NBN update. Let’s not compound a history of poor policymaking by people who claim to be good economic managers

Nov 19, 2020

In years to come Malcolm Turnbull will be remembered as the communications minister who, under instruction from then prime minister Tony Abbott, ‘demolished’ Labor’s 21st Century National Broadband Network. But another prominent politician had earlier inflicted enduring damage to any nascent aim of becoming an innovation nation and set us back as a player in an emerging digitally enabled world. Are we heading towards a repeat of this mistake in telecommunications policy?

Credit – Unsplash

John Howard’s privatising of Telstra led to what in Canberra they term “unintended consequences”. Not just unintended, it seems, but also unending.

The 500 pound telco gorilla kept growing in size and confidence and cemented its considerable market dominance. It now wants to buy the NBN it once refused to build.

Labor is not entirely blameless of course. Its failure, back in the 1990s, to take the advice of telecommunications experts and economists and structurally separate Telstra’s wholesale and retail arms set the scene for one of John Howard’s biggest policy blunders.

Added to the shenanigans that marked the tumultuous period when big talking American Sol Trujillo and his two hyperbolic amigos ran Telstra and look where all this has landed us!

Trujillo famously played ‘chicken’ with the Rudd Government and refused to submit a sensible bid for the role of building the NBN. This led Rudd and his communications minister Stephen Conroy to decide to build their own broadband network.

When Malcolm Turnbull subsequently took the fateful (and ultimately disastrous) advice of a bunch of his ‘techie’ mates and ditched a modern fibre rollout in favour of reusing its old copper wires Telstra took him to the cleaners. We, the hapless taxpayers, now hand Telstra more than a billion dollars a year so that NBN Co can deliver millions of us slow and unreliable Internet access.

Adding insult to this avoidable injury, Telstra is now doing what governments of both persuasions should have done and is undertaking its own structural separation – hiving off its fixed assets into the unimaginatively named offshoot Infraco. The reason for these corporate gymnastics is that Telstra as it is currently structured is banned by legislation from bidding for the NBN should a sale occur.

Of course, nobody expects Telstra to offer anything like the money that has so far been blown on this infrastructure lemon. It’s hoping to benefit from a fire sale by a government desperate to separate itself from a messy political issue. And banking on being the only player with the funding and the technical nous to fix the mess the business is in right now.

What Malcolm Turnbull was told would cost $29 billion has now well passed the $50 billion mark and the NBN bean counters are still doing their sums. Another $4.5 billion has recently been added to the tally – most of that to go on replacing dud copper connections with the fibre that should have been deployed in the first place.

Unsurprisingly, other telcos are expressing opposition to Telstra being allowed to buy the NBN. From the outset, Labor’s model envisaged a wholesale-only broadband service to be sold by multiple retailers. The expectation was that this would lead to more sellers and increased competition at the consumer level. To date, that hope has failed to materialise with the incumbent players retaining a high level of market dominance.

Allowing a retailer – especially the market leader – to own the wholesale component is hardly likely to benefit consumers.

However, with the company in charge of this debacle – NBN Co – massively in debt and predicted to need billions more dollars in order to replace its outdated technology the risk is the government takes the easy option and offloads the problem by selling it to Telstra at a massive loss. If that happens the ghosts of John Howard and Malcolm Turnbull will haunt us for decades to come.

Had Telstra remained in government hands it could have built a world-leading broadband network for considerably less than we’ve so far paid for what is now a debt-laden albatross around the government’s neck delivering a demonstrably second-rate service.

Even The Australian right-wing columnist, Terry McCrann, has wised-up and reckons the NBN “is now the single most important foundational infrastructure for the Australia of the 21st century. For that reason alone it must remain publicly owned”.

Labor’s policy was, and still is, to eventually privatise NBN Co. But giving the NBN to Telstra is hardly in the national interest so a rethink is inevitable if Anthony Albanese becomes prime minister sometime next year.

By the way, we can’t blame then CEO David Thodey for striking such a great deal for Telstra shareholders. That was his corporation’s law obligation. Nor can we blame current boss Andy Penn for wanting to do the same.

(Laurie Patton is a former CEO / Executive Director of Internet Australia, the NFP peak body representing the interests of Internet users, and until recently the Vice President of TelSoc. This article first appeared in The Lucky General.)

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