Speech to the CommsDay nbn forum Sydney
16 November 2015
'BRINGING IT ON': THE NEXT CHALLENGE OF THE NBN
E & OE
Well thanks very much John Stanton and if I can acknowledge Grahame Lynch and the great journal of record that is CommsDay. Michael Lee, a predecessor as Communications and Arts Minister. In fact Michael was saying he was the very first Minister to combine both those responsibilities together. And it's terrific to have the Arts back with Communications. I think the rationale was that Communications needed a bit of funking up. So the Arts certainly gives us the opportunity to do that. And I'm also greatly heartened when I look at Michael, because when you've been in a portfolio for a period of time it can have an effect on you. And Michael has no obvious twitch, so that's something that I'm relieved about.
John, can I acknowledge that you've been a good tutor to me in the brief time that I've been Minister thus far. And I think you're very hard on yourself in terms of your presentation this morning. John, I think there was a lot of sizzle in what you had to deliver today. NOST who can't get excited about that. Working Committee 58, if we didn't think it could get any better, we then had Working Group 53 and then 63. And the mother of them all, Working Committee 68. Good work there John.
Friends, it's terrific to be here and I do also need to acknowledge the chair of nbn Ziggy, who's doing such a tremendous job helping to bring order to bear in what was previously chaos.
And Ladies and Gentlemen, just looking around the room, I know they say politics is blokey, but as I look around this room, I feel much better about my profession. So thank you very much. Clearly we have a bit of work to do, in terms of STEM in schools, and in particular, for the other half of the population.
After listening to John's introduction, you might ask yourself, what qualifications does someone who, for the past five years, has been the Minister or the Shadow Minister for Disability and Ageing have to be the Minister for Communications. Fair enough question to pose to yourselves.
Let me just take you through briefly what I think might be some helpful background. I have been responsible for the rollout of the National Disability Insurance Scheme. It is a $22 billion scheme. Not $22 billion in total. At full rollout it will be a $22 billion scheme, each and every year. That's the annual budget of the NDIS. So they're big numbers. nbn involves big taxpayer numbers as well.
National Disability Insurance Scheme, it kicked off three years ago and is due to conclude in 2020, similar to the nbn. It has a massive ramp-up in 2016 -17, again, not dissimilar to the nbn. So while my area of responsibility previously was in social policy, I have had carriage of what is a massive venture on a huge scale, with a very challenging ramp up in a relatively short period of time. So there are probably worse backgrounds to have coming into the communications portfolio.
I also did have the benefit of representing Malcolm in the Senate for the last couple of years to give me a broad understanding of the issues in the portfolio. It's terrific to have this gig and this particular responsibility.
And as I've had this role for the last eight weeks or so, I've spent a fair bit of time out and about, in the field, in different parts of the country, looking first hand at the rollout of the nbn and talking to members of the community. I have got to say, there is a fair bit of excitement about when you talk to people about the nbn, about its rollout and about the prospects that it has for their homes and their businesses. As you know, as a government, we are absolutely committed to rolling out the nbn as quickly as possible and as positively cost effectively equitable as possible.
Our Prime Minister Malcolm Turnbull has been talking a lot about innovation, in fact most Ministers are thinking about changing their middle names by deed poll to "innovation" to get with the zeitgeist, and there's no doubt the nbn will be a key facilitator for innovation in the nation, the nbn in a sense will be the sinews of the economy.
We recognise that fixed line does remain the best option still for the majority of Australia's national network. There has been a lot of talk about mobile broadband, and the extent to which it can be a substitute or replacement for fixed line broadband. To date however, the experience is most consumers have preferred fixed line networks, and this is backed up by recent data showing that fixed line access to the Internet continues to dominate.
For instance the latest 'Leading Indicators' report released by my Department's Bureau of Communications Research shows that the data downloaded over fixed line networks grew to 1.35 million terabytes in the three months ending in June 2015.
In comparison, the volume of data downloaded via wireless devices was approximately 39,000 terabytes for the same quarter. This represents less than three per cent when assessed against fixed line data consumed.
This year, our election policy commitment for the multi-technology mix became a reality. On the ground the FTTN rollout is already gathering steam. More than 1,500 nodes are now installed along suburban streets and nbn work vans are appearing in increasing numbers. In New South Wales services are available to 22,000 users. And later this month the first FTTN services in Queensland will go live in Bundaberg.
Small scale construction work to test rollout methods in HFC areas has also started in the major capitals.
And at the other end of the spectrum, remote Australians are tantalisingly close to having a first-rate broadband service following the successful launch of Sky Muster last month.
This is a far cry from the situation we inherited just two years ago.
Even our redoubtable Prime Minister Malcolm Turnbull opened his remarks to the first CommsDay 'NBN Rebooted' conference by noting that getting the nbnproject back on track; completed in a reasonable timeframe; and at a reasonable cost, would be a "daunting challenge".
For the record, when the Coalition took charge the rollout was three years in, and the equivalent of two years behind. There was a lot of ground to make up.
In brownfields, the network stood at only half the company's planned 'premises passed' target .
But even that metric was flattering. Around one-in-three of those premises 'passed' were not actually connected in any way to the nbn. Progress, in an operational sense, was glacial. And what's worse, a time-consuming but necessary re-work program lay ahead.
In Tasmania a new contractor was needed, just to do the clean-up.
And across all mainland rollout sites there were multi-dwelling units and other complexes to revisit. These were deemed too hard, and had simply been skipped in the first pass.
Throughout his two years as Communications Minister, Malcolm wrestled gamely with the nbn tiger.
Beginning with a new statement of expectations — which sought to stabilise the project — and a baseline Strategic Review that tested our policy assumptions and recalibrated the way ahead. This was followed by:
- a policy audit;
- a broadband quality and availability project;
- a cost-benefit analysis and regulation review;
- a review of the fixed wireless and satellite programs; and
- revised agreements with Optus and Telstra — allowing fibre to the node and HFC to be added to the multi-technology mix.
To some of you, going over these entrails may seem a little tangential.
Yet for legislators and public policy makers, this type of foundational work is the only basis upon which such a mammoth undertaking should proceed.
Our policy remains technology agnostic.
We expect that nbn will continue to review its practices and choose the most economical and time-saving technology option for a given area.
Turning the nbn around
As we have often said, the nbn is the largest and most complex infrastructure project ever started in Australia. It is a national enterprise in the most literal sense – extending down every suburban street, spanning thousands of square kilometres in fixed wireless coverage, and beaming in from 36,000km overhead.
At the outset, I can share with you that I am confident the right team is now in place.
With Ziggy Switkowski at the helm, we have one of the most experienced telecommunications executives in the country. And an executive management group led by Bill Morrow that is focussed on better commercial outcomes and and continual process-improvement.
As you know, our policy has always been to deliver the nbnsooner, more affordably for consumers, and at less cost to taxpayers.
A critical input informing our approach was the highly detailed Cost Benefit Analysis.
Among other things the report found that most users were not willing to pay more for higher download speeds.
This assumption has been borne out in the Australian context. There are now more than 400,000 end-users on fibre in brownfield areas, but less than 20 per cent of them are using the nbn's top speed.
At its most fundamental level, the Cost Benefit Analysis showed that the speed that matters most – is actually the speed of the rollout.
That is because most of the social and economic benefits derived from fast broadband result from more Australians having it sooner. National-level benefits simply cannot accrue when access is only available to a few.
Under this Government, nbn is shaving years off construction time while still delivering fast broadband of at least 50 megabits per second to 90 per cent of the fixed line footprint.
For the vast majority of households this means the nbn will provide the same high speed and high quality service no matter what broadband technology is used.
The first fibre-to-the-node services were launched in Belmont, NSW, in September with most users experiencing speeds of 100Mbps download and 40Mbps upload - virtually indistinguishable from the experience on alternative technologies like FTTP.
nbn aims to have 500,000 FTTN premises 'ready for service' by mid-2016 and 3.7 million by mid-2018.
nbn has also kicked-off an HFC technology pilot in Redcliffe, Queensland, to around 300 premises. This is one of the world's first trials of open-access wholesale using HFC. Four service providers are participating. The nbn Corporate Plan estimates that around 4 million premises – about one-third of Australian homes and business – will access the nbnover HFC.
Continuing advances in HFC technology such as DOCSIS 3.1 will deliver even greater benefits for end-users at very low incremental cost.
Around the world, HFC networks are among the most commonly used means of delivering superfast broadband. Nearly 150 million households connect to the Internet via this technology. In the US — the world's largest cable broadband market — there are over 50 million subscribers.
Astonishingly the previous Labor Government had agreed to pay billions of dollars to junk this infrastructure in Australia despite its obvious capabilities and the cost-efficiency of upgrades compared to overbuilding.
While there is still much work to do on the nbn rollout — we're making significant headway.
More than one million premises have been added to nbn's footprint under the Coalition's watch and the company is continuing to innovate with new products and technologies like fibre-to-the-basement.
Over the next three years the company is seeking to double the network footprint year on year. The aim is to pass more than three-quarters of all Australian homes and businesses by the end of 2018.
The company has acknowledged these targets will not be easy to achieve. But at least the nbn now has a solid footing having hit its forecasts quarter by quarter and year on year.
Similarly, the first-quarter results for FY16, showed an encouraging uptick in revenues, connected services, and footprint.
And while there is always cause to commend progress, it is not the Minister's job, nor the company's, to airbrush the obvious risks.
Speaking frankly, the job remains tough because there is still a lot that can go wrong.
Even with my Ministerial experience as the guy in charge of the NDIS, the nbn risk profile is sobering. The company is ever watchful and ever mindful.
And I acknowledge that many of you in this room — vendors, RSPs and others are also sharing in some of these risks.
Obviously the big unknown right now is scaling up FTTN and HFC. The company has learned much from the FTTN construction pilots already completed and I understand there is growing confidence among delivery partners in meeting the construction timetable.
A similar learning process will be needed for HFC.
The management at nbn have demonstrated they are capable and trustworthy. You need only look at page 69 of the 2016 Corporate Plan to see the company has spelled out a selection of 'billion dollar' risks that are considered 'plausible'.
Day by day, NBN Co is applying new strategies to address these known risks. As the Delivery Partners, contractors and RSPs would know, the company has made great strides in better managing orders, sticking to appointments, and successfully installing equipment and cabling.
For example, in June 2013 about one-third of the brownfields footprint fell into the notorious "service class zero" category. These premises were simply stranded.
Today, less than 5 per cent of premises are in this situation — a dramatic improvement particularly considering the network has scaled up from 163,000 premises to over 910,000 in that timeframe.
And because 'what gets measured, gets done' nbn now publishes their serviceability numbers by state and nationally, every week on its website.
As we look to the future, I expect nbn to continue to be transparent and factual about their progress and task ahead.
Understanding the Corporate Plan
The 2016 nbn Corporate Plan is the most robust assessment to date of how the rollout of the network can be achieved. It comes after more than a year of top-down, bottom-up planning by the company.
As the planning process has become more detailed, and as further contracts have been executed, nbn's understanding of the costs and timescale associated with building the network has also improved.
As noted previously, the team is realistic about the fact there are future uncertainties about the rollout, and this is reflected in its estimates of the rollout cost.
The Corporate Plan forecasts a peak funding range of $46 billion to $56 billion, with a base case of $49 billion and a $4.6 billion contingency.
Given what we know today, this is the most credible assessment of the expected cost a very complex infrastructure build, and simply reflects the great many unknowns that remain.
I am sure you are aware of the heightened scrutiny of the Corporate Plan and peak funding forecasts over recent weeks.
It is important to place such opinion in its appropriate context.
Even critics acknowledge that the multi-technology mix will see fast broadband reach communities sooner and at less cost than the alternatives previously considered.
Headline-grabbing terms like 'blowout' take little account of the multitude of financial projections and operating parameters that underpin peak funding estimates. Some elements have gone up, while others have decreased compared to the assumptions that were used in the 2013 Strategic Review.
Clinging to what might have been in some parallel past takes no account of the billions already spent on the nbn, and indeed, of the revenue foregone given the underperformance of the early years.
One thing is abundantly clear however. Any reduction in operating costs claimed for an all‐fibre network would be miniscule when compared to just the interest payments on the extra investment required for such construction.
And while we are on the topic of cost, I do want to highlight that nbn's understanding of the true costs associated with the network build has improved as the rollout has progressed.
It is only because of the thorough review process undertaken by the company, as requested by the Government, that we know that the estimated cost of rolling out the network has increased, for both an all-FTTP and multi-technology mix rollout.
nbn has calculated that from this point forward, reverting to an all-FTTP rollout would see peak funding balloon to as much as $84 billion.
Not only would the company be saddled with negative cash flows out to the horizon but the construction phase would not end until 2026 and potentially as late as 2028. In such a rapidly evolving sector it's hard to imagine what user demand might look like more than decade from now.
Eleven years ago, the iPhone hadn't been launched. Twitter didn't exist. Facebook was barely a start-up. Apple TV and Netflix were years off in the future.
Who would care to guess what services and products will become available in the next eleven years.
Obviously these comparisons are central to the ongoing debate. Not only to the millions of Australians awaiting better broadband — but to those charged with managing the public purse and formulating future broadband policy.
So returning to the present, there is much to be learned from actual practice.
Far from Australia being an antipodean outlier, leading telcos from markets including the UK, Germany, and the US are also deploying FTTN.
Like nbn, these companies recognise they can take advantage of copper to get better broadband out to end-users, quickly and economically.
British Telecom in the United Kingdom and Deutsche Telekom in Germany have shown that FTTN is able to scale up very quickly; albeit with a commercial rather than universal mandate.
I have spoken a lot this morning about the role of nbn in completing the network, but the truth is, the rest of the industry – construction partners, vendors, retail service providers – and many of you are here today – have very important roles to play.
From difficult beginnings, nbn has moved to repair business relationships and has put in place new contracts with incentives better aligned to achieving rollout and connection targets.
The first of these new contacts were signed with a range of construction partners in June this year, covering around 4 million homes and businesses that are scheduled to be connected with Fibre to the Node, Fibre to the Building or Fibre to the Premises.
nbn is also working with service delivery partners on an employment and training program to ensure there are enough skilled people to build and maintain the network in coming years.
In light of last week's positive youth unemployment results, I am delighted to see nbn taking the lead with their Career Start campaign targeting school leavers with the promise of long-term, rewarding work in the telco industry.
A final point worth mentioning on the rollout progress is the ongoing deployment of the fixed-wireless and satellite networks.
With the Sky Muster satellite now going through a period of in-orbit testing, nbn is working towards a commercial product launch before the middle of next year.
The successful rollout of nbn's Long-Term Satellite Service is crucial to bringing high-speed broadband Australia's most under-served areas, and we are focussed on ensuring that nbn's two Ka-band satellites are put to their highest-value use.
nbn has already held several meetings with a Distance Education working group — bringing together Commonwealth, State and Territory education officials and product experts from nbn to make sure public interest services can be delivered to users in Australia's most remote areas.
Similarly, nbn is continuing its product innovation work in fixed wireless. The commercial launch of a 50 megabit-per-second service is just weeks away.
This world-class network is now accessible to 300,000 premises across truly diverse geography, from the coastal fringes and rich dairying country of Tasmania, to the hinterland of Far North Queensland.
The nbn and innovation
It's clear that high-speed connectivity will support Australia's prosperity in the 21st century. As the Prime Minister has said: 'the Australia of the future has to be a nation that is agile, that is innovative, that is creative'.
Digital platforms offer one of the greatest opportunities for both businesses and governments to innovate and become more productive.
I have previously described Malcolm as the most tech-savvy Prime Minister to date. He has set a clear mandate for his Government, including in part, the establishment of the Digital Transformation Office earlier this year and my appointment as the Minister Assisting the Prime Minister for Digital Government.
The Government will also be launching its innovation package in the coming months, which will include measures to encourage stronger links between business and the research sector, and more support for start-ups.
Ubiquitous, high-speed broadband is a key productivity input. And as such, the nbn will be a critical bedrock of our innovation agenda.
To produce the next generations of innovators, entrepreneurs and creatives, we need high-speed broadband.
And to support a productive, agile and robust economy, we need ubiquitous broadband.
To enable Australians in cities and in the bush to maximise their business opportunities, they need broadband connectivity.
I'm pleased to say that with the right management team now in place; with the best technology mix now being delivered, and with productive partnerships right across the industry we can 'bring it on'.
Media contact: Justine Sywak | 0448 448 487 | Justine.firstname.lastname@example.org
1. NBN Co's 2012-15 Corporate Plan forecast 286,000 premises passed for FTTP brownfields for FY2013 (page 37). The 2013-16 Corporate Plan set a revised estimate of between 155,000 to 175,000 premises passed by June 2013, which was an expected shortfall of approximately 111,000 to 131,000 premises passed (page 55).