full opinion/analysis by Renai LeMay
30 August 2013
Image: Office of Malcolm Turnbull
With Labor’s electoral hopes gradually sinking and most Australians expecting the Coalition to take power in the Federal Election in little over a week, Malcolm Turnbull would be well-advised to start planning his first moves as Federal Communications Minister. But, as our analysis reveals, if the Coalition wins, the first 100 days of Turnbull’s tenure will be incredibly gruelling, with a laundry list of tough action items a mile long.
It’s a common aphorism in political circles that the first 100 days of any government’s time in power are the most important. In that period, much foundational work is done that will underpin the next several years of delivery. Key planks of new policy are officially set in place and ministerial orders issued to departments, agencies and government-owned businesses. Important appointments are made, both to the offices of new Ministers, as well as public sector organisations. Previous government policy initiatives may be wound down or cut off before they begin, and staff members seen as being partial to the previous administration may be reassigned to less important roles or, occasionally, simply walked. New names are chiseled on the doors of offices. It’s a busy time.
And it’s important for new reigning parties — particularly those politicians taking on Ministerial responsibility — to get this time right.
If a new Minister spends their first three months in power not taking strong, decisive moves and bringing in a broom to sweep out the old and make room for the new, then incredibly powerful homogenising forces within the public sector begin to take hold. You can see this phenomenon most strongly within highly activist government bodies such as the Attorney-General’s Department, which has its own set of policy agendas that it regularly works on with client agencies such as the Australian Federal Police and the Australian Security and Intelligence Organisation, independently of the Minister of the day. The Department of Defence is another example of this. If a new Minister does not grasp the reins of power firmly in these portfolios, they will quickly find themselves to be the slave — rather than the master — of the public servants who they are meant to be guiding. These departments will not hesitate to put the exact same policy proposals to a Labor Minister as they would a Minister from any other party; and the amount of pressure they can bring to bear is subtle but still powerful.
If you assume that the Coalition is set to wrest power from Labor in the upcoming Federal Election in two weeks, as polls show most Australians increasingly are, and if you assume that Malcolm Turnbull is set to become Communications Minister, as Opposition Leader Tony Abbott has openly stated, then you would have to also assume that these issues will be especially pressing for a Turnbull ministership.
The reason, of course, is the extremely sharp timeframes involved in the Coalition’s plans to reshape Labor’s troubled National Broadband Network project.
Turnbull’s policy ambitions for the NBN, based on its immediate past history of rollout speeds, are incredibly ambitious. By the end of 2016, effectively the end of the Coalition’s first term in power, Turnbull has pledged that all home and business premises in Australia will have access to broadband speeds of between 25Mbps and 100Mbps. Should the Coalition win a second term in power, which history would suggest is close to inevitable, then it would then have three years to deliver broadband speeds of between 50Mbps and 100Mbps by the end of that succeeding three year period.
Turnbull’s ability to deliver those promises will depend largely on the speed with which he can take NBN Co, a company wholly created to serve Labor policy aims, and reform it along lines that will serve the Coalition’s agenda instead. Given that NBN Co has continually failed to meet its targets under Labor and does not currently enjoy the confidence of the telecommunications industry at large as a result, this will be one difficult task.
So what steps will the new Communications Minister need to take to achieve his aims? And particularly, what moves should Turnbull take in his first 100 days in office to lay down a solid foundation for three years of broadband policy delivery? I’m glad you asked. I’ve got a laundry list.
The first thing which Turnbull will need to do upon taking power as Federal Communications Minister is obvious: He needs to find new management for the National Broadband Network Company.
Irrespective of where the blame lies for the situation, the poisoned and potentially litigous relationship which has developed between the Earl of Wentworth and NBN Co’s current board will make it impossible for Turnbull to work effectively with it in future as Minister. There is just too much suspicion and distrust, too much blood in the water, for NBN Co’s current board to co-exist with its new primary shareholder minister. Upon taking office, Turnbull must immediately ask for the resignation of NBN Co chair Siobhan McKenna, as other 2009-era board members such as Diane Smith-Gander and Terry Francis. Other board members, particularly former Leighton executive Rick Turchini, may be asked to remain, to ensure stability during the transition.
If I were Turnbull, I wouldn’t bother with the kind of ‘executive search process’ which Labor has previously undertaken to find new board members. Those kind of things normally take six months, and Turnbull has enough connections of his own. If I were the MP, I would already have a shortlist of executives primarily drawn from telecommunications and construction industry background, to fill the vacant chairs. A former senior executive from Telstra or Optus would do well as chair.
Secondly, Turnbull must deal with the management of NBN Co.
NBN Co chief executive Mike Quigley has already announced his retirement, and it is likely that an executive search process has been underway for months to find a replacement for Quigley. Given their fraught personal history and the fact Turnbull has already stated he has no confidence in the executive, the MP should ask Quigley to immediately step down, and appoint either head of corporate and commercial Kevin Brown, or chief operating officer Ralph Steffens, as acting CEO until a permanent replacement for Quigley is found.
I would appoint Brown as acting CEO, if I were Turnbull. He’s been at NBN Co since the start and has long deputised for Quigley in important matters; plus, Turnbull will want Steffens to maintain his current focus on the NBN rollout.
Turnbull will also need to take somewhat of a hand, probably informally, in influencing the replacement of other key executives at NBN Co. There are quite a few people within NBN Co who are openly hostile to the Coalition’s FTTN vision for the NBN, and this will likely lead some to resign if the Coalition wins power in September. Obviously this is mainly a matter for NBN Co, but Turnbull will want to keep a close eye on how the company appoints replacements for these staff.
That’s management sorted. Now for policy.
There are some obvious and relatively trivial first steps which Turnbull should immediately take in setting policy for NBN Co; some very quick and easy directions which the new Minister should issue to the company’s management.
Firstly, after having complained loudly and long during the election campaign about the Government’s failure to publish NBN Co’s corporate plan, Turnbull must immediately request a final version of the latest plan from NBN Co, and publish it.
Given NBN Co’s abject failure to adequately deal with the issue of multi-dwelling units in its network rollout (MDUs account for most of the premises which are technically ‘passed’, but which cannot actually ‘connect’ to the NBN’s fibre), Turnbull must immediately direct the company to put together a plan for integrating a fibre to the basement or similar strategy in its current FTTP rollout plans, to ensure the MDU issue is rapidly expedited in NBN Co’s current FTTP rollout. NBN Co is believed to have previously suggested this idea to Communications Minister Stephen Conroy, who is believed to have knocked it back on policy grounds. It’s time to resuscitate this concept, which almost everyone in the telecommunications industry except Labor thinks is a good idea.
As a matter of course, Turnbull must also direct NBN Co to temporarily stop signing new supplier agreements for construction work and equipment, as well as ceasing new FTTP construction in new areas. I think NBN Co will probably do this anyway, but it never hurts to put things in writing. Of course, FTTP construction in areas where it has already begun will still continue.
As mentioned in the Coalition’s policy document, three reviews should also be kicked off immediately. Turnbull must direct NBN Co itself to conduct a rapid fire 60 day review into its progress and costs, structure, internal capabilities, commercial prospects and strategic options. Independent reviews (probably one by the Productivity Commission, and one by an external consultancy) will need to be ordered into (1) broadband policy and NBN Co’s governance, and (2) the economic and social costs and benefits of different broadband technologies, considering also government regulation in the area.
Still with me? This is all of the easy stuff. In fact, I would expect that Turnbull could get most of the above done in the first few days he has as Communications Minister. All of the orders above are mainly things which Turnbull can quickly direct via a short Ministerial letter to the relevant person.
The next steps listed here will be harder, much harder — representing the main meal after the tasty entree` which the Duke of Double Bay has already enjoyed.
The first ‘harder’ step which Turnbull must take is to direct NBN Co to renegotiate its complex arrangement with Telstra, which gives the company access to Telstra’s ducts, pits and pipes infrastructure, as well as seeing Telstra’s copper network shut down, and its HFC cable network shut down for broadband access, as Telstra transfers its customers onto NBN Co’s infrastructure. To put it simply, this won’t be an easy negotiation. The last time NBN Co and Telstra did this dance, the negotiations took a year to go from the initial financial heads of agreement in June 2010 to definitive agreements, and long months of negotiation before that.
This time around, Turnbull doesn’t have 18 months to negotiate a new deal with Telstra. NBN Co must get Telstra to agree to give NBN Co access to its copper network from streetside ‘nodes’ to premises, as well as a range of other measures such as continuing to operate its HFC cable network and possibly even opening the HFC to competitive access or selling it to NBN Co. Under any scenario, Telstra will continue to operate and maintain a portion of its copper network. This model — where a FTTN network is shared between a government company and former incumbent telco — hasn’t really been implemented anywhere in the world, and it’s not clear precisely how it will work. Will Telstra sell its copper to NBN Co? Will it sell access to the copper? Will it reject any attempt by the Government to keep Telstra operating its HFC cable network? Will it sell its South Brisbane fibre area to NBN Co? At this stage, nobody knows. But Turnbull must get NBN Co to get this new deal done — quickly, within existing cost structures, and without much fuss on either side.
This will be Turnbull’s most important undertaking as Minister, and it will kick off within the first several weeks of the Liberal MP taking office. It will be an incredibly hard and gruelling piece of work. At this stage, most industry observers expect it to take a great deal of time to get done — time which the Viscount of Vaucluse does not have, if he wants to get NBN Co focused quickly on a fibre to the node rollout.
Other factors may also come into the Telstra negotiations. With NBN Co’s current contractual relationships failing to deliver the NBN on its original timeframe, there are many solid arguments for handing much of the work of actually building or designing the NBN to Telstra, as I wrote in Delimiter 2.0 last week. This may come into the talks, or be discussed separately between NBN Co and Telstra, upon Turnbull’s request. And Telstra may bring other issues in, such as the Universal Service Obligation work it does in rural areas.
Simultaneously with the Telstra negotiation, Turnbull must direct NBN Co to re-examine all of its other major contracts with both equipment vendors and construction companies, with a view to modifying them to fit along FTTN, and not FTTP lines. As Shadow Minister, Turnbull has committed to honouring existing NBN contracts, but these are complex deals, and most will have out clauses which allow re-negotiation. Some of these negotiations will need to await the finalisation of the Telstra deal, but NBN Co will be able to get some of this work done, with the assumption that NBN Co and Telstra will be able to agree on the terms of their larger deal.
Turnbull will also, as he has stated, direct his Department of Broadband, Communications and the Digital Economy to carry out a 90 day study which will rank Australian regions by their availability and quality of broadband. “We will require NBN Co to amend its rollout plan with effect from the soonest commercially feasible date to grant priority to the identified inadequately served areas,” the Coalition’s policy document states. Priority will be given to areas where HFC cable broadband doesn’t already exist, as it theoretically allows speeds up to 100Mbps.
Most of these orders which Turnbull will give NBN Co will come as part of a revised, formal Statement of Expectations which the new Minister will issue the company. You can find the existing Statement of Expectations available online. However, I am sure that, as Conroy did when he was Minister, Turnbull will be in relatively close contact with NBN Co’s new chair and acting chief executive during the first few months of his tenure. NBN Co might be an independent company and the Government merely its only shareholder, but I don’t think anyone at the company is in any doubt that Turnbull will be its new master and commander.
Turnbull may also want to consider asking his departmental staff to draft a piece of legislation which would be extremely useful in assisting with more Australians to get better broadband faster. Currently many of those living or working in areas covered by the HFC cable networks operated by Telstra and Optus are unable to actually access the cable, usually because they live in apartments or other forms of “multi-dwelling units” where the telcos have been unwilling to connect up cable due to the cost and the difficulty of getting apartment block owners to play ball.
I don’t know precisely how to get around this issue, but I suspect it can be resolved through a combination of incentives for Telstra and Optus, as well as supporting legislation to get around the issue of recalcitrant apartment block owners. Property owners can’t refuse renters access to water or electricity, after all — why should they be able to block the deployment of faster forms of broadband? This situation makes no sense, and if Turnbull is serious about continuing to use the HFC cable networks, he needs to set in progress an examination of the MDU issue so that more people can connect to HFC.
Now, the steps I’ve outlined above are Turnbull’s most important immediate tasks which the Baron of Bellevue must undertake upon taking office. If Turnbull does not take these steps in his first 100 days, his policy agenda will start to be delayed substantially: A fact I am sure the Shadow Minister is well aware of. It will be enough if Turnbull kicks off these initiatives within his first three months: Doing them alone will represent a huge jumpstart to implementing the Coalition’s NBN policy. These are the major moves to be undertaken. But let’s make no bones about it: These are huge first steps for anyone to have to take in a new Ministerial portfolio. Usually when new Ministers are appointed, they have a few months to get their feet under the desk and work out how best to work with their new department. Not so for Turnbull. The MP will have to move very quickly to implement his policy agenda; or else it will rapidly come unstuck, very much in the same way which Labor’s NBN policy itself has largely failed to deliver so far, over two terms in power.
There are also a number of other minor moves which I would strongly recommend Turnbull focus on, once the big ones are under way. Or perhaps small separate teams of staff members should examine these issues.
For example, Turnbull has not really clarified yet how he will deal with the $800 million deal which NBN Co holds with the nation’s number two telco, Optus. The deal was set up to see Optus shut down its HFC cable network and transfer its customers onto the NBN, but the MP has been a long-term critic of the arrangement, viewing it, as I do, as anti-competitive. It will be even more so if Turnbull forces Telstra to maintain its own HFC cable network. Turnbull will need to decide whether the Government would walk away from that deal with Optus.
There are also a tranche of other issues in the Communications portfolio unrelated to the NBN.
For example, Turnbull and Opposition Leader Tony Abbott launched a $100 million mobile blackspot policy during the election campaign several weeks ago. Implementing this policy will see Turnbull’s staff negotiating with Telstra, Optus and Vodafone. In that process, the new Minister will necessarily need to consider the ongoing massive transfer of customers from Vodafone to Telstra, and whether, given the fact that Vodafone is rapidly running out of time to keep its business alive, whether a Coalition Government would want to grant concessions to Vodafone to help keep mobile competition alive in Australia.
The current Labor administration has broadly ignored the fact that Telstra is currently killing Vodafone and attempting to wind back mobile competition in this country. But if things continue as they are now, Vodafone only has several years more before its Australian operations may become unsustainable. This is a clear issue which a Turnbull ministership will need to urgently monitor and consider, no doubt with in-depth consultation with the Australian Competition and Consumer Commission.
Turnbull has already pledged to review the ban on Chinese vendor Huawei participating in NBN contracts, and I think that process should kick off quickly. The Attorney-General’s Department and ASIO will be against any re-examination of the situation, but Huawei’s inexpensive networking gear represents a way to radically bring down the cost of constructing the NBN. Given the fact that no espionage allegations against Huawei have ever been proven, it’s fitting that this situation be looked at again.
Lastly, there are several unsavoury issues which the current Labor Federal Government is staunchly trying to ignore and sweep under the carpet. As the recent revelation of iiNet’s refusal to participate has made clear, the limited mandatory Internet filtering scheme enacted by Communications Minister Stephen Conroy and the Australian Federal Police, which is seeing ISPs filter a list of ‘worst of the worst’ child pornography sites, has broadly failed and must be re-examined.
An associated issue is that Federal Government departments and agencies have started using for other purposes the same Section 313 Telecommunications Act notices that the AFP is using for its failed filter effort. The most high-profile example of this system in action has been its unilateral use by the Australian Securities and Investments Commission, which has resulted in hundreds of thousands of innocent websites being blocked.
Conroy had pledged to set up some central administration, control and transparency of the system, but resigned before that could be implemented. Meanwhile, his department is probably still working on something similar. Turnbull needs to cast his eye into this initiative and work out what’s going on, before ASIC or someone else accidentally blocks another 250,000 sites.
Wow. It’s a long list, isn’t it? Who would be Communications Minister? And bear in mind that I haven’t even touched here on other areas of Turnbull’s portfolio, which is extremely broad, covering not only telecommunications matters, but also issues relating to Australia Post, media giants the ABC and SBS (as well as media policy in general), television (including the switch to digital television), the Australian Communications and Media Authority and so on. The Communications portfolio is a large one in the Federal Government, and I’ve limited this article to the steps Turnbull will need to take in his first 100 days in the telecommunications portfolio alone. I am sure there are many other issues the new Minister will need to deal with.
The key thing to understand here is that the first three months of Turnbull’s time in office are going to be excruciating. There is just so much here that the Earl of Wentworth has signed up to get done, and so much of it is foundational work that will underpin everything else the Coalition wants to get done in the three years following. I hope Turnbull’s not exhausted from the election campaign. Because he will need every shred of energy to keep his policy agenda on track.
The MP also cannot expect the media to give him a free ride in his first three months, just because he will be a new Minister. Turnbull has spent the past three years as a loud and vocal critic of virtually everything Labor has done in the telecommunications portfolio. Well, it is likely that he is about to get his chance to put all those perceived ills to rights. The rub is that if he puts a foot wrong, the media will come down on him like a tonne of bricks. What’s good for the goose, after all, is good for the gander — and if Turnbull doesn’t perform as Communications Minister, he may come to regret blasting Labor as hard as he did.
Of course, for now, nothing is certain. Labor could still take the election, as unlikely as that appears at this point. The Coalition could find itself in a minority government situation, as Labor did in 2010, and be forced to compromise on its existing policy objectives. Right now, Australia’s future is very much up in the air. All will become clear in a little over a week.