Chapter 1

Chapter 1


Resolution of appointment

1.1        On 14 November 2013, the Senate established the Select Committee on the National Broadband Network to inquire into and report on the Government's reviews of the National Broadband Network (NBN) and the governance of NBN Co, with interim reports as the committee sees fit and a final report on or before 10 June 2014.[1]

1.2        The committee's terms of reference identify the following areas of inquiry:

Brief history of NBN policy

1.3        On 7 April 2009, the Rudd Government announced the establishment of NBN Co to 'design, build and operate a new super-fast National Broadband Network'.[2] The NBN would:

1.4        The NBN was initially proposed as a joint partnership between Government and the private sector. During 2008, the former Minister, Senator the Hon Stephen Conroy, convened a panel of experts to evaluate proposals from the private sector.[4] The expert panel was chaired by the former Secretary of the Department, Ms Patricia Scott. The other members of the panel were: Dr Ken Henry AC, (Treasury Secretary); Reg Coutts (Professor Emeritus of Communications at the University of Adelaide); John Wylie (CEO of Lazard Carnegie Wylie); Rod Tucker (Laureate Professor at the University of Melbourne); Tony Mitchell (Allphones Chairman); and Tony Shaw (former Chairman of the Australian Communications Authority).

1.5        On 26 November 2008, the Commonwealth received Proposals from six proponents: Acacia Australia Pty Ltd, Axia Netmedia Corporation, Optus Network Investments Pty Ltd, the Crown in the Right of Tasmania, Telstra Corporation Ltd and TransACT Capital Communications Pty Ltd. On 13 December 2008, the Panel met and considered the future of the Telstra Proposal. After considering legal and probity advice, the expert panel and the Commonwealth concluded that the Telstra Proposal had not met the conditions of participation for the RFP and Telstra's Proposal was excluded from further consideration in the RFP process.[5]

1.6        In its report to Government, the expert panel advised that:

All Proposals were to some extent underdeveloped. No Proposal, for example, provided a fully developed project plan. None of the national Proposals was sufficiently well developed to present a value-for-money outcome.[6]

1.7        The expert panel also advised:

The Proposals have also demonstrated that rolling out a single fibre-to-the-node (FTTN) network is unlikely to provide an efficient upgrade path to fibre-to-the-premises (FTTP).[7]

1.8        This advice was in part informed by a concurrent review by the Australian Competition and Consumer Commission (ACCC) of the types of rollout proposed for the NBN. However, the expert panel also formed its own view that FTTN was not a cost effective path to FTTP.[8] The expert panel concluded:

The Panel can see a way forward to achieve the outcomes sought by the Government and has provided that advice in confidence to the Government because of the commercial sensitivities arising.[9]

1.9        Following receipt of this advice, the Minister met with Prime Minister Rudd on 21 January 2009 to seek approval to bring an alternative plan to Cabinet.[10] The Strategic Priorities and Budget Committee of Cabinet considered the NBN policy on a number of occasions between 29 January and 6 April 2009. Cabinet formally considered the NBN policy on 7 April 2009.[11] The Government also received advice from other Government agencies and the external advisers engaged by the Department on costing alternative proposals.[12]

1.10      In announcing the new National Broadband Network proposal in April 2009, the Prime Minister, Finance Minister and Minister for Broadband, Communications and the Digital Economy stated that:

The Panel of Experts has encouraged the Government to invest in optical fibre technology, supplemented by next-generation wireless and satellite technologies. The Australian Competition and Consumer Commission has also endorsed the use of FTTP as a superior technology to Fibre to the Node.[13]

1.11      Work to begin implementation of the NBN began shortly after the announcement. The Government announced that it would:

1.12      The Implementation Study was delivered to Government on 5 March 2010 and was released on 6 May 2010[15] Key findings and recommendations from the Implementation Study included:

1.13      NBN Co delivered its Corporate Plan 2011-13 on 8 November 2010.[16] The Corporate Plan was released publicly on 20 December of that year, together with the Government Statement of Expectations.[17] The Government Statement of Expectations also constituted the Government response to the Implementation Study.[18]

1.14      The Corporate Plan and the Government Statement of Expectations (20 December 2010) reflected the Government's changes to its expectations for the NBN since the Implementation Study:

1.15      In August 2012, NBN Co released its second Corporate Plan (2012-15).[20] The Corporate Plan noted that concluding the Definitive Agreements with Telstra had taken nine months longer than foreshadowed in the previous Corporate Plan. The Corporate Plan defined the Commencement Date as “7 March 2012, being the date that the Telstra Definitive Agreements became wholly unconditional.” As a consequence the NBN is now two years into the build program for the FTTP rollout.

1.16      The Corporate Plan confirmed:

1.17      In March 2013 NBN Co announced that the failure of its contractors to mobilise resources necessitated a downward revision of its June 2013 forecasts.[22] In May 2013 Telstra put a temporary stop on remediation work while asbestos handling practices were reviewed.[23] In August 2013 Telstra announced the recommencement of pit remediation.[24]

1.18      In an address to TelSsoc on 2 December 2013, Mike Quigley summarised the achievements of the company to date:

1.19      In his Australian Computer Society Telecoms Address on 11 October 2013, Senator Conroy summarised the reasons why the former Government conceived the National Broadband Network. An abridged version is provided here:[26]

The digital age is upon us, but the realisation of the opportunities it presents is really just beginning. We started on realising it on day one by creating the Department of Broadband, Communications and the Digital Economy. Labor’s policy on broadband formed in Opposition was an essential part of this name change, so was the wider agenda. So as well as focussing on broadband we started a national discussion about the digital economy.

Over the last four years we released three major reports;

These reports were dismissed by Malcolm Turnbull as justifying the NBN by “framing it as a pre-requisite for global digital greatness.”

This is the Coalition’s fundamental error—they don’t understand that we are building the NBN because of the promise of the digital economy. We are not talking about the digital economy to justify the infrastructure investment. Labor made the decision to invest in broadband because of its importance to our economic and social future.

The Coalition response to our initial broadband policy was to assert that the private sector would build broadband for our cities. The Coalition only has a broadband plan because, as Peter Reith identified, the failure to have a credible broadband policy cost them the 2010 election.

Labor’s approach to the Digital Economy actually focussed on three areas—providing the physical infrastructure, developing services and building national capability.

Labor’s commitment to build a new national broadband infrastructure was forged in Opposition. Three factors resulted in the need to move from the initial plan to build Fibre to the Node and instead build Fibre to the Home. The first was the resistance of Telstra to structural reform. This resistance led them to submit only a brief non-compliant tender response and they were excluded from the process. The second was the impact of the Global Financial Crisis on alternative bidder’s ability to raise capital. But thirdly, and most significantly, the Expert Panel advised the government that FttN was not a cost effective path to a full fibre network.

At the heart of our approach were two fundamental principles.

The first was to fix the industry structure and get sustainable retail competition.

The second principle was to make sure that we make an investment in long term infrastructure, not a stop-gap.

The starting point for Labor’s policy was to ask what infrastructure you need to empower the digital age. The starting point should not be identifying the cheapest interim step to get you through the next five years.

1.20      On 7 September 2013, the Coalition formed Government. Since being sworn in, the Minister for Communications, the Hon Malcolm Turnbull MP has announced five reviews into the NBN, including:

1.21      The Strategic Review also flagged a sixth review focussing on the fixed wireless and satellite programs, which will “consider strategic options available to NBN Co to cost effectively provide coverage to areas outside the fixed footprint, as well as considering the optimal model to provide this coverage.”[27] The committee understands that this review will be completed in March and will be examined by the committee in subsequent hearings.[28]

1.22      On 24 September 2013, NBN Co shareholder Ministers, the Minister for Communications and the Minister for Finance, provided NBN Co with an interim Statement of Expectations for the transition period.[29] The interim Statement of Expectations directed NBN Co to:

1.23      The interim Statement of Expectations also instructed NBN Co to “continue existing construction where build instructions had been issued.” Further build or remediation instructions “should not ordinarily be issued pending further analysis and discussion.” It also advised that: “management of existing design work should occur so as to optimise value in the context of the Government’s policy for a flexible architecture.” The Committee has considered NBN Co’s application of this instruction as part of this report.

1.24      The interim Statement of Expectations indicates that it provides guidance only, and that NBN Co should consult with the Government for any matters not covered by its advice.[31]

Previous parliamentary committee inquiries into the NBN

1.25      Since the announcement of the termination of the Request For Proposals process—and its replacement with a government-owned company to build the NBN—four parliamentary committees have inquired into various aspects of the project:

Purpose of the interim report

1.26      This first interim report provides an overview and analysis of the Strategic Review based on evidence received by the committee to date. The Committee has issued this interim report because it has significant concerns with the reliability of the Strategic Review.

1.27      The report focuses on three key aspects of Government policy on the NBN:

1.28      The Committee acknowledges that a number of Questions on Notice and Questions in Writing to NBN Co remain unanswered at the time of writing. The Committee cannot be held hostage to long delays by NBN Co and the Minister in responding to these questions. Further comments on the issue of responsiveness are made in Chapter 4.

1.29      The Committee will pursue further lines of inquiry before presenting its final report to the Senate. A list of submissions to the inquiry and the public hearings held to date can be found in Appendix 1 and 2 respectively. The committee will have more to say in Chapter 4 about the conduct of some of the hearings, and the attendance or otherwise of witnesses in response to certain orders of the committee.

1.30      The findings of the Strategic Review will be incorporated into NBN Co's 2014-17 Corporate Plan. The Strategic Review advised that the Corporate Plan was scheduled to be provided to the Government in the first half of 2014, and that the Strategic Review had been prepared to assist the Government formulate policy and inform decisions on the Statement of Expectations for NBN Co.[35] NBN Co has since indicated an intention to lodge a 2014-15 “budget” before June and a full Corporate Plan in the second half of the year.[36] The revised timing will enable the plan to incorporate the findings of the cost-benefit analysis and the broadband quality project. It will also enable the Corporate Plan to be more fully informed about the real costs of any change in strategy.

1.31      The Strategic Review is the first of the planned Government reviews to have been completed. The Broadband Availability and Quality Report was released on 20 February 2014 (noting that NBN Co was provided with early data for consideration in the Strategic Review),[37] but the Committee has not yet completed its investigation. Similarly, the terms of reference and panel of experts for the Independent cost-benefit analysis and review of regulation were announced on 12 December, and on 13 February 2014 the expert panel released a Regulatory Issues Framing Paper. However, until the review progresses further and the committee has the opportunity to seek submissions and call relevant witnesses, few conclusions can be drawn. Subsequent review processes are ongoing and will be examined in turn.


1.32      The committee thanks all those who have assisted with the inquiry to date, including those who have appeared at hearings and made submissions.

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