The government’s plan to sell the NBN at a profit makes getting answers about the true cost of its rollout and what it provides exceedingly difficult. By Karen Middleton.

The politics of the NBN

NBN Co CEO  Bill Morrow (left) and Minister for Communications Mitch Fifield at a senate estimates hearing in May.
NBN Co CEO Bill Morrow (left) and Minister for Communications Mitch Fifield at a senate estimates hearing in May.

Late on Tuesday night, the chief executive of NBN Co, Bill Morrow, was put on the spot.

During a senate estimates hearing, New South Wales Labor senator Deb O’Neill asked Morrow why NBN Co didn’t publish the data she knew it had about the maximum attainable internet download and upload speeds across Australia on the various kinds of infrastructure – fibre, copper wire and pay TV cabling – that made up the national broadband network (NBN).

With that information, O’Neill argued, potential customers could know upfront whether the speeds for which they were being asked to pay – but which people complain are frequently not reached – could actually be achieved in their area.

“We can do anything, technically,” Morrow replied. But he told her now was not the time to give would-be customers that information.

“I would actually personally wait,” he said. “I think that the minister has directed the regulatory bodies to be quite aggressive on looking at all things customer experience right now and I think they’re going to probably come up with solutions.”

The communications minister, Senator Mitch Fifield, supported his response, saying the Australian Communications and Media Authority was indeed examining “the customer experience”. Fifield said the government was “in the business of transparency” and NBN Co already provided the information to the retailers, which were the “conduit to the consumers”.

O’Neill pointed out that the retailers were not passing it on. “The problem is that millions of people across Australia don’t have access to the information that allows them to make an informed decision about what they’re actually able to buy or not able to buy,” she said. “The buyer can’t even beware because they can’t see.”

She sharpened her question to Morrow: “If the shareholder minister, who is sitting there beside you, directed you to make this information available, are there any red flags for you?”

Morrow said he would “do whatever the minister asks”, but added that if anyone was going to be forced to answer a consumer’s question about the maximum speed that was actually available, it should be the retailers. “NBN should not be the police,” he said.

O’Neill asked Fifield if he would direct NBN Co to reveal the information.

“Senator, I’m not going to make any universal declarations sitting here in a senate estimates committee at 10.30 on a Tuesday night,” he responded.

Fifield said the government wanted to talk to the retailers about how information might best be conveyed to customers.

O’Neill turned back to Morrow. “Mr Morrow, would putting the information on your website cause any harm?”

Morrow responded by revealing that the retailers had asked NBN Co not to divulge it but to “play the role of wholesaler and step behind the curtain” and let them do that instead.

Except, as O’Neill noted, they don’t. She persisted: “But is there a likelihood of any harm?”

“I wouldn’t want to speculate at 10.30 at night either, senator.”

The senator’s allotted time for questions then expired.

The exchange went to the heart of the problem with the broadband rollout and the conflicts within it.

Consumers have a strong interest in knowing whether they actually get what they are paying for on the NBN. As ABC TV’s Four Corners demonstrated this week, increasing numbers feel they don’t.

But aside from generating goodwill, there isn’t much incentive for the other parties to tell them. In some respects, it is in their commercial and political interests to keep consumers in the dark.

Once the national broadband network is complete, the government wants to sell NBN Co and make a profit.

That plan allows it to deem the government-owned enterprise an asset, not a liability, which in turn means it can be listed off budget so its burgeoning installation costs are not included in the bottom line where they would make the deficit look worse.

Detailed information about the real service capacity across the network could boost or damage its saleability, depending on what it shows.

It could highlight differing levels of service available on fibre, copper and cabling, and either uphold or challenge the government’s claims about the quality of the network being adequate to meet the nation’s needs, amended as it is from the original Labor government version that would have offered fibre to the consumer’s door.

The Coalition argues Labor’s version was massively expensive, unrealistic and unnecessary, and that it could not have been rolled out in the allocated time or at anywhere near the estimated cost.

“Tens of billions of dollars wasted by the Labor Party, leaving us with the biggest corporate train wreck ever undertaken by a federal government,” Prime Minister Malcolm Turnbull declared this week. “Now what we’ve done – we’ve got on with the job. We’re playing the hand of cards we were dealt by Labor and we’re building it.”

Before the 2007 election, then opposition leader Kevin Rudd’s original broadband network was proposed to take eight years and cost the taxpayer less than $5 billion, in a public–private partnership. After the election, that changed into a government business enterprise at a cost of $43 billion. A subsequent study, commissioned by the Coalition, put the estimate at $70 billion.

The cost and original time line of the current government’s network has also blown out. Before the 2013 election, the then communications minister Malcolm Turnbull promised it would be completed by 2016 and cost $29.5 billion.

That changed to completion by the end of 2020 costing $41 billion.

The cost estimate is now about $50 billion. But the government says its version will provide as good a service as Australians need and want and will be cheaper and faster to set up than Labor’s.

If information about the real attainable speeds was published, NBN Co might face criticism for blackspots on the network, where the quality of that infrastructure or geography or congestion due to high demand – or all of the above – mean the fastest speeds simply aren’t going to be available. That might also make consumers less inclined to pay for high-speed packages in some places. But the information might also reveal where there is greater bandwidth available and where retail customers are paying for particular speeds but not seeing them realised.

Morrow argues that on the NBN, 80 per cent of the country will get speeds of at least 50 megabits a second and the rest of the country will get at least 25. He says if NBN users are getting speeds a lot slower than that, they should talk to their retailers because there must be something else going wrong.

NBN Co is hinting at a possible reason without spelling it out. Is it possible some retailers are selling high-speed packages to consumers but not paying NBN Co to access the extra bandwidth to deliver them? That might explain why NBN Co says if anyone is going to release the information, it should be the retailers.

In other words, if the consumer isn’t achieving the speeds NBN Co says are possible, perhaps the problem lies with what the retailer has actually paid for.

The Australian Competition and Consumer Commission, which has issued guidelines saying consumers should be notified of any potential limitations in their service prior to sale, has begun a four-year program monitoring broadband speeds in 4000 households. A spokesman told The Saturday Paper it will “also draw out whether issues are being caused by the performance of the NBN, or by internet service providers not buying sufficient capacity”.

Bill Morrow acknowledged that complaints to the Telecommunications Industry Ombudsman about the NBN had increased 159.3 per cent in 2016-17 compared to the year before.

According to the ombudsman, of 27,195 complaints received, almost 60 per cent were about the level of service.

When Radio National presenter Fran Kelly asked Morrow why people were logging on and finding the speeds for which they had paid weren’t there, he said: “That’s a question and a decision by the retailer.”

If there’s any reputational damage to be sustained, NBN Co believes that’s where blame should lie. For their part, the retailers are arguing NBN Cois charging too much for the bandwidth.

NBN Co is currently in negotiation with retailers over pricing. But Morrow is warning retailers, consumers and the government that prices are going to have to get higher if the NBN is going to pay for itself as the government intends.

“The reality is the price people are paying today and the price the RSPs [retail service providers] are paying NBN Co is not enough to repay even the $49 billion that we’re intending to spend on this and that we expect with future applications that price to go up,” he said.

“If the RSPs cannot get the consumer to pay more, then we have a problem.”

The economic model on which the government has built its NBN relies on it being a saleable commodity at the end.

It is expected to both return a profit to the government and fulfil a social obligation to provide the possibility of an internet connection to everyone in Australia, including to those places for which it will incur a loss.

Morrow acknowledges those two requirements are sometimes in conflict.

Kelly asked Morrow if he was at the point of asking the government to change that model and subsidise NBN Co or abandon plans to sell it.

His answer left open that possibility in future: “No, not at this point in time.”

Some have long argued it should have been Telstra rolling out the NBN, and that the original carrier should have been split into a retail and service-delivery entity, with the latter setting up the national broadband network using existing infrastructure.

Instead, the government opted to establish a whole new business that pays Telstra to access its lines.

Bill Morrow says it’s equal to $1000 per premise. “That’s $15 a month I have to collect from each and every consumer out there to pay for these fees that we’re paying to Telstra that none of these other incumbent companies around the world have to do,” he said.

Morrow says he isn’t arguing for a government subsidy, pointing out that even under Labor the NBN was always meant to be a consumer-pays model. But his comments reinforce that, as the broadband network rolls out across Australia, cost will continue to be a major issue unless some of the inherent conflicts are resolved.

And for the government, that cost may not just be measured in dollars and cents.

This article was first published in the print edition of The Saturday Paper on October 28, 2017 as "Fibre to the no".

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Karen Middleton is The Saturday Paper’s chief political correspondent.

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