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Australia's NBN Looks Copper-Colored

The new Australian government has made its first moves to reshape the NBN (national broadband network), appointing former Telstra chief Ziggy Switkowski as chairman, replacing the board of NBN Co and embarking on a review of the next-generation access network project.

In an official statement announcing the decisions, the new Minister for Communications, Malcolm Turnbull, said five of the seven NBN Co Ltd. board members had offered to resign. Two -- Dr Kerry Schott and Alison Lansley -- have been asked to stay on and will form the new slimmed-down board with Switkowski, who will be executive chairman until a new CEO is found.

Founding CEO, former Alcatel-Lucent (NYSE: ALU) executive Mike Quigley, resigned from the post in July, and served his final day at the helm on October 3. (See this Delimiter report to read his farewell email to NBN colleagues.)

Former Alcatel-Lucent executive Mike Quigley (front right) is no longer at the helm of Australia's national broadband network (NBN) project.
Former Alcatel-Lucent executive Mike Quigley (front right) is no longer at the helm of Australia's national broadband network (NBN) project.

Switkowski's first task will be to lead the review of the project: A report is expected by December 2.

"This review will set out the true costs, in time and dollars, of the NBN Co project under previous Government's policy settings," Turnbull said in a statement.

Turnbull has promised to slash the cost of the project -- currently slated to be approximately A$39 billion (US$36.6 billion) -- by cutting the planned level of fiber access connections and, instead, investing more in fiber-to-the-cabinet and VDSL technologies that utilize the existing copper connections to end users. (See Australia's NBN: Will Fiber Get Voted Out?)

NBN Co, set up by the outgoing government four years ago, is already two years behind its original schedule and has just halved its June 2014 target. It has been criticized for extravagance and for its poor relationship with subcontractors. (See Australia Unveils $31B FTTP Plan and Quigley Lands Major FTTP Role.)

Geoff Johnson, a research vice-president at Gartner Inc. , said the state-owned entity had become "a bigger monopoly in its behavior than Telstra."

Johnson said the Switkowski review was likely to be completed quickly. "It won't be a long-winded review. There's so much information around [from previous reviews]," he told Light Reading.

He believed it was unlikely the review would result in any major shift in Turnbull's copper-centric plan.

But he said he was looking forward to seeing how the review calculates the net present value (NPV) for a fiber-centric strategy compared with a copper-centric approach, "particularly if they do it over a proper period, over 30 years. It maybe that the fiber NPV is a better calculation."

Turnbull -- a former investment banker and major investor in one of the country's first ISPs -- is pushing the copper alternative because it is a faster rollout.

The government's other task will be to strike a fresh deal with Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) over the copper network, which was to be shut down but which will now remain in commission. "It's a tweak, rather than a massive rejig. It could be just a few months," Johnson says.

The operator would keep the A$11 billion paid for separation from the copper network. "The government will get its way, and Telstra will agree, based on the money," believes the analyst.

— Robert Clark, contributing editor, special to Light Reading

R Clark 10/7/2013 | 9:07:22 PM
Re: Sweet deal? Telstra will continue to operate the copper network. Right now it gets paid a fee to deactivate copper 18 months after a fiber connection is in service. The negotiation with the new government will be about that loss of compensation and for access to the network.

Telstra is now also allowed to compete with NBN through its HFC cable network.

NBN is where it is is because the previous government tried to make an end-run around Telstra. Brave decision, but Telstra holds all the picture cards.
[email protected] 10/7/2013 | 10:42:53 AM
Re: Sweet deal? Certainly looks like Telstra's access network is about to be given a new lease of life -- what will be interesting, I think, is whether the new plan includes a longer-term migration (in the areas where possible) from FTTC to FTTdp (distribution point) and finally FTTH, or whether it will cap it at FTTC/VDSL2 in the areas where that is initially deemed to be quickest/most cost-effective.  
Carol Wilson 10/7/2013 | 9:34:21 AM
Sweet deal? So will the NBN now operate Telstra's copper network? Or will Telstra continue to be involved, and get paid for that, after getting the money for turning off the copper network?
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