Oakeshott: Coalition's NBN may only save $5 billion

Oakeshott says any NBN cost benefit analysis carried out by the Coalition needs to consider the cost of maintaining the existing copper network or it risks coming up with “false figures”.

The private sector and the NBN

In its 2012-15 corporate plan, NBN Co stated the government would provide an estimated $30.4 billion in funding for the NBN. Another $13.7 billion in funding would come from peak debt, with NBN Co’s initial corporate plan indicating additional debt funding would “involve private sector investment”.

Oakeshott says that informal conversations indicate there is strong interest in the private sector investing in the NBN.

“[However], there’s a reluctance to get too involved too early and that is partly due to some of this politics that is making that business decision more difficult,” he says.

“People aren’t willing to take such a large risk so early when the politics is still not clear, but when the time’s right I don’t think there will be any problems whatsoever in the private market being involved … over the next five years.”

Interest in investing in the network could come from domestic and international companies, according to Oakeshott, and Australia should learn from New Zealand’s experience and involve the private sector in the project at the start, not the end.

He believes private sector involvement has also been hindered because the NBN is viewed as risky by some companies, which have chosen to take a ‘wait and see’ approach: waiting until uptake is higher and the risk is lower.

For example, James Spenceley, CEO at ASX-listed company Vocus Communications, told Computerworld Australia last year that it wasn’t investing in the NBN yet because of the limited rollout of the network so far.

“Without bipartisanship and at a very early stage of a decade-long build, risk is quite high for [the] private sector at this stage,” Oakeshott says, “but as those key risk factors drop away, potentially this year, I think you will see a lot of very positive interest from the private sector.

“I think issues around when and where debt financing is involved is now starting to be a conversation that needs to be had and getting the election out of the way [and] clarifying some of the policy issues, dependent on who wins; I think that will up the ante on some of those conversations between government and the private sector.”

Oakeshott optimistic about NBN targets

Oakeshott says there are both positive and negative aspects of the current NBN rollout. On the positive side, he cites the speeds achievable on the network, its reliability and its rate of return.

The downsides of the project are that it is running behind schedule, the high up-front capital costs and some issues faced by residents transitioning to the network.

“In any of these changeovers or transitions you can get all sorts of technical issues and they’re bobbing up all over the place at an individual level, as well as [in] communities like Julia Creek in Queensland who are on the backbone, yet can’t access it,” he says.

“I just think transition issues need to continue [to be worked through].”

Despite some of these technical issues, Oakeshott believes NBN Co will meet its target of passing 286,000 premises by June this year.

The company announced recently that it has passed 72,400 premises in greenfield and brownfield sites.

“I think all the regulatory issues that were holding it up are over and they’re foot to the floor now,” he says.

“I don’t have any evidence to prove otherwise. [But] I’d be disappointed if they’re just pulling all our legs.”

Follow Stephanie McDonald on Twitter: @stephmcdonald0

Follow Computerworld Australia on Twitter: @ComputerworldAU

Tags Malcolm TurnbullRob OakeshottNational Broadband Network (NBN)fibre-to-the-home (FTTH)fibre-to-the-node (FTTN)

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15 Comments

Ernie

1

"Shadow minister Malcolm Turnbull has consistently stated the Coalition’s NBN could be rolled out faster and cost less."

What in the world does the Coalition know about building infrustructure? Last time they were in power they built nothing and sold assets.

Rod

2

Look at the state of the copper network at this video then make your mind up http://www.youtube.com/watch?v=BjvTn5Do6GQ

Nathan

3

I think Turnbull would be on the right path given his experience with setting up Ozemail and his success in the private sector.

$5b is a massive saving given the total Labor expenditure of $37b. As is typical when the coalition comes back into power they will have to spend considerable time cutting costs to right the budget deficit that Labor has racked up.

gnome

4

Turnbull is a merchant banker, not a network architect, which was completely reflected in his investment in Ozemail, and the private sector has been conspicuous by its almost complete absence from building fibre networks.

The claim that $5Bn is a massive saving is a massive wank, given the scale of the project. The 'saving' will condemn us to another generation of poor standards until the FTTN has to get ripped up and replaced with FTTP anyway, at huge cost.

Abel Adamski

5

Considering the state of the Telstra copper infrastructure as shown by the size of the pit and duct remediation contracts, I suspect that the rest of the infrastructure, i.e the copper last mile is not much better so expensive to identify and remediate BEFORE any plans can be drawn up for FTTN, the obsession with upgrading and extending the monopolistic cable TV network (HFC) the cost of doing so will due to the upgrades and increased backhaul and infrastructure and repairs will approach the original install cost (I hear approx $10Bill jointly ) .
I truly doubt any cheaper for the end user, with reduced income to cross subsidise so it will cost the taxpayer mega bucks for an inferior Patchwork National Infrastructure that third world nations would look down on

Abel Adamski

6

http://delimiter.com.au/2013/02/01/telstra-remediation-work-delaying-nbn/

Sergio

7

How many roads, hospitals etc would $5 billion build. You guys make it sounds like it's a pittance..

Abel Adamski

8

Sergio
As I pointed out, I think Oakshott has failed to take all the factors into consideration. Including upgrading the monopoly Pay TV/Media product HFC for the benefit of certain interests it will actually cost more for a severely inferior over the long term ESSENTIAL NATIONAL COMMUNICATIONS PLATFORM FOR THE WHOLE NATION, that will pay for itself without costing the taxpayer, in fact unlike the coalition version it will pay a dividend to the taxpayer for just those needs

damien

9

Ernie - you sound as though you trust Conroy & Co. to get it right? Think pink batts, the education revolution, cash for clankers, petrol commissioner, price watch, super clinics, live cattle export, immigration - et al.
Give me break mate!

Richard Ure

10

Nathan, Reducing the cost of the NBN will have no impact on the budget deficit you are so concerned about. If you don't understand that argument, pleaseread more likely on this issue., it has been explained many times.

Mor generally when the $32 billion is spent, who will own what it is spent on? Telstra?

Twinny

11

The state Telstras copper is in (a shambles), lack of maintenance (in favour of shareholder dividends - if any) no wonder it costs what it costs.

The only savings will be to trim the fat in terms of how many people running this show and their huge salaries. Tax payers want efficiency - the worry is that no one really knows what it costs (what will the be the end blowout in billions?) and how much of that is "administration costs".

Abel Adamski

12

Twinny
Actually it is the contractors that are the hands on workforce at the coalface, the "Fat" are the people who plan, organise, design etc etc. Comparing skills and responsibilities and functions with advertised positions in any company - all in the ball park.
It is truly a massive task. It took the PMG/Telecom/Telstra 70 Years to cover 90% of premises, NBN has to do it including planning in 10

John

13

Anyone with half a brain will know that oppostion to FTTP is nothing more than opportunistic politics. Why should Australia settle with a second rate FTTN? Why can't we be global leaders in this field and have some bi-partisan support on this massive national project. This is our opportunity to seize the opportunity and the coalition want to downgrade it. Half the delay affecting the roll out of the NBN was at the planning/contractual stage as access to Telstra infrastructure is important to keep the costs down as much as possible. Lets remember that this issue was complicated by the coalition under John Howard, as if he had seperated Telstra properly when it was sold in the first instance it would not have been so messy. The relality is regardless of who is in Government projects of this size do take a long time to kick off but once they get momentum things get more efficient. There is a learning curve so for once can we all as Australians get behind something that will benefit us all?

Question Everything

14

Given that more people are using mobile phone and tablets on wireless the number of broadband connections to the home are reduced. Another question is is the American government building a national broadband network or are all telecommunications funded by private enterprise. A quick check of the situtation world-wide might be interesting as i wonder why Australia is again being the odd one out

ash casey

15

'only'...."ONLY' $5 BILLION!? !! Oakshot has seriously lost touch with how much $5BILLION is and what a saving $5BILLION could buy in terms of education, health or welfare to Australians.

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