Yet in reality the review had found NBN Co in better shape than the Coalition policy assumed, with its worst case scenario falling more than $20 billion short of the April headlines.

Undeterred the Prime Minister in June said: "By the end of the decade, that everyone will have access to, I think, it's 50 megs download speed, or better. So, this is the commitment that we have made and this is the commitment that we will keep."

Lower minimum speed guarantee

Unfortunately NBN Co is only guaranteeing minimum speeds of 25Mbps on fibre to the neighbourhood (or node) (FTTN), and only 12Mbps during the migration period from the old copper network.

In a June speech on Lessons from the NBN. The Minister for Communications set out what he describes as "The Anatomy of the NBN's Risk." In doing so he positions the risks as legacy issues inherited by NBN Co from former policies and management.

However, many of the risks cited in it were risks that have been introduced by Malcolm Turnbull himself as part of his "multi-technology mix" approach, not ones inherited from previous decisions.

Potentially the biggest risk introduced by Malcolm Turnbull is the IT systems upgrades required to accommodate his multi-technology mix.

Prior to the introduction of the MTM, NBN Co had one fixed line access network to manage – a fibre network. By September 2013, NBN Co had substantially completed its OSS/BSS systems under the existing NBN model, and these systems had proven themselves capable at the scale reached in June 2013.


The MTM introduces four more fixed-line networks that need to be managed by NBN Co's systems: FTTN, fibre to the basement (FTTB) and two hybrid-fibre coaxial (HFC, or PayTV) networks.

Management of these networks includes the ability to provision services, but it also includes the requirement to have a record of the assets and manage maintenance of those assets.

Progressive ownership change

Under the revised agreements with Telstra and Optus, NBN Co will progressively take ownership of the copper and the two Pay TV networks. But NBN Co will not inherit Telstra's existing IT systems – it will need to build its IT systems from the ground up to manage this data, which will be provided to NBN Co incrementally as it takes ownership of these networks.

The risk, cost and complexity that the MTM has introduced for NBN's IT capital costs is significant.

The government's strategic review, which for political reasons provided a pessimistic forecast of project finances, forecast IT capital cost of $1.6 billion. In his speech the minister revealed the projected IT capex spend for the MTM saying "by the company's forecast, it will [have] spent approximately $2.5 billion on IT capex by the 2021-22 financial year."

That is nearly $1 billion more than the new management team's own forecast for the all-fibre model.

The policy shift to MTM has also introduced a number of risks to other significant metrics: rollout timeframe, take up and revenue.


The foundations of the NBN were incredibly complex. Despite the inaccurate assertions that the NBN was conceived on an aeroplane or developed in only 11 weeks, nearly three years of detailed analysis and policy work occurred from the announcement in April 2009 to commencement date in March 2012.

These included the preparation of the Implementation Study by McKinsey and KPMG, passage of the legislation, the finalisation of the Definitive Agreements with Telstra, and the Optus HFC Agreement.

Hit the reset button

In September 2013, Malcolm Turnbull hit the reset button and in doing so introduced new risk to the project.

He re-opened negotiations with Telstra and Optus. He created a need for new legislation, new systems, new supply agreements. A company of close to 3000 employees was redirected from execution to analysis.

The risks from cherry-picking and wireless substitution have been increased by the technology choices made. The use of HFC depends on a relaxation of the rules on the size of aerial cables despite the PM having been previously a very vocal critic of the HFC deployments.

We were told that moving to FTTN would enable Telstra to partner in construction, but new construction contracts see no sign of this "partnership".

After nearly two years the revised agreements with Telstra has only just commenced, and the Optus agreement hasn't. The rollout of FTTN and HFC is still in the trial phase and of the million premises made "serviceable" by the NBN, only 67 were served by an MTM technology.


Mr Turnbull's commitment to telling the truth has resulted in the company saying almost nothing. The Strategic Review was heavily redacted, blacking out anything that involved forward commitments. It is now 34 months since NBN Co last issued a full Corporate Plan.

In his speech Mr Turnbull noted that "a seven month delay in either [NBN's] FTTN or HFC product launch" would add $1 billion to NBN Co's peak funding requirement. Because we have no idea of the originally expected launch date we don't whether the Minister was flagging an increased requirement that has already occurred or merely a future risk.

There is no denying that the original policy prescription for the NBN was ambitious. But the project that commenced after three years of analysis in March 2012 was well researched, and by September 2013 (18 months later) was making steady progress.

The Coalition government, after just three months in office and based on one hastily conducted review, embarked on a radical policy shift. The government underestimated the cost, complexity and timeframe involved in radical policy shift from the full fibre model to MTM.

Just as the former management was never responsible for the policy decisions of the former government in establishing the project, the current management isn't responsible for the complexity and risk that has been imposed by the Abbott government.

Nearly two years into his term, Malcolm Turnbull needs to be held accountable for the rushed process by which he has imposed extensive complexity and risk to the NBN project.

David Havyatt is executive director of DigEcon Research. He is a former policy adviser to federal Labor and is an active member of the ALP.