Thursday, August 06, 2009

The NBN Board

I blogged about what I thought the composition of the NBN Board should be. Today Senator Conroy has announced the rest of the Board. The good news is that it is a small Board, and presumably has the capacity to appoint some additional directors.

My earlier comments were focussed on the need for the Board to be appointed to reflect that its task is actually a very large project delivery task. What we have been given is a Board highly skilled in fields of financial transactions, restructuring and acquisition. Only Doug Campbell has experience in building and running things. The Executive Chair and CEO Mike Quigley is experienced in telecmmunications as a vendor. Useful skills and certainly experienced at the managerial part of the task, but not the same as building stuff.

Reading the brief bios of the appointees it is hard to escape the conclusion that the entire focus is on engineering the transaction of vending in the Telstra CAN, not on being prepared to build it regardless. The only difficulty with that is it creates less incentive for Telstra to co-operate. This NBN Board does not look like a credible threat of an alternative network builder.

It is also potentially a worry that two of the Board members are McKinsey alumni while McKinsey in partnership with KPMG will be the lead adviser. McKinsey have been long term advisers in the Australian telco space - both through the recommendations to Telecom Australia in the late 1980s that abolished the State structure and developed the customer facing division structure (later adopted as the model for Telstra) as well as making the same structural recommendations for Optus in the 1990s. More recently they have undertaken significant work for Telecom New Zealand, mostly to do with failed strategies for delivering an NGN and avoiding regulation.

One concern of note is that as a consulting firm McKinsey's core focus is usually on how to generate superior returns - how to create and exploit market power. This is, of course, the complete antithesis of the objectives for the NBN Co.

That said all progress is good. I don't intend my comments as criticisms of the individuals appointed nor of the relevant firms. I am only interpretting them as strategic signalling, and suggesting that perhaps more needs to be done to make it clear that acquiring assets from Telstra is only one option.

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