NBN Co fights back on Pipe CEO's disclosure claims
- 21 April, 2010 16:45
- Comments 10
NBN Co has defended itself from criticism made by Pipe Networks founder Bevan Slattery that the company’s level of disclosure and consultation had been deficient at every level.
The stinging attack, made at the recent CommsDay summit, also saw Slattery argue that a commercial return in building out the wholesale only Fibre to the Home (FTTH) network to 90 per cent of Australia at a cost of $43 billion was impossible.
Responding to Slattery’s criticisms, an NBN Co spokesperson told Computerworld Australia that NBN Co had been “highly transparent”.
“We issued a consultation paper on the network design and high-level wholesale bitstream product in December,” the spokesperson said. “This was supported by well-attended industry briefing sessions. We received nearly 50 submissions and considered them carefully before issuing a response.”
The spokesperson said that NBN Co had also recently completed a “very detailed” series of industry workshops looking at network planning and design, network construction, operations and interworking with customers and partners.
“…Industry representatives had direct access to the key personnel who will be responsible for the construction and operation of the network and support systems,” the spokesperson said.
The NBN Co also plans to issue a paper on the points-of-interconnect, and a more detailed product description over coming weeks, the spokesperson said.
“We have also indicated we will submit a special access undertaking regarding the proposed price of our basic service offer with the ACCC in June, and this is also a transparent process,” the spokesperson said.
Computerworld was also referred to NBN Co CEO Mike Quigley’s speech at the CommsDay Summit which saw Quigley argue that the suggestion the NBN would not make a return for 30 years was wrong.
“Our business case, and we have built up a business case, shows three things,” Quigley said. “The first is that that we will generate a positive return on our costs before the end of the construction period.
“Second, we will recover our yearly costs, including capital costs, within a few years after the end of construction period. That means we will be net income positive for that period.
“And thirdly… we will be building the project so that we can repay all the government’s equity contribution within the normal life of a telecoms project, which is a 20 to 30 year period.
“What Senator Conroy has … outlined is a government initiative that has more than just a commercial return – it has a broader set of objectives, and that’s what we need to take into account.”
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Comments
David Havyatt
Unfortunately NBNCo seems to have a lot of people with Telstra wholesale experience. Consulting on the technical aspects but not on the price or means of determining a price is the standard monopolist play.
Submitting a special access undertaking, one that is supposedly already being discussed in detail with the ACCC, and presenting it to customers after the fact is not consultation.
I'm personally not close to this action, and maybe there is more consultation going on. But until NBN Co gets the sequence right - that the ACCC will be endorsing an agreement between NBN Co and its customers - they cannot claim to be undertaking consultation.
Harquebus
First rule in salesmanship: Identify your market.
Phil Collins
Appears to me this industry his its head so far up its own duct that it would prefer no activity in favour of self-serving navel gazing that ultimately favour its so-called nemisis - Telstra.
Bevan Slattery
NBN Co:
“Our business case, and we have built up a business case, shows three things,” Quigley said. “The first is that that we will generate a positive return on our costs before the end of the construction period.
RESPONSE
Then why doesn't NBN Co. release it's business case? This is the disclosure I am seeking. Your business case would also include many key assumptions such as take up assumptionis, revenue/product assumptions, etc.
I find it surprising there appears to be a "solid business case" when NBN Co. presented 48 hours ago haven't even decided which rollout methodology they are following.
This response is a very general statement and does not provide sufficient detail as to exactly what 'costs' are, nor exactly what the construction period is. It does not provide any real disclosure nor review of the core items in the business case.
COMMENT
“Second, we will recover our yearly costs, including capital costs, within a few years after the end of construction period. That means we will be net income positive for that period."
RESPONSE:
Again a very vague statement . Saying you are 'net income positive' is that in accordance with Accounting Standards meaning Net Income (Revenue less all expenses including depreciation and cost of debt). I highly doubt it will be net income positive assuming there is $20B in debt being proposed + dividends to shareholders needing to be paid.
Also, construction period being 8 years, you are expecting 'some' return a few years after (why not be specific) meaning it will be well beyone 2020 before you get any 'net income' whatever that means.
Again, if you have this and are confident with it, then why not disclose some of the key annual cashflow statements along with key assumptions relating to take-up and profit.
Bevan Slattery
NBN Co:
“And thirdly… we will be building the project so that we can repay all the government’s equity contribution within the normal life of a telecoms project, which is a 20 to 30 year period.
RESPONSE:
What about private investment? Isn't private investment key to this? Are fully franked dividends being paid to private investors?
A normal life of a telecoms project has no correlation with an expected return on capital. Looking for 20/30 year return on telco investments is ABNORMAL. Unlike many utilities (water and power reticulation) Telco is a much higher risk of capital (and return). A utility can seek a return on capital of beyond 10 years, not a telco project. This is because there is little development in alternate water or power reticulation systems over the past 20 years, whereas data (bytes) have seen many, many different and alternate technologies over the past 10 years let alone 20 or 30.
What about the private industries equity contribution? Paying the governments equity contribution (would like confirmation of exactly what that number is) over 20/30 year period sounds like an "interest free loan" rather than a commercial return.
NBN Co:
“What Senator Conroy has … outlined is a government initiative that has more than just a commercial return – it has a broader set of objectives, and that’s what we need to take into account.”
RESPONSE:
What has been promised is 90% FttH homes connected (connected means connected - not passed) along with private investment fully supported by a commercial return. So whilst it has a broader set of objectives (which I can agree) you need to be clear about keeping your CORE promises. If there is a deviation to that, or an internal understanding that is no longer true, then you are misleading people with the perception that you can.
This can of course be resolved if NBN Co, or DBCDE or the Minister can disclose for public review the business case (along with the critical assumptions behind it) along with cashflows for this very, very important project.
Until such time that happens, you are making vague comments about "net income" or "commercial returns", which are not able to be substantiated .
If NBN Co. and the Government believes they are good at disclosing, then please disclose the single most important document surrounding NBN Co- that is the business plan/case (not just the implementation study).
Regards
Bevan Slattery
PS: Your disclosure to the ACCC SAU is *required* and not voluntarily.
Gough Hawke
You aren't looking for a safe Liberal seat somewhere are you Bev?
Bevan Slattery
I do not have any preference or dislike politically. I have no interest other than a strong dis-interest to ever be involved in politics.
Cheers
[b]
Gough Hawke
Fair enough Bevan. But you'd fit the bill nicely.
So if you ever change your mind, I'm sure Tony & Co with their strangely similar anti NBN policies, would welcome you with open arms.
Anonymous
Anyone old enough nto remember what Telecom a 100% government owned company was like? it only modernised once some private hands got hold of it!
And all the cheers squad for NBN seem to think that government know anything about a commercial business.
Anybody remember Buourkes ACTU store that was going to put DJ's and Myer out of business.
Anybody reemeber Rudd Bank
Anybody remember Pink Batts
Anybody remember BER
Anybody remeber Grocery Watc,Fuel Watch.
What business credentials does Senator Conroy have, or for that matter Mike Kaiser, certainly almost all of the senior people at NBN are failed people from other Telco's
This thing will never be built, mainly because they have no idea what they are trying to build!
Can anybody tell me where the money is coming from?
Get out of our commercial business space Government,you are just not qualified to be there!
Gough Hawke
No but we can remember how the monopolist Telstra screwed us all and that's all we need to remember.
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