’Turnaround specialist’ Bill Morrow’s plan for the NBN
In April, former Vodafone Australia chief Bill Morrow took the helm of $42 billion national broadband company NBN Co, a role that had been temporarily filled by Ziggy Switkowski. Californian-born Morrow is known as a “turnaround and transformation” specialist.
Kirsty Simpson There are few chief executives who get the same level of public scrutiny as you. What sort of impact does it have?
Bill Morrow I have not changed my behaviour at all. But I am starting to be more sensitive and alert to it. So, for example, when I get pulled into senate estimates and senate select committees there’s lots of questioning – for whatever the motive is, I don’t even want to speculate on that – but it’s not typical for a private company or a publicly traded company. It’s not an experience that I am used to, so therefore I think [about what I am going to say] more than I would otherwise. [But], and I’ve been on the record for this before, I think it’s appropriate that it gets scrutinised.
KS Where are you at with the TPG issue? [NBN Co is appealing TPG Telecom’s plans to roll out broadband to inner-city apartment buildings].
BM As we understand it, the ACCC [Australian Competition and Consumer Commission] is still conducting its investigation. In the meantime, we are taking a competitive response to their announcement. We want to be able to secure the same multi-dwelling units that they are after in the hopes to protect the business model, and to protect the taxpayers’ investment. We have started offering a service; we have accelerated access to the fibre to the premise products [in some of the areas TPG is seeking to roll out its network].
KS What would a TPG win mean?
BM A win is not TPG getting knocked back. I don’t want to stifle competition. My objective here is solely to point out that there is a business model that NBN is based on that does not necessarily account for that sort of competition coming in, because of this cross-subsidy market. And so a win in my view is either a change of that model by the government or a clear delineation that we are not going to have a construction competition for a period of time while the NBN is being built … That was something set by the government before my time. My job is to point out that we may have a problem and to be responsible with taxpayer money.
KS Can [infrastructure] competition coexist with the NBN as it is today?
BM Not in any material manner. Let’s say the ACCC rules that TPG is not doing anything inconsistent with the Telecoms Act and then Telstra decides, Well, I’m going to do that too then… Now it starts to get more material. The more of that margin that NBN Co can no longer count on to cross-subsidise the remote areas means that we have to charge even more for the other areas. Then you have a greater price difference for the remaining metropolitan areas – that makes those opportunities even more attractive and further drives competition and you have this exacerbating problem as you go forward. Or you blow your budget. And that’s why this needs to be well thought through. I know the Vertigan panel is looking at this.
KS Some commentators have expressed concern that the many reviews examining the NBN are slowing decision-making. Is that fair?
BM I am not waiting for anything. By the end of 2019, I want to make sure that all homes – and there are about 12.5 million of them – have access to the broadband network we are building. And about eight million are going to connect by the end of 2019. That’s going to help us generate over $4 billion in annualised revenue. And we are going to do all of that within the peak equity funding envelope of $29 billion, and we’ll have to get debt on top of that. The reviews are not slowing us down.
KS What about the industry access arrangements with Telstra? [NBN and Telstra are continuing to renegotiate their 2011 $11 billion contract despite earlier expectations a new deal would be concluded by June.]
BM They are progressing well. We won’t trade value for time, and I’m not worried. Telstra is actually being responsible to their shareholders but they’re being quite good at the table with us.
KS You have talked before about higher than expected rural demand. Can you tell me more about that?
BM Satellite is connected to a bit more than 40,000 [regional and rural] homes. We aren’t selling any more of those services because the interim satellite capacity is limited, and the more people you put on, the slower it gets. The government has given us the authority to expand that capacity on the interim satellite services and that’s actually taking place as we speak. We are already seeing areas where capacity has been lifted and performance is coming up.
KS And you have plans to launch a satellite of your own?
BM Yes, we have an interim and a long-term [satellite strategy]. The interim is buying capacity off somebody else’s satellite. That’s what we are offering to those 40,000 customers until the long-term satellite launches. And that’s scheduled in the beginning of 2016 … Are we seeing higher demand? Absolutely, that’s why we exhausted that interim satellite capacity so quickly. We are now planning to do more fixed wireless than we were earlier – that shrinks the number of homes that need to be served by satellite. The fixed wireless is going extremely well.
KS There was a review in May that said you need more spectrum to provide wireless services. What are your plans?
BM We are working with ACMA [the Australian Communications and Media Authority] very closely on that. We have talked with the telco companies that have spectrum in Australia and we feel quite confident we have a solution to fill that gap.
KS How quickly is the rollout of the fibre network going to be now?
BM Every three months you are going to see more and more of the ramp-up occurring. I see why there’s frustration within the communities because the NBN has been spoken of now for about five years. And people hear about huge numbers – billions and billions of dollars [being spent] and there are questions about fibre to the node and fibre to the premises, and which is better. Yet they don’t have any idea when they are going to have access to it.
KS You were unable to give rollout targets earlier this year. Will you be able to do so soon?
BM We’re considering it. But it’s not an easy decision. You can put information out there but it’s so difficult to predict when a particular area is going to come on. To nail it down to a month is impossible, to nail it down to a quarter is extremely difficult; even to the half-yearly it moves around. When we put information out there we want our customers to be able to rely on it … So making future multi-year predictions is just not appropriate.
KS There has been criticism of the quality of the rollout. What’s your view?
BM The measure for this was the number of homes passed... The politicians, to the management, to the employees – they all talked about this. [For] external partners that were helping us build this network, that was the No. 1 pressure point … Now why this is important is that as soon as I can pull the cable down the street then I can declare the neighbourhood as “ready for service”, which means the retail service providers can come and contact you. [But, say] I’m at the end of a cul-de-sac … and after all the excitement you have to tell me to wait three or four months and tear my driveway up, I’m upset.
But you ask about quality, too. Now when there’s too much management pressure and people are fearing for their jobs, managers are making decisions that are not necessarily being scrutinised across the board, you start getting sloppy craftsmanship because people are under the pump. So this is a shift in focus … on those three elements: how fast we can get this in; the quality and the service levels we provide, and then the cost to the taxpayers. The last thing we will jeopardise or sacrifice is service levels or quality … that is a mantra we need to push throughout the company. For whatever reasons, the past regime didn’t push that.
This article was first published in the print edition of The Saturday Paper on Jul 5, 2014 as "Bill the cable guy". Subscribe here.