An interim report of the Senate Select Committee on the National Broadband Network issued yesterday has expressed "significant concerns with the accuracy and reliability" of the strategic review process that led to NBN Co adopting the multi-technology mix model for the network favoured by the Coalition.
"The Committee considers that the assumptions and conclusions set out in the Strategic Review are unreliable in the case of all examined scenarios," the interim report states.
It claims "financial manipulations and other irregularities" found their way into the strategic review conducted by NBN Co late last year, including the exclusion of $4 billion in incremental architecture savings, assumptions regarding the delay in the revised deployment schedule, overly pessimistic revenue assumptions and the factoring in of higher unit costs for the fibre build that add $14.4 billion in capital expenditure.
In what will come as a surprise to absolutely no-one, the Senate committee rejected the new NBN rollout strategy and the multi-technology mix underpinning it; the rollout of fibre-to-the-premises in some suburbs and fibre-to-the-node in others is "an inappropriate use of taxpayers' money".
So-called 'fibre on demand' — the option to have fibre extended to the doorstep for an additional fee in FTTN areas — will "create competitive disadvantages for individuals and small businesses outside the fibre footprint, and will entrench broadband inequality in Australia".
The interim report recommends that NBN Co submit a revised strategic review that covers only two scenarios: An optimised FTTP rollout and a revised multi-technology mix rollout based on "actual costs for FTTN and HFC derived from discussions with Telstra, Optus and vendors."
"This scenario should also include all costs to undertake the flagged upgrades to 100 Mbps by 2023, 250 Mbps by 2028 and 1000 Mbps by 2030," the report adds.
NBN Co should continue to rollout FTTP in the meantime and "proceed free from political interference". The other recommendations included investigating the production of the original strategic review, ongoing parliamentary oversight of the rollout and improved transparency and accountability for NBN Co.
In what will also come as a surprise to absolutely no-one, the Coalition senators issued a dissenting report that found the majority's report to be "grossly misleading and untruthful in its portrayal of the evidence provided" to the committee.
"Coalition Senators additionally find that the process of preparing this interim report of the Senate Select Committee, including the provision of a deliberately falsified version of the majority report to the Coalition, to constitute an abuse of process," the dissenting report states.
"[T]he Committee has degenerated into a highly politicised and at times farcical face-saving exercise where [former communications minister] Senator [Stephen] Conroy, has sought to distort the history of the NBN and deny or disguise his direct personal culpability for massive economic damage to a crucial input industry and the destruction of taxpayers’ money on an unprecedented scale."
The Coalition senators accused Conroy of "bullying and hectoring" witnesses who appeared before the committee and included a list of other incidents of "poor conduct or conduct unbecoming of the Committee".
"The majority interim report seeks to discredit the various independent analyses of the NBN undertaken since the September 2013 election," the dissenting report states.
"Instead it asks the public to believe that the NBN was on track and just around the corner – after six years where Labor’s walk never once matched its talk. The plausibility of this narrative is a matter for the Australian public to judge for themselves."
"I think that the Senate lost an opportunity to actually provide some real guidance on exactly what the options are at this point," said Mark Gregory, senior lecturer at RMIT University's School of Electrical and Computer Engineering and a frequent NBN commentator.
"Apart from influencing the media and public drawing attention to the questionable assumptions in the Strategic Review the report doesn’t have any real teeth; the current Government should respond, but they may not," said Chris Coughlan, an independent telecommunications industry analyst.
Labor hasn't taken the opportunity to address some of the mistakes it made while in government, Gregory added. Telstra's structural reform has proceeded too slowly and the telecommunications industry remains without a long-term plan.
"We've seen that there are problems with the [NBN] legislation — the loophole that TPG's now exploiting — so there are issues around there, and then of course issues within the NBN. We've seen quite a few of those: Problems with the contracting of the construction, problems with how NBN Co's been set up. That hasn't really been addressed."
"They've had a huge number of submissions, they've had a huge number of very learned people come and talk to the Senate, and I don't see any of that reflected in the report as such," Gregory added.
"There's an awful lot of platitudes and awful lot of statements of what the politicians would like to see, rather than listening to all the people that came and talked to them at the inquiry."
"In my view, the major failing of the strategic review, and something not drawn out in the interim report, is the assumption that access to the Telstra access copper and HFC will be at a cost no greater that the existing $11 billion committed to in the Telstra NBN Co definitive agreements," said independent telecommunications industry analyst Chris Coughlan.
"The current agreements compel Telstra to disconnect the copper network and broadband from the HFC network, ownership of these assets still rests with Telstra. The strategic review shows that NBN Co will save $23 billion, the difference in peak funding between Scenario 2 (Radically Redesigned FTTP) and Scenario 6 (Optimised Multi-Technology Mix).
"This has now been made public, before negotiating access to the assets necessary to deliver the $23 billion in peak funding savings. I.e. it incrementally values Telstra’s assets at up to an additional $23 billion.
"I’d imagine that Telstra’s institutional shareholders and Board would be wanting a slice of the $23B. From this perspective making the Strategic Review public met the political agenda of the Government but has made a rod for the back of NBN Co in trying to negotiate access to Telstra's assets.
"The interim Senate committee report questions the numbers and a more realistic view may have the differences in Scenario 2 and 6 much closer. This no doubt would assist NBN Co gain access to the Telstra assets, but would that put a question mark on changing track and adopting Scenario 6.
"I might be incorrect and Telstra will hand over the assets quickly for a low dollar value. If this is the case, then Telstra will probably not take on any additional reparation burden of making good the assets and they will be made available, 'as is'.
"From the interim Senate report the condition of the copper asset has been questioned, and this is reasonable. With an asset about to be replaced with NBN Co fibre it would be prudent to limit the expenditure to short-to-medium term 'patch' repairs rather than longer term replacement repairs to the copper. Access to the HFC will be more difficult; Telstra still has the Foxtel distribution over this asset."
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