Monday, July 6, 2015

Where is the NBN Co Corporate Plan?

In my AFR column that appeared in print today I noted that it is 34 months since a full NBN Co Corporate Plan was released.

I just thought I might touch on a bit of history here on why it has been so long.

Prior to the 2013 election NBN Co had submitted a 2013-16 plan, but the Government asked that the plan be reviewed in the light of some current issues. One in particular was the construction delay caused by the halt to Telstra remediation while working with asbestos training and work practices were revised and implemented.

In the 'NBN Debate' conducted on Lateline on 12 August 2013 between Malcolm Turnbull and Anthony Albanese the now Minister asserted the then Deputy Prime Minister was sitting on the plan and wouldn't release it to the public.

Later in the same program a very agitated Mr Turnbull was far more direct saying that the company had been told to keep the "draft" stamp on it because there was a "time bomb ticking away."

Unfortunately Labor wasn't re-elected and so no 2013-16 Corporate Plan was ever published.

However, both the plan that had been originally submitted as referred to by Mr Turnbull and the plan submitted to the Minister subsequently have since been leaked. Most importantly Mr Turnbull chose not only not to release either version of this plan, but instructed his strategic review to work off the 2012-15 Corporate Plan. (An archive on the history of the NBN including Corporate Plans is being developed here.)

Mr Turnbull was particularly aggrieved by the idea that Corporate Plans might be received in "draft" and took to Twitter two days later to record his "outrage".

Mr Turnbull released neither version of the 2013-16 Corporate Plan. The 2014-17 Corporate Plan was released in November 2014. In doing so NBN Co heavily qualified the plan saying:

NBN Co's officers do not give any guarantee ... that the results, performance or achievements expressed or implied by the FY2015 estimates will actually occur. NBN Co is not yet in a position to generate projections with a reasonable level of confidence for FY2016 and FY2017,

The shareholder Ministers also noted the limitations of the 2014-17 Plan, saying:

Given the transitional nature of the 2014-17 Corporate Plan and various ongoing activities (such as negotiation of amendments to the NBN Co/Telstra Definitive Agreements) which will be material inputs to future planning, the forecasts, analysis and risk assessments in the 2015-18 Corporate Plan will be crucial.

As the company advises, it is not in a position to generate forecasts with a reasonable level of confidence beyond the current 12 month business cycle and as such anything beyond that are heavily premised on long-range assumptions.

The Corporate Plan is important. The now Minister thought so when he demanded the original Corporate Plan be published in full. He thought so in the NBN Debate on Lateline.

He also thought so four months after that debate when on 7:30 on 12 December 2013 he said:

We have got to stop the spin. We've got to start telling the truth and have some numbers and forecasts.

The 2015-18 Corporate Plan is the first time NBN Co will make firm commitments about anything to do with the Multi-Technology Mix. Almost everything delivered in FY2015 has been the continuation of the original NBN model.

The plan is already with the Minister. The Minister previously vigorously objected to the idea that a plan other than the final plan might be received by Government. The Minister previously failed to release either version of the 2013-16 Corporate Plan despite insisting on its publication during the election campaign (see Note).

The SSCNBN in its Second Interim Report called for the release of the full plan when finalised. The Government Response is that Government supports the recommendation and notes the Statement of Expectations from the Australian Government to NBN Co requires the preparation
of annual corporate plans for the purpose of “consideration by Government and subsequent public

More recently the Senate passed a resolution (known as a return to order) on 17 June requiring the tabling of:

A complete and unredacted copy of the NBN Corporate Plan 2015 18, prepared by NBN under the Public Governance, Performance and Accountability Act 2013 and applicable rules and guidelines, and containing each and every financial and deployment forecast identified by NBN and the Department of Communications during the 2015 Budget Estimates hearings as being contained in the NBN 2015-18 Corporate Plan.

The response from the Minister for Finance was:

One observer noted "Fine sentiments, but there's just one small problem: the 2015-2018 Corporate Plan doesn't exist." The writer referred us to the Hansard from Budget Estimates.

There Deputy Secretary in the Department of Communications, Mr Robinson,  noted "The corporate plan is still being settled. All the processes get a draft at the end of May and the government considers it and talks to the company. There may be changes in timing of debt associated with that, but it has not been settled."

The language, however, becomes fun in itself as this exchange showed:

Senator CONROY: When do you expect to receive the final draft? Today is 28 May so it does not leave a lot of days.
Mr Robinson: GBE guidelines call for a draft corporate plan by the end of May, and we expect one.
Senator CONROY: A final one?
Mr Robinson: A final draft, yes.
Senator CONROY: Not another iteration? It will be their final one.
Mr Robinson: It is a draft in discussion with the government, but yes.

On the basis of the Minister's earlier comments about drafts it wasn't perhaps that unreasonable to ask for the Corporate Plan. The motion also asked for an un-redacted version of the Strategic Review, but that was also denied.

The questions that Senator Conroy was asking about the Corporate Plan indicate that this plan will be like the 2010 Corporate Plan in that it will still be premised on detail of Government policy.

NBN watchers will wait in anticipation of the Corporate Plan. As a marker the only real Corporate Plan released so far was on 8 August 2012. It was 12 August 2013 when Minister Turnbull aggressively demanded the next one. That should be when we get to see it.

Note: In his outburst on the Corporate Plan in the Lateline Debate Malcolm Turnbull said "You've got a time bomb ticking away. You've got a confession from the company that they're failing and you don't want to let the public know." Mr Albanese had previously repeated that the project was on time and on budget, and under questioning that it would be delivered by FY2021 for $37.4 Billion in Capex.  The Corporate Plan that Mr Albanese was supposedly "sitting on" did exactly what Mr Albanese claimed. It did show a $1.6B increase in peak funding due to delays at the start of the roll-out.

That the Government was justified in not relying on that plan is revealed in the next version of the plan that was only considered by the NBN Co Board after the election. It may never have been formally submitted to the Minister but comments about targets indicates the Minister was aware of at least some of its contents. That next version moved the completion date 6 months because of the suspension due to asbestos, it maintained Capex but reduced peak funding by $0.8 billion.

Of course, Mr Turnbull maintains that these weren't achievable.

But in the Lateline interview he also said of his $94 billion estimate:

Now, those four assumptions about revenues, cost of construction, wireless-only households and time are very reasonable ones. We put them out more than four months ago and nobody has been able to say that our assumptions are unreasonable, or, that given those assumptions, you would not end up with a $94 billion figure. And you'd think if they were wrong, in more than four months, the Government or NBN Co or somebody would've said, "No, Malcolm, you've got that number wrong." No-one has said that.

He is right, in large part because Labor didn't use the company management to do political work. But the company did eventually tell him he got it wrong - in the Strategic Review. And as the First Interim Report of the Senate select Committee on the NBN said the most accurate forecast was the cost of the Radically Redesigned model without assuming lower revenues and without assuming limited numbers of simultaneous work fronts. In brief, the Strategic Review largely confirmed the NBN Co Corporate Plans.

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