NBN doomed to failure: iiNet

Australia's third-largest ISP iiNet said yesterday that the government's $4.7 billion national broadband network was "doomed to be a monumental failure" despite the fact that iiNet itself is a member of Terria, a consortium bidding to build the network.

Michael Malone
(Credit: iiNet)

The government's process and policy was "fundamentally flawed" according to iiNet managing director Michael Malone, speaking at a hearing for the Senate Select Committee on the network. He believed there was a risk that the network wouldn't be built at all, but that even if it were, the prices would be such that most Australians wouldn't see the benefit of the $4.7 billion spend.

Malone said that the government's good intentions had become lost. "They have misunderstood the need for regulatory policy reform and mishandled the process so badly that it is doomed to failure before it's even begun," he said.

"The first priority and only test of the success for the NBN is that customers must be better off from it being built," Malone said, highlighting the over 12Mbps speeds which many customers are already achieving using iiNet DSLAMs.

"If customers end up paying more for a slower product than they are receiving today why is the Government wasting almost $5 billion of taxpayers' money?"

"This is a once in a life time opportunity to get it right. The NBN must be about delivering better outcomes for Australian consumers and a truly competitive, innovative environment. If it doesn't deliver that it should not be built," Malone concluded.

In response to iiNet's comments, a spokesperson for Communications Minister Stephen Conroy said that the government was confident that the process would deliver sound proposals.

"The Government has previously noted the strong response received for participation in the NBN request for proposals and we continue to anticipate that we will receive some very competitive proposals on November 26," they said.

However, Telstra has been threatening to pull out if the government does not rule out the inclusion of structural separation in the process. At its investor day yesterday, the telco bemoaned the lack of regulatory certainty, with CEO Sol Trujillo saying that Telstra chairman Donald McGauchie had sent a formal letter to the federal broadband department months ago requesting clarification on the situation.

Sol Trujillo at the investor day
(Credit: Suzanne Tindal/ZDNet.com.au)

"We think that we could do this well, we think that we could meet the timeline kind of constraints," he said. "But it's got to be consistent with how we operate, and changing assumptions of how we operate throws away any sense of timing, any sense of economics, any sense of do-ability. So all we're saying is look, before we bid, we have to have clarity on this, because otherwise we don't know how to bid."

There has been no formal reply, Trujillo said. "Donald McGauchie sent the letter and would like to get a letter of clarification back that specifies it," he said.

Shadow Communications Minister Nick Minchin jumped on iiNet's comments, saying Labor should abandon the national broadband network effort and instead invest in underserved areas while leaving the industry to continue its competition in metro areas.

The sentiments echoed Minchin's earlier comments on the matter during a Sydney conference this week.

"On our side of politics we do actually have much more faith in the free market and the private sector and believe taxpayers funds should be carefully targeted at areas of most critical need," he said.

"We also believe that government should be very wary of investing taxpayer's money in business ventures. That's why we got out of most of the businesses the federal government was in," he said.

Minchin called the national broadband network a simple big bang solution which he thought was only an election gimmick. "Labor based this broadband promise on just a glib election promise rather than basing it on any sound fundamental robust and realistic public policy approach," he said.

"In the lead up to the election, the government's approach was just vague and simplistic and frankly purely populist... I think it ignored reality, they provided very scant detail ... As someone who has been involved in election processes in this country for 30 years, I know when something is based on focus groups of swinging voters and that's exactly what Labor delivered," he said.