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Featured, News, Telecommunications - Written by Renai LeMay on Monday, March 18, 2013 10:13 - 205 Comments
NBN could cost $100 billion, claims Turnbull
news Shadow Communications Minister Malcolm Turnbull has publicly claimed that Labor’s National Broadband Network project could could cost as much as $100 billion to build, despite the company’s own estimates showing that it will require around $37 billion of capital injection from the Government and eventually make a return.
The comments were made in an interview on the Sky News television channel over the weekend. “The fundamental problem that we’ve got with the NBN is not simply that it’s costing so much money – I mean that is huge obviously, and that’s our biggest complaint – but it’s taking so long. At the rate they are going this could take 20 years or more to complete, and it could cost up to $100 billion,” said Turnbull.
When questioned by the presenter where that figure came from, Turnbull replied that it was based on how much it was costing NBN Co per premise to deploy the network. “… of course you have got to remember they have reached now as of end of December passed only 70,000-odd premises out of 12.25 million they are supposed to do over the next eight years,” the Liberal MP said.
However, it is not clear where Turnbull is sourcing the $100 billion figure from, as the MP has recently criticised NBN Co for not releasing cost per premise data with respect to its current network rollout.
It’s not the first time a senior member of the Coalition has mentioned a $100 billion figure with respect to the NBN. In October last year, for example, Shadow Treasurer Joe Hockey used the exact same figure in an interview with ABC Radio’s AM program at the time.
“… we can’t trust the numbers that the Government is putting in the budget papers,” Hockey said. “Last year they said there was going to be a $22 billion deficit, it turned out to be a $44 billion deficit. There is not one contractor in Australia that believes the Government is going to roll out its National Broadband Network for $32 billion. Expectations are as high as $60 billion, $70 billion or even $100 billion for the National Broadband Network.”
Similarly, in an article published on his website and on business media outlet Business Spectator, Turnbull wrote on September 6 that he could not provide precise financial figures regarding the difference between the Coalition’s rival NBN policy and the Government’s existing project:
“I have been careful not to nominate a particular sum of money as the difference between what we would do and Labor’s current plan. For a start there is enormous scepticism that the NBN Co project can be completed within the cost and timeframe of their business plan. Several very experienced civil contractors and engineers have said to us recently that they think the actual build cost is likely to be $80 to $100 billion for example.”
Additionally, Turnbull pointed out at the time that telecommunications consultant Cliff Gibson had estimated a similar amount industry newsletter Communications Day in May 2011, saying: “I do know that the two partner organisations that we work with would have put tens of millions of dollars worth of work in to put the bid together and our experience on this exercise, and the costing involved, would lead me to think that the cost of roll- ing out the optic fibre to 93% of the homes around Australia is going to cost between 60-80 billion.”
However, based on current evidence, it currently appears as if both Turnbull and Hockey are incorrect in their claims that the NBN project could end up costing up to $100 billion in total.
NBN Co’s current corporate plan (PDF) states that NBN Co will require some $37.4 billion in capital expenditure over the next decade to construct its network infrastructure. It will also spend some $23.1 billion in operating expenditure over that period, although that figure is expected to be made up mainly from $26.4 billion in revenues over that period. Ultimately, over the long term (30 years or so), NBN Co is projecting that it will make a return of 7.1 percent on the Government’s investment in the infrastructure — meaning that it is currently projected that the construction of the NBN will actually make the Government money on its investment.
Additionally, not all of its funding is expected to come from the Government. NBN Co is currently projecting that it will require about $30 billion worth of government investment over its life, with another $14 billion to be funded through debt arrangements.
NBN Co has already locked in construction contracts for much of the next half-decade in states and territories around Australia, as well as network equipment and other related contracts, giving it significant forward visibility in terms of its costs. In addition, the company has finalised its $11 billion agreement with Telstra and its $900 million deal with Optus, and it is also seeing more Australians take up higher-value NBN plans than it had been estimating, meaning that its revenue estimates may be conservative.
In comparison, the Coalition has consistently declined to provide detailed financial information relating to its own policy, which is currently based on fibre to the node technology, as opposed to the NBN’s fibre to the home rollout. Turnbull initially stated in mid-August that the Coalition had a fully-costed policy “ready” to be released, but later rescinded the statement, telling the ABC that the Coalition was not in a position to be able to fully cost its policy before the next Federal Election.
In a statement released last year, Communications Minister Stephen Conroy called on the two Coalition politicians to “stop misleading the Australian public” about the cost of the NBN. “The Government released the 2012-2015 NBN Co Corporate Plan provided by the NBN Co Board on 8 August. That plan stated the capital cost of the NBN will be $37.4 billion,” Conroy said. “Since then both Mr Hockey and Mr Turnbull have claimed that the cost could be as high as $100 billion. This is false and inaccurate.”
“The NBN Co Corporate Plan is informed by the agreement with Telstra and signed construction contracts. The Corporate Plan was prepared by the experienced executives of NBN Co, and was approved by the highly qualified independent NBN Co Board. Mr Hockey’s and Mr Turnbull’s outrageous claims effectively accuse the NBN Co executive and board of being negligent in their duty.”
“This is a disgraceful slur on NBN Co. They should apologise immediately and stop misleading the Australian public.”
The Opposition has made a number of other inaccurate statements about the NBN over the past few years which have been picked up by various segments of the media. Several months ago, speaking on Channel Ten’s Meet the Press program, Nationals Leader Warren Truss made a number of major factually inaccurate statements about the project, as detailed in this article by Delimiter at the time. In addition, Truss had previously made a number of inaccurate statements about the NBN over the past several months.
In June, for example, Shadow Treasurer Joe Hockey inaccurately claimed that 4G mobile broadband had the potential to be “far superior” to the fibre technology of the NBN. In mid-May, Opposition Leader Tony Abbott misrepresented the cost of connecting to the NBN, in comments which the Government claimed represented a deliberate attempt to mislead the Australian public on the issue. Turnbull similarly made a number of factually incorrect statements on the NBN throughout March, and in January Abbott got quite a few facts about the NBN wrong in a radio interview.
Conroy himself has from time to time made inaccurate statements about other projects in his portfolio. In February, for example, the Minister appeared to consciously tell a factual inaccuracy with respect to the current implementation status of Labor’s controversial Internet filtering project, stating that Telstra and Optus had implemented the mandatory filtering system, when they have only implemented a drastically reduced voluntary version.
As I wrote in October:
There’s not really much to analyse here. NBN Co and Conroy have provided clear financial estimates for the NBN based on actual contracts which have been signed and actual customer take-up. In comparison, the Coalition has declined to provide the working for its own financial estimates. There just isn’t any evidence right now that what Turnbull and Hockey are saying is correct.
Image credit: Office of Malcolm Turnbull
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