Truth: Turnbull’s MTM decision is coming home to roost … financially


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    • I would imagine the funds being provided to NBNCo (er, sorry, nbn™) would have to appear in the budget somewhere. The key aspect is that it is (was) classed as an investment, with a tangible asset being ‘purchased’, so the net effect on the government’s balance sheet was zero.

      Now, however, they’re spending *more* money to buy something worth considerably less (the sort of thing only prudent financial managers such as the Coalition can manage to do). There’s a real question hanging over the NBN now: will it ever turn a profit, or will it forever be worth less than Abbott & Turnbull have made us pay for it?

      If the latter, it comes onto the balance sheet as an expense under Gov’t accounting rules, if I’ve understood it correctly, blowing a $50 billion hole in the budget bottom line.

      Of course, the way they’ve set it up, there’s a good chance any such event will happen sufficiently far down the track that there’s even money it’ll happen when Labor are in power, in which event the Coalition leaders of the time will no doubt blame the Labor party for the monumental screw-up that the NBN will have become.

      The obsessive focus the MTM model has on lowest up-front cost, at the expense of long-term value, is partly what sets this up. (Most of the rest being Abbott’s ‘anything so long as it’s different to what Labor did, I don’t care what the experts say’ approach to governing)

      Labor may have a Hail Mary card, though, in the form of FttDP (fibre to the drop point) using skinny fibre, which nbn™ have already demonstrated costs barely more than FttN while delivering far more capable services.

    • I assume that would be the point wouldn’t it?

      Ever since before this lot got in we got hammered w/ all this noise about “spending on NBN = taking money from the budget” so much so even that it’s been debunked over and over again and even the honourable Mr Turnbull et. al. even said it’s an off budget that people still quote that fallacy (just check Whirlpool… we still got ppl saying that on recent topics as a valid “counterpoint

      And yet here we are budget day.. and.. it’s not on the budget?

    • I believe under Labor it was ‘on budget’ but ‘behind’ by about a year (maybe its hard to tell as this things a political football and both sides usually lie) if nothing else there’s been little real evidence to prove otherwise.

      Considering a 9 month asbestos delay waiting on T$ to fix its stuff and several years of legislative delays due to LNP and politics that aint half bad!

      Its revenue projections were up on forecasts, its costs were lowering (project Fox had some significant savings … the skinny fibre stuff as well again would be lowering costs). Importantly things like ARPU numbers were much higher than predicted (which is why they were going to look at making it cheaper on RSP’s).

      Spending wasn’t out of control, the budgets they were producing were to discrete 10’s/100’s of millions not 10’s of billions in error margins and unknowns.

    • As an investment, it gets left off the books, mostly because things even out over time. As a commitment, it stays on budget, and thats where we’re at now. By limiting the Govt funding to $29.4b it changed from being an investment to a commitment, so the accounting changed.

      This is fairly standard accounting methodology.

    • That’s a terribad idea. As screwed up as the ‘last mile’ is becoming, there’s still a very good backhaul network and some FttP that was built under Mike Quigley.

  1. I can’t say I’m at all surprised, myself and many others predicted this MtM cluster fuck would be financial suicide for the NBN and that private sector finance would be unlikely to invest in such a mess without at least some form of very robust guarantees.

  2. Nbn/ Ruddstra (the 2009 edition was an uncool billion larger as an initiative than the market cap of Telstra at the time) is off budget, taxpayer dollars go in as equity, think investment (meant to deliver a risk adjusted return over and above that of fed gov bonds).
    Buying up SingTel Optus and Telstra CAN/ HFC was meant to assure a high uptake.
    That and whopping usage (CVC) charges.
    Hence the lashing out at TPGW FTTx, hoarding of spectrum, … Let’s see how long it takes the ACCC to go after fibre access, usage, QoS, interPOI charges, just like they did for copper from Telstra.
    Business Insider indicated this budget has nothing for a FTTN/ FTTPDp replacement (or shared 2.5 GPON FTTP to direct 10G NG PON2 FTTP) over the forward estimates. Presume the latter will wait till post 2020 privatisation.
    Presume HFC updates to DOCSIS3.1 are still on the cards.
    Nothing about a third satellite.
    Ah, well, Telecom/ OTC were privatised from 1997 (with the Future Fund offloaded shares when they were low, only to now be heading for inadequate coverage of all them defined benefits pensions, for those not on contribution based superannuation), and Aussat offloaded onto a then start-up Optus with more than three times debt over equity, back in 1991.

  3. 8th paragraph:
    “… it was probably the Government’s intention to keep as much information about the NBN out of the pages of the Budget as was humanely possible.”

    While the above is probably also true, I’m guessing the 2nd last word is supposed to be ‘humanly’?

    • That depends on how much seeing the truth writ in black and white would make your blood pressure rise :)

  4. No surprise there. The only winners from the “turnbull” NoNBN are Telstra who have sold their network to the NBN 3 times, and Rupert who thinks streaming is a fad that he can shutdown with glacial internet speeds to save his beloved foxtel.

    No doubt Turnbull has a nice cushy job lineds up at Telstra when he gets the boot in politics.

  5. Hi Renai,

    I appreciate that you need to eat and therefore you pay wall some of your more controversial articles, however, this kind of article would actually HELP to make a much bigger impact if it was completely public.

    Especially only a short distance from an election.

    • Agreed (paid up subscriber here).

      Renai, I think if you value getting a better gov than we have now (a green-labor coalition sounds good imo), perhaps you should make your articles holding they libs feet to the fire available either free and or syndicated to other outlets?

      Not enough Australians know of the corrupt crony capitalism that has eaten away our nbn like an aggressive cancer!

      • GLP (or LGP) party? although the N in LNP is probably superfluous these days it would seem ;)

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