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Apr 8, 2013

Ninety billion maybes: 13 questions about Turnbull's NBN

Some time this week we will see “the 12-page costing” for the Coalition’s broadband policy. Stilgherrian lists 13 questions to ask as you flip through the pages.

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Malcolm Turnbull

Outrage over politicians manipulating the media to their advantage is as moronic as outrage over fish swimming, so props for another prime propaganda gambit to Malcolm Turnbull.

Today’s Daily Telegraph exclusive is an uncritical rendering of Turnbull’s summary of a document no one’s seen, apart from calling it an “extraordinary” claim and adding two sentences of he-said she-said at the end. Thus the narrative for reporting the Coalition’s NBN policy is framed before the conversation even begins. Again. Hats off.

Turnbull has repeatedly complained about the broadband debate’s quasi-religious nature, though I contend that’s a bit pot-kettle. He’s also resisted publishing even rough cost estimates. “If I put out a set of financials, I want them to be right,” Turnbull said in February, while in the same conversation very carefully saying it was “BT’s experience… that the FTTN approach costs about a quarter of the cost of fibre-to-the-premises and around a quarter to a third of the time”. Clever, that.

Some time this week, the rest of us will get to see “the 12-page costing” that’ll be released as part of the Coalition’s broadband policy. Has Turnbull done the honest thing, and updated all of NBN Co’s estimates with new data based on experience and appropriate risk calculations? Or has he picked every worst-case figure he can find and screeched “cost blowout”?

That is, are mathematics and logic being deployed honestly? Or merely, as Stephen Colbert might put it, to create an impression of maths-iness?

Here’s a few questions to ask as you flip through those dozen pages:

  • What is the basis for the claim that the per-household rollout cost is 40% higher than forecast?
  • Of “the current 50% delay to the schedule” — let’s gloss over the fact that even if the delay is unchanged it won’t be 50% of the total time once we get to the end — what proportion is fixed and done, like the delay in negotiating with Telstra, and what proportion is part of the rollout itself?
  • Do these claims take into account any projected drop in the per-household cost or gain in time taken as contractors overcome initial unfamiliarity with the job?
  • Is there any evidence yet that contractors are achieving these gains, or failing to do so, and if so by how much?
  • “The Coalition’s estimates of the real capital costs suggested they would be more likely to reach $71 billion, not the $37.4 billion claimed by NBN Co’s most recent estimates,” The Tele writes. What is the likelihood of each of these and other potential outcomes, and how was that risk calculated?
  • Is this analysis based on the correct total number of premises, including business premises, or mistakenly using only “households”? (Don’t laugh. The Economist Intelligence Unit got this number wrong by six million.)

And on broadband policy more generally:

  • In February’s “Our Plan: Real Solutions for all Australians“, the Coalition promises to deliver “high speed broadband” and “super-fast broadband”. What are the definitions of those terms?
  • The Coalition promises to “upgrade broadband to all areas where services are now unavailable or sub-standard”. What is the minimum standard that must be met, and how might that standard change over the next decade?
  • “We will roll it out faster to high priority areas,” the Coalition writes. What factors determine whether an area is high priority?
  • Labor’s NBN policy promises to deliver entry-level NBN capability at the same price regardless of location — essentially a social equity and regional development goal. Does the Coalition policy also support that goal?
  • If specific technologies are mentioned, is there clear differentiation between technologies that are available off-the-shelf today and those that are only being trialled or even still just experimental?
  • If specific data transmission speeds are mentioned, is it clearly indicated whether these are theoretical maximum speeds or those likely to be obtained in real life?
  • Different broadband technologies have different capabilities in terms of upload speeds relative to download speeds, which in turn affect the ability for individuals and businesses to be creators and participants in the digital economy and culture, rather than merely passive consumers. How does the Coalition policy discuss and reflect this issue?

These questions should equally be put to Labor, of course.

Delays and cost variations seem inevitable with big projects. The Tele calling the NBN’s 4% capex increase a “blowout” is just tabloid-screech. It’s a tiny figure for an unprecedented civil project. Yet there’s a point where reasons become excuses, and if we reach that point then NBN Co and its political masters will try to smother the problems with rhetoric.

Are we at that point? “Potentially cost an extra $45 billion” sounds a bit like pick-and-screech to me but, as my maths teacher used to say, let’s see the working-out.

Stilgherrian —

Stilgherrian

Technology writer and broadcaster

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45 thoughts on “Ninety billion maybes: 13 questions about Turnbull’s NBN

  1. Warren Joffe

    And what about some honest quoting from Achmed with context:

    “Four Corners reveals tonight” as if it was to come tonight! It was 2008. And when you search you find that 1. in respect of the Fairfax takeover he was acting as a lawyer for his US bondholder clients, and 2. the context for the Tim Costello quote, which was not necessarily adverse anyway, might have included this from Greg Barns in Crikey:

    “In any event, I don’t know of anyone else who could have led the ARM as effectively during that campaign. Turnbull’s work ethic and feel for the campaign was second to none. This was a person who would send me emails at two in the morning; who would ring me at all hours of night and day with suggestions, ideas and sometimes just to chew the fat and let off steam about the campaign. He traversed the country, never once complaining about the grueling schedule.

    When our polling showed us heading south in the final days of the campaign, Turnbull rightly decided that we should switch the advertising strategy from feel good, nationalist sentiment ads, to information style advertisements which would help to combat the lies peddled by the monarchists about what a republic would mean in practical terms for Australia. It was a strategy that helped arrest the slide, and our polling showed we lifted our vote in the final week of the campaign.

    There are very few people in Australia who actually commit their own money to a cause knowing that they will get little or nothing out of it. I had a campaign budget approaching $5 million and Turnbull contributed the lion’s share of that money. Other high profile republicans either never put their hands in their deep pockets, or bitched and whinged about the campaign and Turnbull’s role in it.

    Tim Costello’s reported portrayal on tonight’s Four Corners program of Turnbull as the Great Ayatollah of the republican movement is inaccurate  — perhaps understandably so because Costello played no substantive role in the referendum campaign.

    Yes, Turnbull was the intellectual powerhouse —  he is head and shoulders above most of his parliamentary colleagues in this sense  — but he was open to ideas. I had many a session with him during those intense months from May 1999 until Referendum Day in November of that year. I found him receptive and he never once screamed or ranted at me.

    Finally, let me share a small but touching vignette about Turnbull that I think speaks volumes for the man. On the Monday before the Referendum he and I walked from the Park Street HQ of the campaign to do a media gig at Taylor Square in Sydney. As we walked he turned to me and said whatever happened on Saturday, the campaign team had done a great job. He meant it  — after we lost the Referendum he never once launched into recriminations against me or other campaign team members.”

  2. Warren Joffe

    @ Someone

    Let Achmed down gently. Please explain to him that I’m not a typical Liberal supporter (cf. “as a Liberal supporter”) but someone who had to give up teaching because the irredeemably thick were beyond my level of patience. (I could usually pick the boy at the back who was just stirring by pretending to be thick. Maybe? No, I’m afraid not this time).

    Try explaining that even $5000 for one’s own connection to FFTP because one is convinced (e.g. by the success of one’s previous judgments in the business one is running in rented premises, or just because one is – and free space at grandma’s keeps the costs low) that one has a great idea that needs 100+Megabit/sec uploads is equivalent to somewhere between $5 and $10 a week in interest cost. Only affordable by the rich of course! OK he’s a nerd who has no friends he can move in with where they already have FTTP and has been kicked out of uni where they have 1 gigabit/sec. OMG, he’s Jesus and no one has been John the Baptist (not a good career choice that last anyway).

    And, when Achmed is over his excitement and had his cup of Milo can you ask him what those notes on Turnbull and his character have to do with anything. Makes him sound like the sort of person who would be great to have on one’s team with huge energy, relevant experience and a successful track record in business. When was the last time we had a government with more than one Rhodes Scholar led by a Rhodes Scholar. If only Keating’s Turbull-esque drive had been infused into Beazley under Hawke’s Prime Ministership. (Greg Blewett did a pretty good job dealing with AIDs too).

    What a contrast between Government and Opposition Achmed has drawn attention to. A man like Turnbull willing to be part of the team, and not even Shadow Treasurer under Abbott while all those union puppets and ex puppet masters on the government side are at each other like mangy dogs fighting over scraps.

  3. Warren Joffe

    @ David Hand

    Don’t bother with Achmed. He is totally innumerate and without commercial or economic literacy. He also lacks the intellectual rigour to understand which assertions such as he makes are totally unconvincing E.g. he seems to think that quoting government ministers on the impact of the NBN’s own self-justifications is persuasive and worth more than a row of beans.

    He and almost the whole of the cheer squad for the full Conroy are a hard-to-explain bunch of people whose business nous is obviously nil, so are hardly going to be cutting edge users of 100Megabit/sec uploads any time soon, let alone 1 Gigabit.sec. (Just make a note if you come across any of them who claims to be a financial adviser to avoid him like the plague).

    The idea that any business that has a future is not going to take off because of a failure to invest something up to $5000 for fibre to the premises is just balmy beyond belief. And the idea that renting makes a significant difference is also ridiculous. Mind you, the tenant who really wants to full FTTP may have a bit of an argument with his landlord about who pays for the connection and how much. He will of course have to sound plausible when he points out that there is a greenfield site, or an ugraded one, only a couple of miles away and that he won’t feel like renewing his lease if the landlord doesn’t come to the party. In reality, if he has a 5 year renewable lease or something longer he will invest $5000 himself and get a tax deduction for the amortisation.

  4. Achmed

    The assumptions underpinning the Coalition’s costing of Labor’s NBN have today been torn to shreds at the Joint Committee for the National Broadband Network.
    “The robustness of NBN Co’s Corporate Plan, which the Government had independently verified by KPMG and Greenhill Caliburn, has been reaffirmed again today,” the Minister for Finance and Deregulation, Senator Penny Wong, said.

    “Mike Quigley, CEO of NBN Co, has demonstrated that the NBN Co Corporate Plan is sound and that the Coalition assumptions about the cost of the project are wrong.”

    The Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy, said: “In evidence given to the committee, Mr Quigley demonstrated that:

    •The actual cost of building the NBN to each home and business is between $2,200-2,500 per premise, not $3,600 per premise as claimed in Mr Turnbull’s policy document.
    •NBN wholesale prices will fall in real terms, not triple as claimed in Mr Turnbull’s policy document.
    •The NBN remains on track to be completed by 2021, not 2025 as claimed in Mr Turnbull’s policy document.
    “This evidence proves that the assumptions underpinning the Coalition’s costing of Labor’s NBN are a fraud.
    “If Mr Turnbull had any credibility at all, he would admit that he has based his costing on a lie.
    “He should also immediately stop misleading the public about the prices people pay for the NBN now and what people will pay in the future.
    “If he doesn’t, it’s just another sign that Mr Turnbull will say anything to hide the fact that his plan would leave Australia with the broadband equivalent of the Sydney Harbour Bridge with only one lane.”

  5. Warren Joffe

    Can someone tell me where I can find a nice mountain with a view, preferably including a nice lake or, better still, the sea? It has to be in the electorate of an Independent MP who can get me “superfast broadband” no matter the cost so I can work 24/7 producing mountain-porn, the latest innovation to help Australia’s smart people keep ahead of the Chinese.

    But while I am at sea level may I keep to the opinion that there is a huge burden of proof for a Minister whose whole career has been as a factional careerist numbers man and presents us with a faster broadband project costing 10 times the one that, only 15 months before was his election promise – before the experts he hired and the bidding process showed him he didn’t know what he was talking about. He hasn’t even tried to discharge that burden of proof, instead leaving it to self-interested individuals and young nerds without a skerrick of economic or financial literacy to create a buzz of enthusiasm for it. A bit like the previous enthusiasm about “the greatest moral issue of our day” which has been steadily subsiding as it becomes apparent that a government relying on Tim Flannery is away with the pixies. Talk about the Charge of the Light Brigade (“there’s not to reason why, someone had blundered”): Conroy is not so much a Stalin figure as a Lord Cardigan who can give orders but not deploy the brain to any good effect.

    By contrast, though he must be playing politics as well, we can count on Turnbull being able to rely on a successful business career and one, most important, which made him a fortune out of Internet based communications. Of course he can’t produce useful and reliable figures until Conroy and the NBN management provide the financial information that they are obviously too embarrassed to admit to. What a pity they can’t even imagine the public wanting to invest in the NBN as a good investment because then they would have to think of preparing a prospectus for a public float. Fat chance!

  6. John Bennetts

    Before anyone expresses an opinion that wireless 4G connection is acceptable, let me recount my experience.

    Due to deteriorating wire which Telstra refused to maintain, I eventually was forced off ADSL and onto 4G wireless, the only other available option being full satellite, with all the delays that is entails.

    Most school days I lose connection due to congestion and subsequent slower-than-slow data speeds. Some evenings, ditto.

    Anything better than the old dial-up 54kbps is average.

    I am limited to 300GB total per month, so movies and Skype are out of the question. My VOIP phone is only a memory, so trunk and international calls come at full freight prices. Even voice-only Skype drops out. I have business in China and a daughter in Canada with whom communication is limited to typed stuff and photos sent via Dropbox or Facebook.

    For this, I pay more than I formerly paid for unlimited monthly usage of ADSL at the same address.

    I’d kill for an FTTP connection. And yes, I am out of town, but not far – about 2km as the crow flies from the centre of a town with population of 15,000+ in one of the highest average household income non-capital city local government areas in Australia.

    The sting in the tail? Because my phone bundle no longer includes a broadband connection, I have lost the discounts which I had for years previously. Telstra even charged me to break the bundle when I moved to wireless, even though this move was made necessary by their own failure to provide the service as contracted and paid for.

    Nice.

    No wonder the government has adopted Plan B (or was that Plan NBN?).

  7. michael r james

    @Achmed at 3:48 pm
    ” By 2034, the entire Government investment (including the interest) will have been repaid by the users of the network, leaving the Government owning a valuable asset (the NBN network) and no associated debt.”

    Exactly and isn’t that one of the prime reasons the Libs hate it. This huge flow of funds should be going thru the hands of big biz instead of government so that it is big biz who takes their rent. This is what they mean by “free market”, innit?

    Stilgh should also do a critique of Alan Kohler’s strange quasi-defense (if that is what it was) of Turnbull’s intentions in last week’s Oz. There was no critical assessment, simply (apparent) acquiescence to the most horrible of outcomes not even mentioned above: removal of the structural separation of Telstra. Indeed NBNCo would be forced to serve the 10-20% rural and difficult to reach (unprofitable) market segment while Telstra would have carte blanche to “compete” in the cities. Naturally this will cripple NBNCo and make it appear a failure (of a “government quango”) to be competitive in a “free market”.

    Overt is that this return to status quo ante plus FTTN, will be the creation of a two-tier telecoms system: those willing and able to pay the proposed $2,000 for the FTTH connection and the rest who will have to cope with a deteriorating copper system (which of course Telstra will manipulate to deliver even worse performance pour encourage les autres to pay up for acceptable service; sound familiar?)

    But even that has its flaws. Since residency is so fluid these days, especially amongst the young, tech-workers and upper echelon workers, what happens when they change domicile: do Telstra put in FTTH in their new home for free (or some pro-rata arrangement), and what do they charge the new occupants who could feasibly get FTTH for free?

    But Turnbull has boxed himself into a corner so it is probably going to happen despite his own best instincts (unless I am crediting him with more sense than he deserves).

  8. Rob

    “Delays and cost variations seem inevitable with big projects.”

    Not always. Australia’s biggest communication project before this was (or even will still be) the overland telegraph in the 1870s (http://en.wikipedia.org/wiki/Overland_Telegraph).
    It was completed on time, and I understand also on budget. Someone recently converted the cost of this project (₤128,000) into today’s dollars, and it was remarkably similar to the initial projected cost of the NBN.

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