Minister for Communications

The Hon
Malcolm Turnbull MP

Minister for Communications

Strategic Review of the National Broadband Network

The Hon Malcolm Turnbull MP
Minister for Communications

Senator the Hon Mathias Cormann
Minister for Finance

Thursday 12 December 2013

The Strategic Review of the National Broadband Network recommends the project be completed using a mix of technologies to save $32 billion, keep monthly bills lower and deliver the NBN to all Australians four years sooner than under Labor’s plan.

The Strategic Review finds the Government’s goal of completing the NBN in six years is achievable.  By 2019 nine out of ten Australians can have access to download rates of at least 50 megabits per second (and as many as seven out of ten to 100 megabits per second or more).

The Review estimates Labor’s all-fibre NBN will cost $73 billion and take until 2024 to complete, and increase average broadband bills by up to 80 per cent to meet the rate of return targeted by the former Government.

Following the September 7 election the Ministers for Communications and Finance asked the new leadership of NBN Co (the publically-owned company building the network) to conduct the Review and evaluate whether fast broadband could be delivered sooner and at less expense.

NBN Co carried out the Strategic Review with the assistance of three external advisors – the Boston Consulting Group, Deloitte and KordaMentha.

The Review reveals the NBN is in a fundamentally worse position than the Labor Government at any time disclosed to Parliament or the Australian public:

  • Three years into the rollout, it is two years behind due to “an unrealistic assessment by key internal and external stakeholders of the complexity and time required to complete the task”.
  • The current NBN Corporate Plan overestimates revenues up to 2021 by $13 billion.
  • Occupants of less than a quarter of established premises ‘passed’ by the NBN fibre network can order a service and be confident of receiving it in a reasonable and predictable timeframe.
  • NBN Co’s persistent underperformance reflects “a lack of deep internal experience in complex infrastructure, construction projects and project management”.
  • Key decisions were taken “without appropriate commercial rigour and oversight”.
  • The company’s internal culture is corrosive of performance: “A fear of being blamed for mistakes generated a lack of willingness to accept responsibility in some functional groups.”
  • NBN Co’s previous leadership clung to unachievable Corporate Plan forecasts “notwithstanding clear factual evidence to the contrary”.

The result has been a comprehensive failure of Labor’s plan for the NBN, which the Review finds:

  • Will take until 2024 to complete, against the 2021 finish claimed in the NBN Co Corporate Plan.
  • Will require $29 billion more funding than forecast in the Corporate Plan.
  • Will not earn a sufficient return on investment to stay off-Budget.

The Strategic Review’s findings that the NBN rollout and revenue targets were never achievable, and the network only reaches 3 per cent of Australian premises after four years and $6.4 billion of funding stand as an enduring testament to the incompetence of the Rudd and Gillard Governments.

The Government must now deal with the consequences of Labor’s irresponsible management of the project.  These include spending commitments of $15 billion locked in under Labor, and the urgent need for a fundamental transformation of NBN Co’s culture, organisation and leadership.

The Government has already addressed NBN Co’s capabilities by appointing an experienced Board and senior executives with the skills to manage the project in a more commercial manner and deliver improved outcomes. 

The massive financial commitments inherited from Labor, continued deterioration in the rollout schedule, the time needed to pilot new technologies and the restructuring of NBN Co required to address the problems detailed in the Review have significantly increased the cost of a viable alternative approach to the NBN.

A multi-technology rollout, which aligns with current Government policy, is estimated to cost $41 billion rather than the $29.5 billion estimated by the Coalition in April.  This estimate allows for an increase in the project’s contingency reserve from 10 to 20 per cent, and still saves $32 billion compared to continuing with Labor’s plan.

The Government remains committed to limiting its equity investment in NBN Co to $29.5 billion.

At the same time, the accumulated delays and state of NBN Co mean the Government’s aim of ensuring nationwide access to fast broadband by 2016 cannot be achieved.  The Government will work with NBN to search for ways to accelerate the rollout in its early years.

The Government intends to reprioritize the NBN to ensure underserved areas receive priority.  It will shortly release the initial results of an assessment of broadband quality areas of Australia by the Department of Communications.  This will guide the future NBN rollout schedule.

Key findings of the Review regarding a rollout using a mix of technologies are:

  • Such a plan, including upgrading existing HFC infrastructure and deploying both fibre-to- the-premise and fibre-to-the-node, will reduce funding by $32 billion assuming Government equity is capped at $29.5 billion.
  • The reduced costs compared to Labor’s NBN means retail broadband prices need not rise.
  • About 91 per cent of premises in the fixed-line footprint will have access to download rates of at least 50 megabits per second by 2019. Under Labor’s plan, 43 per cent of Australians in the fixed-line footprint will still be waiting for very fast broadband at that date.
  • Under plausible assumptions about revenues, an NBN using an optimised mix of technologies can earn returns roughly equal to the Government bond rate.

Importantly, all forecasts in the Strategic Review have been arrived at independently by NBN Co and, in the view of the company and its expert advisors, are both conservative and achievable.

The Strategic Review prepared by the company has been released in full by the Government, except for redactions of legally and commercially sensitive material made at the request of the company.

As a result, for the first time the Australian public has access to the same information as the Government about this project.

The advice contained in the Strategic Review will be a crucial input into Government policy, setting out as it does the facts on the current NBN and realistic and informed analysis of options to vary its design and delivery.

The Government remains committed to completing the NBN as quickly and cost-effectively as possible and managing this taxpayer-funded project with complete transparency.

STRATEGIC REVIEW OF THE NATIONAL BROADBAND NETWORK 

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