Saturday, 14 September 2013

The Real Deal on the Coalition NBN: same price, worse outcomes.

The reason the ALP Government, not private industry, had to build an NBN is because the Coalition deliberately screwed-up both Broadband and Telecommunications. In the early 1990's, Telstra had plans, within it's normal budget, to rollout Fibre to all homes by 2010. In 2005, Telstra wanted to build a node-based NBN by 2010. What happened is solely the failure of the Liberal & National parties to make proper decisions.

Over the decade 1997-2007 when action was needed and the private sector could have delivered, they didn't just sit on their hands, they did exactly the wrong things: ignoring Broadband, privatising Telstra unseparated and not implementing legislation to create strong competition in Telecommunications.

For the Coalition to now want Broadband "sooner" is hypocritical and disingenuous.

The ALP created a new type of Public-Private Partnership where they leveraged the historically low interest rates, "patient" capital for long-term support and the Government's ability to accept low returns.

The NBN is built exactly like a Tollway/Motorway: someone else builds it, runs it and charges the public, then the asset is handed back to the Government. The sole difference is that the Government has contributed most, not all, the Equity - and it gets paid back in full with handsome dividends.

The real cost to taxpayers is the interest on the Equity funds: $12.5 billion until 2033 when its paid back. Then we get another $40-$45 billion in dividends by 2040.

The Budget to build the NBN doesn't concern the Government, it's NOT on their books. Whether it costs $30 billion, $40 billion of $50 billion to build the NBN does not matter to the taxpayer. What matters is what comes out of their taxes every year and that NBN Co doesn't just break-even, but pays back the Equity.

The Turnbull Node Plan is a tissue of lies. Here's how:
  • The real cost to taxpayers of the current plan is only $12.5 billion, yet the Coalition has never released their estimate of this cost, or even if their NBN Public-Private Partnership will payback the Equity. Over 20 years to 2033, this is $40 billion in interest and $30 billion in loans, putting the taxpayer at risk of a $70 billion loss from the Fibre to the Node Plan.
  • The Coalition NBN Budget is unbelievable:
    • If their claim to only change one thing, 75% of fixed-lines are Copper/VDSL2, then that's only $12 billion of the Budget. Yet Turnbull claims savings of $17 billion after spending $8 billion on building the FTTN. It's a complete fantasy.
    • On top of this, the Coalition plans to throw-away the FTTN, destroying half of its investment. That deliberate and planned waste of $4 billion is never included.
    • At the best, a Copper FTTN costs the same as the current full fibre, and will only be complete a year earlier. This is not the deal of a lifetime, but the con of a lifetime.
  • All the NBN profits are generated by the top 25% of users, the rest of us get services at, or below, cost.
    • This happens because usage is exponential. The top 1% of users download 50% more data than the entire lower 50% (10% vs 6.42%).
    • Higher speeds allow those, like businesses, who place a dollar value on their time, to reduce total costs. Wages are far, far higher than Broadband rental.
    • The NBN take-up and income is already 18-24 months ahead of Budget. It is spectacularly  successful financially.
  • The Coalition hasn't released the charges they used in their model, nor contradicted they'll use "One speed, one Price" charging, rather than the tiered pricing model.
    • Because businesses make up 48%-49% of ISP connections, they need to be able to get guaranteed speeds anywhere, not just "designated areas". Wages lost waiting for downloads and uploads is many, many times the monthly broadband rental.
    • NBN Co currently charges wholesale prices of $24 - $38 for the same line, soon this increases to $150. "Tiered pricing" reduces the entry-level costs at least two-fold, increases profits and allows customers, who want, to pay more for something they value: time savings.
    • Contrary to Turnbull's assertion of "nobody needs more than 25Mbps", the real income figures of NBN Co released on 19-April, show that 31% of consumers are already paying for 100Mbps. That's way more than the 18% included in the forecasts, increasing Average Revenue Per User considerable. Something that a "one speed, one price" regime cannot do.

Since the April launch of the Coalition NBN policy, Turnbull has actively stifled debate, introduced distractions and misdirections and refused to answer basic questions about the finances, profits and charging of his Node Plan.

At a minimum, the taxpayer needs to know the planned pay-back period and Rate of Return of the Coalition model used in their Policy.

It's $70 billion of real taxpayer money the Coalition is risking, we have a right to know the figures.

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