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Tuesday, 18 June 2013
Page: 6182


Mr TURNBULL (Wentworth) (12:16): I want to draw honourable members' attention to the dissenting report by the coalition members and senators which sets out some very disturbing facts about the disastrous state of this project. The debate over the NBN, of course, has been contentious, but the rollout has been proceeding for long enough now for there to be some objective facts on the ground and, indeed, in the ground.

The first point that the coalition have made is that the fibre rollout is well behind schedule. The original NBN Co. corporate plan published at the end of 2010 forecast that fibre would be available and connected to 950,000 brownfield and 319,000 greenfield premises by June 2013. As at the end of May the fibre network had passed 71,000 brownfield and 32,000 greenfield premises. That is a catastrophic shortfall. It is not just a question of falling short of the 2010 forecasts. By brownfield, of course, honourable members understand I am talking about the already built-up areas as opposed to new developments. I mentioned that the first forecast was 950,000 to be passed by end June 2013. In August last year their new corporate plan slashed that down to 286,000, then in March 2013, just a few months ago, that target was again reduced to between 155,000 and 175,000, and as of mid-May the fibre network had passed only 71,000 brownfield premises. This is one shortfall after another.

There have been cascading forecasts, the target is dropping down, and it says something about the management of this business and their capacity to forecast. They set a new target in August last year, they then had to dramatically reduce it in March this year, and now it appears they are going to fall short of a target that was set 90 days prior to the target date. There are no forecasts in the corporate plan that one can take seriously.

This slowness of the rollout is a very significant issue. Honourable members will understand that one of the arguments in favour of the National Broadband Network has always been that having everyone in Australia connected to very fast broadband will deliver economy-wide benefits, big spillover effects, externalities. We do not doubt that those benefits are there to have ubiquitous connection to very fast broadband. The big question is: what is the incremental benefit, if any, between having people connected to very fast broadband at the speeds it can be achieved under the approach we favour—in most built-up areas, fibre-to-the-node—and having fibre-to-the-premises? The one thing that is clear—and there is no argument in any of the literature or in experience—is that having everyone connected to very fast broadband, even at speeds much slower than the peak speeds available on fibre, is a real benefit. The problem that we face, therefore, with the NBN's slow rollout is that we are not getting the benefits of ubiquitous connectivity any time soon, and perhaps we might not be getting them for 20 years or so. At the current rate of progress the completion of this network will take many decades.

In our re-examination of the NBN's financial model, in our alternative policy, we assumed that it would take another four years to complete. That is a very optimistic assumption. At the moment the NBN is passing less than a quarter of the number of premises it should be passing, even according to its revised corporate plan. For a project that is passing around 350 premises a day, as it is at the moment, to seriously imagine that in 18 months or so it is going to be passing well over 6,000 a day is just incredible.

The reality is that this project is going to be long delayed. That means that the benefits of universal or ubiquitous connectivity will also be long delayed. It is cold comfort to say to somebody—and there are at least two million premises in Australia in this category that have, effectively, no broadband at all since they do not have broadband at a speed that would enable them to watch a YouTube video—'Don't worry, you are going to get the Rolls Royce option, the fibre-to-the-premises option, in 10 years or 20 years time.' That may well be beyond the lifetimes of some of the occupants of these premises, and it is certainly beyond the time their children will be at school.

The issue really boils down to a fundamental one of management. There is an argument about technology, but even if you accept Labor's argument about technology the fact is that the project is just not getting there. One of the problems that we are seeing is that the civil contractors who have been employed—Silcar, Transfield, Syntheo and Visionstream—have not been delivering the premises that they have been contracted to deliver. It is common knowledge in the industry that they are all losing a huge amount of money. The word on the street, as it were, is that these contractors will need to have contract prices increased by something in the order of 30 per cent of the current contracted rates if they are able to make any money or any margin at all.

That being the case, what does that tell us about the reliability of the NBN Co.'s cost forecasts? It has a corporate plan that its management tells us is based on the current contracted costs, yet we know that the contractors are going backwards financially. This has had some pretty dramatic results: the Silcar CEO Peter Lamell left the company in May; the Service Stream managing director, Graeme Sumner, left the company in April; and the Syntheo joint venture appears to be about to be dissolved.

The failure to have satisfactory commercial relationships with the civil contractors is a profound failure of the NBN Co., because it does not have a huge civil workforce of its own and is not proposing to have a huge workforce of its own, although it has sought to take over the management of the construction in the Northern Territory. But it needs to have a satisfactory relationship with its civil contractors and it needs to have contracts with them that enable them to pay their subbies a fair price and make a margin for themselves. If they cannot do that, it simply will not continue. We have set them out in some detail in this dissenting report.

I spoke earlier about the asbestos issue. I will not go over all of that ground again. But the coalition are very concerned that the Commonwealth will be liable for asbestos risk, notwithstanding that it is in Telstra pits that are being remediated by contractors working for Telstra. As you know, the Work Health and Safety Act imposes on NBN Co. a duty to workers, including workers employed by—for example—Telstra or contractors to Telstra if their work is influenced or directed by NBN Co. It is very arguable, it seems to us, that NBN Co. is in that position of influence and therefore could have liability for this asbestos risk.

We are particularly concerned that the issue of asbestos has been well-known for a long time and this does not reflect well on either Telstra or NBN Co. There has clearly been a failure of supervision on the part of both companies. I simply note and draw the attention of honourable members to the comments that we have made there.

I want to now turn to the question of the fixed wireless rollout, which has not had enough public debate or discussion because the fibre-to-the-premise rollout is so much bigger. Fixed wireless is the technology solution for about four per cent of the country. Under the plan, 93 per cent gets fibre-to-the-premise, four per cent gets fixed wireless and three per cent gets satellite. I might say that under the approach that we would sake many of those premises or households in the fixed wireless footprint at present will get wire line, fixed line, very fast broadband. They are in towns that have less than 1,000 premises, which will not get fibre-to-the-premise under Labor's approach but which will be eminently suitable for a vectored VDSL fibre-to-the-node solution of the kind that we are proposing. There are many smaller communities in rural and regional Australia that will get much faster and much more convenient broadband services under our approach than they will under Labor's approach.

Looking at the way the NBN Co. is tracking at the moment, it has been reported that even on their best case scenario their fixed wireless network will cover only 31,291 premises by the end of June, which is only 45 per cent of the 70,000 target. The explanations for this shortfall given by the NBN Co. management frankly beggar belief. Their explanation is—and this has been given by the minister as well—that there has been an unanticipated level of tall trees in rural and regional Australia. I will quote the evidence from the NBN chief technology officer, Gary McLaren, in estimates of 30 May in which he talked about these trees. He said:

We have always expected there will be some areas, mainly due to vegetation—trees and the like—that will cause those installations to not be able to pass through that qualification step …We are seeing those being slightly higher than we would have originally expected.

Being ambushed—bushwhacked—by the presence of tall trees in regional Australia is a fairly pathetic excuse. But it does underline the poor planning and the poor management of this project.

Finally, I want to touch on the very, very troubling issues about management. We have at the moment a new chairman, Siobhan McKenna. She has been on the NBN board from the outset but she became chairman on 21 March, replacing Harrison Young. She has said publicly that she is taking a much tougher approach to management. She has said that she does not want Senator Conroy, the minister, being able to communicate directly with NBN Co. Chief Executive Mike Quigley, although Senator Conroy seems to have said that he will not play along with that.

More troublingly, it is being widely reported—and has not been anywhere denied—that Siobhan McKenna has, on behalf of the board, sought the dismissal of the Chief Executive, Mr Quigley, and that she has no confidence in him. If this were a publicly listed company, belonging to a bunch of superannuation funds and private investors, and there was published in the newspaper a report saying that the chairman had no confidence in the chief executive and wanted the chief executive sacked, that matter would have to be resolved within hours. And, yet, we have at the moment with this company, the biggest infrastructure project in our history, a situation where the management is tearing itself to pieces, the board is opposed to the chief executive—it sounds like the Labor Party caucus, frankly—and there is no denial, clarification or confirmation. When Mr Quigley was sought to be questioned about this in estimates, as we have set out in this dissenting report, Senator Conroy prevented him from answering any questions. This project, sadly, is in utter chaos. This dissenting report, which I commend to honourable members, sets out in some detail the sorry tale of mismanagement that the NBN project is today. (Time expired)