philperth2010 wrote on Feb 21
st, 2012 at 9:43pm:
http://nbnmyths.wordpress.com/With the NBN and its related myths constantly evolving, this list was revised in August 2011
The total capital cost of the NBN is $36.9 billion dollars, not $50 billion. Of the $36.9bn, the government investment is set at $27 billion. The remainder will come from revenue and NBN Co’s private debt. Unlike most Government expendiature though, the NBN is forecast to return all of the Government funds, plus interest, by 2034. It is forecast to begin repaying the Government funds in 2020.
The $50 billion figure often quoted by Malcolm Turnbull is deceptive. It’s a “rounded up” number achieved by adding the NBN capital cost ($36.9bn), together with the payments to be made over time to Telstra for the leasing of their pit, pole and exchange network ($11bn). However, these payments to Telstra are operating expenses, which are paid from the revenue of the NBN. They take place gradually over its lifetime and do not add anything to the Government or debt funding required to build the NBN. Claiming they should be included in the cost of building the network would be akin to adding the cost of electricity to run the Opera House for 30 years to its build cost.
The project has been fully studied and costed by NBN Co and respected independent firms. The 2010 KPMG-McKinsey NBN Implementation Study found that the network could be built for $42.8bn (this was prior to the Telstra deal), would not have any net cost to the Government and would have an estimated net value of $40bn in 2025, earning a return on investment (ROI) of 6-7%, which is more than enough to repay the debt and equity used to build the project. The NBN Business case has also been independently analysed by respected global corporate advisor Greenhill-Caliburn, which found the revenue and cost projections in the business case were reasonable.
The truth is more important than the facts.
Frank Lloyd Wright (1869 - 1959)
onsultants, lawyers, contractors: All aboard the NBN gravy train
BY: KEVIN MORGAN From: The Australian October 13, 2011 12:00AM 31 comments
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NATIONAL Broadband Network head Mike Quigley appears today before the joint parliamentary committee on the NBN's rollout, so perhaps he can explain what value is being delivered by the $36 billion taxpayer-backed project the Economist Intelligence Unit labelled in a recent survey of national broadband initiatives "an extreme example of government intervention". The report found Australian government spending on the NBN dwarfed government spending in any other market.
Quigley will have to not only justify the headline cost of the project but the limited and costly progress to date.
His first progress report submitted to the committee as executive chairman of NBN Co revealed that after two years and despite spending more than $800 million, only 18,000 homes had been passed with fibre-optic cable and a mere 600 connected. In contrast to the fanfare that accompanies parts of the NBN being turned on, the critical progress report was released two weeks ago, late in the evening, deliberately missing news deadlines. Why? Because it's clear from the report that the NBN is not shaping up as a good news story.
In Tasmania, where the network was first switched on, the take-up rate is less than 15 per cent. Worse, the cost of deploying what little fibre has been rolled out is double the estimate contained in NBN Co's first corporate plan. That November 2010 plan estimated it would cost $2300 to pass each household with fibre but the progress report suggests it is costing $4700 with connection adding a further $1000 per household.
If those construction costs cannot be reined in and were repeated for all 12 million premises, then the NBN's capital cost could blow out by $28bn.
In April, NBN Co ended negotiations with 14 contractors hinting there was collusion and price gouging. It's small wonder there couldn't be a deal given the vast gap between what the government has budgeted and actual costs.
No one, of course, is pointing out that the NBN's costs could explode. Why would they when NBN Co's 900 employees are averaging more than $150,000 a year? And the gravy train doesn't stop there. Consultants, lawyers and IT contractors are doing even better. In the 12 months to June, NBN Co spent $60m on consultants and a whopping $42m on legal costs while $220m has been spent or committed to a billing and operational support system even though NBN Co will be dealing with at most only a couple of hundred customers. And this cost could double.
Nor are the country independents who supported the Gillard government being neglected. Pushing fibre farther out into rural communities means the costs of serving some rural households could approach $8000, and when the fibre stops the wireless and satellite subsidy will cut in.
Earlier estimates in the corporate plan show that the average capital cost of an NBN broadband connection through wireless or satellite will be $14,600 and with revenues of only $80m a year each wireless and satellite connection will need an annual subsidy of $1700.
And even NBN Co's potential rivals are in on the act. Telstra is set to sign off on a $13.8bn deal that will see nearly $3bn in contracts for use of Telstra's fibre-optic cables and exchanges locked in, even if the NBN isn't fully built. Taxpayers are underwriting the deal. NBN Co is also buying out the Optus pay-TV network for more than $1bn, a price that Optus could only have dreamed of on the open market. Truly an Alan Bond moment for Optus chief executive Paul O'Sullivan. This is happening at Telstra's behest in possibly the most anti-competitive deal yet seen in Australia.
These realities lie far from the government's spin that the NBN will come in on budget and deliver affordable broadband to all Australians. Again, earlier estimates released by NBN Co put the lie to that. If the NBN's business case is to comenear stacking up, even without the massive cost blowouts that are threatened, within 10 years Australians will have to spend more than three times as much on fixed-line broadband as they do today. That's a big call when broadband prices have fallen for the past 10 years.
Clearly many won't be in a position to pay more for NBN services and that is obvious from Tasmania, where the pork-barrelling that underpins the NBN saw it rolled out to communities in marginal seats such as Scottsdale and Smithton where more than 40 per cent of households, double the national average, have incomes below $800 a week. And even households better able to pay may not take up the higher speed, higher-cost services essential to the NBN's success. The number of wireless (mobile) broadband users now rivals fixed-line users and spending on wireless broadband will soon match spending on fixed-line broadband.
Faced with a choice between higher speed fixed-line broadband over fibre and the utility and convenience of mobile broadband, many consumers will spend their discretionary dollar on mobile.
That will shoot further holes in the NBN's fragile business case, but that scarcely matters to the government, desperate to spin the NBN as a good news story through to the next election. It may not because it is becoming increasingly clear that the NBN's attempts to deploy higher speed broadband will be marked by cost blowouts and delays that cannot be hidden.
Kevin Morgan served on Kim Beazley's ministerial committee on telecom reform on behalf of the ACTU and is an independent telecom consultant.
no offence phil... but the truth is all in the mind of the believer....nothing but nothing has come in on budget....why anyone would think this enormous project will is a mystery... did you see what the exec are getting paid???...lol
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