1. The AFR has gone down hill in it’s coverage of a lot of things, but as their editor in chief was one of the longest serving editors at The Australian, it’s no wonder they are heading in similar directions (both subs and content)…

    It’s “a good thing” for news outlets like Delimiter though, I doubt they will ever figure out the link between poor content and dropping subs though, much like the other “dead tree” MSM press…

    • Well the Quality:Circulation ratio is a direct inverse linear one, that’s far too subtle for any economist.
      They need a bunch of introduced forcings and data ‘cleansing’ with all the validity of phlogiston before they have faith in anything ;-)

    • Actually has one question the worth of their reporting and evaluation of all Financial and Investment matters.

  2. “There’s also this unusual statement in the AFR’s article: “NBN Co must recover its costs and deliver a financial return to the government so that Federal funding for the massive project is treated as an investment, rather than an expense on the budget.”

    I’m not an accountant, but I suspect this statement to be inaccurate.”

    It absolutely is. I know you know of this document, but as a reminder anyway this is where the facts are:

  3. NBN Co started an official letter with Dear Firstname? That’s fantastic :D I would never dream of starting a letter of such importance with any less than Dear Mr Lastname.

  4. And another mistake:

    > NBN Co rejects these arguments. It has promised to freeze prices for the first five years of operation and limit later increases to below the inflation rate.

    1.5% below the CPI, not “below the inflation rate”.

    • Whoops, make that “Below 1.5% below the CPI, not ‘below the inflation rate’.”

    • The writer of the article just commented to me on twitter
      “yep but the 2 scenarios where it does recover ICRA depends on nominal prices rising, or staying flat, with no impact on demand”
      “NBN expects prices to fall in both real and nominal terms”

      So basically the price will drop for users this is good news for consumers if it does not drop NBN make there money back and the article is wrong so there are 2 potential positives and one negative.

  5. I once considered using the AFR as toilet paper. However, I suspected it would deposit more than it removed.

  6. There is another issue lets say they still have $5 billion to pay the asset which is the NBN would be worth a lot Telstra sold for $50 billion so to make that up they could simply sell NBNco and make a massive profit yet this is ignored.

    A FttN network on the other hand would be worth next to nothing

  7. The investment will always stay an investment, regardless of whether it returns a profit or not. If it DOESNT return a profit, at some point the loss will be written off as a bad debt, and at that point the amount written off (and only the amount written off) becomes a budget cost.

    Basically, if the project costs $40b, and they recover $35b by 2040 through the users, then decide to accept the extra $5b as a loss and pay out any remaining bonds, then only that $5b is a budget expense.

    AFR is trying to make out that if this happens the entire $40b would be a budget expense when it wont be.

    FYI, thats something I can see happening at some point in the future. Just pay out any remaining liability to get it off the books once and for all. It will be fiscally responsible to do so at some point where the accounting costs arent justified. But that wont be for a long time yet.

    • I agree they should write off some of the debt, but not to write off bad debt, instead to allow NBNCo to drop prices of access further.

      • Thats actually an option I hadnt considered. What happens in 5 to 10 years when everything is back to normal, and we’re looking at surplus situations?

        Will the Govt have the option of using any surplus to reduce the NBN loans, and hence reduce the interest, etc and get the project cost neutral faster? I cant see why they wouldnt.

        That WOULD put some of the cost on budget, but totally voluntarily. It could also be an option for either party to use as an enticer – consider putting $1b on budget every year to reduce outstanding amounts. $1b ON budget wouldnt be a big expesnse, and have it as a totally floating option that could come and go if/when budgetting got tight (or tighter).

        Obviously wouldnt really be an option at the moment, but you never know what next year (or the year after) will bring.

  8. Renai, will you be putting a complaint in to the powers that be?? I think that deserves one

    • I just reaks of sensationalist reporting how the majority of MSM do not allow comments.


    • seriously,
      at some point in time, they have to become accountable. these media outlets, and the coalition party;

      slan·der/ˈslændər/ Show Spelled [slan-der]
      1. defamation; calumny: rumors full of slander.
      2. a malicious, false, and defamatory statement or report: a slander against his good name.

      for the last 24 months, even longer. i havent seen or heard anything remotely true, that has come from faifax media or from the liberal party, with regards to the NBN. it is a Joke, it is defametory and it should be against the Law.

      what can we do about it apart from joining whirlpool?

  9. Of course the NBN must be right! Even though a basic cost/benefit analysis was never undertaken. NBN Co hardly has a good record for getting things right, like the roll out timetable for example.

    My money in on the Fin Rev over NBN or Delimiter, when it comes to figures.

  10. Thanks for a very informative article Renai, presenting an example of FUD in action in the mainstream press. The AFR unfortunately appears to be following in the footsteps of the experts in NBN FUD, namely News Ltd publications. Selective reporting (and under-reporting) is something that often never gets a spotlight shone on it and it is refreshing that at least someone is prepared to say “Hey, wait a sec!” to such a glaring example as this one.

    The FUD train continues unfortunately.

    Busy year ahead! :-)

    I just hope that somehow enough Australians wake up to the true vision and inherent value of the NBN project. If we manage to yet again shoot ourselves in the foot on the doorstep of achieving something this important we will truly rue the day.

    PS…I will never forgive you Malcolm Turnbull….what a disappointment.

    • Malcolm maybe, he does have a website and a blog where comments are welcome even comments diametrically opposed to his statements . ( as long as no more than 1 or 2 links )

      I would point the proverbial laser at the LNP leadership (if that title is appropriate) team

  11. I also noticed how there are no figures in the article just they may not recover costs in 2040 there are 2 questions
    If they don’t recover costs by 2040 when will they?
    How much of a shortfall will there be?

    Yet neither of these questions are answered at all there are no numbers to back up what they say for a Tabloid called the Financial anything you would think an article would be formed from more than just hand waving and hyperbole.

  12. Tsk, tsk, lies by omission. Shame on you FTR.

    It’ll be interesting to see if this floats, because if it does there’ll be ample ammo to sink it – which in a way will show up the FTR to be the lying lot they are…

  13. I do wonder whether anyone will forward this issue to the Australia Press Council in a formal complaint against the AFR’s report, or even Media Watch. It seems like a pretty clear-cut case where the newspaper just got this wrong.

    • Media Watch don’t care anymore they are more interested in papers publishing false things from the AP or Reuters without doing more research than anything NBN

    • They arent factually incorrect, they are just factually incomplete, so the best you might hope for is a retraction/correction.

      Which will no doubt be buried somewhere around page 35.

      • But the ARE, Gav – their reporting on the ramifications for missing the payback target for the entire project to be considered a cost is a blatant attempt to undermine one of the most fundamental arguments for the NBN by deliberately confusing and misleading the public. Think about it – as soon as you convince someone that the NBN is a 40b on- budget cost to the tax payer, suddenly there is a good argument for shifting those funds to areas where it is more urgently needed (ie whatever is immediately obvious to Joe Public in his immediate vicinity). This sort of nonsense should absolutely be prohibited in law and policed diligently – press who publish stories so obviously misleading and detrimental to the public interest should be shut down IMHO.

        • Dont get me wrong, I fully agree that the article is clearly FUD, and seems to intend to be nothing else, but there is nothing wrong with the facts they state. There IS a scenario where NBN costs become budget costs.

          And this is the problem. Because they only concentrate on one part of the release, and get that single part right, they cant be taken to task by the Australian Press Council. Any complaint would need to see if any of the facts posted were wrong, and the finding would be that they werent.

          Morals done come into it, and whats left out doesnt come into it. You could only complain that they were wrong, and you’d lose that argument.

          WE know its FUD, THEY know its FUD, but the general readership wouldnt. And thats all the anti-NBN/pro-Liberal crowd cares about – convincing the voters to vote Liberal.

      • They are factually incorrect on the budget treatment issue. The press council also has specific requirements regarding the headline which I’m pretty sure the article doesn’t meet.

  14. The NBN will inevitably return a profit, even if it takes 50 years to recover the costs.

    Then there’s the likelihood of the NBN being sold off by a future government, which should comfortably cover any outstanding debt.

    Why is it that the NBN has to pay for itself to be seen as and investment, yet other public infrasructure (such as roads) does not?

  15. My boss at work has trouble believing that:

    a) The Coalition would claim to have a policy without having done their “homework”
    b) The media would mislead the public about issues with the NBN

    Where does this strange faith in the media come from?

    • The same place as their faith in the LNP.

      I too wonder why people supposedly interested in “facts” like alain, gunmen, et al, consistently ignore the facts when it comes to the LNP and NBNCo…on the one hand there is an actual project in full progress with and actual business plan that shows they will pay us back, and on the other hand, there’s a party with “aspirations” of “policy” that change on a daily basis.

      It comes down to one of two things really, they are either so blinded by ideology that they are basically no better than a religious zealot basing their world-view on “faith”, or they are paid astroturfers with an agenda.

      • It’s called shilling. We know it goes on – why are people still surprised by this?

        You are right, though, I shouldn’t jump to conclusions – they COULD simply be both extremely biassed AND stupid.

        • I’m not surprised at it, I just wonder how they get away with the tactic of “hey, look at me, I’m so intelligent I can pick apart intricate details of the financials of the opposite party but I base my stance for my side on pure blind ideological faith”.

          The LNP have no policy. They have aspirations of having a policy one day, more than likely after the election…

  16. Nbnco have to make a return above the bond rate to be classed as an investment. A drift down by a few percent does turn it into a cost. The rest of the article is correct, afr clearly being misleading here.

    • “Nbnco have to make a return above the bond rate to be classed as an investment. A drift down by a few percent does turn it into a cost.”

      Evidence? Do you have any?

      • I’m not really sure what Michael is trying to get at, whether it’s a cost or benefit over all, it can still be an investment (unless he’s using the definition of “Money that is invested with an expectation of profit” for investment, and not the “The commitment of something other than money (time, energy, or effort) to a project with the expectation of some worthwhile result” one).

        As far as I can see though, even during a global downturn NBNCo’s figures are looking OK?

      • Actually, I think I see where now, in the context of the AFR piece:

        AFR: “NBN Co must recover its costs and deliver a financial return to the government so that federal funding for the massive project is treated as an investment, rather than an expense on the budget. ”

        He (and AFR) have made the same old factual error that has been pointed out many, many times, the NBN is not “on the budget”…

    • Read what I wrote above. If, at some point in the future, the Government of the day decides to write off whatever is owed at the time, that writeoff becomes a budget cost. But only then, and only for the amount written off. It doesnt have to be bad debt to write off either, just a financial decision to turn the cost into a public cost rather than an investment cost.

      So, lets say NBN Co falls a few billion short (Say, $5b) some 25 years from now, and the GotD decides not to wait any longer for profits from the NBN wholesale prices to pay that amount back. Its only that ($5b) amount that is a cost.

      Thats pretty much the worst case situation here. Versus Liberals $12.5b as their best case situation. Plus copper maintenance costs, costs to Telstra to buy/lease the copper itself, and so forth and so forth.

      So it seems the AFR is saying is that even in the Labor worst case scenario, its still costing the public less than the Liberals best case scenario with weaker technology.

    • As I have already linked it but you seem incapable of either reading other comments or clicking links before spouting off, here is the proof that you are completely wrong.

      “To sum, accounting treatment does not depend on the realised rate of return of NBN Co, or whether that rate falls below a benchmark. In addition, the accounting treatment does not depend on whether the government intends to sell NBN Co in future. The sale, funding, operation and all payments stemming from these activities, are accounted for in the budget statements as per normal accounting procedures.”
      source: http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/2011-2012/NBNBudgetStatements#_Toc314147473

    • @Michael

      There is no evidence NBNCo. must make a return above the bond rate. Even the scenario of NBNCo. only making $1 more than it cost to fund the equity (plus the interest on the equity funding) would mean it is still an investment.

      And as Renai says, if it DOESN’T makes this (which I also cannot find current evidence for, as current rends suggest tier takeup will continue to rise beyond what NBNCo. have predicted in the CP) it can be written off as capital loss and any cash made form the eventual privitisation o fNBNCo. will cover the difference.

      In ANY possible scenario, NBNCo. can be treated as an investment.

      • There is no evidence NBNCo. must make a return above the bond rate. Even the scenario of NBNCo. only making $1 more than it cost to fund the equity (plus the interest on the equity funding) would mean it is still an investment.

        Errr, interest on the borrowed money?

        Oh I get it, the Reserve Banks of the world will have driven interest to zero in the near future… hmmm, yeah I forgot about that.

        • @Tel

          Errr, interest on the borrowed money?

          Did you READ my comment??

          Even the scenario of NBNCo. only making $1 more than it cost to fund the equity (plus the interest on the equity funding)

          As long as NBNCo. cover the (approx.) $40 billion dollars the government ACTUALLY pays out to fund their $30.4 billion equity in NBNCo. it doesn’t need to make anymore to be considered an investment (if indeed it does at all)

  17. Well I see that even AFR have dipped into the bucket of sh!t that most of the Media is dipping into for their information, which is being built predominately on innuendo and gross misrepresentation of the facts.

    One of the reasons I love Delimiter is it hasn’t become Politicized like everything else and just calls the facts as they fall. If there is opinion, it is under the Opinion section and not Opinion thrust down your throat, complete with directive on what you must do to make sure you don’t misinterpret what they desire you to believe and do. Fine for Sheeple, but some people aren’t brain dead or comatose yet.

    Hats off to you Renai, you’re a rare thing these days, a real Journalist who researches and vets their information and keeps the opinion, as opinion. You may just save the once noble art from complete disrepute. Keep it up.

    Unfortunately there is little left in Oz for reading on Australian issues that hasn’t become some vested Interest’s mouthpiece, in their manufacturing the consent of a misinformed Public, to the fulfilling their dreams, complete with a compliant political landscape that they control.

  18. Every year in it’s financial statements, NBN co needs to make an imparement test under AASB 136 Imparement of Assets, and get that checked off by the Autior General, and whichever auditor it hires.
    The actual NBN policy is described in the2011-12 annual report Note 1(L) on page 70-71.

    Basically, this standard requires an estimate of the returns of an asset (eg the whole NBN) to get an estimate of it’s present value in use at a reasonable discount rate and then compare it against the book value of the asset. As long as the value in use is greater than cost, there is no problems. Otherwise a write down of the asset value is made to the book value of the asset.

    There are problems with this due to the NBN being still under construction, so the auditors would rely on the NBN corprate plan, and make comparisons of the projected and budgeted costs anre revenues against what the NBN has actually delivered. Thus far the plan is comming together, so no imprements have been made.

    The government has an even easier time of valuing the NBN, as it just relies on whats in the NBN’s annual report for imparement testing.
    The only time the NBN won’t be an investment is if the NBN is completely impared, but to alledge that would need some conclusive evidence (eg. construction costs blowing out compared to budget, below planned subscribers and ARPU, new technology to render fiber obsolete.) As the AFR article has no additional evidence concerning imprement, so their comment about the NBN being an investment is irrelavent and rather impunes the work of the Auditor General.

  19. I think most sensible people have stopped reading the Australian Financial Review – which is probably a bit disappointing for the editor of what is supposed to be a serious newspaper.

    As soon as you allow editorial independence to go, you lose all journalistic credibility and just throw your lot in with the tabloid rags.

    • It is unfortunate that both the AFR and Australian have descended to such depths.

      Sure they may have had a right wing bias, but then Fairfax, the ABC etc were a counterbalance all of which is representation of Public Viewpoints and beliefs, however the depths to which they have sunk is pitiful to observe and even Fairfax is being dragged on the same downhill slope

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