analysis Last week the majority of Australia’s media reported that the National Broadband Network Company’s corporate plan showed it had blown its budget and was running late. But the truth is that the document actually paints a picture of a sensible and mature operation which is hitting almost all of its targets.

If you’re at all interested in the NBN, you couldn’t have missed the hundreds upon hundreds of articles written last week by Australian and international journalists about the release of NBN Co’s new corporate plan. And almost universally, they were all along the same theme — screaming of disaster and woe, cost blowouts and delays, catastrophe after catastrophe. You have to wonder what new labels of hyperbole would be applied to an actual catastrophe — one that wasn’t a “First World Problem”.

“NBN Co fails on target rollout,” wrote The Australian newspaper. “NBN hopeless behind targets: Lib MP”. “NBN returns are far off.” The Sydney Morning Herald’s coverage was along the same lines. “NBN costs blow out by billions,” it reported. And even the normally conservative Financial Review newspaper and ABC Online sites were getting in on the action. “NBN Co confirms billion-dollar cost blowout,” wrote the ABC. And in one day the AFR published half a dozen articles in a row, all with headlines heavily critical of the NBN. No wonder Communications Minister Stephen Conroy thinks the newspaper has a vendetta against the NBN.

And of course there were the usual conservative commentators weighing in as well. We’ve already heard what Andrew Bolt had to say, and Terry McCrann and the normal radio shock jocks all piled in to slam the NBN as well. This, it seemed, was a project doomed to be a “financial disaster”; one which could do no right and should obviously be cancelled.

With all of this flotsam and jetsam clogging the public stream, I wanted to sit back a bit before I analysed the NBN’s new corporate plan released this week and give the plan a bit of room to breathe and the nation’s commentators some time to run out of steam on NBN Co’s new corporate plan before I put my own thoughts down on the matter. This morning I went through the plan in detail. I sat down, and over an hour and a half, read right through the full 96 pages of NBN Co’s new document guiding its future over the next three years. And I have to say, what I found in those pages seems quite remarkable.

Let’s start off with the headline claim: That NBN Co has “blown” its budget, which was the line which almost all of the media ran with last week. The amazing thing is, that this generated so many headlines, when from a financial perspective it’s actually hard to justify this claim by looking at NBN Co’s new corporate plan.

The basis of this claim is the corporate plan’s disclosure that the capital expenditure cost of building the NBN’s infrastructure has risen by 3.9 percent, from $35.9 billion to $37.4 billion.

Now, speaking as a business owner and someone who has covered technology projects for the past decade, I have to say that a change of 3.9 percent in any direction is within the margin of error for any technology project. And when that project involves deploying tens of billions of dollars worth of fibre-optic broadband infrastructure around an entire nation … by a company which was only set up several years ago from scratch? I’d personally consider it absolutely amazing that the project’s capital costs as a whole are within 3.9 percent of their projected figure — and I’d expect any project manager worth their salt to feel the same way. We’re talking billions upon billions of dollars of estimates here. The fact that NBN Co is still within a few percentage points of those estimates, several years down the track, is nothing short of remarkable, and I’d challenge anyone to find a project this size which has remained this close to its original cost estimates.

This is especially the case when you consider the incredible changes which have taken place in NBN Co’s strategic approach to construction over that period. The most obvious would be the incorporation of the ability to gain access to and use vast portions of Telstra’s network and the addition of Optus customers onto its back from the telco’s HFC network, but there’s also the changed Point of Interconnect model due to the unexpected ACCC decision, which went against the Government’s and NBN Co’s views on the issue. Then, too, NBN Co has changed its deployment model to an ‘opt-out’ structure and has a huge an ongoing negotiation with greenfields housing estates on how it will deploy its infrastructure in those regions. And the list goes on.

In short, NBN Co has, over the first few years of its life, suffered a continually changing policy and commercial negotiation landscape which has forced it to change many of its construction assumptions on an ongoing basis. And yet, despite this, it has managed to keep its overall projected capital expenditure costs within 3.9 percent of its original projection. Incredible.

There is also the question of whether this level of capital expenditure cost increase even matters.

Although NBN Co is planning to spend several billion dollars more on its network rollout, last week’s corporate plan showed that it is still planning to make a long-term return on the Government’s investment in it of 7.1 percent — and that figure actually increased slightly in the latest Corporate Plan, despite the huge amount of change in the project’s underlying assumptions and policies. Any investor will tell you that it’s not how much money you put into a project which matters — but how much you get out afterwards. Given that getting access to a few extra billion dollars — hell, tens of billions — of cheap extra debt is no problem for a government the size of Australia’s with our stellar credit rating, this makes the return on that investment a much more pertinent financial benchmark than capex — and on this measure, NBN Co continues to stay very financially stable and on track.

When you take into account the fact that vast social and productivity benefits will accrue to the nation from having universal fast access to broadband, and add to that the fact that last week’s Corporate Plan showed deploying that broadband is still eventually make a small amount of money for the Government, the rationale behind the NBN’s business case continues to remain incredibly strong. An infrastructure investment which will eventually pay for itself, with significant additional non-financial benefits. That’s the definition of good policy.

The second major claim is that the NBN is delayed by six months. In part, the corporate plan makes clear, this is true: NBN Co has not been able to commence fibre rollout in some areas simply because it lacked the necessary detailed network information; information which was only provided in Telstra in march this year, after the negotiations between the pair of telcos took nine months longer than expected. Now, there is a legitimate case to be made that NBN Co and the Government should have anticipated that, given its incredible complexity, the Telstra deal would take a long time to be finalised.

But again, here the nature of the situation has been portrayed by most of the media to be far worse than it actually is. For starters, NBN Co is currently projecting that the completion of the fibre components of its network will be delayed by six months, not nine months — in short, that the network will be completed by June 2021, instead of December 2020. This alsodoesn’t tell the whole story. Other areas of NBN Co’s infrastructure rollout — for example, its satellite and wireless services and its backhaul transit network linking up cities and regions — have been speeding ahead in the meantime, and will be completed over the next several years. NBN Co hasn’t been standing still waiting for Telstra to give it the green light in every area — far from it. While the lawyers have been arguing, the rest of NBN Co has been locked in hyper-acceleration mode.

You can see this by looking at other areas of activity within the company over the past several years. The Corporate Plan makes clear, for instance, that the massive Business Support and Operational Support Systems which sit at the heart of NBN Co’s network have already been deployed — a gargantuan undertaking for any telco, let alone one as complex as NBN Co.

NBN Co has signed up almost every telco in Australia — representing 94% of the fixed telecommunications market — to use its services going forward. It now has 1,620 employees, permanent offices in every major city, its own datacentres, construction and equipment contracts covering all of Australia and so on … the list goes on endlessly.

The overwhelming impression that you get from NBN Co’s new Corporate Plan is one, as its chief executive Mike Quigley has said, of an active, operating company which is moving ahead at full speed with its business. This isn’t the startup company of 2009, nor even the uncertain company of 2010, still finding its feet. In 2011, I believe, NBN Co turned into a frenetic ant’s nest of work, and its tentacles now extend out into every area of Australia’s telecommunications sector.

Now, most who analysed NBN Co’s corporate plan didn’t ever get beyond these two headline issues — the “cost blowout” and the “delays”, which NBN Co and Communications Minister Stephen Conroy disclosed right up front last week when the plan was released.

But when you delve a bit deeper into the plan, anyone who is enthusiastic about the future of telecommunications in Australia will find a huge amount of to be optimistic about.

Take, for example, NBN Co’s disclosure of the fact that there are now 500 NBN-based retail plans in the market from 41 retail Internet service providers, giving consumers a huge variety of choice when it comes to their NBN broadband connection. Or the fact that those plans have tended to focus at two speed levels — 25Mbps, for cost-conscious consumers, and 100Mbps — for everyone else, who wants to take advantage of the full NBN speeds. Or the fact that broadly, those plans are very similarly priced to current prices on ADSL, an inferior broadband technology.

Take, for example, the fact that NBN Co is experiencing a higher take-up higher speeds than it has previously planned for, meaning that the company’s pricing packages are proving successful in the market, and that there is stronger demand for faster speeds than NBN Co has been projected. This means, over the long term, that if this trend continues that NBN Co will actually be able to reduce its wholesale prices due to it making increased revenue, which should correspond to a decrease in retail broadband plans by ISPs.

Take, for example, the fact that over the next year hundreds of thousands of Australian premises will have access to fibre, hundreds more access to fixed wireless and satellite broadband, and that by the end of 2016, that figure will be close to four million for fibre and a million for fixed wireless and satellite — five million premises which will have massively better broadband than they had access to before. And the corporate plan points out that NBN Co’s ‘volume’ rollout is now under way, with all of the years of preparatory work behind it.

Now, if I had any criticism of NBN Co’s corporate plan, it would be that I don’t believe it’s as detailed as it could be.

Most of the figures contained in it, for example, aren’t broken down into the level which most telecommunications analysts would like. We don’t get to see much behind the curtain of headline “capex” or “opex” costs. We don’t get to peek into NBN Co’s expense statement to see what has changed, line by line. And we don’t get to examine its projected revenues per customer or per product line. And this, to some commentators, will make NBN Co’s plan hard to stomach. When so much has been left out, to what degree can we take its statements as fact?

And yet — and this is a point which very few are making — NBN Co’s corporate plan still represents the most detailed financial document I’ve ever seen for a Government technology project of any stripe. The Australian Taxation Office, for instance, has spent billions on its core IT systems overhaul, the Change Program. But we never saw a line by line analysis of that project. The same can be said for Customs’ Integrated Cargo System, Queensland Health’s disastrous payroll systems implementation, the Western Australian Government’s IT shared services initiative, and so on.

Neither have we been able to get this level of detail on similar private sector projects. When Telstra rolled out its Next G network, it never completely disclosed how much it spent on the implementation, and Optus isn’t saying how much it’s spending on its 4G network now. We didn’t get to see how much every line item cost PIPE Networks in its submarine cable to the United States, and we don’t get to see now how much that network makes it. In short, what NBN Co’s corporate plan represents is a level of detail unprecedented when it comes to the reports which I’ve seen of major technology projects in Australia.

And yet, having read through the entire document, I find it very hard to find areas to criticise NBN Co on it. Where things have gone wrong or been delayed, NBN Co has provided an explanation for them. Where things have been better than expected, NBN Co has also explained that. It has laid out what it expects to do, and is conscious of the need to deliver on those targets. There are governance controls in place, accountability measures — this isn’t a wild horse let off the leash: It’s a carefully, managed, well-structured project delivered by calm-headed people who appear to believe strongly in what they are doing and are champing at the bit to deliver on their company’s goals.

Last week, Liberal MP Paul Fletcher wrote that if NBN Co was funded by private sector investors, its chief executive Mike Quigley would “probably have been fired by now”.

But the truth is, as was also true of his tenure at his previous employer, Alcatel-Lucent, that by all indications Quigley has been managing NBN Co in an exemplary fashion. Its corporate plan shows that he’s keeping NBN Co on track despite extraordinary external pressures and a constantly shifting landscape. At the moment, the project displays all the right signs of being able to deliver on the aims it was set up for — and within its original projected financial guidance, providing the financial returns it originally envisaged.

Maybe it’s too much to expect from Australia’s media at the moment that it represents what NBN Co does accurately and in context. But for my own part, I’d like to pass on my congratulations to the company for keeping things on an even keel so far. Contrary to most media reports, NBN Co isn’t drowning — it’s waving. And I believe as its volume rollout gets into gear over the next several years, many currently critical of the project will be forced to realise just how sound its governance has been.