Sunday, December 1, 2013

Turnbull's New NBN: A prediction

The Coalition's NBN report is due in tomorrow, I believe, 2nd Dec, 2013.
This is an incomplete prediction for what will be released.

Update Sun 8-Dec: Unsurprisingly, the report wasn't released to the public last week and we're told large slabs will be kept secret. Most. Secret. Government. Ever. Bizarrely, Abbott claimed "we're on a Unity Ticket" supporting Gonski was not an "actual" promise, but a misinterpretation by the public & press. Does the Liberal Party have a list of their actual promises? Not publicly. Their election materials are consistently like their "fully costed budget": "summaries", vague statements, platitudes and slogans.
The Liberal costings were not given to the Parliamentary Budget Office until the last minute [and then only fully divulged to their own hand-picked 'Independent' review group].

Update: I missed the obvious change: as little as possible buried cable, maximum use of aerial cable.
So get used to a mess of cables in the sky in your suburb. This neatly devalues the Telstra "pits, pipes and lead-ins" to zero... They wouldn't be used, so wouldn't have to be paid for. A good bargaining chip? Telstra has never lost in commercial negotiations - I'd say they won't this time either. NBN Co Mark 1 didn't come lightly to settle on the most expensive "buried cable" as its preferred network model. It's a longer-life, more reliable, lower maintenance model: lower Total Cost of Ownership. You can pay more now and a lot less later, or save a few pennies up front and regret it for a very long time.

Back to the Future:
  • Telstra will be offered government funding for the FTTN Sol Trujillo pitched to the Howard ministry in 2005.
    • Probably only $4.7 Billion, without CPI as "the hardware is now so much cheaper".
    • Telstra will be given the competition protections/exceptions it lobbied for in 2005.
    • Telstra will not have any universal supply connectivity requirements.
      • NBN Co will still be required to supply broadband, probably FTTP, connections where no other supplier wishes to supply an area.
      • Telstra and other Telcos will be able to build only where they deem it to be economic.
      • Telstra will have the footprint their HFC (Cable) network supplies declared as "25Mbps".
    • Telstra will not be obliged to offer wholesale connection to its "private" Customer Access Network.
  • Telstra and other Telcos will be able to exclusively supply niche markets, especially MDU's (flats and apartment blocks), at unregulated prices.
    • FTTN by Telstra will most likely be rolled out in country towns.
    • NBN Co will be directed to in-fill unserved areas with (expensive) Fixed Wireless.
    • NBN Co will be directed to supply Fibre connections at subsidised prices to MDU Network Operators.
  • Telstra may undertake a 'best efforts' upgrade of its HFC assets to the current (fast) DOCSIS 3.0 standard.
    • Consumers will have no recourse in requiring Telstra to connect 100Mbps services.
    • Higher speed services will only be connected "at full commercial rates".
  • NBN Co will be forced to remain the sole Satellite Service supplier.
    • They will be directed to continue charging the current fully subsidised wholesale rates
  • Single wholesale fee structure will be abandoned:
    • Network owners will be able to charge unregulated "competitive rates" for areas they exclusively control.
    • Tiered charging will be reintroduced for non-Metro areas:
      • Country dwellers will be given direct government subsidies, unrelated to need or usage.
      • It is unlikely these subsidies will be pegged to prices, leaving country subscribers further and further behinds
  • NBN Co will be directed to lay, but not connect, Fibre past all premises.
    • NBN Co will incur the majority of network construction expenses, with none of the revenues.
    • NBN Co will be forced to retain the existing 121 Points of Interconnect, while their premises served will be drastically reduced.
    • NBN Co may be directed to reduce their minimum wholesale rate to $16/month for lower-speed services or resold FTTN services.
Cheaper, Sooner, More Affordable:
  • The hybrid, optional private-sector supply will be trumpeted as being "much cheaper", at least in immediate CapEx by NBN Co.
  • Because nominated services, such as Telstra HFC and exclusive MDU FTTN's, will be 'declared' as 25Mbps compliant for the entire footprint covered, regardless of premises connected or able to be served.
  • Non NBN Co services will be removed from calculations of "Affordability" with NBN Co also directed to reduce their wholesale charges, enabling "more affordable" to be claimed.
Financial Outcomes:
  • The new NBN Co financial plan:
    • will cap government funding at $29.5 billion, forcing NBN Co to raise additional funds "on market".
    • The new Internal Rate of Return will exclude large slabs of CapEx related to the existing investment, writing off many billions and effectively moving losses onto the Federal Balance Sheet.
    • The new target IRR will be "cash-flow neutral" or just positive for all new CapEx.
      • This will be insufficient to achieve break-even,
      • the government funding can never be repaid,
      • the NBN Co investment under the Coalition will result in massive losses, that will be transferred back onto the Federal Budget.
  • Under these conditions, NBN Co will be unable to raise commercial loans as it won't have the cash surplus to meet payments as they fall due.
    • This is the technical requirement for insolvency.
    • NBN Co will put itself into voluntary liquidation at this point.
    • The major creditor, Telstra, will swap its outstanding amounts for majority ownership of the NBN Co assets.
  • Under the already agreed variations to ACCC regulation, Telstra will be able to charge whatever it deems "competitive rates" for the new network under its control.


  1. . Malcolm and Ziggy will be further lorded as giants of business.
    . Malcolm and Ziggy will receive Queens Birthday honours for services to whatever.
    I caught Ziggy at Senate Estimates the other day. You would have laughed to hear the rubbish out of his mouth.

  2. Then some time after 5 or 10 + years, it'll be privatised via a public float, tender or direct sale at nominal price to Telstra.