I’ve sat on the sidelines of the NBN discussion, listening to the arguments from many supporting NBN 2.0, that is FTTP to 90% of Australia. I am pleased to say I am a supporter of this goal. Now is as good a time as any to start the spreading of fibre deep into the community and connecting up homes, businesses and government directly, writes Bevan Slattery.

It is time to build over the legacy copper network which has, and will continue to serve us well for the next decade or so. Now is also the time that this must be done with the best minds the industry has to offer, with experience in designing, building and maintaining fibre networks, carrier interconnectivity, long haul transmission networks, data centres and providing wholesale access. Under the cloud of the single largest government deficit ever is the overwhelming obligation that the regulatory framework and financial principles for the construction and operation of this network are met by the most stringent rigor and public scrutiny.

The taxpayer, the consumer and the companies considering vending in assets all need to understand the structure of the NBN Co and how it intends to provide a return.

Finally, NBN 2.0 needs true industry support and to do that the industry needs to be consulted in an open and transparent manner and by bodies that are recognised, as industry bodies capable and equipped with a constitution and mandate for same. So with these positive statements, there needs to be a dose of reality added to the mix.

NBN 2.0 is already perilously close to being doomed. The main reason is that it is an idea or concept that is being rushed to construction with no financial and social modeling providing any basis for investment. Without this, the Senate is unlikely to proceed with approving the bill and taxpayer investment in the NBN.

Even if NBN 2.0 gets passed by the Senate and commences construction in Tasmania this year, it will be faced with the cold, hard reality that NBN Co does not have the intellectual property to undertake this task immediately and has very few of the required regulatory reforms and access issues in place for the most cost effective and efficient rollout possible. This is incredibly important because in the absence of a well defined investment plan for the NBN, the Senate will almost be compelled to put the Tasmania test bed under intense scrutiny to ascertain issues such as cost per home passed, cost per connected home, utilisation rates, interconnection and wholesale access systems and community benefit.

I would suggest that the Senate will have a field day pulling NBN 2.0 apart and focusing on poor initial take up rates at potentially less than 10%, pushing the cost per connected home through the roof (possibly as high as $20,000-$30,000 per connected household). If the initial take up rate is this low the Senate could well argue that it would have been less of a burden on the taxpayer to buy every household in Tasmania prepared to pay for NBN 2.0 with a new car rather than provide them a broadband service. Sure it’s a cheap shot, but it’s a quote that will attract headlines.

An NBN business plan is just so fundamental.

Without it no public company is legally able to vend in assets to NBN Co. It would be a breach of their fiduciary duties to do so. There may be companies prepared to vend in some or part of their assets on the basis that a guaranteed return is provided via construction contracts by a parent or related party, however, probity would most likely then become an issue. This fact needs to be accepted.

Additionally, everyone needs to get a grip on the fact that NBN 2.0 will not make a return, let alone a commercial return until at least 2020.

I agree with Grahame Lynch, I broadly agree with Henry Ergas on this. The only possible way NBN 2.0 can provide a direct or commercial return for investors (whether it be cash, debt or assets) is if the government contributes approximately 70% (or based upon the headline number here $30B) as a passive or indirect investment in which the ‘return’ will be intangible such as the general advancement of telecommunications in Australia and possible improvement in overall GDP. It should be also noted that to provide a return, it would also require the retirement of the existing copper network at some stage in the future.

NBN 2.0 is only going to happen if it has learned the lessons from NBN 1.0. So far, that doesn’t seem to be the case. We seem to be pushing a process to meet a deadline rather than roll out a sustainable and technically brilliant broadband network. 

NBN 2.0 is at risk of failure from the same people who think they are helping. Yesterday Paul Budde publicly labeled Grahame Lynch as a “Luddite” at CEBIT for having the audacity to ask where the commercial return for NBN 2.0 will come from.

Somehow Paul Budde seems to think that there does not need to be public scrutiny and accountability for the single largest infrastructure spend in the nation’s history. His cavalier attitude in saying “she’ll be right mate, E-Health and Smart Grids will make up the revenue and be driving applications for NBN 2.0” severely undermines his credibility as an analyst and the Minister through his apparent association. 

It is not the people who are asking the questions that are jeopardising NBN 2.0, but the zealots who are racing forward with reckless abandon. If we do not proceed in a well constructed and transparent process with clearly defined goals for NBN 2.0 including social and economic then NBN 2.0 will either not proceed, or be halted mid-construction when the reality does not meet the hype and shareholders (taxpayers) become disillusioned. It’s happened all before. The year was 2000 and they called it the ‘dot com bubble’ or more aptly put a time when you could “build it and they will come”.

Bevan Slattery, CEO Pipe Networks