Australia: NBN wins it for Labor

Petroc Wilton, CommsDay

Telecommunications policy has ultimately tipped the knife-edge balance of the Australian federal election, with both of the independents who propelled Labor to its eventual victory citing broadband as a key factor in their deliberations.

But while the result effectively locks in the ALP’s FTTP NBN as a model for the nation’s broadband, Tony Windsor and Rob Oakeshott have scored a victory of their own: parlaying their support into a substantive change to the policy. According to Oakeshott, the network will now be deployed on an “outsidein”

model, prioritising rural and regional areas.

The duo made their decision public in a press conference scant hours after fellow independent Bob Katter broke with the rest of the regional triumvirate and cast his lot with the federal Coalition.

“I intend with my vote, for what it’s worth, to support the Labor Party,” said Windsor. “[Of] the issues that I thought were critical to this, possibly the most critical was broadband. There’s an enormous opportunity for regional Australians to engage with the infrastructure of this century... my advisors in relation to the broadband technology, and there are a number of them, suggest that you do it once, you do it right, and you do it with fibre. And that has been one of the major influences that I’ve had in terms of making a decision.”

Oakeshott – who said that the pair had secured “a regional Australia package that has never been seen before, and will turbocharge regional Australia” in their negotiations – also identified broadband as one of “the big sticking points for us” in a lengthy preamble before confirming his own support for the Gillard government.

REGIONAL CONCESSIONS: Oakeshott and Windsor went on to outline NBN concessions for regional residents that they had won through their negotiations. “One of the breakthroughs that we did have, and the prime minister will probably announce this, is in relation to the broadband network, there’ll be equity in terms of the wholesale pricing across country areas – that’s a significant additional value add to the arrangements for broadband,” said Windsor.

“And roll-in, not roll-out: priority for regional areas first, so it’s a broadband roll-in now – bingo!” chimed in Oakeshott. More precise details on how this will modify NBN Co’s rollout have not yet been revealed, though when asked whether they would stick to the proposed schedule for the project, Oakeshott replied that “that’s not our choice... the policy issues are for determination on the floor of Parliament

in public debate – but if they start dragging their feet, don’t worry, we’ll be up their ribs.”

It’s also not yet clear how this roll-in model could affect timings in the funding of the project. Under the original deployment plan, NBN Co Mike Quigley has previously suggested that revenues from NBN Co services could begin to offset costs within a few years as the network begins to roll out. However, regional areas will likely prove less profitable with fewer residents served by local infrastructure and fewer retail service providers buying the wholesale service, potentially pushing back the time for the network to break even.

NBN CO JUBILANT: Meanwhile, staff at NBN Co – whose jobs had been resting on the outcome of the extended election process – greeted news of the result warmly, but emphasised that with the Canberra standoff finally settled it would be back to business as usual.

“NBN Co’s management and its 300 employees welcome the clarity that today’s announcements provides in relation to the future of the NBN,” a spokesperson told CommsDay. “The team at NBN Co has been working on business as usual in the post-election period, while limiting discretionary expenditure, extending the deadline for some tenders and putting the award of several tenders on hold. We will now work to restore deferred processes, including the recruitment of staff.”

“Everyone at NBN Co is looking forward to working with business, government, the community and our customers to deliver a high-speed broadband future for all Australians. NBN Co will meet with its shareholder ministers to discuss future policy directions.”

Comment by Grahame Lynch

Now for NBN V2.1

After the longest two weeks of the Australian telecom sector’s life we now have some resolution. There will be an NBN but it will be re-prioritised on to rural and regional rollouts, with the urban areas already well served by ADSL2+ and HFC to wait their turn. A genuine NBN V2.1 if you like.

It is likely to be a widely popular outcome in the industry. The members of the Competitive Carriers’ Coalition along with Optus will be elated: it was always on their wish list that the NBN be rolled in from the outer metro and rural markets, on the basis that an initially regional NBN both expands their market footprint faster and preserves the value of their urban DSLAMs. Funnily enough, the newly formed Alliance for Affordable Broadband will also be happy on grounds of both altruism and self interest: it wanted a more focused NBN spend that targeted areas of need while at the same time was interested not to see private infrastructure stranded. The new NBN will tick more of its boxes on both counts.

If the so-called Hayman plan for separating the NBN’s funding sources into a more heavily subsidised rural rollout and a more commercially based urban rollout is on the money—and Tony Windsor’s comments yesterday suggest it is then I would suggest that the government has also offered some form of subsidy guarantee to make good on the new commitment to equivalent pricing in the bush.

But sources close to the government suggest that Labor made no new concessions on retail pricing parity which suggests that Windsor may have been exaggerating the point of difference there. Rather astonishingly, PM Julia Gillard suggested aspects of the deal with Windsor on NBN were “commercial in confidence.”

Telstra will be happy too. It gets to cut over its high-cost rural infrastructure faster and keep its urban copper and HFC infrastructure which earns higher margins for longer.

Obviously the 300 staff at NBN Co are overjoyed. They get to keep their jobs for a start, but most importantly, they now have some hard work to do. A reworking of the NBN to prioritise regional and rural Australia obviously has enormous implications for the deployment and business plan for NBN Co it increases upfront costs, reduces initial revenues and has a whole range of implications across areas such as supplier choice and staffing decisions. Most significantly, it increases the pressure to get the wireless and satellite aspects of the NBN up and running as soon as possible.

NBN civil contractors with large regional workforces will be the winners here, and there are even some suggestions that regional power utilities may be called on to mobilise their assets and resources in favour of faster regional deployments. Vendors who have missed out on initial NBN contracts will also be hopeful that a change in deployment plans will translate into new tenders, while the existing ones will be ecstatic that they won’t have the uncertainty of a change of government.

As far as Labor are concerned, well, the party likely owes Stephen Conroy a large debt. It was his originally audacious $43b NBN plan that proved the difference in the end the act of policy vision that apparently convinced Tony Windsor to give Labor the key 75th vote and also played into Rob Oakeshott’s decision to get it to a governing 76. As I argued post-election, Labor’s NBN pitch faltered somewhat in the election campaign. Its messaging went awry as it talked over people’s heads about gigabits and smart dishwashers.

But in the end these stumbles didn’t detract from the fact that the policy had imagination and vision certainly enough for rural independents who very rarely get the chance to deliver actual outcomes for their electors.

That said, victory of this type will be a touch bitter-sweet for Conroy. Yes, his policy got Labor over the line but it may now be revamped to suit the priorities of Tony Windsor and Rob Oakeshott the tail will now be wagging the body.

Unlike the first term, Conroy would now have to share the credit for the NBN’s outcomes as Windsor will claim partial ownership of its rural and pricing equity focus. As the NBN enters build-out phase it will become more problematic in terms of media coverage and it will also likely go on budget now as well, with all the negatives that might entail as costs mount up. Windsor won’t be copping blame during the inevitable negative media cycles. Conroy should probably be spared the come-down and rewarded with a promotion perhaps to Finance.

But at least Conroy stays in government. The Coalition, by contrast, need to be asking some serious questions of themselves as to how they finished up on the losing side of the broadband issue for two elections in a row.

While the previous shadow Nick Minchin set a high standard for the portfolio, there were many NBN critics and Liberal Party types wondering why Tony Smith failed to make much of an impact in the portfolio.

The late campaign policy launch was a disaster, both in terms of optics and substance, and to anyone with a personal interest in better broadband outcomes specifically those stuck in black spots the Coalition had little to impart of direct relevance. Although critiques of the NBN found their mark in the last week of the campaign, especially as Malcolm Turnbull, Paul Fletcher and Andrew Robb stepped up their involvement, it was manifestly too late to have much impact on the electorate.

Game, set and match to Labor. The NBN survives, now with a new “improved” rural independent flavour. With just a couple of seats needed to snatch victory at the next election, it would be ludicrous for the Coalition not to subject itself to a deep re-think about how it presents on broadband. And clearly opposing the NBN’s very existence will be a harder task when the thing is half-built with potentially millions of customers come 2013.

At the same time Labor needs to work hard to avoid what Tony Abbott predicts for the NBN that it will become “school halls on steroids”, in reference to the cost blowouts in education building projects.

It’s been a wild three years in politics already and the NBN only remains a positive for Labor if it is executed well and delivers real benefits. As one Liberal said yesterday “the politics of the NBN have a long way to go.”