Executive Summary

Executive Summary

NBN Co Strategic Review

The Senate Select Committee on the National Broadband Network (the Committee) has issued this interim report because it has significant concerns with the accuracy and reliability of the Strategic Review.

The Committee considers that the assumptions and conclusions set out in the Strategic Review are unreliable in the case of all examined scenarios.

The Committee has found that the Revised Outlook includes financial manipulations and other irregularities, such as:

The Committee considers that—without the financial manipulations evident in revenue and other assumptions—the so-called “radically redesigned” FTTP scenario represents a better estimate of the cost of the fibre build than the Revised Outlook. This is because the productivity and architecture improvements included in Scenario 2 had already been included in the September 2013 Corporate Plan, and implemented, by previous NBN Co management.

The Committee has equally strong concerns about the reliability of assumptions underpinning the MTM, the recommended option. These include:

NBN Co’s previous Corporate Plans have been developed over a period of many months and have been subject to independent oversight and verification. By contrast, the Strategic Review was the result of “five weeks of intensive work on the part of lots and lots of people”[1] and was subject to no independent external oversight.

Further, the committee rejects the rollout strategy advocated by the current Government and reflected in the MTM. In particular:

The Committee considers these rollout strategies reflect a fundamental misunderstanding of broadband quality—particularly uploads—and demand for this quality and reliability in the residential and small business market. Failure to consider that broadband quality and capability goes beyond download speeds is systemic in the Strategic Review.

The Committee concludes that the Strategic Review does not comprise a sufficient information base for the NBN Co Board or the Minister to adopt an alternative deployment path for the NBN.

Recommendation 1

NBN Co should submit a revised Strategic Review that provides transparent assumptions and corrects deficiencies and distortions. The revised Strategic Review should provide details of only two scenarios:

The revised scenarios should include consideration of broadband quality beyond just download speeds, and the demand for attributes like upload speeds and reliability in the residential and small business market.

Prior to submission, the Strategic Review should be scrutinised and verified by an independent advisor engaged by the Department of Communications and the Department of Finance.

NBN Co should be directed to continue and accelerate the FTTP roll out while further analysis is undertaken by NBN Co, the Departments and the Minister. The Committee notes that NBN Co is not able to progress the FTTP rollout at the maximum rate possible at present. This is because—under the interim Statement of Expectations—NBN Co is required to obtain approval to issue additional build instructions. This places the management of the current FTTP rollout under direct political control. The committee considers that, given the continuing review work, and the fundamental problems with the Strategic Review, NBN Co should continue the current FTTP roll out at the maximum rate possible and free from political interference.

Recommendation 2

NBN Co should continue and accelerate the roll out of the FTTP network while further analysis is undertaken.

NBN Co should be allowed to proceed free from political interference.

NBN Co Governance and Review Processes

Key appointments to the NBN Co Board and management relevant to the Strategic Review reflect to a large extent personnel named in media reports before the election. There is also clear evidence that key appointees have prior personal associations with the Minister. The Committee considers that some of the processes of recruitment for the Board and management of NBN Co have created the perception that these are political appointments for a political purpose. In reaching this conclusion, the Committee is not making any judgements about the skills and experience of any of the individuals.

A key finding of KordaMentha was that “no material issues exist within the accounts of NBN Co.” However, the Strategic Review draws radically different conclusions from the information contained in the 2013-16 Corporate Plan signed off by an independent board in June 2013.

It is not clear to the Committee how the NBN Co Board could have endorsed the Strategic Review, given its clear deficiencies. In the Committee’s view, this should be investigated to ascertain how and at what point the governance processes at NBN Co have failed under the current Government.

Recommendation 3

Governance processes between NBN Co and the Minister should be investigated to determine how a document with the deficiencies evident in the Strategic Review was produced and signed off by the NBN Co Board and the Minister.

The committee is also uneasy at the multiple reviews of the NBN that have been announced and the very short timeframes for their completion. Noting the Committee’s findings as to the Strategic Review—and the Government intention for reviews to inform the development of NBN Co's Corporate Plan 2014-17—the committee considers that the reviews and their findings should be subject to continuing and close parliamentary scrutiny.

The committee also notes the finding of the Strategic Review that the intense politicisation of the NBN—driven principally by Coalition opposition to the project—has adversely impacted the performance of NBN Co and the efficient deployment of the network.

Recommendation 4

The Committee recommends that the Senate amend the Committee’s Terms of Reference to enable ongoing and robust Parliamentary oversight of the National Broadband Network.

Transparency and Accountability

The Committee considers that transparency has decreased markedly at NBN Co since the change of government, despite undertakings prior to the election. In summary:

Of key concern to the committee is the uncertainty evident in the community about the rollout. The lack of consultation with local communities, and the absence of information available to these communities on the rollout, has been a key theme of submissions to the committee and evidence given at public hearings.

Recommendation 5

Shareholder Ministers and NBN Co should implement concrete measures to improve transparency and accountability. At a minimum, NBN Co should:

Immediately take steps to rectify community uncertainty about the rollout. NBN Co should inform communities where physical construction is taking place, and provide forecasting data on its website to advise local communities when services are expected to become available;

Attend all Parliamentary Committee hearings and answer questions on notice accurately and in a timely fashion, as is appropriate for a Government Business Enterprise accountable to the Australian people; and

Publish the full program summary report on its website, in accordance with the interim statement of expectations.

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