news Shadow Assistant Minister for Communications Michelle Rowland has accused Malcolm Turnbull of being a “liar” and failing to “tell the truth”, with respect to the Communications Minister’s ongoing false statements about the cost of Labor’s National Broadband Network policy.
Turnbull and a number of other Coalition figures have recently made a number of ongoing statements claiming that Labor’s technically superior Fibre to the Premises version of the National Broadband Network would cost some $73 billion to build, would take four years longer than the Coalition’s version and would result in consumer broadband prices 80 percent higher than at present.
The Liberal MP repeated the comments in Parliament yesterday, stating that Labor’s version of the NBN would have had a peak funding requirement of $73 billion. “… we cannot recover most, if any, of the billions they have wasted to date, but what we can do is finish the project sooner, cheaper and more affordably. It will be cheaper for consumers and over $30 billion less expensive for taxpayers,” Turnbull said. The Minister has made similar comments recently during the Federal Budget process, in interviews on the Triple J and 2UE radio stations and in other communications.
However, as Turnbull is aware, some aspects of the Minister’s comments are inaccurate.
NBN Co’s Strategic Review document, published in December last year and available online in PDF format, provides a range of possible network deployment models. The report makes it clear that under almost every scenario, the NBN project as a whole will make a modern return on the Government’s investment in the project. This means that the Coalition’s policy would make slightly more money than Labor’s option — but neither would, in the long-run, actually cost the Government anything, with the money to be recouped through monthly broadband subscriber fees. The table containing the data can be seen here:
Furthermore, the Strategic Review also indicates that if NBN Co radically redesigned Labor’s FTTP model and an all-equity model was used to support the rollout, the total capital investment requirement for Labor’s model would be $54 billion, just $15 billion more than the Coalition’s model. Turnbull’s statement that NBN Co could not complete an all-FTTP model until 2024 is also inaccurate, with the Strategic Review stating that a reworked FTTP rollout could be completed by 2023 — just three years after the Coalition’s model. In addition, consumer prices on the NBN are not set to rise, with current NBN retail prices being comparable to other forms of broadband and NBN Co having locked in prices to the rate of inflation.
In Parliament yesterday, Rowland interrupted a speech Turnbull gave on the matter repeating his claims. “Rubbish! You’re a liar!” the Labor MP said. “Tell the truth! Try it!”
In addition, in a separate speech on Monday in response to a NBN-related motion moved by Liberal MP Ann Sudmalis (which largely repeated Turnbull’s claims), Rowland again accused Turnbull of “deliberately misleading” Australians regarding the NBN’s finances. You can watch the full speech online on YouTube.
“Looking at the motion that is before us, on every single point the mover has stumbled, perhaps unwittingly, into the realms of what I call Turnbullistan,” said Rowland on Monday.
“The minister—because this really does look like it was drafted in the minister’s office—likes to claim that the strategic review tells him that Labor’s plan for its NBN would cost $72.6 billion, increase prices for consumers and not be complete until 2024. On every single one of these claims made by the minister, he is wrong. He is deliberately misleading the community.”
Rowland said that NBN Co’s Strategic Review conducted under the new Coalition Government revealed two things about the cost of the project: That “the only real difference in the cost to the Commonwealth between Labor’s plan and the government’s plan is less than one billion dollars in equity financing”, and that “choosing levered peak funding inflates the result by including costs of debt”. Labor’s original NBN policy called for about $30 billion of government equity investments; the Coalition’s new model calls for about $29 billion.
“Therefore, it could be just as reasonably claimed that the strategic review showed that the fibre-to-the-premises NBN could be built for the capital expenditure included in the corporate plan,” the Labor MP said.
Furthermore, Rowland said, the Strategic Review itself did not represent the actual cost of building a Fibre to the Premises network (Labor’s version of the NBN). “It was a hypothetical exercise based on a series of forward projections and assumed that management of the project would not achieve any efficiencies,” the Labor MP said. Rowland added that Turnbull had also conflated several different concepts of cost used in describing the project.
Rowland also pointed out that the Coalition had previously falsely estimated the cost of Labor’s version of the NBN at being above $90 billion. Previous to the Federal Election, the Coalition’s rival NBN policy background briefing paper contained a number of estimates which caused the Coalition to estimate the cost of the NBN at $94 billion.
However, that figure has since been extensively critiqued as having been based on a combination of worst possible scenarios for the project and is no longer regarded as being valid. NBN Co’s Strategic Review, which pegs the cost of Labor’s NBN as low as $54 billion, is now regarded as being the authoritative estimate on costs.
“I would also note that this was the mob running around prior to the election saying the cost of the NBN was $90 billion,” said Rowland. “Even the hapless member for Moncrieff [Steve Ciobo[ used that figure in the House a few weeks ago.”
Rowland also pointed out that the Coalition had already acknowledged it could not meet its election promise of delivering 25Mbps speed to all Australians by the end of 2016.
“Before this government became expert on breaking election commitments, they were breaking promises on the NBN,” Rowland said. “We all remember the laughable press conference with the then opposition leader and the member for Wentworth and Sonny Bill Williams. During that press conference the now Prime Minister said: ‘Under the coalition by 2016 … there will be minimum download speeds of 25 megabits … we will deliver a minimum of 25 megabits … by the end of our first term.'”
“That promise was broken in December last year. It barely lasted a couple of months.”
opinion/analysis
Fantastic speech by Rowland here — I highly recommend you watch it online. The Shadow Assistant Minister for Communications was on fire. She is one of the most accomplished parliamentary performers when it comes to telecommunications issues.
Image credit: Parliamentary Broadcasting, NBN Co
Sock it to them Michelle! Keep hammering Turnbull and his lies!
Finally some mud slinging back!
Nice to start reading about Labor speaking up about the NBN again!
Labor isn’t very good at the mud slinging. Like the last few days with to referral of the speaker to the privileges committee don’t they know your supposed to report that straight to the AFP.
True and it doesn’t help with this speaker…
Reporting things to the AFP would have no effect, they’re effectively the militant wing of the LNP.
The difference being that if the Libs fling mud it is plastered as fact all over the MSM. Lab mud slinging isn’t reported or it is reported as whinging or lying.
@Lionel
Exactly. People seem to assume that Labor is doing nothing, or very little, regarding the NBN. I think the opposite is true if you’re paying attention to the Senate Select Committee on the NBN.
There’s the ‘ol fire.
Think the budget has slapped Labor out of it’s self induced post election stupor; government isn’t sound unless there are voices questioning choices (as opposed to simply saying ‘no f*ck off’).
It’s not a case of disagreeing; it’s holding policy to account.
@Brendan
I think it’s more likely that news outlets are just more willing to run stories on the budget than they are on the NBN. For whatever reason, the MSM is almost completely ignoring the NBN or just spreading Coalition propaganda.
Why keep people informed on a subject, when widespead knowledge of that subject could hurt you in the long run?
The NBN is bad news for the MSM, and they know it.
This reeks of nothing more than protecting profits.
Well explained, thorough and detailed. What will we get out of of MT? Probably a repeat of the same garbage he’s been spouting all along.
What will we here in mainstream media? *crickets*
Between that and the bleating about the Budget “Emergency”, it’s a depressing time to be an Australian. This Government are destined to set us back decades.
I forget the rule but I believe it’s pretty much forbidden for politicians to call each other liars so I hope she doesn’t get in trouble. Considering it’s also forbidden to lie to parliament in the first place I’m sure she’d have a strong defense.
They’re just not allowed to say it to eachother’s faces in parliament, press conferences are usually pushed to the absolute legal limit of what is acceptable to say, hell, look at the garbage that’s been coming out of the government for the last 8 months!
But yes, essentially, you are correct.
Since I haven’t read anything about Rowland being ejected, I’d assume they don’t have much choice on this one but for Mal to take his lumps.
There’s no law to say that they can’t lie in Federal Parliament.
It’s just unethical.
Otherwise, how can you explain the many, many lies that the Noalition have come out with within the last 12 months?
Nice one Michelle!
And Malcolm better watch his arse (rather than his navel), his plan is actually the one with threats that’ll blow out his budget and ROI. One being the Telstra/Optus negotiations, another being the ‘competition’ with TPG. Then there will be the take up issue with Malcolm’s Mix, with the speeds he’s offering, 4G is actually an attractive option…
Ed Husic doesn’t do too badly either…
https://www.youtube.com/watch?v=fGcFXOXvWRc
What Chamber is this? Aren’t the opposition important enough to warrant the full house?
God, no.
Ludlum spoke to an almost empty room with his viral speech. There was another guy who spoke to an empty room.
“… but neither would, in the long-run, actually cost the Government anything, …”
Either I’m misunderstanding the situation here or my arithmetic is wrong. The forecast rate of return to the government from scenario 1 is between n/a (0% ?) and 2.5%. The government is borrowing its equity stake in the NBNCo via government bonds for which the current interest rate is 3.75%. If the government borrows at 3.75% and invests for a return of 2.5% then they not only do not recover their equity but they lose money each year.
You’ve written several articles on this topic so it’s clear I’m missing something. Can someone please tell me where I’m getting it wrong?
Unless I’m wrong, interest payments are included in the cost side of the equation. The return on investment is calculated with respect to it, over the given timeframe. In this case, FY2040.
For example, say you borrow $1000 and that covers your costs of operating etc., you get charged interest at 3% pa, compounded over 3 years. After 3 years your total interest bill is $93. Total cost = $1093. Now say you don’t pay anything back in the meantime to reduce your borrowings, and after 3 years you make $1500 in revenue. ROI (after 3 years) = (1500-1093)/1093 = 37%
The interest the NBNCo pays on its commercial debt is included in the figures but the interest the government pays on the bonds is not.
aiui it is correct to say the NBNCo is making a modest return to the government of 2.5% for scenario 1. However, if the government is paying 3.75% to borrow the equity stake then it is not correct to say scenario 1 is not costing the government anything. On those figures the government is losing money.
As I say, this is just aiui. Renai is saying something quite different. One of us is wrong. I’m happy to be shown where it’s me.
Not quite CMOT. Say you buy a house, interest rates are 5%. As long as you pay down the mortgage at greater than 5% per annum, the capital borrowings will reduce.
Eventually, the capital borrowings hit zero, after which the amounts that would have normally been put aside as repayments become profit to you.
With the NBN and funding, its similar. Not identical, but similar. They might have 3.75% interest rate, but if they are making 4% of the funding per annum, they are covering the 3.75% and giving a small amount back as profit to the investors.
Reality will be that they will be making less than 3.75% for a while, then making more. It’s when they make more that things start going in the right direction, issue is how long it will take to pay down the capital investments.
Eventually the amount paid back to the investors is 102.5% of their investment. Whether that final percentage allows for inflation or not, I have no idea, but thats how it works – its essentially little different to a home loan.
Dont get caught up in the fine details with that analogy, its not perfect. But hopefully its a little clearer.
Thanks. I get it that the NBNCo can cover its costs, including interest on its commercial debt, and still generate a return of 2.5%.
Renai’s statement was from the government’s point of view though. From the figures Renai includes in the article the government gets a return of 2.5% on its investment in the NBN. The thing is it is paying 3.75% (current 10 year bond rate) to borrow the money for the investment.
On those figures the NBNCo is making money but the government is losing money. So even though, as you say, the government gets back 102.5%, they have paid 103.75%.
Am I misunderstanding the IRR and the annualised return to the government is actually greater than 2.5% (or greater than 3.75% )?
hey mate,
you’ve raised some valid points here. I’ll make two points in return.
1. If you assume a FTTP scenario, what we’re essentially talking about here is Scenario 2 in the Strategic Review, where the FTTP model is radically redesigned. Scenario 1 is a legacy option at this point. And I think we also have to assume something close to Revenue Trajectory A under that scenario, because of the very strong uptake of the NBN so far. Everywhere the NBN has been deployed, Australians have taken it up very quickly — faster than Quigley expected, for example.
http://delimiter.com.au/2012/05/29/higher-100mbps-uptake-will-spur-nbn-price-cuts/
This means we’d likely see something akin to a 4.0 percent ROI, rather than the negative, zero or 2.5 percent ROI under Scenario 1.
2. This whole discussion is rather pointless anyway. Even if you assume that the Federal Government makes a negative return on its investment of a few percentage points for the NBN, it still winds up owning a huge national piece of infrastructure. When the NBN is complete, many people, including myself, argue that it should be privatised. The many billions to be made from such an effort would ensure the Government would make a huge amount of money on the NBN under any scenario. This aspect is often overlooked.
It’s hard to put a value on a massive national universal Fibre to the Premises network. But I think we can all agree that over the long-term, that value would likely be massive — and massively more than what the Government would spend building it. The value inherent in Telstra, for example, is a good way to look at the situation. Telstra makes ~$3 billion a year in profit — and that’s after billions upon billions of investment is ploughed into the company’s networks.
http://www.businessspectator.com.au/news/2014/2/13/technology/telstra-lifts-h1-profit-17bn
No matter which way you look at it, from a purely financial point of view, an all-fibre NBN is a pretty sure investment for the Government. And that’s not counting the massive other advantages this kind of network construction would bring, as you’re aware — productivity, social equity, efficiency and so on. Just removing the cost of Telstra and Optus maintaining the copper and HFC networks is probably almost incentive alone to do an all-fibre NBN.
My 2c :)
Renai
What you are trying to say is; even if it is a “loss” of 1% it doesn’t matter because:
Lets call it a 60 billion dollar network (interest and all that jazz included):
1) Pay 60 billion dollars,
2) During the specified term receive 59.2 billion dollars back.
3) Cry at the “loss” of 800 million dollars. (worst investment ever!)
4) ???
5) Sell the network for 60 billion dollars.
Thanks. I thought you were referring to the Labor NBN (scenario 1). There’s my mistake :)
I’m convinced the MTM is not the most cost-effective solution in the strategic review and a case can be made against it using their own figures. I think David Braue at ZDnet has made a start on this. I think you’re contributing to the good work. If I see something I don’t understand I’ll ask questions in the hope it will strengthen the argument. Keep going.
I’ve long believed it is not important for the government to break even on its investment in the NBNCo as there are many other benefits from the NBN that can be offset against any loss. That’s not the way Labor set it up though and it’s a bit late to take that tack now with the SR imo. It’s a good line of attack for the CBA though.
Okay. I see what you’re saying. In order to actually make a return to the government, the IRR has to be higher than the bond rate. Because if the IRR is 2.5% and the cost of funds (bond rate) is 3.75%, from purely a profit-making perspective you would have been better off not to invest.
Renai’s already touched on this, but I’ll add my 2c:
1) This is not purely a profit-making venture – the fact that it repays itself is a bonus to the Government’s goal of building infrastructure, providing a good regulatory environment (a level playing field, so to speak) and providing a service to all Australians on equitable terms.
2) You have to look at the timeframe. Even with IRR to 2040 of 2.5%, from that point on capital expenditures are nil, operational expenditures are down and revenues are up. Take it to 2045 or 2050 for instance, and I would guess you’ll have an IRR considerably greater than 3.75%.
3) The IRR to 2040 of 2.5% is misleading. Firstly, it is based on Scenario 1 which as Renai says is a legacy option – if left alone and NBN Co were to continue with FTTP, we would be looking at Scenario 2 (at worst – things would probably be better). Secondly, it is based on using dodgy assumptions such as increasing the time to roll out (delaying income thus reducing revenues, increasing operational expenditures), no gains in efficiencies (increasing costs and again increasing time to roll out), and vastly lower uptake than shown in reality – especially of higher revenue services (significantly reduced income).
Finally someone other than our esteemed writer to call this germ out on his lies.
Michelle definately knocked it out the park, I must congraulate her for sticking it to the man.
Much butt hurt to be had for Mal the moron during that speech, now how do we keep that ball rolling?
GENIII
I don’t get the language Mr Turnbull used in the withdraw (“I am wounded! She has offended the House!”). Is this some sort of proper parliamentary lingo or is he just being a drama queen?
Mr TURNBULL: I would ask the honourable member to withdraw, Madam Speaker. I am wounded! She has offended the House!
…
Ms Rowland: I withdraw.
Mr TURNBULL: Thank you. I am feeling a bit better now, thank you, Madam Speaker. I am very sensitive!
He was just being sarcastic …
Ah thanks, it’s hard to tell with these guys.
She probably would have been evicted from the house since Madam Bias is speaker :(
Is it really fair to even be comparing the costs of Liberal’s plans to that of Labor’s? I think Liberal’s is just a middle step towards what inevitably will be FTTP. What would be the cost and time difference between an immediate FTTP compared to a mix of tech then eventually moving to FTTP?
Under 1bil off the bat. Down the road, when all the MTM is finalised, built and operational, I have no idea how much more, but it most certainly would be at least 10 times that amount.
A significant portion of the investment into a FTTN plan is not useful for FTTP.
The large cabinets; the additional power infrastructure to each of those cabinets.
All of the actual terminating equipment inside the cabinets.
The batteries (that need regular replacement) in the cabinets.
Not to mention; a very significant portion of the investment into either network is having a man digging up a street. Why not have him dig up more of the street while he is there to install fibre the whole way; instead of only half way.
And a lot of the costs of the current copper network are also not removed by the installation of FTTN (that are removed by FTTP) namely since only a small portion of copper is being removed you still must maintain the copper maintenance for the entire life of an FTTN network.
The cost of the liberal network doesn’t include any adjustments for the cost of aquiring the copper network from Telstra. Right now there is only an agreement to pay 11 billion dollars for the transfer of customers. Telstra has not agreed to give the copper to anyone for that sum of money. Expect to see additional funds allocated to taking ownership of the wiring.
In addition to taking ownership of the copper network; now the Liberal plan includes using the Optus/Telstra HFC networks. Both of which do not have any wholesale operations, nor are they owned by the government. There has been no explanation of the cost of taking ownership of these networks. (Previously the 11 billion dollar payment to Telstra included the transfer of internet customers off the HFC networks. It did not include opening them up to wholesale operations).
A lot more question marks that haven’t been answered in the currently available costings. Given that all of those questions HAVE been answered for a FTTP costing, I don’t think looking at the differences in the currently announced plans is worth while. (because one is fully costed under many scenarios, and the other has many question marks)
Harri at 5
And the LNP is the political wing of the IPA
The LNP was created by the IPA, so you are indeed correct.
http://en.wikipedia.org/wiki/Institute_of_Public_Affairs
“And the LNP is the political wing of the IPA”
Don’t forget Rupert’s vested interest in destroying NBN. This government has no interest in the welfare of this country. In fact they are actively destroying it, no doubt on instructions from the wizened foreigner whose business interests would be jeopardised if NBN went ahead.
Let us not forget
http://www.theage.com.au/comment/murdoch-sends-trusted-general-col-pot-to-bring-down-rudd-over-nbn-20130803-2r6fk.html
http://cafewhispers.wordpress.com/2013/02/26/revealed-the-media-conspiracy-against-the-government/
http://www.theguardian.com/commentisfree/2012/dec/20/bernstein-murdoch-ailes-petreaus-presidency
http://theconversation.com/murdoch-and-his-influence-on-australian-political-life-16752
http://ipa.org.au/publications/2080/be-like-gough-75-radical-ideas-to-transform-australia
So far sort of on track
Note the punishment of KR thru the Royal Commission for daring to not obey Rupert
A salutary lesson for all politicians, other media organisations and Prime Ministers.
“… we cannot recover most, if any, of the billions they have wasted to date…” — this bit interests me. The recent budget laid out the funding plan for their $29.5b (up to 2017 or whenever), and importantly included the $8b or so spent so far.
The “billions they have wasted to date” is part of their funded total. So if they are claiming to recoup the whole $29.5b, and get a modest ROI, then they know 100% that they will recover the entire amount “they have wasted to date”.
Straight up lie right there, one way or the other. They’re either lieing that they cant recover “most, if any”. or the claim of an ROI is a lie.
So which is it?
So Monty Pythonesque, or is it Fawlty Towers
http://www.smh.com.au/business/the-economy/telstranbn-co-set-to-miss-deadline-20140529-395o7.html
It’s pretty simple; if it ceased to be an investment, and became a budgeted cost; the losses would appear on budget. They don’t, ergo you don’t get to bitch out the result.
Turnbull is all sound and fury signifying nothing; he’s continuing the exact same budget methodology as the previous government.
To claim existing investment as a total loss, may be politically expedient, but does not match reality. It’s an investment and as such profit may be negative until critical mass is achieved.
The portion of the network that is all fibre will see considerably return over it’s life span. Far more so than Copper (of which we now have to purchase, or lease).
The losses, however will continue to mount up given we have to relieve the incumbent of a network that actually DOES have value; that will distort any return as you now have to factor in that additional cost.
When everyone is tossing around costing comparisons between the NBN and MTM how come nobody is hammering home the point that the MTM has yet to be fully costed??? They cannot claim a fully costed MTM until we know how much it will cost them to buy/lease the CAN and HFC, and probably should also be including annual maintenance costs that also include node running and maintenance costs.
Given that they have also stated the MTM will require an upgrade to FTTP within 5 years of completion that cost, particularly when directly comparing it to the NBN, should also be included. A like for like, cost for ALP to get FTTP around the country and cost for LNP to eventually reach the same. These things will display to all Australians the massive wastefulness being perpetrated by the LNP on the taxpayer. As an aside what private company is going to be stupid enough invest in the MTM after the taxpayer has forked out 29.5 billion???
Are you certain that it will make more? Perhaps a higher rate of return, while earning less overall is more accurate.
Read a lot about investments and getting money back. Just because x billion is spent doesn’t to mean you will get x billion back – you will only get what it is worth back. The NBN Co design doesn’t stack up against more current design methodology. It could be cheaper to rather rebuild it.
The other key issue – for various reasons fibre networks generally have a useful life of around 30 years – not sure if I would be rushing out to invest in a network with limited remaining life. Ironically copper maintains it’s performance for a lot longer.
“Just because x billion is spent doesn’t to mean you will get x billion back – you will only get what it is worth back.”
This is false in this context. That comment would hold validity if the capex of x billion was spent on something that was sold for x billion (whats it’s deemed to be worth), not x billion spent on a system that generated return after return every year.
“The other key issue – for various reasons fibre networks generally have a useful life of around 30 years – not sure if I would be rushing out to invest in a network with limited remaining life. Ironically copper maintains it’s performance for a lot longer”
Well, no… fibre is a glass & silica compound that is hermetically sealed during production process. Copper is an element that is prone to oxidization and electrolysis given the fact that is has had around 48 vdc fed down it for it’s entire life,, with the occasional 120 vac pulse to run the ringer. Copper has one thin plastic sheath and a outer sheath, fibre has:
1. Core: 8 µm diameter
2. Cladding: 125 µm dia.
3. Buffer: 250 µm dia.
4. Jacket: 400 µm dia.
Essentially, when cable engineers started developing fibre, which by the way began in 1973 at the Bell Laboratories, they had already learned from the problems with copper so they had experience to draw on.
Fibre Networks ARE prone to failure, but the issue generally lies in the laser that feeds the photons down the fibre. They spend there life pumping out photon packets sometimes at incredible speeds on multiple wavelengths and that’s all they do their whole lives. Ive never seen any information that proves a fibre optic cable just ceases to work.
Copper DOES NOT maintain it’s performance for longer, that is just plain BS.
Probably best to go and enlighten yourself on Wikipedia.
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