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Interview with Waleed Aly - ABC Radio National Drive
Transcript of The Hon. Paul Fletcher MP
Interview with Waleed Aly
ABC Radio National Drive Program
12 December 2013
E&OE
Topics: National Broadband Network
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WALEED ALY:
Joining me is the Parliamentary Secretary to the Communications Minister, Paul Fletcher. Thank you very much for sparing some time for us.
PAUL FLETCHER:
It's a pleasure, Waleed.
WALEED ALY:
I understand that these things are often unpredictable and the previous government had several problems of its own in cost blow outs and timing and all of those sorts of things, but bottom line, this was a promise, something of a signature promise going into the election, and now it's broken, isn't it?
PAUL FLETCHER:
Well, what's happened, Waleed, is that we said that once we came to government we would establish a strategic review in which the board and management and of NBN Co, supported by consultants, in this case Boston Consulting Group and others, would look at what it would actually cost to complete Labor's rollout and how long it would take. And what that strategic review, the report of which was released today, has found is that it's going to cost - it would cost $73 billion to complete the rollout compared to what was in the company's corporate plan most recently of $44 billion, so that's $29 billion more, and even more importantly that the rollout would not finish until the end of - until two and a half years - three and a half years after it was supposed to finish. So rather than finishing in mid-2021, it would not finish until 2024.
WALEED ALY:
Yes.
PAUL FLETCHER:
So the first job of the strategic review was for the company, with its advisers, to give the government honest advice about what it would cost and how long it would take to finish.
WALEED ALY:
Right. But they gave you honest advice about your plan as well and said that your plan will not come in on time and on budget. That's the point, and you made a promise about that. Why would you make that promise if you clearly didn't have all the information you needed?
PAUL FLETCHER:
Well, let's be clear then about what the strategic review has said, the company and its advisers have recommended a particular option, the so-called multitechnology option, which would involve a mix of fibre to the premises, fibre to the node, and HFC, or the cable networks, rolled out by Telstra and Optus in the mid '90s. Now, what the company has recommended and has found in the strategic review is that by 2019 it will be able to deliver a speed of 50 megabits per second to 91 per cent of the fixed line footprint.
Now, the important thing is we said that by 2019 we would get to 90 per cent. So we are meeting that goal. It is true that we are not going to be able to meet our interim 2016 goal. What we will get to, according to what the company has said in the strategic review, is 43 per cent able to get 25 megabits per second by 2016. Now, why the difference? And the answer is that we have discovered through this process that the NBN Co and its rollout were in even worse shape than we had expected and that had been disclosed by the previous government.
WALEED ALY:
Okay. But the Australian public are surely entitled to be sceptical of a target out at 2019 that its stages are on schedule when the interim target won't be met and when we've seen this over and over, admittedly with the previous government, but this is the nature of a project that is this big. I still come back to that original question; doesn't it come down to the fact that you promised something that you were in no position to promise because you didn't have the relevant information, and now you've had to break it.
PAUL FLETCHER:
Well, I think what it comes down to is that the previous government started with a political set of commitments and then backfilled to try and come up with a plan to execute. The plan went very much off the rails. We...
WALEED ALY:
So you've broken your political commitment up front.
PAUL FLETCHER:
We prepared a policy based on the best available information we had, but we also said as soon as we came to government we would conduct this strategic review. This is a very detailed document which has been publicly released. There's only a very small part of it that's been kept confidential, essentially so as to not to compromise the company's interests in some coming commercial negotiations and, indeed, taxpayers' interests as the shareholder, but this is a detailed, fact based exercise in saying how do we go forward from here and what is the company's advice and recommendations.
And we're being clear and transparent here that we will get to the 2019 commitment that we made of 90 per cent of the fixed line footprint able to get between 50 and 100 megabits per second. The 2016 staging post, we will not get there in quite the same way, and so we'll be at 43 per cent with 25 megabits per second. But the key thing is this is now a very detailed piece of advice to government from the company as to its recommended way forward and we're being very clear and transparent about that.
WALEED ALY:
Okay.
PAUL FLETCHER:
But if people are going to have some confidence about the plan, the corporate plan, that will now be developed as the next phase based upon the strategic review.
WALEED ALY:
One of the things that the review recommended was that the 3000 staff that are currently tied directly to the NBN Co are too many, more than required. Are we going to see job losses there?
PAUL FLETCHER:
Well, the board and management of NBN Co have developed this plan and - or have done - prepared the strategic review with the recommended option, this is option six, and included within that is some views about staffing levels. Now, board and management will make their decisions. What we want to ensure is that they are using taxpayers' resources, the very large amount of taxpayers' equity invested in the company in the most efficient way, and they will make decisions about how best to allocate the company's resources to achieve the rollout and to do so in the most cost effective way.
WALEED ALY:
That's a yes, isn't it?
PAUL FLETCHER:
Well, it's a - that is a decision for the company because that is the position. We are being very clear about the respective responsibilities of government and the company and one of the reasons the previous government got into such a mess on the NBN rollout was because those proper lines of accountability [indistinct]...
WALEED ALY:
[Interrupts] Hang on. Who did the review?
PAUL FLETCHER:
The review was done by the board and management of NBN Co advised by consultants, Boston Consulting Group, Korda Mentha, the well-known forensic accountants...
WALEED ALY:
Yeah.
PAUL FLETCHER:
...and Deloitte.
WALEED ALY:
Oh yeah, it was done by the company.
PAUL FLETCHER:
Yes, it was.
WALEED ALY:
And now you're saying it's a decision for the company as to whether or not it will accept its own review. I would have thought that that's a done deal, isn't it?
PAUL FLETCHER:
Well, this is the company's review. That is absolutely the point, yes.
WALEED ALY:
So we will see job losses, surely. I just think if that's what they've recommended and you're going to take - well, not you, they're going to take their own advice, why don't we just be upfront about it?
PAUL FLETCHER:
And the other key point to make is what now happens is that the company will develop a corporate plan based upon what is in the strategic review. So that's the next step and board and management will develop that plan and there'll be a set of management actions arising out of that.
WALEED ALY:
The review doesn't, at least as far as I could tell, doesn't put a figure on the potential repair costs of the existing copper network. Why would they not do that? I would have thought that's a crucial element in costing this.
PAUL FLETCHER:
The cost of remediating the copper is - you're right - something to be taken account of as you build a fibre to the node network because a fibre to the node network involves retaining part of the existing copper between the exchange and the home, so you build fibre from the exchange to the halfway point, a node that'll sit on the street corner and serve about 200 homes, and then running from that home will be the existing - sorry, running from that node to each home will be the existing copper.
WALEED ALY:
Right. So shouldn't that maintenance be costed? I would have thought...
PAUL FLETCHER:
It absolutely is included within the total funding of $41 billion, which is estimated as the cost of the recommended option six, the multitechnology option, in the report. So the cost of necessary remediation of the copper has been taken account of and, indeed, a very conservative approach has been taken. We've had a look at - or the company, in preparing the review, has had a look at the experience with fibre to the node networks in other countries. Also looked at information about the state of Telstra's copper network and has developed an estimate of the cost that will be required to remediate the copper where that's necessary and that's certainly been built into the economics here.
WALEED ALY:
Okay. Paul Fletcher, I appreciate you making yourself available to us. That's Parliamentary Secretary to the Communications Minister, Paul Fletcher. He's the Parliamentary Secretary. Communications Minister, of course, Malcolm Turnbull.
ENDS
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