Thursday, October 13, 2011

Consultants, lawyers, contractors: All aboard the NBN gravy train

NATIONAL Broadband Network head Mike Quigley appears today before the joint parliamentary committee on the NBN's rollout, so perhaps he can explain what value is being delivered by the $36 billion taxpayer-backed project the Economist Intelligence Unit labelled in a recent survey of national broadband initiatives "an extreme example of government intervention". The report found Australian government spending on the NBN dwarfed government spending in any other market.

Quigley will have to not only justify the headline cost of the project but the limited and costly progress to date.

His first progress report submitted to the committee as executive chairman of NBN Co revealed that after two years and despite spending more than $800 million, only 18,000 homes had been passed with fibre-optic cable and a mere 600 connected. In contrast to the fanfare that accompanies parts of the NBN being turned on, the critical progress report was released two weeks ago, late in the evening, deliberately missing news deadlines. Why? Because it's clear from the report that the NBN is not shaping up as a good news story.

In Tasmania, where the network was first switched on, the take-up rate is less than 15 per cent. Worse, the cost of deploying what little fibre has been rolled out is double the estimate contained in NBN Co's first corporate plan. That November 2010 plan estimated it would cost $2300 to pass each household with fibre but the progress report suggests it is costing $4700 with connection adding a further $1000 per household.

If those construction costs cannot be reined in and were repeated for all 12 million premises, then the NBN's capital cost could blow out by $28bn.

In April, NBN Co ended negotiations with 14 contractors hinting there was collusion and price gouging. It's small wonder there couldn't be a deal given the vast gap between what the government has budgeted and actual costs.

No one, of course, is pointing out that the NBN's costs could explode. Why would they when NBN Co's 900 employees are averaging more than $150,000 a year? And the gravy train doesn't stop there. Consultants, lawyers and IT contractors are doing even better. In the 12 months to June, NBN Co spent $60m on consultants and a whopping $42m on legal costs while $220m has been spent or committed to a billing and operational support system even though NBN Co will be dealing with at most only a couple of hundred customers. And this cost could double.

Nor are the country independents who supported the Gillard government being neglected. Pushing fibre farther out into rural communities means the costs of serving some rural households could approach $8000, and when the fibre stops the wireless and satellite subsidy will cut in.

Earlier estimates in the corporate plan show that the average capital cost of an NBN broadband connection through wireless or satellite will be $14,600 and with revenues of only $80m a year each wireless and satellite connection will need an annual subsidy of $1700.

And even NBN Co's potential rivals are in on the act. Telstra is set to sign off on a $13.8bn deal that will see nearly $3bn in contracts for use of Telstra's fibre-optic cables and exchanges locked in, even if the NBN isn't fully built. Taxpayers are underwriting the deal. NBN Co is also buying out the Optus pay-TV network for more than $1bn, a price that Optus could only have dreamed of on the open market. Truly an Alan Bond moment for Optus chief executive Paul O'Sullivan. This is happening at Telstra's behest in possibly the most anti-competitive deal yet seen in Australia.

These realities lie far from the government's spin that the NBN will come in on budget and deliver affordable broadband to all Australians. Again, earlier estimates released by NBN Co put the lie to that. If the NBN's business case is to comenear stacking up, even without the massive cost blowouts that are threatened, within 10 years Australians will have to spend more than three times as much on fixed-line broadband as they do today. That's a big call when broadband prices have fallen for the past 10 years.

Clearly many won't be in a position to pay more for NBN services and that is obvious from Tasmania, where the pork-barrelling that underpins the NBN saw it rolled out to communities in marginal seats such as Scottsdale and Smithton where more than 40 per cent of households, double the national average, have incomes below $800 a week. And even households better able to pay may not take up the higher speed, higher-cost services essential to the NBN's success. The number of wireless (mobile) broadband users now rivals fixed-line users and spending on wireless broadband will soon match spending on fixed-line broadband.

Faced with a choice between higher speed fixed-line broadband over fibre and the utility and convenience of mobile broadband, many consumers will spend their discretionary dollar on mobile.

That will shoot further holes in the NBN's fragile business case, but that scarcely matters to the government, desperate to spin the NBN as a good news story through to the next election. It may not because it is becoming increasingly clear that the NBN's attempts to deploy higher speed broadband will be marked by cost blowouts and delays that cannot be hidden.


Queensland education authorities raise concerns about Australian Curriculum prior to roll out

HUNDREDS of issues and concerns have been raised by Queensland education authorities about the Australian Curriculum just months before it rolls out in classrooms.

Concerns include how to teach numeracy across all areas of the curriculum, literacy primarily promoting formal grammar, an inappropriate expectation on Year 2 students to talk about conflict at home, and India and China being unnecessarily "preferentially identified".

The "issues and concerns" are cited in two reports written jointly by Education Queensland, the Queensland Catholic Education Commission, Independent Schools Queensland and the Queensland Studies Authority (QSA).

The reports respond to an Australian Curriculum general capabilities draft and a request for feedback on the nature of the cross-curriculum priorities.

The general capabilities and cross-curriculum priorities are part of every curriculum learning area.

A revised version of the general capabilities draft is expected to be released next month and state education authorities say they are confident the concerns won't affect the curriculum's delivery next year.

Concerns raised in the general capabilities report include: "It is not clear how to support numeracy as a general capability and teach numeracy within the Australian Curriculum: Mathematics."

Under literacy it states: "The structure primarily promotes formal grammar. Being literate requires more than the ability to correctly use formal grammar; being literate requires proficiency in the full range of literacy competencies."

Authorities also warn: "It is not appropriate for students by the end of Year 2 to be '. . . describing possible causes of conflict at home . . .' as this may be a highly sensitive area for some children."

In the cross-curriculum response, under "Asia and Australia's engagement with Asia", it states: "The preferential identification of China and India are unnecessary. By only highlighting two relationships we are sending inappropriate messages that favour growth over other factors."

A QSA spokesman said the general capabilities and cross-curriculum priorities were designed to provide additional support for teachers and their considerations should not delay implementation of the Australian Curriculum.

"Queensland schools are still on track to successfully implement the Australian Curriculum from 2012," he said.

Education ministers from around Australia will meet on Friday to consider the curriculum's achievement standards. Education Minister Cameron Dick said Queensland supported the Australian Curriculum.


Altogether too much red tape in our public sector

WE have just had a tax forum largely debating how to raise revenue. Yet the government could save up to 20 per cent of its expenditure by overhauling traditional policy-making and accountability processes in the delivery of public services.

If we think of schools, hospitals and prisons as firms, then the regimes that regulate them amount to the worst red tape imposed on any sector of the economy, resulting in billions of dollars of lost productivity each year.

I know what defenders of the traditional approach will say, so let me make clear that I am not arguing for any reduction in accountability but for accountability that is more effective.

It may seem strange that I should criticise my old profession. But I have spent 17 years working with a British-based company that employs 70,000 people worldwide, most of whom deliver public services for governments under contract, and I have developed a deep respect for front-line public servants. We should take some of the frustration out of their jobs and make them more productive.

The chair that I have taken up with the Australia and New Zealand School of Government is explicitly designed to look at the delivery of public services through the eyes of front-line management and staff, rather than studying them from the top down.

Since taking up the chair, I have revisited the literature on policy implementation and I find it differs in fundamental ways from a service delivery model.

The implementation model assumes that policymakers dream up policies, give them legal or structural form and public servants then implement those policies. That sometimes happens when policymakers generate an original solution.

But most of the time they are tinkering with longstanding public services such as hospitals and schools. In those cases, a policy initiative is merely another intervention in the way existing services are delivered.

Of course, policies change from time to time, human resource practices should be improved and those who deliver public services must be held accountable for the expenditure of public funds and the exercise of state power. But the processes we have developed are grotesquely inefficient. We should develop models that cost less.

Policymakers have to stop tinkering. Interventions should be strategic, not tactical, and where possible bipartisan. We have come to believe that democratic accountability means that politicians and policymakers, and middle managers in head office, have the right to intervene in delivery whenever they feel it is necessary.

They reserve the freedom to endlessly adjust policy settings in the interest of "getting it right", failing to understand the immense cost they impose on service providers, in terms of efficiency, innovation and service quality.

I recently interviewed an experienced private-sector project manager who spent several years in a large state government agency and I asked him what was different. He said that government's intention was never clear; there was no real plan. And government delegated much less responsibility to line management: "Most project managers in government aren't managing their budget": responsibility for the cost of capital belonged with someone in Treasury.

Public service managers point to three advantages of the contractual as opposed to the traditional model. First, a contract provides a clearer sense of what they have to do and how it will be judged. Second, it gives them much greater autonomy; having been given a mission they know it will remain constant for the life of the contract and they can get on with deliveryFinally, they feel more accountable for outcomes.

We must shift from process accountability to performance accountability, with front-line managers given a clear statement of outcomes and time to deliver.

To have the public service in perpetual fear of being named in parliament or humiliated in the press is not effective accountability and it results in dreadful distortions. Institutions are designed to minimise the opportunity for scandal and not to maximise value for money and the quality of service.

Governments need to make more use of contractual models in delivering public services, without necessarily using the private sector. They also must appoint quality people to front-line management and learn to trust them. They must change the risk-reward ratio, identifying and honouring those who succeed, while protecting those who take measured risks and fail. We must encourage innovation in front-line services that is systemic rather than heroic.

Politicians tell us we need to raise national productivity. Physician, heal thyself.


Tony Abbott should seize free speech as election issue

TONY Abbott has been gifted a new election issue that he should seize: a Labor Party ready to restrict political debate and valid expressions of view by the Australian people.

Labor's response to the Andrew Bolt case has been a wall of silence. There is no doubt, however, this is a Labor law and the judge's decision that further represses political debate is seen as a Labor value.

Unless overturned on appeal (if there is an appeal) this law will haunt Labor and constitute another chapter in the degeneration of its culture, a process now dangerously advanced.

Indeed, it is hard to find a more perfect example of the trap of political correctness and the legal-human rights culture of legislating for good behaviour than this application of the Racial Discrimination Act. It plays into Abbott's favourite political crusade: Labor's capture by elite special interests that patronise the Australia people and insist on laws that restrict debate in a way most Australians will not accept.

There is one certainty. Labor will pay a political price. This has yet to dawn on caucus because of the range of more serious problems that Labor faces.

But Abbott and shadow attorney-general George Brandis have taken the decision that counts. They intend to punish Labor on free speech and punish it hard. In Abbott's hands, however, this assumes a lethal import.

In his oped on this page on September 30, Brandis said: "If the Bolt decision is not overturned on appeal, the provision in its present form should be repealed."

There is no shadow cabinet decision to this effect. But Abbott and Brandis have consulted and, in effect, have decided. It signals a new cultural attack on Labor on grounds of political correctness.

This penetrates to values and Abbott loves a clash over values. Imagine his message: Labor wants to gag ordinary Australians (yes, the outsiders) who speak out against the values prescribed by the insiders.

The split between Labor and the Coalition seems to be wide. Brandis told The Australian yesterday: "If I was to become attorney-general in an Abbott government I would make defence of freedom of speech one of my most important priorities."

Only a fool could mistake such signals. If the decision by Justice Mordecai Bromberg stands, then Julia Gillard as PM should commission a review of the 1995 amendments to the Racial Discrimination Act that were relevant in the Bolt case.

Such a review would signal Labor's willingness to rethink the act. But it is improbable because these were Labor amendments and for many the Bromberg decision is exactly what the law was designed to achieve. Labor, in effect, is trapped. The defeat of Bolt, one of its hate figures, is seen as a victory for Labor values, for human rights and against hate speech and racial intolerance.

There would be uproar if Gillard signalled she was unhappy with the law or its implications.

The issue here is not Bolt. His articles contained many mistakes. Indeed, there is a persuasive argument on journalistic grounds that they should not have been published and former editor of The Age Michael Gawenda has said he would not have published them.

Nor does the notion of Bolt as free-speech martyr have the slightest traction, given that few other people have enjoyed the benefits of free speech for so long.

If the law were merely limited to race hate there would be no issue. But it isn't. The heading on Part 11 A of the act refers to "racial hatred" but, as Justice Bromberg said, its provisions are not restricted to racial hatred or racial violence.

Any argument this law is necessary to protect Jewish, Aboriginal or Muslim communities from racial hatred is false because the law extends far beyond such purposes. It makes behaviour unlawful in a racial context when it is likely "to offend, insult, humiliate or intimidate". This is a conspicuously low threshold. Brandis describes it as a "grotesque limitation on ordinary political discourse".

Judge Bromberg sees the purpose of the act as being to promote tolerance in a multicultural society and he makes findings within this framework. In short, it is about respect in a multicultural society, a threshold lower than the defamation test. The certainty is that Australia's robust political discourse will sometimes fail this test.

Should Pauline Hanson have been subject to legal action for her comments about Aborigines? Or would this have only been counterproductive? How far should the state go as political censor?

The act has a series of exemptions on free-speech grounds including "fair comment" in the public interest. But Bromberg found Bolt failed to qualify because his articles were inaccurate (a completely valid call) and written in inflammatory language that used mockery, derision and cynicism.

This showed that Bolt "failed to honour the values asserted by the RDA" and that his articles reinforced "racially prejudiced views".

The core message is apparent. "Insufficient care and diligence" was displayed by Bolt in upholding the values of the act and, as a result, he was not entitled to exemption on free-speech grounds.

Prominent lions from the cultural industry are now cheering a finding that you can have free speech provided you meet the required standard of politeness. Yes, they are a farce.

Nobody pretends free speech is unfettered. Yet the limitations revealed by this judgment are significant. So is the reaction. What counts in Australia today is politics and ideology: the wider debate increasingly reflects the view that "provided I agree with you I will support your free speech, but if I don't then I will oppose it".

This strange mood is driven, above all, by the failure of the progressive forces to carry the nation with public hostility to carbon pricing the prime exhibit. This was the policy enshrined by the progressive forces, yet it is the policy that has ruined Gillard. The upshot is a tide of anger and resentment that rises and falls within Labor and its cultural backers.

Labor has stumbled into a print media inquiry that may be toothless, constructive or hostile to print media operations. Who knows?

Frankly, not Labor. Meanwhile many of its cultural backers are irrational about Abbott and fan hostility to shock jocks, the so-called Murdoch media, while betraying their resentment of an Australian public that still backs Abbott.

It would be a disaster for Labor to become party to the new political correctness. Doesn't Labor see this is not about Bolt? Doesn't Labor grasp that this issue plays directly into Abbott's entire political narrative? Doesn't Labor grasp that stifling debate is a sure loser with the voters?

And when will Labor get some mainstream common sense into its values? If it doesn't, it faces greater electoral erosion.


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