Spinning Australia's National Broadband Network - it's a fail

Profile picture for user pwallbank By Paul Wallbank February 19, 2017
Summary:
The travails of Australia's National Broadband project last week show what happens when the public runs out of patience with PR spin. It's ugly

Bill Morrow - Australia's National Broadband Network CEO
Bill Morrow - CEO, nbn - under fire

"Every once in a while, you let a word or phrase out and you want to catch it and bring it back. You can't do that. It's gone, gone forever," said Dan Quayle during his time as Vice President to George Bush Sr.

The boss of Australia's National Broadband Network, Bill Morrow, may well be reflecting on Dan Quayle's words, as an unguarded statement about the population's lack of enthusiasm for high speed web surfing set the country's creakingly slow internet if not alight, at least into a dull glow of indignation.

Morrow was speaking at NBN's half yearly report briefing, where the media present were less than impressed with the company's disappointing financial situation and the progress of the network. Despite the project's scope being downgraded in 2014 from a largely 'fibre to the premises topology' to a mainly 'fibre-to-the-node' service, it is still only at fifty percent the progress promised in the original business plan.

The speed of the network and artificial pricing constraints have proved to be a real irritation for subscribers and when Morrow was asked why the company's resellers aren't offering gigabit services during the media conference he fell for the trap of suggesting Australians wouldn't use it. From the NBN's transcript of the conference;

Question: (Jennifer Dudley-Nicholson, News Corp, Media) Well, no, how much would it cost in terms of delivering the service - is it prohibitively expensive and is why people sort of can't access it?

Bill Morrow: Well, again I suspect - all I can do is assume here because it's the retailers that do their market research and determine which product. But a gigabit per second is a lot of bandwidth. We did scour the planets and go around to talk to a variety of different carriers that have gigabit per second services in the market that Page 21 of 26 in fact are selling, and where consumers have taken up gigabit per second services. We asked the question, has anybody actually used that amount of bandwidth. The answer was unanimously no. There are not that many applications that warrant much above the products that are being sold at nbn today. So I suspect that's the main reason. If I have to pay for it - to move from 100 up to a gigabit per second - I don’t really have the application or the need for it, so why would I pay more to do that. Jennifer, I believe that's the market dynamic that is occurring today. Now I say that as we know there are things on the horizon that are going to increase the need for further demand. What do you think about AR or AI, or any of these other elements with media streaming going to 4K and 8K and immersive sound. All of these other things could certainly drive up more of that consumer need, but we haven't seen that as of yet because those aren’t really here to where people feel I need to pay extra money to get that kind of service. Even if we offered it for free, we see the evidence around the world that they wouldn’t use it anyway.

It didn't take long for the media and public to react to Morrow's comments with the executive being blasted for being out of touch with the modern economy and the needs of businesses, households and internet users.

Morrow, while right saying in most households don't need a gigabit connection, became the lightning rod for the widespread dissatisfaction with the project which has so far missed the expectations of many who were hoping it would drag Australia's notoriously expensive and slow telecommunications sector into the 21stCentury.

Far from being a luddite, Morrow was the boss of Vodafone's Australian mobile network joint venture after running US telecommunications company Clearwire, California's Pacific Gas and Electric Company and Vodafone's Europe operations prior to becoming the NBN's CEO in 2013. He is far from an old-school luddite public service manager of the type criticised by Paul Shetler when he parted ways with the Australian government.

Morrow's problem comes back to how NBN is haunted by its history and Australian political ideology. In 2009, when the company was founded to undo forty years of poor telecommunications policy, the originally planned 43 billion Australian dollar project (33bn US dollars) was kept off the budget by the then Labor administration pretending the company would a profitable government owned enterprise by 2018. The current government has maintained the fiction that the money will be repaid.

To achieve this, the NBN was given an effective monopoly on building retail landline networks and a punitive regime of access fees was implemented for Internet Service Providers connecting to the NBN – the main reason why resellers won't offer gigabit plans is such a service would cost somewhere between 300 and 400 a month for most households.

As the damage from Morrow's comments became apparent, the NBN's well staffed PR and corporate comms machine went into overdrive ringing around Australia's tech and telecoms journalists while sending Morrow on media charm offensive around the country where he was told in no uncertain terms by the punters that they were deeply unhappy.

Morrow himself wrote a blog post on the company's site defending his position, explaining what he meant and touched upon the core problem in the company's finances which requires them to artificially throttle speeds in the hope of upselling customers to higher services.

The nbn™ network is costing around $49 billion to build – and we need to recoup that cost – given that our business model is split between driving revenues from access and consumption charges, we simply cannot match the kind of 1Gbps pricing on offer in markets like Singapore and Hong Kong.

Whether the project turns out costing $49 billion remains uncertain, along with its prospects of profitability, as currently only 1.8 million premises are connected against the four million projected in the company's 2010 business plan. That shortfall seriously hurts the cashflow projections and as the NBN cuts access charges in response to public pressure, the funding situation doesn't look like it will get better soon.

For Australians the more telling statistic is at the time of NBN's launch in 2009, content delivery network Akamai ranked Australia's average internet speed at 24th. By last year the country had fallen to 60th in Akamai's global survey.

To be fair to Morrow and the company's current management, many of the problems they are facing were inherited from the previous executive team that left the mostly fibre project 70% behind schedule when the government changed in 2013. Those delays have been compounded by political interference which saw the incoming government rescope the project to become largely fibre to the node – a change described by the now Prime Minister, Malcolm Turnbull, as delivering cheaper and faster rollout. It did neither.

Australia's national broadband project was always an ambitious scheme, sadly let down by political interference and at best indifferent management by Bill Morrow's predecessors in the early days to f the scheme. While little of that is Morrow's fault, he's surely learned a lesson to choose his words carefully if he doesn't want to antagonise Australia's frustrated internet users or be remembered as the internet version of Dan Quayle.

My take

I encountered the community anger towards Bill Morrow's comments and the NBN PR blitz myself last week when hosting my irregular national Australian Broadcasting Corporation tech program. The NBN was the main topic and all but two callers – one was an NBN flack – expressed their dismay or disgust at the service.

A few hours before the show I'd been contacted by another earnest NBN comms guy explaining how the CEO was taken out of context.

Despite the PR blitz, those callers are right – the National Broadband Network is Australia's tragedy. The project promised to revolutionise the country's telecommunications infrastructure and resolve forty years of poor policy decisions that had entrenched Telstra's domination of the market and stunted growth of the nation's online industries.

Sadly it wasn't to be as the original management team, lead by former Alcatel Lucent executive Mike Quigley, was more focused on buying flashy coffee machines for the staff tea rooms rather than getting on with building the project. Had the project being running on schedule and budget in 2013, it would have been much harder for the incoming Liberal government to tear up the original plans.

The politics though has been the bigger problem with both governments subscribing to a fiction that such a project could be kept off the budget through financial fictions and those fantasies resulting in convoluted pricing structures which discourage customers from signing up to genuinely fast services.

Watching NBN's army of well paid PR people fanning out to explain the company's position and the CEO's insistent explanation of what he meant to say has been fun for jaded hack though. It's an interesting case study of what happens when the public runs out of patience with corporate spin.