news Ex-Communications Minister Stephen Conroy has acknowledged that the private contractor model which NBN Co attempted to use in its national fibre rollout has failed due to the inability of the company’s partners to deliver on their commitments, in an admission which again raises the possibility of Telstra being brought back in to assist with the rollout.

In every other country currently conducting nationwide telecommunications infrastructure rollouts, the company’s incumbent telco, which historically has owned the nationwide copper network, is involved in a pivotal fashion in also conducting the upgrades to that infrastructure, often with government assistance. In the UK, for instance, BT’s Openreach division is conducting a major fibre to the node-based network rollout; in NZ Zealand it’s a new division, Chorus, split off from Telecom New Zealand, in Germany it’s Deutsche Telekom, and so on.

Often, in such examples, the Government of each country has taken steps to structurally separate the national incumbent telco into wholesale and retail divisions or even completely separately owned companies, with the intent that the wholesale division is not able to provide favourable treatment to the retail division, and has an incentive to independently upgrade the copper network.

However, in Australia, the previous Labor Federal Government declined to pursue either the paths of separating Telstra’s wholesale and retail divisions or having the telco be involved in the NBN rollout, beyond providing access to its ducts and other network infrastructure. Instead, in April 2009 the then Rudd Government, with Conroy leading the telecommunications portfolio as Communications Minister, set up a new company, NBN Co, which engaged major national construction firms to deploy the NBN around Australia.

Despite NBN Co having signed multiple construction contracts amounting to billions in fees, the latest set of quarterly rollout figures obtained by Delimiter this week show that the company is still making extremely slow progress with its network rollout. NBN Co added on only 83,700 fibre premises in the three months six June, and just 18,000-odd fixed wireless premises.

Of particular note is the company’s Tasmanian operations, which have actually gone backwards slightly over the past several months. As at 12 August, NBN Co’s fibre network was listed as having passed some 32,003 premises in the state. However, by 7 October, the figures had gone down slightly for Tasmania, to just 32,001.

Over the past year NBN Co has been forced to cancel a number of its construction contracts as they have failed to deliver, and either taken on responsibility itself for some of the work, or contracted new partners.

In an interview last night on the ABC’s Lateline program (we recommend you click here to watch the full interview), Conroy said that he “naively” believed that the construction industry would keep to its contracts in terms of the NBN.

“What we found was that the construction industry were unable to deliver on their contractual obligations,” he said. “And back in March-April, the NBN Co actually sacked Syntheo in the Northern Territory, have now effectively sacked Syntheo in South Australia, and have already brought in other providers before the election to begin work on the ground in Western Australia because Syntheo had failed to meet by not just a small margin, but an extraordinary margin their contractual obligations. So money was returned by Syntheo to NBN Co in Darwin.”

“I’m not privy to all the final arrangements in South Australia or Western Australia, but what we’ve seen is some of Australia’s largest construction companies failed to deliver on their contractual obligations.”

Conroy said that overall, he and the now-departed NBN Co board of directors had to take on the responsibility for believing that the construction companies could deliver on their contracts. Ultimately, he said: “I think the construction model that NBN Co put in place hasn’t delivered. But it hasn’t delivered based on contractual obligations not being met by these construction companies.”

The news comes as speculation continues to mount that new Communications Minister Malcolm Turnbull will hand significant portions of the construction work for the NBN back to Telstra. During the election campaign, Informa senior analyst Tony Brown asked Turnbull whether one way of fixing the issues with NBN Co’s contractor workforce would be to bring in the Australian company most qualified to roll out telecommunications infrastructure in the existing copper network — the company that owns it, has all the network information, decades of experience and an existing workforce stretching into the tens of thousands that don’t need: Telstra.

“It is curious that Telstra have not been used as a contractor to build any part of this network,” Turnbull responded. “I’m not aware of a new generation network of this kind … I’m not aware of any new generation network that are not being built by the incumbent. Even in say, Singapore for instance, there is an independent entity, a separate entity that is going to operate the network, [but] they’re still using Singtel to do the construction.”

“I assume Telstra was excluded for political reasons, but Telstra should certainly be a candidate. Obviously there are details of price and matters of that kind, that are pretty relevant, but Telstra does have a huge amount of experience.”

Telstra is currently conducting a trial of the Coalition’s preferred Fibre to the Node technology on its network. In addition, the telco has previously offered to conduct more construction work on the network.

opinion/analysis

I and many other people have been saying this for months: The construction model which NBN Co is using for the NBN is fundamentally broken and needs to be looked at again by the Coalition. Forget FTTP or FTTN; the question here is whether the model can be applied to make either work at all. Because based on the latest, terminally slow rollout stats, NBN Co and its contractor workforce is not well-suited to deploying either model. Why? Because they’re upgrading a network which is not their own; it’s someone else’s. That someone else is Telstra. As I wrote on Delimiter 2.0 back in August (subscriber content):

“A growing body of evidence is mounting that NBN Co should seriously consider contracting the nation’s incumbent telco Telstra to build large sections of the National Broadband Network infrastructure, no matter which major side of politics wins the upcoming election, and no matter whether a fibre to the node or fibre to the premises model is eventually chosen.”

Image credit: NBN Co