Quigley quenches Malone's NBN scepticism

After "a healthy debate" with NBN Co chief executive, iiNet supremo Michael Malone has been convinced that the National Broadband Network will be delivered.

iiNet chief Michael Malone (Credit: iiNet)

"Before I walked into that meeting," Malone told ZDNet.com.au yesterday, "I thought there was a 50/50 chance this thing will ever get built — even with all the right government backing."

Within 10 minutes of meeting Mike, I thought, boy, this guy can do it. He is incredibly impressive.

iiNet CEO Michael Malone

Malone, who heads up Australia's third largest ISP, is in Federal Court this week defending iiNet against AFACT's claim that it authorised its customers' breach of copyright.

While numerous high profile executives, such as Cisco's Les Williamson, are keen to meet with Quigley, few, besides those that have attended the recent round of industry briefings, have had the chance. Malone said he had met with Quigley a few weeks ago, and described him as "incredibly impressive".

"Within 10 minutes of meeting Mike, I thought, boy, this guy can do it. He is incredibly impressive. I know the government's got KPMG (and McKinsey & Co) out there doing the implementation study, but Quigley, within 10 minutes, he was able to show there were a few things that are obvious about the roll-out and it was bang, bang, bang, bang," said Malone.

iiNet had previously expressed concern over where ISPs would connect to the planned fibre network and last year Malone said the initial NBN proposal would be a "monumental failure", which would likely threaten its investments in broadband equipment connected to phone exchanges. Yesterday, Malone pointed out that Quigley had headed up AT&T US metro-fibre roll-out, U-verse, and understood the complexities involved in building "back-to-base alarm" systems, lifeline services and the switch to digital television.

Asked whether his concerns had now been allayed, Malone said, "we had a healthy debate about it" and that he was able to propose to Quigley a network access structure which would protect the value of existing fibre networks.

"Saying that everybody has to connect in the CBD of each state ultimately is not a good result," said Malone. "A lot of carriers would have to write down fibre assets. And it would be a bad look for the government if you're talking about fibre being the way forward and everyone having to write down fibre," he said.

Instead, Malone said he would like ISPs to be able to hook into the network at multiple points. "And that you incentivise for hooking in closer and closer to the customer. I don't think anyone wants to see volume discounts — that only benefits one party in the industry."

Instead of discounts based on the size of an ISP or telco's customer base, he wanted to see an infrastructure-based discount schedule. "I think having some form of discounted value, which is because you're collecting in the suburbs or a regional town and that you're paying for the fibre to come back to the CBD itself, that that would give you some benefit," he explained.

Malone said iiNet planned to maintain its current $30 million a year capital budget for new broadband equipment — Digital Multiplexer Subscriber Lines (DSLAM) in phone exchanges — despite the impending arrival of the NBN, which may render DSLAMs obsolete.

"Our payback on installing a DSLAM is less than two years. NBN is five to eight years away. Until we learn something different, we will continue," said Malone, who explained that it currently depreciates the technology over five years, while it has an eight-year lifespan.

"If we got some indication tomorrow that NBN is hitting Perth, it's not going to remove all our DSLAMs in two or three years. The worst case if there was a Perth roll-out would be that it might reduce the depreciation schedule to three to four years," he said. The critical factor in determining the lifespan of its DSLAMs in two key regions — Bathurst, NSW and Geraldton, WA — was how long it will take to fire up the planned backhaul builds, currently out for tender.

"Both regions have been promised new backhaul coming sometime in the next year. What we don't know is how long after the backhaul comes online will NBN fibre to the home come online," said Malone.

Once the NBN has been sufficiently delivered across major metropolitan areas Malone said there will be two major assets that will differentiate ISPs: the number of customers and notoriously complex billing systems.

"If you have a fully commodotised network layer, it's the billing relationship that will be important. If you make a 10-cent mistake, you can make a $100 error too. [Customers] won't trust your billing system, so getting a trustworthy billing system is essential."