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”.

Independent MP Rob Oakeshott believes based on his own “rough figures”, a Coalition version of the National Broadband Network (NBN) would only be $5 billion cheaper than Labor’s $37.4 billion NBN.

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

Oakeshott, who backed the Labor-forming government after the last federal election, citing the party's NBN policy as a key reason, told Computerworld Australia 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”.

“My costings, including on the obvious assumption that the copper network will be kept and maintained, are based on industry feedback and various sources. They are full of assumptions though, so I would strongly welcome a cost benefit analysis of the Coalition’s fibre-to-the-node policy,” he says.

“Maintenance costs have to be factored into any capital spend, as does the retention of a parallel copper network.”

In August last year, BIS Shrapnel calculated maintenance costs for the copper network could total $700 million per year.

Adrian Hart, senior manager at BIS Shrapnel, said maintenance costs of the copper network could add up to $1 billion per year.

“The maintenance of the copper network, alongside rolling out fibre-to-the-node, really only makes this [a] single figure [saving], in my estimation, [of] about $5-6 billion difference between the two policies,” Oakeshott says.

“[The Coalition is] denying the maintenance of and the retention of the copper network in what I’ve seen quoted by them so far. That would be a cost that would continue to grow over time as the copper network becomes more difficult to maintain.”

Oakeshott has called for the Coalition to switch to a fibre-to-the-home approach for several years and says he will continue to “call them out” on what is an “inferior policy position”. He will also continue to build bipartisanship support around FTTH.

One of his main points of contention with the Coalition's version of the NBN is he believes it will not provide the rate of return that the federal government’s NBN has targeted – a 7.1 per cent return over the 30-year period 1 July, 2010 to 30, June 2040.

“It’s just disappointing that the Liberal party in 2013 is arguing against the market in carbon pricing and arguing against the rate of return for the NBN build. Markets and rates of return should be the traditional domain of the business-friendly Liberal party,” he says.

“I just wish, in many ways, that it was Malcolm Turnbull arguing the case for fibre-to-the-home and not against fibre-to-the-home because personally, in many other policy areas, he and I are peas in a pod.

“It wrecks me in the brain that they’re for some reason choosing politically not to support them.”

With an election date now set for 14 September this year, Oakeshott says the NBN will be a significant election issue. But given the choice, he believes Turnbull would rather not fight on the election battleground over the NBN.

“I think he’s [going with FTTN] to demonstrate that he is part of the team and I just hope if they are successful in government, that in many ways he is the minister for communications so that he can minimise the damage done by any election promises made,” he says.

“How a lower speed with less reliability and a lower rate of return is better for Australia even stretches the imagination of a good and smart man like Malcolm Turnbull, let alone the rest of us.”

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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.”

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