nbn writedown likely to be "inevitable"
The looming federal election is increasingly likely to be a make-or-break moment for the troubled nbn project, and a writedown of the value of the network is looking to be a certainty according to experts.
In comments to Fairfax Media, the first CEO of NBN Co, Mike Quigley, said a writedwon of nbn assets is now “inevitable” due to the “disastrous” rollout to date.
Quigley said the Coalition’s move to a multitechnology rollout model had severely hurt both the revenue-generating capacity and the useful life of the project.
Under the multitechnology mix model, the project’s peak funding costs have ballooned to $51 billion and the ability to generate revenue had been severely constrained, he said.
Labor has already indicated that it is open to writing down part of the project’s value. But the government has insisted that NBN Co is on a pathway to sustainable revenue generation and that the government is not considering a writedown of its loan or equity.
But telecommunications analyst Paul Budde, who consulted extensively on Labor’s original design for the nbn project and has been suggesting for some time that a writedown may be needed, noted that PwC, Standard & Poor and the Productivity Commission have all since made similar suggestions.
In a blog post, Budde said the election represents a chance to overhaul the project and introduce “nbn 3.0”. But fixing the project will require careful planning.
“[M]ore and more people and organisations have mentioned that the current financial model is not well suited for the next step, but a willy-nilly write-off is certainly not what is needed to fix the problems,” he said.
Budde said the potential change in government represents a chance to finally conduct a thorough cost benefit analysis of the project, taking into account difficult-to-measure economic benefits such as the ability of a national broadband network to facilitate digital transformation in areas including health, education, government and the energy sector.
“This is in my opinion the key reason why we have ended up with the current nbn mess. It is impossible to build such a network purely based on neoliberal economics, if you want to truly promote this as critical national infrastructure you will have to take the national interest into account and put a value on productivity, innovation, cost savings and so on,” he said.
“Yes, it will be difficult to come up with hard economic figures that exactly calculate all those benefits, but politicians should be brave enough to accept a best national effort on this... For this we need progressive, not conservative politicians to take the nbn to the next stage.”
As a ballpark estimate, Budde said roughly 50% of the investment of the project can be earmarked for the national good and the rest can be financed commercially based on a long-term utility investment model.
“This would fit in nicely with predictions from others that roughly 50% of the current investment needs to be written down/revaluated/reclassified in order to make it a proper investment for the upgrade of the network that needs to take place over the next 5 to 10 years.”
As has been made clear by recently published ACCC statistics, this upgrade will mainly involve replacing or upgrading the fibre-to-the-node (FTTN) component of the network, Budde said.
The ACCC today published its latest quarterly Wholesale Market Indicators Report, finding that just under a quarter of the nbn’s nearly 4.8 million customers are still subscribed to the lowest tier 12 Mbps download speed plan.
But the proportion of customers on 50 Mbps or higher plans also increased to 56% for the December quarter, up from just 16% during the same period a year earlier. Due to NBN Co’s Focus on 50 promotion to encourage wholesale adoption of 50 Mbps plans, the number of customers on 25 Mbps plans nearly halved to 945,476.
Information Technology Professionals Association (ITPA) is a not-for-profit organisation focused on continual professional development for its 18,700 members. To learn more about becoming an ITPA member, and the range of training opportunities, mentoring programs, events and online forums available, go to www.itpa.org.au.
ITPA needs your help in the ongoing fight to preserve your rights, security, privacy and job...
Technology and its use by government will be key issues upon which ITPA will provide commentary...
A range of ICT industry bodies has urged the government to implement reforms to its encryption...