Extract from ABC News
Analysis
By business editor Ian Verrender
It is the infrastructure project everyone loves to hate.
The National Broadband Network, which should have provided the platform to allow us all to work remotely and been a massive boon to business, instead has become an object of ridicule and source of intense frustration throughout the COVID pandemic.
But perhaps, just maybe, the criticism has been overdone. For our very own NBN may well be on the mend. Unreported this may be, but just in the past month, we've reversed the trend, advancing on the global rankings when it comes to download speeds.
We now proudly stand in 62nd place, outstripping Montenegro, Kosovo and Kazakhstan although, sadly, we still trail Uruguay.
Don't get over excited, though. This time last year we were in 58th spot. And that's purely on download speeds. When it comes to upload, our speeds are less than half the global average.
As projects go, the NBN pretty much failed on every count; horribly overbudget and over deadline, delivering a product that is slow and expensive.
The question is, can it be saved and made into a useful piece of equipment to power the economy into the future? And the answer to that is, quite possibly, yes. Although, like everything in life, there's a catch. Taxpayers will need to take a hit and that could be coming soon.
Who's to blame for the mess?
There's a long and colourful cast beginning with the Howard government's decision to sell off Telstra as a commercial operation competing in the retail market while remaining the monopoly owner of the national infrastructure.
You could blame Telstra under Sol Trujillo for attempting to thwart every attempt, first by the Howard government and then the Rudd government, to build a national fibre-optic network.
You could blame the Gillard government for striking an overly generous deal with Telstra to use its existing assets to migrate fixed line customers across to the new operation.
You could blame the Abbott government for attempting to cut costs with the ill-fated decision to switch from a purely fibre-optic network to a hodge-podge of fibre, rotting coaxial cable and a century-old copper network that ultimately blew out the costs and delivered an inferior product.
But that's all academic and in the past. And finger pointing won't fix the main problem; the project is not worth what we've paid and the Government knows it.
The NBN is on the books with a $51 billion valuation tag, but the Parliamentary Budget Office in June last year calculated its fair value at just $8.7 billion.
Of the $51 billion total, the Federal Government has an equity stake of just under $30 billion with most of the remainder debt held by the NBN.
If and when the project is sold, that debt will travel with the NBN to its new owners. So it is the equity stake, the value of the shares, that is the sensitive issue for us as taxpayers.
Let's just for a second put aside the second-rank technology the project employs that makes it slow and unreliable. There's also some dodgy accounting practices that render it slow and expensive.
To keep the NBN "off the books" and not part of the federal budget, the Rudd government classified the project as an "investment" rather than just government spending. That facade has been maintained by the Coalition.
As an investment, however, the NBN has to deliver a commercial return. That means it needs to cover its costs, plus a bit on the top. And so, given the cost blowout, it's had to charge the telco companies an arm and a leg to achieve that goal.
They, in turn, have to offer a decent priced service to customers, and the only way they can do that is by skimping on the speeds.
The end result? We pay a fortune for a sub-standard service.
So how do we fix it?
The only solution to this is for the Federal Government to write down the value of the project and take the financial hit.
If it wrote down that $30 billion equity stake to just $8.7 billion, that would crystallise a $21 billion loss, which would hit the Federal Budget and our national debt.
For a surplus-obsessed Coalition, that's been an absolute no-no for years. But as the budget surplus dreams evaporated under a pandemic-induced stimulus spending spree, it may now be an opportune time to reconsider an NBN write-down.
After all, what's another $21 billion when you have an expected deficit of $184 billion this financial year with gross debt forecast to blow out to $852 billion? Especially if it means you may pave the way to deliver cheaper and faster internet to the nation that could lift productivity.
In any case, it's running out of time. The NBN is close to completion and that means the Government will need to offload it, but there is no way any rational purchaser would fork out the kind of money the thing cost to build, particularly given it will need to be upgraded to a full fibre network if it is to compete viably against new technologies like 5G.
Who is likely to buy it?
While our industry super funds scour the globe for good infrastructure projects in which to invest, it's unlikely they would go it alone on the NBN.
It may seem like a rerun of an old horror movie but Telstra, the company that threw everything it could to thwart a fibre-optic cable rollout and then profited handsomely from it, may end up playing a key role in the NBN's future.
Several years ago, it established a division called InfraCo with the aim to once again own and control the national telecommunications network.
The Gillard government struck an $11 billion deal with Telstra in a desperate attempt to get the project to fruition. In addition to using its pipes and ducts to roll out the cable, the money also was paid to compensate Telstra for customers migrating across from its fixed-line service.
The billions still are rolling, as you can see from the graph below. In the past financial year, it raked in more than $3 billion.
Despite this ongoing largesse, which for years bumped profits higher and helped inflate dividends to shareholders, Telstra management more recently has blamed its declining earnings on the NBN rollout and the loss of fixed-line customers, as though it was all unexpected.
Last week, it switched tack and blamed the COVID pandemic.
It's also lashed out the exorbitant prices the NBN charges retailers like Telstra, Optus, Vodafone and TPG, campaigning for a drastic reduction, calls that have been supported by the competition regulator. And it has been a major investor in 5G, which unless the NBN can lower its prices could pose a serious competitive threat.
Ironically, a big reason the NBN is so expensive is the overly generous deal the Gillard government struck with the company back in 2012.
Should it win back control of the national network, Telstra would be forced to float off InfraCo as a separate entity, possibly to existing Telstra shareholders, or by calling in super funds as major investors.
After the debacle during Telstra's Trujillo years, when the Federal Court was inundated with cases against Telstra from rival retailers and the competition regulator, rules now are in place that prohibit a telco from owning the network.
Whatever the outcome, it's highly likely Telstra shareholders will end up reaping most of the benefits of the NBN at the expense of taxpayers.
No comments:
Post a Comment