This appeared a few days ago:
NBN writes off recovering $31b of government investment
Lucas Baird Reporter
Dec 1, 2022 – 7.24pm
NBN Co will not recover at least $31 billion the government invested to build the network in a move designed to allow it to cut wholesale internet prices in the future.
In a new draft pricing proposal lodged with the Australian Competition and Consumer Commission this week, the government-owned company said it would no longer seek to recover the full $44 billion sunk into the initial build and instead would only claw back $12.5 billion from retail internet providers.
NBN Co stressed the $31.5 billion contraction to its Initial Cost Recovery Amount (ICRA) would not itself lead to any writedown or impairment of its value, which would hurt the federal budget’s bottom line, saying it will allow instead the setting of “lower wholesale prices in future” than otherwise.
“[ICRA] is a recognised regulatory concept that reflects NBN’s un-recovered costs to date,” a spokesman said. “Limiting drawdown of the ... ICRA is not a write-down, and NBN Co has no plans for a write-down or impairment.“
The regulatory write-off comes largely down to the shock reset of NBN Co’s policy aims in August, when Communications Minister Michelle Rowland said the company would stay in public hands for the foreseeable future and opened the door to forgetting about recovering some costs incurred in the building and maintenance of the network.
The change comes just a few days after the Productivity Commission’s Competitive Neutrality Complaints Office found the fair value of the NBN was significantly lower than the government’s equity investment.
“In 2021-22 ... the market value of NBN Co after acquitting its debt was an estimated $19.7 billion, well below the Australian government’s (then) $29.5 billion of contributed equity,” the review said.
The government has since poured more cash into the NBN, most recently a $2.4 billion injection to extend its fibre-to-the-premise footprint to a million more homes in the October budget.
ICRA downgrade ‘politically palatable’
Telecommunications analyst Paul Budde told The Australian Financial Review that the change in ICRA was unlikely to end with an immediate writedown of the NBN’s value.
“The cost of the NBN has blown out to such an extent that you cannot see it as a commercial investment, because if you do then the reality is that you need to set prices that are too high for consumers,” Mr Budde said.
“The only way to overcome that is to accept this is a loss that has nothing to do with the management of the NBN, but more to do with the upgrade and building costs.”
He thought the ICRA contraction was a “politically palatable” solution that would push any conversation about a writedown out to 2040, which is when the pricing proposal is set to expire.
“This is not a writedown but if this loss is still on the books in 2040, they will have to figure out what to with that,” Mr Budde said.
The pricing proposal – known as the NBN Special Access Undertaking (SAU) – will determine the wholesale pricing structure of the network until 2040 or when NBN Co is privatised.
NBN Co lodged its first draft on Thursday, which was largely consistent with a discussion paper on the topic it released in August. The draft SAU scraps capacity-based charges on all plans for a flatter access charge set to reduce the costs on retail internet providers by up to $7 on NBN’s highest-speeds.
“Our proposed SAU Variation puts the responsibility and investment risk on NBN to meet the expected growth in data demand over the next two decades, while earning the minimum revenues required to invest in the network to deliver faster speeds and greater capacity,” NBN Co said.
More here:
The question that runs through my mind – accepting that the money has gone and the NBN is largely built – is just how this scale of money was lost what why did no-one seem to notice, or care, about reducing this huge bill.
While I have no idea who will actually pick up this tab I am pretty sure it will be the taxpayers in the end and you really have to wonder – given the patchwork NBN we now have – could this not have been done better and cheaper and have we got value for money?
The other issue that is now emerging is the following:
NBN Co struggles to stack up for value against the competition
By Ry Crozier on Dec 1, 2022 1:56AM
Complains about increased ‘cherry-picking’ of its addressable market.
NBN Co says its fixed-line broadband services are increasingly seen by users as not providing value for money compared to alternatives.
The company said yesterday [pdf] that a survey it had commissioned and run over the past six years showed a gradual erosion in customer sentiment about the cost-performance of its broadband services.
NBN Co has previously only once released these figures - in late July [pdf] - but they did not contain the 2022 numbers.
The addition of the 2022 numbers show that the value-for-money gap is widening between NBN and non-NBN fixed-line and mobile services.
NBN Co said it needs to retain customers to meet financial projections and to “recover substantial investments in its network”, although the extent to which that recovery should be permissible is a hotly-debated regulatory topic.
The contest for apartment dwellers
The numbers are offered in an explanatory statement that accompanied a freshly revised special access undertaking (SAU) submitted to the ACCC for review.
And they are far from the only ones concerning competition.
While NBN Co has routinely criticised cellular operators for offering NBN-like 5G fixed wireless services - even going so far as to scope the size of the exodus it faced back in April - it hasn’t previously put forward a level of detail on its competitive threats as it did late on Wednesday.
More here:
https://www.itnews.com.au/news/nbn-co-struggles-to-stack-up-for-value-against-the-competition-588541
So price competition as well as the inevitable need to re-do all those Fibre To The Curb copper based links as well as a need to start to upgrade to 1000 Mbit links paints a pretty dire picture.
It seems there are costs out there for the next decade or two and we all know who will pay!
This says it all:
‘We’ve come full circle’: Labor declares regulatory reset of NBN
By Jessica Yun
December 2, 2022 — 3.51pm
Communications Minister Michelle Rowland has defended the Labor government’s policy to return the national broadband network closer to its original design despite fresh admissions it will not be able to recover $31 billion invested into the project.
Speaking alongside Finland’s Prime Minister Sanna Marin, as the pair announced a major upgrade that aims to boost internet speeds for 7 million Australians by 100 times, Rowland said the current government’s policy would future-proof the NBN.
“I think by coming in, myself and Finance Minister [Katy] Gallagher as shareholder ministers, we have effectively undertaken a regulatory reset,” Rowland said.
“We will keep the NBN in public ownership for the foreseeable future whilst we finish this job of making it a better network.”
Rowland’s comments come after NBN Co admitted in a newly submitted pricing proposal that it will not be able to recover $31 billion in regulatory costs attached to the initial build of the network.
Under the new model, NBN Co will charge telcos such as Telstra and Optus much lower wholesale prices, which have been a major point of contention between the telecommunications industry and the industry.
The NBN was first announced by the Rudd Government in 2009 and was intended to provide fibre network coverage for 93 per cent of Australian homes and businesses. In 2014, under the new Coalition government, then-Communications Minister Malcolm Turnbull said the roll-out would switch from a primarily fibre-to-premises model to a mix of different technologies. The NBN currently involves six different underlying technologies.
Rowland took aim at the Coalition government over its decision to use Telstra’s copper network for fibre-to-the-node (FTTN) connections which she said had resulted in cost blowouts and made the NBN less reliable.
Lots more here:
Frankly I am not sure this can ever really be sorted! What do you think?
David.
1 comment:
This says it all "The NBN was first announced by the Rudd Government in 2009 and was intended to provide fibre network coverage for 93 per cent of Australian homes and businesses. In 2014, under the new Coalition government, then-Communications Minister Malcolm Turnbull said the roll-out would switch from a primarily fibre-to-premises model to a mix of different technologies. The NBN currently involves six different underlying technologies."
The coalition stuffed it up. It cost more to build something that was not as good as intended (not less) and it will cost more to make it what was intended.
The cost of the NBN will now be treated like any other public infrastructure like (some, non-toll) roads, sewerage, police, justice, public health, welfare etc.
A government's finances are different from corporate and personal. The cost of the NBN would only have been relevant if they intended to sell it, which they now won't - which is probably a good thing.
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