The cost of building the National Broadband Network depends entirely on the deal to use Telstra’s underground ducts, which has not yet been approved, so it’s impossible to be sure what the project will cost.
But not only has the NBN Company gone to tender on the construction contract, and narrowed it down to a shortlist, but it is now playing hardball on the price.
On Friday we saw a leaked story, presumably planted by the NBN Co., accusing almost the entire Australian contracting industry of “price gouging”, followed by a press release announcing that the tender process had been cancelled because the construction companies had been “unable to provide acceptable terms and prices following four rounds of pricing negotiations”.
The press release went on to say that: “NBN Co. is confident it can secure better value for money by going a different route.” That route was not spelt out and subsequent inquiries to the NBN Co. failed to elicit further details.
In an interview conducted on Friday morning, the Communications Minister Stephen Conroy didn’t know either. He simply said the NBN Co. wouldn’t get any more budget to build the network.
It has since emerged that the NBN Co. is now talking exclusively with the Leighton-Siemens joint venture, Silcar, and probably already was when the press release went out on Friday.
In that case the leak and press release were just clumsy attempts at spin. What the purpose of that is can only be imagined – so I’ll imagine something.
The thing that’s becoming clear about the NBN is that it’s effectively a joint venture with Telstra.
A large part of both the construction and operations budgets will be paid to Telstra for the use of its ducts and for the decommissioning of its copper wires.
After it’s built, Telstra will be the NBN’s biggest customer, and thanks to the ACCC’s decision to force a reduction in the number of Points of Interconnect from 121 to 14, Telstra will be the largest supplier of backhaul. In fact, the ACCC has enshrined Telstra’s position as the key wholesaler in the future of Australian telecommunications.
Telstra was also one of the 14 shortlisted construction tenderers for the Request for Proposals process that was killed on Friday in favour of exclusive discussions with Silcar.
Interestingly, when it emerged last year that Telstra was one of the shortlisted bidders, the Communications, Electrical and Plumbing Union welcomed that fact and said: “An agreement… between Telstra, NBN Co. and the Government and a halt to any further Telstra redundancies should now be a priority for all parties.”
One wonders whether NBN Co. has become the meat in the sandwich between Australia’s unions and the Labor Government in a battle to use the NBN as a new benchmark for workplace standards in this country.
Something similar happened with Victoria’s disastrous desalination plant at Wonthaggi, where the CFMEU, NUW and AWU fought for coverage and in the process used the plant to achieve a new benchmark for wage claims. In the end the contractor, Theiss, was put on the back foot when some “spies” were discovered on site, providing the opportunity for an outraged strike and righteous spin by the unions involved.
Friday’s spin by NBN Co. looks like an attempt to head off such things at the pass and to prevent the use of the NBN as a wages benchmark.
That would have been more likely if Telstra had won the construction contract, as well as supplying the ducts and customers.
But I wonder whether this game is over. Telstra shareholders still have to approve the deal giving NBN Co. access to the ducts and decommissioning the copper so the NBN has some customers to start with, so they still have plenty of bargaining power.
There is far more going on below the surface of this lake than we are seeing above.
This article first appeared on Business Spectator.
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