Job losses 'likely' after review finds Coalition's NBN plan to cost billions more

Updated

Communications Minister Malcolm Turnbull says job losses are "likely" at the NBN Co after a review of the Government's broadband plan found it will be billions of dollars more expensive than the Coalition had promised.

The strategic review revelations come as it is confirmed that current Vodafone Australia boss Bill Morrow will start as the new chief executive of the NBN Co next year.

The review, conducted by the NBN Co, states the Government's proposed fibre-to-the-node-based network would require around $12 billion more than estimated in the Coalition's April 2013 policy.

Speaking after the analysis was unveiled, Mr Turnbull said jobs would have to be cut following downgrades to the company’s profit forecasts.

"I think the report makes it very clear that the size of the organisation was established to cater for a business that had much higher revenues and a much higher rate of deployment," he said.

"I think it is reasonable to assume from that, given that this document is one that has been approved by the board, that some right sizing is likely to occur. These are all matters for the management."

The Drum: The inconvenient truth for the Coalition's NBN

The Government now faces an uphill struggle to deliver a functionally limited NBN that will already be outdated by the time it is complete,



The Government now faces an uphill struggle to deliver a functionally limited NBN that will already be outdated by the time it is complete, writes technology journalist David Braue.

Mr Turnbull said his policy assumed NBN Co was doing better than it actually was.

"We assumed they would be able to meet their forecasts a year earlier than has been assumed in the study," Mr Turnbull said.

The minister added the Government would not pay any extra to the NBN Co.

The original figures were announced under Labor and NBN Co chairman Ziggy Switkowski has criticised the way they were calculated.

"The original corporate plan underestimated the costs, overestimated what are the real world experiences of revenues and what households are prepared to pay," he said.

In Parliament, Labor's spokesman Jason Clare questioned the independence of the document, because one of NBN Co's executives, J B Rousselot, co-owns a boat with Mr Turnbull.

But Mr Turnbull shut down questions about the boat, saying: "If you think that's a big deal, I'm sorry, let's move on."

He says Mr Rousselot is doing an outstanding job.

Policy promises 'very unlikely to be achieved'

The Coalition's policy promised to give most Australians the option to connect to a 25 megabit per second network by 2016, but the review found that was extremely unrealistic.

It found less than half of the country would have access to those speeds by 2016.

The Coalition's policy also promised to have 50mbps available by 2019 and the review supports this, with 91 per cent of premises expected to have access to those speeds.

The report also found Labor's fibre-to-the-home approach would cost an extra $29 billion in capital expenditure and take an extra three years to rollout.

The review found the current corporate plan had "blind faith" in the achievability of the targets.

"The independent assessment concluded that ... it is extremely optimistic and very unlikely to be achieved," the report said.

It also canvassed a scenario looking at the cheapest possible fibre to the home option, which was still assumed to be $20 billion more expensive.

Mr Turnbull told 7.30 the Coalition's election commitments were issued with "a very clear caveat".

He said the NBN's forecasts had become "increasingly unbelievable" during the Labor government's term.

"We certainly didn't trust their numbers but we didn't have any other numbers to rely on," he said.

"The fact is that the NBN Co is a much bigger mess than even we had thought it is.

"We've got to have a new era, and the new era is one of telling the truth ... where the people who work at the NBN will not have to feel that they have got to say whatever the Minister wants to hear."

New NBN Co chief Bill Morrow says role will be challenging

Speaking to the ABC, incoming NBN Co chief Mr Morrow said it was too early for him to say if the current NBN targets could be met.

"I've not had a chance to meet with the employees, to look at the detailed plans, to interface with all of the third party suppliers and partners," he said.

"I have no idea at this point. I've not seen any of the details."

Mr Morrow says he is confident that politics will not get in the way of the rollout.

"It's so important to the country that naturally there's going to be a lot of strong opinions on this," he said.

"I trust that Malcolm Turnbull, along with Ziggy as the chairman of the board, are looking to bring together all of the thoughts, all of the perspectives to be sure that we set out on a trajectory that's the right one."

He says he took on the job because of its financial and political challenges.

"I look at any assignment, any endeavour - it's not what it is today it's what you can do with it," he said.

"So all of those challenges are real and they're very serious."

Meanwhile, the Government has appointed former OECD economist and outspoken national broadband network critic Henry Ergas to its panel of experts for the NBN cost benefit analysis.

Professor Ergas joins former Victorian treasury secretary Michael Vertigan, Australian Industry Group director Alison Deans and regulatory expert Tony Shaw.

The review will report to government within six months and investigate the value of increased broadband speeds.

Topics: information-and-communication, business-economics-and-finance, federal-government, government-and-politics, australia

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