news Senior Government Minister Paul Fletcher has taken a pickaxe to Labor’s previous funding model for the National Broadband Network, describing it as “spectacularly incompetent”, despite the fact that the Coalition itself admitted during the recent Budget that it had its own NBN funding black hole.
Yesterday Paul Fletcher, Minister for Major Projects, Territories and Local Government, gave a major speech to the Australia-British Chamber of Commerce on the topic of infrastructure investment.
Fletcher is a former Parliamentary Secretary to then-Communications Minister Malcolm Turnbull and often deputises for Communications Minister Mitch Fifield, a Senator, in the House of Representatives in the communications portfolio, including on the topic of the National Broadband Network.
In the speech, Fletcher launched an extraordinary attack on the previous Rudd Labor Government, for what he said was its bungled handling of the NBN project’s finances, linking that project to Labor’s recently announced proposal to for a $10 billion financing facility for Infrastructure Australia.
“Of course this is not the first time Labor has made such an irresponsible suggestion about investing in infrastructure,” Fletcher told the audience.
“Announcing the National Broadband Network in April 2009, Kevin Rudd promised that it would be “operated on a commercial basis … and involve private sector investment.”
“In fact, in one of the most spectacularly incompetent pieces of financial advice ever given by a politician, Kevin Rudd recommended that mums and dads should invest in the NBN, with his press release stating:”
“The Government’s investment in the company will be funded through the Building Australia Fund and the issuance of Aussie Infrastructure Bonds (AIBs), which will provide an opportunity for households and institutions to invest in the national broadband network.”
Fletcher said that Labor “soon dumped” its commitment to seek private sector investment for the NBN, after “receiving advice in the McKinsey-KPMG Implementation Study that private investors would regard the project as too risky and hence taxpayers would need to provide one hundred per cent of the equity”.
“Troublingly, though, Mr Shorten and Mr Albanese today are peddling the same fiction that Kevin Rudd tried to peddle with the NBN – that in some way through financing tricks they can deliver infrastructure which does not have to be funded by the taxpayer,” Fletcher said.
However, Fletcher’s comments come as the Coalition’s own NBN funding credentials are strongly under attack.
The Coalition Government has maintained since the 2013 Federal Election that it would cap the public’s equity contribution to the NBN project at $29.5 billion, and that its final payment of $8.8 billion to the company would be its last.
To fund the rest of its planned rollout through to 2020, the recent Federal Budget notes that the NBN company is expected to raise debt from external markets of between $16.5 billion and $26.5 billion (with a base case of $19.5 billion) to complete the rollout of its network.
However, the Budget also warned that this may not be as easy as expected, and that the Government may need to step in, either to provide “interim funding support” or to help the NBN company raise the debt itself (for example, through guaranteeing its debts). The NBN company is expected to run out of money by the end of the 2016-2017 financial year.
Under sustained questioning several weeks ago in a Budget Estimates session, Finance Minister Mathias Cormann said the Government did not yet have the answers on the issue, despite having been aware of the problem for some time. The Government has established a taskforce to deal with the issue.
Under Labor, the NBN had been expecting to make a return on the government’s investment of about 7 percent. But the reduced profitability of the Coalition’s Multi-Technology Mix model and higher than expected costs have reduced this figure substantially.
It is not currently clear if the private sector will see the project as financially worth investing in, based on the Coalition’s MTM model.
opinion/analysis
Oh, Paul Fletcher. Not the … best time to be criticising the NBN company’s finances, when the Government itself has just confessed to a rather large issue on that front itself.
Image credit: Office of Malcolm Turnbull
“Spectacularly incompetent”: I slam whole LNP NBN model.
And yet the LNP (mis-)managed to make it a far worse state of affairs, but I guess you’ll never criticize them will you?
I think you’re thinking of “Mathew” (not “Matthews”).
Actually, if you read that headline and remove the colon…it kinda rings true…they really ARE a spectacularly incompetent government.
“Spectacularly incompetent” Govt slams Labor NBN funding model
Great, another clown blaming labor for their sh*t while at the same time ignoring the Libs MTM mess. Can these clowns ever get dumber and dumber?
Unfortunately it’s not them that are dumb and dumber. They treat the Australian voters as if they’re dumb and dumber. Even more unfortunately is that it’s a strategy that appears to work, which implies their assumptions about Australian voters are closer to right than
leftwrong.Fletcher worked for Richard Alston, so he knows a lot about dumb. Wait till Labor gets in office and goes through the books. Tony, Malcolm and Fletcher will be chased through the streets.
The Liberals blasted all our money on recycled faulty deprecated assets , where Telstra has run with the money. Yet it’s still Labor’s fault.
““Spectacularly incompetent””
We’re in glass houses here, people.
Actually I tell a lie. The current mob aren’t incompetent, just criminal.
@Renai:
why would you use this type of language? it implies he is attacking Labor with something of substance when as you go on to point out the Libs are in no position to make these kind claims.
Your previous work also shows his claims to be false:
https://delimiter.com.au/2016/01/04/detailed-analysis-of-nbn-cos-finances-shows-fttp-better-value-than-fttn/
I would not say that Fletcher’s claims today are false.
However, I would say they are hypocritical.
The pickaxe thing is just a turn of phrase meaning “attack”.
Renai, I understand why you used the language the way you did, writers license and all that, only issue I have is the choice of tool.
A pick axe is deadly, but Fletcher’s attack clearly was hypocritical and therefore not deadly or able to inflict any substantial damage.
Perhaps a “wet lettuce leaf” might have been more appropriate? ;)
It is hypocritical. They bought into the policy folly instead of being honest with taxpayers.
Failures have been highlighted since the first CP was obviously not meeting targets; shouted down by the ignorant.
Taxpayers will be taking a hit of tens of billions. Can’t say you weren’t warned.
7.1 IRR was laughable. Strongly negative
“Taxpayers will be taking a hit of tens of billions”
For the subs…I agree.
“7.1 IRR was laughable. Strongly negative”
Wow…I agree again! It was far too negative! The long term IRR will be far higher…on FTTP.
Yet they’re still to provide a single figure to support their position. Actual analysis destroys the claim has been provided (still not understood here by the squealers). Actuals showing higher FTTP revenues not enough to offset the far higher cost.
NBNCO: $20b invested to date, this year will generate ~$300m in revenue. Operating loss of $2b. Couldn’t be any clearer, simply unbelievable.
Lol Richard
So numbers man how’s the lower revenues going to off set the now higher cost of the MTM
It’s fine, it’s all going to the plan he wrote for them.
Richard,
So no yearly gain, in the early stage of a project that has been chopped and changed to kingdom come, is no gain? Short-term figures, even though they are ‘actuals,’ do not mean a thing in this context. You are the stereotypical bean counting accountant.
Such small-minded quoting of figures did not get civilisation anywhere.
The long-term investment is clear. One only has to look at the number of FTTP projects around the world. Companies like AT&T, Verizon, British Telecom and Orange are not all making a bad decision at once. They do not.
Thank you again Richard for Ponting out again why there was no $B’s to be invested by private enterprise in Comms infrastructure.
A coalition clown talking about incompetence. How adorable. The lack of self awareness is simply stunning.
Not wrong HC.
What a dickhead, they had three years to “fix” it, but like everything else “LPA” they only know how to come up with three word slogans and fuck things up royally.
Of course they have to make the claim that all along there would be no possibility of private investment. Nothing at all to do with not wanting to invest in the POS dead end technology shrine and political football they have turned it into. As to 7% ROI, that’d be about the same as the return on an investment property, and a lot of people seem happy with that.
If private investors were likely to see FTTP to 93% as too risky, imagine what they would think about the MTM.
Well, you can live with Dial up then!
Just wait until 2nd of July. We’ll see.
Hoping to use the Hired by Fired picture with Paul Fletcher standing near the FIRED sign..
Ahhh meme’s here we come!
Both Coalition and Labor NBN funding models rely upon Government funding for a period of time followed by funding from the external market.
To say only the Coalition NBN has a funding ‘black hole’ when the NBN Government funding runs out is a incorrect assumption.
A Labor government from August onward would be facing a deeper NBN funding ‘black hole’, assuming they follow through in a substantive way with their ‘more fibre’ promise.
I don’t see obtaining funds as a big deal, the loan repayments would be indemnified by the Australian Government, which currently has a AAA credit rating.
Difference is, a full FTTP network would generate a high enough ROI to repay itself within a reasonable number of years.
The so-called MTM makes less than half the ROI of an FTTP network due to its significantly higher OPEX.
Hence the liberal ‘black hole’ is much bigger. The MTM is a higher-risk investment with a lower potential for return.
You are referring to separate scenarios, the ROI would only be significant for a company purchasing the NBN infrastructure, assuming it will ever be privatised.
External fund raising is indemnified by the Government, the fund providers will get their repayments irrespective of the NBN making a profit or not.
There would also be a return to the economy. This is a business opportunity. A very large one, otherwise companies like AT&T, Verizon, British Telecom and Orange would not be doing it.
@alain
A Labor government from August onward would be facing a deeper NBN funding ‘black hole’, assuming they follow through in a substantive way with their ‘more fibre’ promise.
Err yes exactly, finally, FFS… hallelujah.
Simply because of the idiot decision by this idiot government, to revert backwards from FTTP to retrograde FRAUDBAND and then go back to FTTP again… would cost way more than having stayed with FTTP…
Exactly as many posters here have been telling you and telling you and telling you (HELLOOOOO McFly)… but until now you refused to accept this.
But glad you are finally waking up to “reality”, Reality…
You’re welcome.
Nailed it +1
It’s not an assumption, they’ve formed a committee (more wasted money…these LPA fuckers are great at spending/wasting tax dollars) whose sole purpose is to try and and figure out a way out of the black hole the LPA dug.
Look who’s talking.
So when Howard et la privatised Telstra and actively campaigned for mum and dad investors over the course of several floats, what did Fletcher think? Oh yeah that’s right .. no bias there.
Any comment from an ex-floptus hack is meaningless to me.
You only need to read his book “wired brown land” to see what a hypocrite / sellout he is!
No one takes Paul Fletcher seriously. Just another shill.
Paul Fletcher, an incompetent and poorly educated fool. keep on shilling. nobody believes a single word that comes from any liberal party prostitute.
I’m afraid a lot of people still do and that’s the troubling thing.
Renai, a better headline would have been “Spectacularly Incompetent LNP slams previous Labor NBN funding model as “Spectacularly incompetent”- see, total lack of bias there ;)
Running scared of their hand picked NBN lackeys exposing the costly folly of their short termism in infrastructure.
The KPMG McKinsey NBN Implementation Report of May 2010 made it clear that the off-budget project would need to maximise revenues in order to cost-recover, and that gross revenue is a factor of customer takeup times average revenue per user.
So, what do we see? Hansard reports $43 ARPU on FTTP, and 50% takeup after 12 months of service availability. This is more than the forecasts in 2010. The real problem, then, is that Mr Turnbull stopped the growth in FTTP rollouts.
As the leaked documents showed. No wonder he is cross.
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