Gary McLaren's picture

Gary McLaren

An interesting hierarchy of options for the NBN post rollout in this paper. But not clear to me what criteria were being used to make the judgment of Option A above all else.

The specific question I would like to ask is as follows :

The paper points out Option B would require a large write-off (~$30 billion) of the taxpayer's investment would be needed before the private sector would be interested.  

Option A asserts that government ownership of NBN Co (with an ARPU) of $52 per month would be "advantageous" and able to fund investment to a future-proof FTTP (at $10-12 billion) over a 10 year period to be potentially then sold off for presumably no loss of taxpayer's investment (ie. at least for $60 billion assuming after FTTP investment assuming zero cost of capital).

How does government ownership become so commercially attractive that it can avoid a write-off and fund an extra $10-12 billion investment? In 10 years the value to the private sector has tripled from $20 billion to $60 billion. Or to put it another way, to support a $60 billion price-tag, NBN Co's EBITDA would need to be $10 billion per annum assuming the 6 times multiple discussed in Option B. This is more than twice the $4.5 billion EBITDA projected in FY25 by Government's Panel of Experts which was questioned by the author.

It would be interesting to hear more on how a government owned NBN Co can improve its financial performance more than a private sector option. 

We can only hope that post rollout, whichever flavour of government is in charge, we get an honest appraisal of the costs and funding arrangements for the necessary upgrade of the network with deeper fibre. If they are footing the bill, taxpayers need to be told that further fibre investment will most likely come as a cost on the budget and that cannot be fudged any more.