Australian Politics – The National Broadband Network Disaster Unravels

Posted on Fri 12/16/2016 by


Bolt New 01By Andrew Bolt ~

Here in Australia, Maurice Newman says the NBN (National Broadband Network) disaster is becoming too obvious to keep off the books:

Labor promised to “connect 90 per cent of Australian homes, schools and workplaces with broadband services, with speeds up to 100 megabits per second — 100 times faster than those currently used by many households and businesses”.

NBN-Co-LimitedIt undertook to “connect all other premises in Australia with next-generation wireless and satellite technologies that will be (sic) deliver broadband speeds of 12 megabits per second, (and) ­directly support up to 25,000 local jobs every year, on average, over the eight-year life of the project”…

The government planned to be the majority shareholder, but it said “significant private sector invest (sic) in the company is anticipated”…

Fast forward to mid-2016. With around nine months of the projected eight years to run, instead of 25,000 jobs, 8000 people are employed directly or as subcontractors. Just more than 1.1 million connections, a tiny fraction of the 90 per cent of homes, schools and workplaces, promised, have been made. Of those, only 15 per cent opted for the top speed of 100Mbps. A third took the slowest speed of 12Mbps.

Concerned by the NBN’s shortcomings, the Coalition government in 2013 called for a rushed strategic review. It exposed inefficiencies and warned of delays and huge cost blowouts, requiring peak funding of up to $73.6bn. Malcolm Turnbull, then communications minister, … recommended the model be fundamentally changed from fibre-to-the-premises, to a multi-technology-mix network based on copper. It was a fateful decision rooted in politics.

Turnbull ignored New Zealand’s experience of falling costs for FTTP connection. He dismissed expert opinion that claimed FTTP was operationally cheaper and generated more average income.

Instead, he went for immediate popularity by promoting a dubiously cheaper, faster rollout. Poorly executed though Labor’s plan may have been, Turnbull’s decision has saddled Australia with a second-rate network, incapable of competing with faster fibre and wireless speeds. Its relative inadequacy will become increasingly obvious across time.

For example, Verizon, a large US wireless carrier, using fixed wireless technology, is planning a 10Gbps service, 10 times the NBN’s maximum…

These realities pose important questions for the Auditor-General. For how much longer can NBN Co’s debts be quarantined from the national accounts? … But with more than $8bn of losses and counting, and with commercial prospects for the project now so undeniably dim, for ­accounting integrity, the government must consolidate the company’s debts into the national accounts.

NBN Co’s founding chief executive, Mike Quigley, … believes not only has Turnbull’s faith in the copper network complicated the rollout, it is an investment in backward-looking technology that is “shortsighted and expensive”. The use of copper cable has robbed the network of the flexibility of fibre. Where the need for speed is critical, NBN faces increased competition and early obsolescence. It is the most expensive network in the developed world, and private investment may be impossible to find…

Sadly, history will record the NBN as yet another poorly conceived, badly executed, overpriced, taxpayer-funded white elephant.


The figures are shocking. David Uren:

The National Broadband Network has already lost $8.3 billion of the $20.3bn allocated by the federal government, with its cost to the budget expected to soar to as much as $2.1bn a year over the next decade.

The NBN barely appears in the budget papers, but its costs have been estimated by the Parliamentary Budget Office in a study that shows the $49bn project has contributed to the deterioration in the budget bottom line.

The PBO says the final impact will not be known until the NBN is privatised and the market places a value on it.

“Until then, the commonwealth will continue to bear an annual cost associated with its financing of NBN Co,” the PBO says.

It adds that if the sale price is less than the commonwealth’s cumulative cost of financing it, there will be a hit to the federal budget.’

Henry Ergas:

The 2017-20 revision of the corporate plan … shows that NBN Co’s financial position remains dire.

At the end of 2015-16, the company had spent $20.3 billion; by the end of 2016-17, it is forecast to have incurred about $29.5bn in ­accumulated negative cash flows. Taking account of interest costs, the project is not likely to cost less than $60bn…

As NBN Co’s corporate plans acknowledge, for the losses to be stanched, monthly average wholesale charges per customer must double over the next decade. But that implies average monthly retail prices of $100 or more, far exceeding international benchmarks. And since it is difficult to see how those prices could be sustained, analysts believe over half of the network’s $60bn cost will ultimately have to be written off at taxpayers’ expense, making the venture the greatest financial debacle in Australian history.

Andrew Bolt writes for the Herald Sun, Daily Telegraph, and The Advertiser and runs Australia’s most-read political blog. On week nights he hosts The Bolt Report on Sky News at 7pm and his Macquarie Radio show at 8pm with Steve Price.

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