Review Processes and NBN Co Governance and
The select committee was 'established to inquire into and report on the
Government's reviews of the National Broadband Network (NBN) and the governance
of NBN Co', including the processes for the reviews and the outcome of those
reviews. The Committee is required to report on the establishment of the
Government's strategic review of the NBN including:
the adequacy of the terms of reference
the selection of personnel and expert advisers to the review
the data provided to the strategic review, in particular, any
variation between that data and data used by NBN Co in preparing its annual
report and corporate plan, and
the impact of the strategic review on the operational
effectiveness of NBN Co.
As noted, to date there are no less than six review processes that have
been announced pertaining to the NBN. These are:
The Strategic Review
An Independent Cost Benefit Analysis and Regulatory Review
The Broadband Quality and Availability study
An NBN Governance Review
An Independent Audit of the NBN Public Policy Process
Review of the fixed wireless and satellite programs.
The Coalition broadband policy includes details of reviews which would
be initiated by a Coalition Government. The NBN Co Strategic Review was to be a
rapid but rigorous business review of NBN Co's rollout progress and costs,
structure, internal capabilities, commercial prospects and strategic options to
report to Government in 60 days. The Minister announced the terms of reference
for the Strategic Review on 3 October 2013.
The Independent cost-benefit analysis and review of regulation was to 'analyse
the economic and social costs and benefits...arising directly from the
availability of broadband of differing properties via various technologies, and
to make recommendations on the role of government support and a number of other
long-term industry matters'. Terms of reference and panel for the review were
announced by the Government on 12 December 2013.
The Coalition Policy document was unclear on the relationship between
the Strategic Review and the implementation of the Coalition’s policy. At the
launch of the Coalition Policy, Mr Turnbull was asked:
QUESTION: You’ve said in announcing the policy you will
commence a commercial review that will have 60 days to work out how quickly
your National Broadband Network plan can be rolled out. You also announced that
it will be rolled out by 2016. Please can we have those two aims resolved? You
can’t know that you will deliver it by 2016 if you need a commercial review to
MALCOLM TURNBULL: Let me take that question. I can
What we have got here is a policy that is very realistic,
that we have researched very carefully, that we have discussed with people very
knowledgeable in the field – people that are actually building new generation
broadband networks, both here and internationally. So we haven’t spent a lot of
time – we have spent some time with academics – we have actually spent time with
the men and the women that are really doing the work, that really know what
they’re talking about. They are the people that I would encourage every
journalist who is interested in this area to talk to. They are the most
Now we believe the goals here are very realisable but what we
are going to do, as Tony has said, immediately the NBN Co will set out a
realistic objective assessment of how long it is going to take in dollars and
time to complete the project on the current trajectory, on the current design
and then set out what savings can be achieved both in dollars and time by
making changes of the kind that we have proposed and indeed there are some
other changes, because we didn’t want to overcomplicate our proposal.
There are other changes of a more technical nature that can
also make some considerable savings. So that is the, and the point of that is
that that will have the benefit of all of the NBN’s experience and have access
to that information. So I am very confident that that will confirm the
reasonableness of what we have proposed.
The Coalition Policy document is equally unclear on the relationship
between the Cost Benefit Analysis and the implementation of the Coalition's
policy. At the launch of the Coalition Policy Mr Abbott and Mr Turnbull were
QUESTION: Who will do the independent review? Who have
you commissioned to do that and will you abide by any recommendations they make
if they conflict with your policy?
TONY ABBOTT: Look, it will be a fully independent review.
It may be the Productivity Commission although we’re conscious of the fact that
the Productivity Commission has a very heavy workload. It may be Infrastructure
Australia. But one way or another there will be a full independent review of
telecommunications going forward, of broadband going forward and that will
obviously include a cost-benefit analysis, a published cost-benefit analysis of
our version of the National Broadband Network.
QUESTION: Will you do a cost-benefit analysis of
Labor’s NBN because Mr Turnbull you hinted at it at the kick-starter conference
earlier this year. So, will you do a cost-benefit analysis of the NBN?
MALCOLM TURNBULL: The big question...the answer is yes,
all of that will be examined but one of the...
QUESTION: A cost-benefit analysis of the NBN?
MALCOLM TURNBULL: The answer is yes.
The conduct and outcome of the cost benefit analysis in regard to the
chosen broadband technologies will be examined by the committee in subsequent
Board appointments and selection of new management team
Appointment of new NBN Co Board
Since the September 2013 federal election, the Government has replaced
most of the NBN Co Board. On 3 October 2013 shareholder Ministers announced:
- The Government had received offers of resignation from five of
the seven NBN Co directors and one resignation. The Government had accepted
four of these offered resignations but has asked Dr Kerry Schott and Ms Alison
Lansley to continue serving on the Board.
The tenure of the seventh director, Mr Brad Orgill, has been
With the approval of the Cabinet, the Ministers for
Communications and Finance had appointed Dr Ziggy Switkowski to the Board as
Dr Switkowski had also been appointed as Executive Chairman of
the NBN Co, pending the appointment of a new Chief Executive to replace Mike
Quigley, who announced his intention to resign from the position in July.
The Government intended to nominate additional non-executive
directors to the Board shortly.
Media reporting at the time noted that the board members were asked to
resign by the Minister for Communications:
Meanwhile, Mr Turnbull confirmed he asked the company's seven
board directors to resign last week, and all but one have done so.
"That request should not be regarded as any criticism of
any of the directors," he said. "The reason for that was simply to
give the Government complete flexibility in remaking the board in light of its
new policy agenda."
"Decisions about the board will be taken by the Cabinet
in due course."
On 12 November 2013 the shareholder Ministers announced that Mr Patrick
Flannigan , Mr Simon Hackett and Mr Justin Milne had been appointed as
Non-Executive Directors of NBN Co.
At the committee's public hearing on 11 December 2013, the Acting-Chair,
Senator the Hon Stephen Conroy, put to NBN Co executives that the NBN Co Board
was unable to consider draft version 13 of the 2013-16 Corporate Plan because
the Minster had asked NBN Co Board members to resign at the board meeting on
either 19 or 20 September 2013. Mr Brown took on notice to review the minutes
of the meeting and provide an answer.
At the time of writing NBN Co had not provided an answer to this question.
Similarly, Mr Drew Clarke, Secretary of the Department of
Communications, also took on notice a question as to what day Minister Turnbull
asked NBN Co Board members to offer their resignations:
CHAIR: They all did resign on the 19th or the 20th,
Mr Clarke: I do not have the dates in front of me but
there was a number of resignations.
CHAIR: So what happened, that they by osmosis heard on
the grapevine that their resignations were desired?
Mr Clarke: No, there is a distinction between being
asked to offer your resignation and being asked to resign.
CHAIR: I will accept that. So when were they asked to
offer their resignation – if that makes it easier for you?
Mr Clarke: Thank you, it does. I do not have the dates
in front of me but I would be very happy to take that on notice.
Mr Clarke has subsequently advised that 'the Department is unable to
comment on arrangements between the NBN Co Board and the Minister'.
Fairfax Media requested the minutes of the 20 September 2013 Board
meeting under Freedom of Information.
This request was denied. Fairfax sought the views of Mr Timmins, an FOI expert,
in regard to NBN Co's decision to refuse the FOI request. Mr Timmins noted that
NBN Co's arguments were 'speculative, ridiculous and without foundation' and 'all
in all a confused and confusing set of words that suggest a really big effort
to dream up something to put on paper but in the end are unpersuasive'.
Mr Mesman, NBN Co's FOI officer, subsequently noted at the 12 March public
I stand by my reasons. I presume you have access to those
reasons, but, as a starting point, the actual document was found to be within
the commercial activities exemption. I specifically referred to a secondary
issue, outside of the commercial activities exemption, because the applicant
had specifically asked for the attendances of the members of the board of
directors. That was a complement to my primary reason, which was that I found
that the board minutes were subject to our commercial activities exemption.
The committee notes that NBN Co previously released Board minutes—on 30 August
2013—under Freedom of Information.
Selection of new NBN Co Board
Mr Clarke advised the committee about the selection of new NBN Co Board
members at the public hearing on 11 December 2013:
CHAIR: At estimates you advised that the selection of
board members for NBN Co. after the election followed the usual process of long
lists, short lists and a recommendation to the minister. Was that your
Mr Clarke: It was, Senator, with a qualification
around Dr Switkowski. I think they were on different tracks, but the general
point of my evidence stands. As you will recall, the timings of the
appointments of Dr Switkowski and the subsequent appointments were separate. I
do not want to infer that it was all bundled up into one single process.
Mr Clarke advised that the appointment of new board members had followed
the usual process, with the firm Russell Reynolds engaged by the Department of
Communications in relation to the search for new board members.
Further evidence provided by Mr Clarke about the process for appointing
board members raised questions of possible probity problems with the
appointments process. However, the committee was not able to gain a clear
insight of the process and sought further evidence from the Department of
CHAIR: Before Mr Milne was announced as being a board
appointee there were media reports that he was at NBN Co. working for NBN Co.
Did you see any of those reports? Are you familiar with those reports? Do you
know if it is true?
Mr Clarke: I do not recall seeing those reports.
CHAIR: I saw them myself, so I was surprised at the
time. Or not surprised, given the previous publicity that he was getting a job
at NBN Co. Who placed Mr Flanagan's name on the list?
Mr Clarke: I am not going to be able to give you
precise answers to these questions.
CHAIR: I am happy for you to take that on notice.
Mr Clarke: Certainly.
The Department has advised that Russell Reynolds Associates included
Justin Milne and Patrick Flanagan as short listed candidates for the NBN Co
Following the appointment of Dr Ziggy Switkowski as Executive
Chairman, the Department appointed Russell Reynolds Associates, a global
executive search provider, to conduct a search for executives suited to the NBN
At the 19 November 2013 Senate Estimates hearing the NBN Co
Executive Chairman, Dr Ziggy Switkowski, stated:
“As chairman I led the way in identifying potential board
members. There was a reasonable list. To that end we were advised, and I know
that the advisers were commissioned by the department, and I provided input –
indeed, my recommendations – as to board appointments from the perspective that
it was the minister who was going to make the call.”
The process for selection of a new NBN Co Chairman was discussed in
evidence at the committee's public hearing on 11 December 2013. Mr Clarke
outlined the process followed, including a short list for consideration by
shareholder ministers prior to the appointment by Cabinet.
Mr Clarke explained the input of the shareholder ministers to the CEO selection
Mr Clarke: There was a process by which the
shareholding minister made a choice.
CHAIR: Who put Mr Switkowski's name in the ring?
Mr Clarke: I believe it was the minister.
Additional Executive Members
Mr JB Rousselot was appointed Head of Strategy and Transformation at NBN
Co on 23 October. In the role he was to 'lead the Strategic Review process that
is commencing this week and then help manage the implementation of
recommendations and their incorporation into the company’s 2014-17 Corporate
On 13 November 2013 Mr Greg Adcock was appointed Chief Operating Officer
of NBN Co. The company also announced that current Chief Operating Officer Mr
Ralph Steffans would step down and leave the company immediately.
On 12 December NBN Co announced that Mr Bill Morrow had been appointed
Chief Executive Officer of NBN Co. The announcement stated that '[Morrow] will
join the company in the New Year and will be based in Sydney'.
Media reports at the time indicated that Mr Morrow would take up the position 'between
March and April'.
Shareholdings of board and
Other probity issues involving NBN Co board members were raised during
the committee's public hearing on 17 December 2013. These relate specifically
to a potential conflict of interest involving NBN Co board members and senior
Dr Switkowski: I am completely confident that there is
no conflict of interest that will prevent us from reaching the optimum outcome
for NBN Co. Completely confident.
Senator LUDLAM: Do any of your board or any of your
senior management team have shares in Telstra?
Dr Switkowski: I do not know the status of the
shareholdings of one of our board members, but I do know that that person was
appointed to the board with equity in Telstra shares and I think had undertaken
to divest himself of those shares.
Senator LUDLAM: How about your management team?
Dr Switkowski: I am not aware.
Senator LUDLAM: What are your processes internally
within the company for disclosure of that sort of thing? How would you be made
aware of it?
Dr Switkowski: We would expect such holdings to be
disclosed and then to be discussed, at this stage, with me.
Further evidence was given that two of the NBN Co executives held
Telstra shares, with one executive seeking legal advice with regards to his
Processes of Appointments
During the Committee’s public hearing on 29 November 2013, Dr Switkowski
was questioned about the timing of approaches made to himself, Mr Milne and Mr
Senator CONROY: Thank you. I note that last week you
had a discussion about when you were first approached for the position. I am
sure you were aware, for were horrified at the time, to see that there was
media speculation very early in the year that you had been approached and
offered the position. I just want to be very precise—and I accept 'precise'
does not necessarily mean five o'clock on x day—about when you were first
approached to take on a role at NBN Co.
Dr Switkowski: My recollection is that around about
March-April I would have crossed paths with Mr Turnbull when we would have
talked about the telecom industry broadly and NBN, but not with my joining that
organisation being a topic. That evolved in the weeks that followed.
Senator CONROY: Sorry, in the weeks that followed
March and April?
Dr Switkowski: Yes. I had always assumed at that
time—I think I am right—that the minister was consulting widely with the
industry, talking to a lot of people, and sometime around about—
Senator CONROY: He would have been talking widely to a
lot of journalists.
Dr Switkowski: and some time—and I am not clear about
this—around the middle of the year the topic would have been raised about
joining the NBN and considering being on a list of potential candidates for the
Senator CONROY: Did you have any discussions with Mr
Turnbull about any other individuals who would be possible employees or board
members of NBN Co.?
Dr Switkowski: I think in our conversations names did come
up for all sorts of reasons.
Senator CONROY: But did Mr Milne's name come up or Mr
Rousselot's name come up?
Dr Switkowski: For the board?
Senator CONROY: For any position—board or executive.
Dr Switkowski: It is hard to disentangle at which
point I raised the matter of Justin Milne and JB Rousselot and their attraction
for NBN Co., but I certainly did talk to the minister about those people,
Senator CONROY: So you raised them with Mr Turnbull?
Dr Switkowski: As I said, it is hard to disentangle
how these topics arose. Both of those individuals were known to each of us and
they would have been, along with others—and there were lots of others—names
that were judged to be relevant to the NBN situation.
The media speculation referred to in this exchange was published in the
Australian Financial Review and Crikey in May and June 2013, well before the
commencement of any selection processes.
This speculation referred to personal associations between Minister Turnbull
and the prospective appointees. The article in Crikey noted that 'Milne worked
as head of datacasting at OzEmail when Turnbull was chairman'.
It also reported that 'the French-born Rousselot, who was reportedly inspired
to move to Australia after meeting Turnbull on a skiing trip, formerly worked
at OzEmail and Turnbull’s boutique advisory firm'.
An answer to a Question on Notice also confirmed prior personal association
between Mr Turnbull and Mr Rousselot:
Mr Rousselot and Minister Turnbull jointly own an old Couta
Boat and have done so for over 15 years. This is the only joint asset they
This evidence, and the answers from Dr Switkowski set out above, suggest
that any subsequent selection processes by which he, Mr Rousselot and Mr Milne
were selected for roles in NBN Co were not genuine merit selection processes.
The Committee concludes that the processes of recruitment for the Board and
Management have created the perception, at least, that these are political
appointments for a political purpose. In reaching this conclusion the Committee
is not making any conclusions about the skills and experience of any of the
Summary of findings—Key
- Key appointment processes for the NBN Co Board and management
pertaining to the conduct of the Strategic Review reflect to a large extent
media reports naming the same personnel before the election. There is also
clear evidence that key appointees have prior personal associations with the
The Committee concludes that some of the processes of
recruitment for the Board and management of NBN Co have created the perception,
at least, that these are political appointments for a political purpose. In
reaching this conclusion, the Committee is not making any conclusions about the
skills and experience of any of the individuals.
NBN Co culture
Findings of the Strategic Review
A key finding of the Strategic Review relates to the culture of NBN Co
and its effect on the rollout of the network. The Strategic Review explained
part of the methodology used in examining the culture of NBN Co:
The Independent Assessment conducted approximately 60
interviews including all senior management and a sample of employees from a
number of divisions, locations and levels. While this was not a comprehensive
organisational review it is KordaMentha’s professional opinion that there are a
number of people and culture issues that are important to note in the Strategic
Review and that NBN Co should address these issues in the preparation of its
Mr Korda elaborated on this methodology during the public hearing on 17
Trying to compact in what we say, one of our processes – as
we said in the strategic review – we interviewed approximately 60 people
internally, including the executive committee and many employees that we
randomly selected to get a view of the people and culture. That phrase was a
common phrase that was used. We could have used the words ‘siloes’ but there
are many siloes with NBN. There is the construction silo, the revenue silo, the
chief operating officer silo, the finance silo, and so just if you took
premises past there could be three different versions of premises past within
the organisation. That is an example, and I think Ziggy mentioned it before.
Dr Switkowski also commented on the NBN Co culture, advising the
committee of his observations on first joining NBN Co:
The review found what I also found in the early weeks when I
joined NBN, early in October – that is, that, commendably, there was a high
regard and respect for the promises that were built into a corporate plan. But
there was a very high resistance or reluctance to recognise that what was being
experienced and delivered in the field was well away from the assumptions and
the promises in the corporate plan. The culture was such that these differences
were not properly debated and tested, and adequate remedial action was not
taken. I have seen evidence of that in the inquiries and the interrogations of
this committee. There is a kind of ferocious determination to say that what was
in the plan and what was in the headlines of two years ago must have been
right, and that they must still be right. The fact is they are not. They were
not right then; they are not right now.
The overall finding of the Strategic Review was that the culture of NBN
Co was widely seen to be a problem, notwithstanding the motivated and committed
people who had been attracted to work for the company.
The Independent Assessment identified a number of factors believed to be
responsible for the problematic culture in NBN Co:
'living in the political and media fish bowl';
Hiring process lacking rigour;
Whole-of-business strategy neglected in favour of targets within
functional groups assumed to combine to progress the project;
Lack of trust in motives of senior management;
Fear of being blamed for mistakes; reluctant to document
decisions for fear of consequences;
Duplication of roles and functions; and
Complex organisational structure with more personnel overheads
than estimated for in the corporate plan.
Mr Korda too noted the problems of focusing solely on numbers:
We sort of observed the end result and we did find – we went
through to try to find where all these cost savings were to be – there was just
a general lack of business case for many significant decisions that needed to
be made. I think it also had an overlay of trying to meet the culture of
premises past. So you will get some decisions about passing premises in May or
June that pushed up the costs.
Other 'exogenous risks' identified by the Independent Assessment as
affecting the culture of NBN Co include political and media interest and
inherent risk in forecasting.
The Strategic Review also noted that:
...the Executive Committee has not been seen to operate
efficiently and has tended to “seek to protect” perceived areas of
responsibility and influence. While a number of recent changes are expected to
improve the performance of the senior leadership team it was observed that
“there is still a long way to go to optimise the performance of the organisation”.
While the selection of a CEO is important for any organisation, it will be
critically important for NBN Co.
The Strategic Review noted that ongoing culture and organisational
change—including long term direction focus, organisational structure and
workforce model—are part of the re-direction of NBN Co under the implementation
of the revised Statement of Expectations.
However the Strategic Review also details 'immediate' and 'medium term' next
steps for the organisation. 'Immediate steps' focus on the task of the new CEO
as the driver of review and change in the organisation and culture, as its new
future direction is moulded by the revised Statement of Expectations. An 'immediate
...to identify critical capability gaps, address overlapping
roles, and realign responsibilities within the organisation. The company will
need a substantial concerted effort and investment to make the changes required
in CY14. Organisational capabilities will be reviewed and lifted, not just in
relation to copper and HFC.
In outlining the 'medium term next steps', the strategic review is
explains that defining a new operating model pursuant to the revised Statement
of Expectations will be necessary to align construction, IT, business change
and associated operational processes to support copper, HFC and FTTN.
The Strategic Review argues that:
This model will necessarily consider organisational changes
to improve efficiency and productivity along with the redefinition of
processes, culture and risk management practices that will support execution
and delivery of the NBN.
The Strategic Review notes that 'Changing the culture and re-directing
and re-focusing the organisation will take several months and will be critical
'Political & Media Fish Bowl'
The Strategic Review has identified that NBN Co staff living in a 'political
and media fish bowl' is a major contributor to the cultural problems at the
The company as a Government Business Enterprise will necessarily be the
subject of scrutiny. However, whether that scrutiny is reasonable and enables
the company to make unfettered decisions is another consideration.
The Coalition in opposition adopted an uncompromising and indiscriminate
approach in this regard, with the NBN Co Board and management subject to a
series of sustained and personal attacks. These began with attacks on the
integrity of former NBN Co CEO Mike Quigley with reference to his previous
role(s) at Alcatel-Lucent.
Later, these attacks focussed on Mr Quigley’s credentials and competence in his
role as CEO of NBN Co.
These attacks soon broadened to encompass the credentials and competence of the
entire NBN Co Board, culminating in the threat of a judicial inquiry.
In July 2013, the NBN Co Chairman Siobhan McKenna took the unusual step of
writing to Mr Turnbull signalling that the Board had taken measures to protect
itself from 'threats':
Non-executive Directors have been told directly and
indirectly by members of the opposition that they can expect a Judicial Enquiry
investigating their governance post-election. The Non-executive Directors
naturally sought to engage independent legal counsel on this matter, which they
have a right to do, and appointed Herbert Smith Freehills. It is not unusual
for company directors faced with threats to exercise their right to appoint
Opposition attacks were also more generally focussed on the company and
the project. Initially, these attacks focussed on 'demolish[ing]' the network.
Thereafter the Coalition would reflexively criticise network developments as
they arose. For example, when the satellite program was announced in February
2012, it was attacked for being a 'Rolls Royce' solution. Mr Turnbull said:
Now the satellite industry, which is a large one, has told us
and told anyone else who cares to listen, that there is more than enough
capacity on existing satellites. That’s existing satellites available for
lease and satellites that are scheduled to be launched already to provide
broadband services to the several hundred thousand customers in rural and
remote Australia that these satellites of the NBN are going to service.
Even straightforward regulatory processes—such as the process for
securing orbital slots for the long term satellites—were targeted.
Subsequently, Coalition attacks focussed on the performance of the
company against its targets. Often these criticisms ignored evidence
necessitating changes to Corporate Plan targets, particularly those relating to
the shift in the commencement date brought about by the nine-month delay in
finalising the Definitive Agreements with Telstra and achieving regulatory
approval from the ACCC. For example, at the 16 April 2012 hearing of the Joint
Committee, Mr Quigley said:
Mr Quigley: I will return for a couple of moments, if
I can, to make some comments on the corporate plan from December 2010 and
comparisons of the current rollout with the targets that were in that plan. In
the fourth quarter of 2010, when we were finalising the plan, there were a
number of assumptions we had to make which were based on the best information
that was available to us at the time. Those assumptions were highlighted and
bolded and put in a box, in fact, on page 16 of the corporate plan. A number of
assumptions we made at that time have changed for reasons which we simply could
not control. The most obvious of which was the deal with Telstra, which we
assumed would be finalised by June 2011. In fact, it was not finalised until
nine months later, in March this year.
The second was that, just weeks before the December 2010 plan
was released, we had anticipated that the network would use 14 points of
interconnect. You may recall that, at the end of November 2011, the ACCC
recommended to government that the network use 121 points of interconnect. The
list of these was not finalised until May 2011. While we attempted to include
this change in the corporate plan, we could not know the full consequences of
that decision and the impact it would have on the rollout.
The third area—in fact, just days before the 2010 corporate
plan was released—is that the government announced the greenfields policy.
While we did our best to factor the impact of this policy into the plan, it is
now clear that our estimates of greenfields demand was far too high. Our plan
also did not take into account the large proportion of connections for new
housing that were transferred back to Telstra as the policy was finalised. So
two fundamental assumptions driving our greenfields numbers changed. The best
estimate of project demand of new developments turned out to be way too high
and a change in policy saw us move a lot of those numbers that we had assumed
in December 2010 back to Telstra. As a result we need to reflect these changes
in our new corporate plan targets to be provided to the government in May.
Those were probably the three most significant assumptions in the December 2010
plan which had to be modified but there were also others.
We are now in the process of developing a new corporate plan
based on current assumptions and we will provide this to government at the end
of May. So it is neither reasonable nor valid to compare NBN Co.'s performance
with the deployment forecasts that were included in the December 2010 corporate
At a doorstop in Sydney on 5 May 2013, Mr Turnbull said:
The NBN will be lucky to meet 15% of its June 30 target. It
was meant to pass, according its own plan 1.2 million premises by 30 June this
year. It will be lucky if it does 15% it’s more likely to something around 10%.
This is a colossal failure. It is proceeding at a snail’s pace.
Similarly, Mr Fletcher, Parliamentary Secretary to the Minister for
Communications, said in an article in The Australian on 4 December 2012:
The fibre-optic network is supposed to pass 12.2 million
premises around Australia by 2021. More than three years later, as at June 30,
2012, it had passed just 38,914 - less than one third of 1 per cent towards the
finish line. Yet NBN Co's corporate plan, issued in December 2010, promised to
pass 317,000 premises by June 30, 2012.
The committee considers that the effect of these sustained attacks had
an adverse impact on the staff and culture of NBN Co. In fact, the Strategic
Review considers this a key exogenous risk:
NBN Co has been subject to intense political and media
interest since inception. The Independent Assessment commented that this
attention has adversely impacted the performance of NBN Co and the efficient
deployment of the network. While the ongoing interest in the project is
understandable, NBN Co would benefit from being allowed to focus on its core
task away from the political spotlight.
Despite this being identified as a key risk to performance, current
leadership does not appear to have taken steps to address this risk.
On 18 December 2013 under the heading 'Wage bill soars as 400 staff top
$200K,' The Australian referred to data 'uncovered during the production
of the landmark strategic review'.
This data was either sourced from NBN Co or the Minister’s office.
On 26 February 2014, an article appeared in the Daily Telegraph
claiming that 'NBN Co sources have blamed former communications minister
Stephen Conroy for changing the eligibility criteria for subscriptions, which
had been limited to families and small businesses which had no other access to
comparable services'. Under questioning during the 12 March committee hearing,
Dr Switkowski acknowledged that 'NBN Co should not be commenting on such
matters', but indicated that he had initiated no inquiries into the matter.
At Senate Estimates on 25 February 2014, NBN Co Executive Chairman Dr Switkowski
As we revealed on Friday of last week, the total investment
so far in NBN Co approaches $7 billion for three per cent of the build.
The day following Dr Switkowski’s statement, The Australian ran
off its front page an article entitled 'NBN’s $7bn bill for 3pc of network'.
On 7 March 2014, the day the sixth audit/review of the NBN was announced, the
But the truth is very little was actually done. To spend $7
billion to get to less than 3 per cent of the country is a shameful
As NBN Co demonstrated during its half yearly results briefing (see figure
below), the $7.3 billion capital expenditure invested to date has gone into
network and systems that pertain to the entire build, not just the brownfields
fibre local and distribution network (LNDN).
This includes inter alia the fibre transit network, hardware for the
satellite and fixed wireless build, and investment in core IT systems. As
Malcolm Maiden pointed out in his article on the subject:
The NBN is big, but it's still basically a construction
project, and construction projects absorb money and time at the front end as
their foundations are built.
By December 31, $3.5 billion had been sunk into a broadband
''transit network'' that connects towns and cities. The transit network
''passes'' no premises in a statistical sense, but it is the NBN's spine. At
December 31, it was 60 per cent complete, and 38,000 kilometres long.
Another $658 million had been spent on hardware for the
satellite portion of the network that will service remote areas, including two
satellites that are being built in California, and a ground station at Bourke
in western New South Wales.
Backbone infrastructure for the wireless portion of the
network that will be sandwiched by fibre and satellite was in place at a cost
of $408 million, and 94 of a planned 121 points of interconnect for companies
wanting to tap into the network had been completed. The NBN is behind its
original schedule, but is far from only 3 per cent complete.
NBN Life To Date Capital Expenditure
Source: NBN Co
Summary of Findings—NBN Co culture
- The committee notes the finding of the Strategic Review that
the intense politicisation of the NBN has adversely impacted the performance of
NBN Co and the efficient deployment of the network.
Concluding Remarks and Recommendations
Key appointment processes for the NBN Co Board and management pertaining
to the conduct of the Strategic Review reflect to a large extent media reports
naming the same personnel 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, which was signed off by an independent board in June 2013. Further, the
Committee has found that the Revised Outlook includes financial manipulations
and other irregularities. The Committee considers that the assumptions and
conclusions set out in the Strategic Review are unreliable in the case of all
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.
The committee is also uneasy at the way in which the Government has
unveiled multiple reviews and the very short timeframes announced for their
completion. Noting the committee’s findings of the Strategic Review, and the
Government intention for the reviews to feed into 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 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.
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 recommends that the Senate amend the Committee’s
Terms of Reference to enable ongoing and robust Parliamentary oversight of the
National Broadband Network.
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