Sunday, 11 August 2013

NBN: Exposing Turnbull's sleight of hand to Cooma voters (Eden-Monaro).

There's a piece of reporting on Liberal/ALP NBN campaigning that I think is a standout.

The toughest, most hard-headed business people I've met are Farmers and those in Country towns with seasonal business or subject to external-factor economic cycles (drought, flood, exchange rate, world commodity prices...).

Turnbull has duped everyone, including this latest group of seasoned and cynical business people in Cooma with a simple ruse:
  • The NBN is a business. Not first and foremost, but solely.
  • Turnbull is making a pitch to take over this business.
  • Because the FTTN Business Plan is so weak, Turnbull raises every distraction he can think of: Costs without Revenues or Profits, Technical issues, Demand Forecasting (12Mbps is all we'll need) and even social issues.
Farmers are used to people like Turnbull blowing into town with a Big Smile, "glad-hand" handshake, Big Hat, Flash Car and All the Gadgets. They talk up a storm and make a zillion promises about a very grand future you can buy into. But when they take your  money, you know that's the last you'll see of them.

There's a very simple test about what I'm asserting: Where is Turnbull's Business Plan?
He's never presented one.

In April, Turnbull released the Coalition NBN Plan, including a 36 page "Background" document that purports to be a financial analysis and the finances underpinning their proposed changes to the NBN Co business.

There's a lot of space in both documents directed to criticising the current NBN Co Business Plan. A plan carefully prepared professionally by a large group of experts backed by real prices and contracts. This is a credible document you could put in-front of any Bank, and as long as they thought 30-year investments giving a 7% ROI were acceptable, they could assess the NBN Co Business Plan and decide if it matched their risk-profile. Bankers and investors can asses the full, public NBN Co Business Plan.

The Coalition "Plan" focusses only on funding and costs, even skimming over operational expenses. Real business, not make-believe political pitches, have two sides to the ledger: Income and Expenses. Turnbull knows this, but has deliberately omitted Income and hence Profit and what investments are all about: Returns.

The only financial test the Coalition puts on their proposal is very weak: be cash-flow positive. [pg 31]

All the elements that matter in a Business Plan are missing: Market size and segments, price-points, growth-by-segment, product range, option pricing, discounting over time, interest & depreciation, profit/loss, break-even time and Return on Investment.

This is why you've never heard Turnbull talk about the NBN Business. He knows he's not just offering a technically inferior service, he's actually pitching a loss-making business. We know he's done a full Business Plan, because he quotes some of its outcomes. But why has he never published it? Why does he not just stonewall critical questions on wholesale pricing, but gets very aggressive and insulting when pushed?

I encourage you to read Turnbull's released "financials" and for you to ask two questions:
  • Where does he detail all the "business numbers"? [pg 31 to 2019, is all we get]
  • Is it a Business Plan he could put to a Bank?
As voters, we are the investors Turnbull is pitching, is this a sufficient Business Plan?

Do you really think he deserves to be given $30 billion based on a shaky & incomplete "Business Plan"?

If no bank would pony up $1,000 on such a shoddy "Plan", why should we vote him $30 billion of our money? Nobody should care about the Technology, bits are bits are bits, but the business has to be a sound investment. We should be going into a large, collective investment with our eyes wide open, not being given one very small part of the picture. What are they hiding? It can't be good.

In answer to the questions by Chris Reeves for Cooma/Eden-Monaro voters, I offer this:

1. Fibre is NOT "Rolls Royce", it's only a Toyota: sensible and reasonably priced with good, modern technology, but nothing "gold-plated". [Fibre has been used by Telcos in Australia since 1987.]

2. DSL isn't a Holden, it's a 1925 (*) Model-T Ford that's been tricked out with all sorts of "improvements". It doesn't go fast, doesn't stop, doesn't corner, has a terrible ride, burns fuel like
crazy, doesn't carry much - in fact it's like the singing dog: "the wonder is that it does it at all, not how well". And you DON'T want to be in it in a crash - it's also diabolically unsafe and being an old, highly modified 'pile', maintenance is crazily expensive.

Plus it "comes in any colour you like, so long as it's black" - this "one size fits all" product offering with a single common price is why the VDSL2/FTTN cannot exploit the top 25% of the market that consume 50% of traffic. It leads directly to a $10 billion loss over 20 years, without paying $8 billion owed to Telstra. The top 25% contribute all the profit, the rest of us get the Fibre services at cost.

[*] 1925 was the approximate date that subscriber dialling was introduced. Those same phones will still work on the Telephone network. The specification is still 50V at 20milli-amp, 150+VAC ringing, 4kHz bandwidth and pulse-dialling.

3. DSL has one last trick left in it (VDSL2), and it's very expensive. Every new "tweak" is more expensive and buys very little gain. The increments in speed with each new technology round are getting smaller over the 1925-spec telephone cable (category-2) while the costs of each new round is getting higher and the distances shorter. The "" mentioned by Turnbull would need 1.25 million nodes to get even near his target speeds. That'd be insanely expensive and disruptive to do.

4. The Turnbull Node Plan:
  a) assumes they pay Telstra NOTHING and
  b) is designed to make a Loss (my estimate is $10 billion over 20 years + $8 billion owed to Telstra)

All the LNP demand from their NBN is a very low-bar, "be cash-flow positive", to pay maintenance and interest.
  • they can't pay the cost of depreciation, so it makes a LOSS, not a Profit.
  • they'll not pay back anyone, won't pay a cent back of the loans or equity the LNP injects because it'll make a loss.
  • they won't ever achieve a Return on Investment, ever. let alone 7%, it's much better than you or I can get.


  1. Wire from house to node is the bottleneck in this silly "plan". Will have big pipe to Node, but still relying on pipette to the house - even Malcolm would know this is stupid.

  2. Mark,

    There's something in the water down there in Cooma (or the crispness of the Air) that brings clarity and concision to the writers.

    You've absolutely described the heart of the problem in 2 lines.

    Can you work in for me something about "on an public asset we already sold and will have to rent back at exorbitant prices"??

    Serious request. You can find my email easily or reply here.



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