and to be wholly government-owned. No cost-benefit analysis was undertaken. The important criteria seem to have been roll-out cost and time-to-market — get it done quickly, in short. The assumption was that in time the national company would be paying a lovely dividend to the Australian Government, of six to seven per cent a year.

What went wrong? A good first source is a long article in the Australian Financial Review that is now four years old. It is important because it was able to look at what had happened since the vision was articulated, and before the system we now have was firmly in place. There seems to have been no single cause. The estimated cost of the NBN, at $43 billion in 2011, kept growing. Some years ago the Coalition, then in Opposition, estimated it at $94 billion. The truth is that nobody knows. What we now know is that roll-out has been much slower than expected, and that there have been hundreds of thousands of complaints from those who have been connected.

When in Government the Coalition ordered a cost-benefit analysis, whose message was that the original idea was in effect the Rolls-Royce version, and wildly extravagant. It would be cheaper and faster to go down the path of a mixed mode, that is, fibre to a node somewhere near your house and then the old copper wires to your premises, or FTTN (fibre-to-the-node). If the FTTH strategy had been continued, the final year of roll-out was expected to be around 2028 or 2029. That was too far away. Mixed mode was chosen, and it is what is happening.

There were other problems, too, reminiscent of the pink batts and school-halls response to the global financial crisis. Here, too. the villain was haste. We start with the actual construction of the network, which means in large part ripping up streets and laying fibre. After a year of negotiating with the big construction companies the NBN company withdrew its tender proposal, fearing that it would not get a reasonable price. A lot seems to have been done by ‘mum-and-dad’ companies that didn’t have the capital to survive if cash flow became a problem. Many went broke. Things went from bad to worse. Four years ago NBN missed its mid-year target by 42 per cent. Our current Prime Minister was the NBN’s most severe critic when in Opposition, and he doubtless thinks he knows best. The trouble is that the revised methodology doesn’t seem to be doing much better. The AFR critique points to too many things happening much too quickly, and an absence of detailed knowledge of what was involved. The current CEO says there is no chance of the NBN’s ever paying a dividend.

The situation now is that the revised mixed-mode scheme is behind schedule, and is unlikely to reach its proposed 2020 completion date. It is hard to work out all the costs so far, but the mixed mode scheme was to cost a little under $30 billion, and may now cost $60 billion. How much was spent on the Rudd scheme is not clear to me. One current proposal is to write off the original Rudd costs, said to be $30 billion, so that the NBN company can actually make a profit. I read somewhere that Mr Abbott as PM had proposed simply scrapping the Rudd NBN, and letting the market sort it all out. Mr Turnbull, at that time his Minister for Communications, argued that the best option was a revised scheme that would be operational more quickly, even if it was not as powerful.

However you look at it, the NBN is a terrible mess, both financially and as a system supposed to provide everyone with powerful digital access to the world. We seem never to learn from past mistakes, but a few lessons emerge from the NBN mess. First, a vision is a great thing, but it needs to be tested through ample argument and advice, not patted on the back and told to get to work, quickly. Mr Rudd’s vision was certainly part of the technological possibility of the time, and New Zealand, for example, has implemented a FTTH system that appears to work, and hasn’t cost too many arms and legs. Australia has distance problems that New Zealand does not possess, but we might learn something by a serious study of what worked across the Tasman, and what went wrong there (no major project is free from problems).

Second, any serious reading in this area shows how difficult it is for incoming governments to change, let alone to end, major projects started by their opponents when they were in government. The NDIS is another example, as is the Gonski plan in school education. Both of these schemes were visionary too. Labor made it difficult for the Opposition not to support these visions, and one hopes that those presently in Government recognise what they did wrong then. It would be nice if Labor did some soul-searching about it all too. Australia could not have afforded all three schemes. I think I wrote so at the time.

You could argue that once Labor had started down the NBN path there was no good policy available to an incoming Coalition government. Scrap it, and you seem to have wasted billions. Continue it, and you cop all the flak from those disappointed (most people) that it hasn’t come. Water it down, and you cop all the flak from people who say that the earlier one was better, even though it was extraordinarily expensive.

Third, there is intense and partisan argument in the media about the whole thing, and it is most difficult for someone with no real horse in the race, like myself, to get past the claims and counter-claims, the various estimated costs, and the conflicting technological arguments which require real knowledge to understand. I know something about it, but the details are everything, and people simply disagree about them.  I await a decent book-length essay or two from people who were involved so that I can make my own assessment.

In the meantime, to repeat, I want what I have left alone. It works, and provides me with what I want. I do not look forward to any letter from the NBN telling me that they are coming. In fact, I used the Internet to find out what was planned for my suburb, and was told that nothing was planned at this time. Let’s keep it that way.