Abbott government must make NBN top priority to meet roll-out targets

Signficant negotiation delays could make it "impossible" to meet roll-out timetable, according to analyst

The incoming government must make the NBN its priority if it is to meet an ambitious roll-out timetable, Ovum analyst David Kennedy says.

Kennedy said an Abbott-led government could not afford significant delays in either the renegotiation of the existing deal between Telstra and NBN Co to incorporate Fibre-to the-Node technology, and the restructuring of the company’s management and strategy.

“Significant delays in either of these areas would make it impossible to meet its targets for the fixed network roll-out,” he said.

“The new government will need to make the re-orientation of the NBN project its top communications policy priority.’’

He said the new government remained committed to structural separation of the fixed access network and that NBN Co would remain as the wholesale operator.

“But its role in the construction of the network is less secure,” he said. “The series of lengthy delays in contract allocation and execution have put the NBN two years behind its original schedule.”

Under the Coalition's plan, the NBN will run optical fibre to nodes on streets corners, but will need to access Telstra's copper for the ‘last mile’ to homes and businesses - a technological bottle neck.

Wentworth MP Malcolm Turnbull, the likely communications minister in a Coalition government, has promised a financial, management and technical audit of the NBN Co, with a view to making significant changes in the management of the company.

A new chief executive will be appointed after former boss Mike Quigley resigned in July.

Kennedy also questioned NBN Co’s ability to handle the project.

“Whatever changes are made at the top, a key question for the audit is whether the NBN Co really has the capacity to manage such a large civil works program,” he said.

This presents both threats and opportunities for Telstra, which was to be compensated for the decommissioning of its copper and HFC networks. This forced migration was a unique feature of the Australian project, and a lucrative one for Telstra. Its decommissioning payments had a net present value of $4.5 billion in 2011. In addition, it was due to receive a similar amount in rental payments for NBN access to Telstra’s passive infrastructure.

“All of this is now under threat in the 71 per cent of the market where FTTN will roll out,” Kennedy said.

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