Bill Morrow

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What now for the NBN as taxpayer investment is capped?

5:34AM | Friday, 16 May

The Abbott Government’s first federal budget has allocated funds for capital investment into the National Broadband Network (NBN) to continue up to 2017-18 but with a cap of A$29.5 billion.   This falls well short of NBN Co’s original forecast of A$44.1 billion not withstanding various estimates of cost blowouts and new NBN Co leadership’s revised forecast of A$72.6 billion.   The Coalition under Tony Abbott’s leadership in opposition and in government has long maintained that NBN could cost less and be rolled out quicker.   That commitment was confirmed this week by Communications Minister Malcolm Turnbull following the budget announcement on spending.   In a statement, he said the budget provides A$20.9 billion in equity funding to NBN Co to cover up to 2017–18. This is on top of A$8.6 billion already committed bringing the total to the capped A$29.5 billion.   New sources of funding needed   NBN Co CEO Bill Morrow now faces some difficult decisions in deciding how best to allocate resources to meet the objective of providing high-speed broadband across Australia.   Since the Coalition’s election in September last year the NBN has been subject to a number of reviews and a wholesale clean out of management.   With many reviews, such as the cost-benefit analysis, yet to report, the strategic direction for NBN Co is uncertain making it difficult to comment on future developments with accuracy.   What can be said with certainty is the capping of the government’s investment gives a clear indication that Coalition’s NBN will be vastly different from that proposed under Labor.   But some issues will need to be addressed so they do not provide a thorn in the side to NBN Co or hinder the rollout of broadband across the community.   The funding cap amplifies the need for private investment. Only A$57 million has so far been earned in revenue related cashflow against the A$7.3 billion invested to date.   NBN Co will therefore be required to increase revenue and raise funds through private equity or debt financing to ensure it can fund both operational expenses and future capital investments. But it will need to show an attractive rate of return potential to lure Australian institutional investors, superfunds and other international investors.   Alternatively NBN Co will be forced to secure loans to bridge the gap. But whether the Abbott government would offer debt guarantees to the company remains an open question.   NBN Co may seek to reprioritise the rollout of the planned network by cherry picking more profitable connections in metropolitan regions. But this may detract from the rollout of services in areas with a higher capital cost, such as regional towns and outer suburban areas, which are often those areas that have the most to gain from the provision of broadband.   Deals with telcos   The A$11 billion deal with Telstra to lease part of its existing network is currently under renegotiation. This might extend to accessing existing fibre-to-the-cabinet, hybrid fibre-coax and dark fibre in addition to copper infrastructure to speed up “new” NBN rollout.   A changing technology mix means that some existing copper will not be decommissioned, entering operation as part of the NBN.   The outcomes of the renegotiation and the terms of any new agreement will impact the rollout and the future technology mix. Fibre-to-the-node in some form and maximising the use of existing copper infrastructure appears to be a dominant base for such mix and existing carrier infrastructure may offer opportunities in a funding constrained environment.   By further reviewing its construction and installation methods NBN Co may be able to achieve some cost savings and curtail cost blowouts.   Network competition   The NBN Co is operating in an uncertain regulatory environment. The current rules were set up with the NBN Co being a monopoly wholesale infrastructure provider.   But internet service provider TPG’s plan to rollout its own fibre-to-the-basement network is changing the telecommunications landscape requiring a regulatory response. Failure to clarify this would force NBN to lose opportunities in rolling out to rapidly expanding apartments sector with a customer base often opting for higher tier services.   Australia would then see its history repeated once more with parallel network rollout similar to the hybrid fibre-coax rollout by Telstra and Optus.   Maintaining the wholesale monopoly for NBN Co could have possible competitive consequences. Currently there appears to be a confusion in the way wholesale services are defined with potential restrictions on emerging market opportunities. NBN review panel’s terms of reference is seeking input on clarification of this.   Relieving NBN Co of its wholesale-only constraints, or at least redefining its limitations, would allow it to provide network connectivity directly to business end-users such as mobile base-stations, large businesses, governments and national infrastructure such as power grids which offer high growth potential.   This approach would be good for NBN Co as it would open new revenue streams that would support the government’s desire for the company to increase private investment.   Thas Ampalavanapillai Nirmalathas is a Professor of Electrical and Electronic Engineering. He is currently an Associate Director with the Institute for Broadband-Enabled Society which has received funding from a range of sources including the University of Melbourne and Victorian Government. He is also the Director of Melbourne Accelerator Program which helps to promote entrepreneurship culture through acceleration of start-ups. Views expressed in this article is entirely that of the author and do not reflect the views of his employer - University of Melbourne. He receives funding from the Australian Research Council.   This article was originally published on The Conversation. Read the original article.

The devil in the NBN's satellite magic pudding

5:49AM | Tuesday, 13 May

There’s good news and bad news for Australians waiting for the National Broadband Network in yesterday’s announcement about the project’s satellite services.   For those on the outskirts of major cities the good news is more areas will get faster fibre and wireless connections while many rural users are going to find their satellite connections further limited.   Rolling fibre out to the entire nation under the NBN was never going to be feasible and the broadband solution for most of the country’s land mass – although only 3% of the population – was going to be satellite internet.   Overloading the satellites   Unfortunately for the NBN, the wireless and satellite services proved to be way more popular than expected with projections of 600,000 regional homes, businesses and farms wanting a connection compared to the original estimates of 230,000.   For the government the choice was to send up another satellite to cater for these needs or to extend the planned fibre and wireless networks.   The latter option was chosen which means around 300,000 premises than originally planned will get wireless, rather than satellite connections and an additional 25,000 will get fibre access.   Bad news for the regions For those in outer suburban areas an improved service is great news but for people in more remote areas NBN Co intends to manage demand by putting download caps on the satellite service.   A stingy 20Gb per month will stunt the growth of startups and other businesses outside the wireless and fibre footprints. In its 2013 survey of the nation’s digital economy, the Australian Communications Media Authority found that fixed line internet users are downloading over 30Gb each month and that number grew 57% over the previous year.   Clearly businesses in the satellite footprints are going to be disadvantaged compared to their city cousins and overseas competitors. For agricultural startups the limited speeds and data caps of satellite services is going to make it harder for these ventures to grow while based in rural locations.   A magic pudding   The cost of extending the fibre and wireless footprint to regional areas is estimated to be $1.5 billion. NBN Co’s management claim this is “within the envelope” of the $41 billion budget of the project.   A magic pudding mentality was one of the hallmarks of NBN Co’s earlier management where Mike Quigley and his team always maintained that everything was under control as things were allowed for in the company’s Corporate Plan. The assurance that an additional $1.5 billion cost is allowed for in the current numbers is not encouraging; whether the current leadership is better at controlling costs, reducing delays and meeting expectations remains to be seen.   The challenge facing the CEO Bill Morrow’s team in meeting existing timeframes shouldn’t be underestimated with the project stalled in many parts of the country, contractors at war with their subcontractors and customers complaining about problems in being connected in the areas where NBN Co has completed work. An uncertain future   Adding to Morrow’s task is the uncertainty of the coalition’s multi-technology-model (MTM) where no one is quite sure exactly how many premises will be connected to fibre, copper or the Pay-TV cables. Until the scope of the project is defined, it’s going to be difficult to figure out what the ultimate costs and timings will be.   That the take up rate of satellite was far greater than expected shows just how important broadband is to regional businesses, for Australia’s startup sector getting the NBN right is essential to being able to compete in the digital economy.

THE NEWS WRAP: Premiers to meet Tony Abbott after Holden closure announcement

12:23PM | Wednesday, 11 December

The premiers of Victoria and South Australia, Denis Napthine and Jay Weatherill, are set to hold talks with Prime Minister Tony Abbott following the announcement by Holden it will end production in Australia by 2017.   The decision by Holden’s parent company, General Motors, to end production in Australia will directly impact 2900 jobs over the next four years across Victoria and South Australia, with more than 30,000 jobs at risk nationally.   “It's about the whole industrialisation of our economy, and what now needs to be put in place to replace what is a very significant element of the South Australian economy, indeed of the national economy,” Weatherill says.   “I'll seize that opportunity to talk to Mr Abbott about the future of Toyota and how the federal government can work with the state government and Toyota and the entire automotive supply chain industry to secure the future of Toyota,” Napthine says.   “I spoke to Mr Yasuda of Toyota last night. Obviously the government will be talking to Toyota… We want Toyota to continue. They are in a slightly different position to Holden – much more of their local production has been for export,” Abbott says.   Bill Morrow to be named new NBN boss   Vodafone chief executive Bill Morrow is set to be named as the new chief executive of the NBN Co., according to reports.   The announcement is set to be made as Communications Minister Malcolm Turnbull prepares to deliver a strategic review into the rollout, which identifies cost issues and flaws in Labor’s rollout of the project.   Vodafone plays hardball on rents   Mobile communications giant Vodafone is threatening to abandon stores as part of its hardball negotiating tactics with retail landlords, as the struggling telco attempts to renegotiate leases on its stores.   “[They] verbally are refusing to pay the rent. For an enterprise of the calibre of Vodafone, this is cowboy behaviour, considering all the bad press Vodafone have had. They are playing hardball,” one landlord told Fairfax.   “This request [to cut rents] is on the back of numerous store closures that have been performed in the last two years due to the significant losses that have been incurred from the impact of customers leaving. In conjunction with the above customer base loss there have been considerable revenue losses,” a leaked letter from the company to landlords reportedly states.   Overnight   The Dow Jones Industrial Average is down to 5109.5. The Aussie dollar is down to US90.63 cents.

THE NEWS WRAP: Billabong accused of ‘ignoring’ rival offer

7:40PM | Wednesday, 17 July

US hedge funds Centerbridge Partners and Oaktree Capital have accused Billabong of ignoring their rival debt-for-equity bid for the troubled surfwear giant, which they claim would have seen existing shareholders emerge with less debt and more equity.   "Centerbridge and Oaktree are very credible, interested parties, and to not even have a discussion with them when they've flown in from the US was astonishing,” a source for the consortium told The Australian.   Billabong chairman Ian Pollard rejects the accusation.   “We gave [Centerbridge and Oaktree] ample opportunity to provide some indication, at the very least, of what their terms might be, but they indicated they couldn't put up a proposal until they had done due diligence. So we executed the only executable transaction we had,” Pollard says.   Telstra threatens to sue Vodafone over 4G speed claims   Telstra is threatening to sue Vodafone over claims its 4G network is the fastest in Australia and that its coverage now reaches 96% of the Australian population, claims the incumbent telecommunications giant alleges are untrue.   "Telstra is confident of the claims that we make about our network. This type of action is not uncommon," a Telstra spokesperson says.   "Vodafone customers in 4G areas with compatible devices will have access to speeds that are among the fastest not only in the country but in many parts of the world," Vodafone chief executive Bill Morrow said last month.   Queensland government considering second Brisbane casino   Queensland Deputy Premier Jeff Seeney has stated the question of a second Brisbane casino is an essential one for the state government, but it has not finalised a decision on whether or not Brisbane should be a one or two casino town.   The news comes as both James Packer-led gaming giant Crown and Sydney casino operator Echo intensify their campaigns over a second Brisbane casino.   “The casino operators have no need to be taking shots at each other in the public, in the media as we have seen,” Seeney says.   Overnight   The Dow Jones Industrial Average is up 0.12% to 15470.52. The Aussie dollar is up to US92.42 cents.

THE NEWS WRAP: Kevin Rudd appeals to business after winning leadership spill

6:51PM | Wednesday, 26 June

Kevin Rudd has reclaimed the prime ministership after winning a leadership spill of the Australian Labor Party last night, defeating incumbent Julia Gillard 57-45, with Anthony Albanese replacing Wayne Swan as the deputy leader.   In his speech following the ballot, Rudd emphasised the business community and young Australians will be key priorities for his government.   "Let me say this to Australian business: I want to work closely with you. I’ve worked with you closely in the past, particularly during the GFC and there were some white knuckle moments there, as some of the heads of the major banks will remember," Rudd said.   "But we came through because we worked together and I’m saying it loud and clear to businesses large and small across the country, that in partnership we can do great things for the country’s future."   Julia Gillard announced she would not recontest her seat at the next election, also saying that while “[gender] doesn't explain everything, it doesn't explain nothing; it explains some things” in terms of the challenges she faced as leader.   Carriers demand more backhaul access   Competition watchdog the ACCC will begin an enquiry into Telstra’s charges to other carriers for use of its backhaul networks, following complaints from a group of carriers including iiNet, Vodafone and Macquarie Telecom.   Backhaul fibre optic networks are used to send calls and data to and from mobile phone base stations and exchanges, with Telstra owning the only cables to some parts of the country.   "We need the NBN to change some of its priorities to be able to help us bring competition to Australians," says Vodafone Australia chief executive Bill Morrow.   “This is a huge impediment, and you're now going to get customers faster and faster internet access and taxing them if they use it. It ends up being a disproportionate tax as well because for companies like iiNet and Internode, our customers have much higher usage than Telstra customers or Optus customers,” says iiNet chief executive Michael Malone.   ATO warning on profit shifting   Tax Commissioner Chris Jordan has issued a warning to Australian companies hoping to emulate the tax minimisation strategies of tech giants such as Google and Apple, telling the federal government it needs to do more to stamp out the practice.   "They can see what is happening as a result of these international companies taking profit out of the country. They are thinking: 'What functions can we move offshore, what functions can we disconnect and have third-party providers fulfil to put the profit in a low-tax jurisdiction and receive an exempt dividend coming back into the system?'" Jordan says.   “That might be their assertion, but we are going to test every single aspect of those structures. We will want to know whether what purports to happen actually happens on the ground… It is one thing to put in place a fancy structure, but it is another to have it tested five years later, because by their nature these schemes are quite, sort of, artificial.   “We will be taking a leadership role internationally in addressing the problem, but we need to also look at how changes can be made here. The corporate tax base is under threat. What's happening is unacceptable to the community, the government, and to regulators.”   Overnight   The Dow Jones Industrial Average is up 1.02% to 14910.14. The Aussie dollar is up to US92.81 cents.

THE NEWS WRAP: Former British prime minister Margaret Thatcher dies, aged 87

4:23PM | Monday, 8 April

Margaret Thatcher died peacefully last night, aged 87, with Britain’s first female prime minister set to receive a ceremonial funeral with full military honours at St Paul's Cathedral.   Thatcher is considered to be a hero by many conservatives, who credit her with rebuilding the British economy through key policies, which included the privatisation of government assets and her role in ending the UK coal miners’ strike, which in turn drew controversy from those on the political left.   “It was with great sadness that I learned of the death of Lady Thatcher. We have lost a great leader, a great prime minister and a great Briton,” says British Prime Minister David Cameron.   “The Labour party disagreed with much of what she did and she will always remain a controversial figure. But we can disagree and also greatly respect her political achievements and her personal strength,” says British Labour leader Ed Miliband.   Holden told to "go better" after cutting 500 jobs   General Motors Holden has announced plans to cut nearly a quarter of its workforce, with 400 jobs set to go in South Australia and a further 100 job losses in Victoria, prompting renewed criticism about government subsidies for the auto giant.   “After the loss of these 400 to 500 staff [the cost per job] then rises to more than $50,000 of subsidy per employee. It's quite a large sum of money,” said Simon Cowan from the Centre of Independent Studies.   “I think we deserve better. There are a range of important undertakings in that agreement that I want to ensure are delivered to South Australians and now we need to have some serious discussions with the company," said South Australian Premier Jay Weatherill.   Vodafone announces 4G network rollout   Vodafone has announced the rollout of 4G services, following significant falls in the company’s subscriber base in recent years.   “At least for a period of time, we will have the fastest 4G network in Australia. We will have a bit of a differentiation point that no one else has,” said Vodafone chief executive Bill Morrow.   Overnight   The Dow Jones Industrial Average is up 0.33 per cent, at 14,613.40. The Aussie dollar is up to US104.10 cents.

THE NEWS WRAP: APN rocked by executive resignations

3:47AM | Friday, 15 March

Newspaper and radio conglomerate APN News & Media has been rocked by the resignation of its director and chief executive, along with three other directors, in the wake of a major clash with investors.

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