"It is very difficult to predict what the numbers will come out like. I personally hope the company will be cash-flow positive in 2022, because I would like to see the NBN succeed as a piece of public infrastructure. Having said that, there is no doubt that the changes made by the Coalition in 2013 has made the viability of the NBN much more marginal."

Mr Quigley left NBN Co shortly after the Coalition won the 2013 federal election and dramatically redrew the plans for the network.

It is a big piece of infrastructure with a fundamental problem that it has used the wrong technology ... anybody who analysed it will see that. — Former NBN Co CEO Mike Quigley.

Led by then Communications Minister Malcolm Turnbull it ripped up the existing plans to build a fibre to the premise (FTTP) network across the majority of the country, replacing it with a multi-technology mix, comprising the technically inferior, but supposedly cheaper, options of ageing cable TV or HFC networks and fibre to the node (FTTN,) which uses previously retired copper cabling.

The government claimed the MTM NBN could be built for $29.5 billion before changing the FTTP policy, and that it would be accessible to all Australians by 2016. However, problems including the need to do a huge amount of remediation work on the HFC network acquired from Telstra (it scrapped Optus' entirely,) have seen the price soar to $51 billion.

Mr Quigley said any attempt to sell the NBN would expose just how much value has been eroded by following the MTM strategy. Yianni Aspradakis

While the government and NBN Co executives remain publicly positive that the MTM NBN is delivering on its promise of delivering fast broadband faster and cheaper, Mr Quigley said limitations in the infrastructure mean it will not be able to offer higher speed packages in future to drive up ARPU, and will have to spend huge amounts to maintain and upgrade the ageing technology.

"They've now got a network with much higher operating costs and much lower ability to generate revenue than FTTP," Mr Quigley said.


"It is absolutely true that it would have taken a couple of years longer to build FTTP, but all of the data from everywhere around the world shows big decreases have taken place in the costs of building FTTP.

"Any sensible analysis of the statement made by the previous minister that it would take eight years longer and $30 billion more shows he was talking complete nonsense ... From what we know now, it is quite possible that we would have built that original FTTP network for peak funding costs of $45 billion."

While Mr Quigley accepts that the MTM model is too far down the track to change course and return to a FTTP rollout, he says NBN executives need to be planning for the upgrade of FTTN infrastructure, even though it is unclear how it would be paid for.

In order to even make the return on investment needed to make the NBN a viable off-budget investment for the government, it needs to start generating ARPU of $51 a month by 2022. NBN Co's current projections say that is possible.

However, to get ARPU up to its current level of $46, it has had to get so creative with wholesale pricing models to the extent that retail service providers, like Telstra, have complained that selling NBN is unprofitable.

Any future problems with the quality of the MTM network, or the emergence of serious competition in the form of 5G-based fixed wireless, would risk leaving the NBN's economics looking shaky.

One aspect of this week's 2020 corporate plan, which will warrant examination, is the revenue and capital expenditure projections.


From the 2018 plan to the 2019 plan the amount of revenue projected to be generated from the 2018 financial year to 2021 dropped by $2 billion from $15.7 billion to $13.7 billion, whereas capital expenditure projections for the same period increased by $3.4 billion, from $13.4 billion to $16.8 billion.

NBN has said $1 billion of this was a temporary blip due to the need to pause its HFC rollout due to excessive faults, and also cut prices in 2018 to help RSPs ensure customers got the speeds they paid for.

"Like all companies, our financial forecasts from year to year are based on our latest modelling and projections. It is not unusual for any company to refine and modify its forecasts – and we will provide our latest update on all forecasts at the release of our Corporate Plan 2020-23 on Friday, 30 August, 2019," an NBN spokesman said.

Mr Quigley said he hoped the drop was not repeated in the upcoming corporate plan, but that he found it frustrating to see blowouts on the MTM network largely ignored by the same critics who tore into every problem experienced when he was running the company.

"You can imagine if those sorts of changes had have been made back in 2011 or 2012, it would have been a huge issue made of it, but maybe people have just grown accustomed to big cost increases," he said.

"If the public and media can swallow the increase from Malcolm Turnbull's $29.5 billion prediction without too much of a fuss, they're not going to worry about a few more billion now."

Well respected telecommunications analyst Paul Budde said he believed the governments continual rhetoric in insisting that the NBN strategy is on track, will mean the upcoming corporate plan will contain few surprises.


He said a frank discussion should be occurring about financial viability, high wholesale costs, technology issues and future direction, but that NBN was getting away with being "vague and cosmetic".

"Of course it would be interesting for them to address these issues in far greater detail, but why should they? Apart from the political support they are also a monopoly and can largely do what they want," Mr Budde said.

"Details will be hidden as the focus will be on their great achievements such as the end of the rollout, the uptake of higher speeds and the cost control of operating within the budget ... without mentioning that the budget had to be upgraded twice to get the rollout finished."

One area where Communications Minister Paul Fletcher has been clear since the election is in insisting that NBN will not be sold to Telstra.

While Telstra has been an outspoken critic of NBN's pricing, it has also made it clear that it would like to be in a position to buy the assets.

Mr Quigley said he believed the NBN should remain in public ownership for the long haul, and definitely shouldn't be sold to Telstra.

He said that, while no monopoly was ideal, he thought a publicly held one would at least be more likely be driven by the need to maximise public good rather than profits.


One of the motivations for building the NBN in the first place was to try to fix structural problems in the telecommunications sector following the privatisation of Telstra, but Mr Quigley said there were also political reasons for the government to want to avoid a sale process for the NBN getting under way.

In short, he says private equity or any company that does any serious due diligence, would likely value the MTM NBN well below what the government has spent on it, and would want to receive.

"It is a big piece of infrastructure with a fundamental problem that it has used the wrong technology. It has used old, limited technology, and anybody who analysed it will see that," Mr Quigley said.

"So you can't really talk about selling it because then people that understand will put a value on it. When you think how much the government has sunk into it I think the value would not be commensurate ... so I'm not surprised that the current minister is not contemplating a sale at this point."