Slattery: NBN is turning toxic

Government decision to change how the NBN operates is dooming the network to fail and the only winner will be Telstra, according to the NextDC chief and Pipe Networks founder

The $36 billion Government funded National Broadband Network (NBN) has become a bad investment that will only benefit Telstra in the long run, according to NextDC CEO and Pipe Networks founder, Bevan Slattery.

“I actually think the NBN is now turning toxic,” he said. “This is not a dig at NBN Co since it is only executing a strategy for the Government.

“But as a nation-building exercise it is not good.”

Slattery’s comments were spurred by the numerous backflips by the Federal Government on key NBN promises. These include ensuring the network will make a decent return, allowing the private sector to partially fund the project and keeping the NBN as a wholesale-only provider.

In the NBN Co business case document released last year, it noted the NBN would expect a return of 6-7 per cent – a very low figure in Slattery’s opinion.

NBN Co is now a 100 per cent Government-funded organisation and the Federal Government introduced legislation to allow NBN to be provisioned directly to utility providers which was recently passed by parliament.

Slattery pointed out the Federal Government has pushed through bills to change the entire basis of the network in a bid to make it commercially viable.

“The only thing to stay the same in the NBN is its name; everything else has changed,” he said.

Despite Government insisting direct to utility NBN decisions will be assessed by the ACCC, it has done little to calm the minds of telcos such as Optus and Telstra. Both have spoken out against the legislation amendment.

This is one of the biggest reasons why Slattery considers the NBN toxic.

“For those guys to actually come forward and actually state that is a very good point and that was a big backflip,” he said. “That is where the industry started to turn against the NBN.”

There have also been more objections to the way NBN will operate from a number of ISPs.

iiNet and Internode recently voiced their concerns over anti-cherry picking laws in fear it would disrupt planned upgrades to existing high-speed networks.

Compounding the issue was the provision which stipulates ISPs are not allowed to deliver broadband services in excess of 24Mbps downlink to companies employing less than 15 people unless they are able to offer open access wholesale services to competitors, he said.

Slattery considers this is a “national disgrace” and would strand small businesses.

He predicted the NBN will ultimately fail and the only winner in that scenario would be Telstra.

NBN Co and Telstra entered an $11 billion non-binding agreement to gradually decommission the telco’s copper network and move residential customers onto the NBN. The deal also allows NBN Co to lay fibre through Telstra-owned ducts.

“The sad part is Telstra will be the only buyer of the NBN if the network fails since no private equity firm can,” Slattery said. “It doesn’t work if you don’t have customers and Telstra owns a majority [of consumers].

“... If Telstra has the spectrum [for 4G LTE] and the money [from NBN Co], it can by the NBN back for 20 cents in a dollar.”

If NBN fails early, Telstra’s extensive copper network remains intact and it can dominate the wholesale broadband market for another five years at the expense of a wasted taxpayer-funded network, he said.

“I think this is a pretty bad situation and I think the business case for the NBN is flawed,” Slattery said.

And in the vein of online Ruslan Kogan, founder of consumer electronics brand Kogan, the NextDC chief has thrown down the gauntlet at Macquarie Telecom over comments made at the CommsDay Summit on Tuesday by the telco's CEO, David Tudehope.

Tudehope claimed new datacentre players will disappear from the market in the next three years.

Slattery has bet Tudehope $1 million that NextDC would survive and thrive in the coming years. The winner can select a charity the money will go to. The Macquarie Telecom CEO was not at the event to accept the bet.

“I’ll go even further to say not only will I be right but I will be co-locating 20 of [Macquarie Telecom’s] competitors,” Slattery said.

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