- Cost to the Taxpayer:
- What is the cost to taxpayer, as shown in a Budget line-item, of the NBN so far?
- What is the expected on-Budget cost to taxpayers of the MTM-NBN when fully rolled out and upgraded to the promised levels already made? Is that 2020 or later?
- Quality of NBN Investment:
- Since when is an IRR of 2.7%-3.5% better for an investment than 7.1%?
- Just what are the nominal & CPI-adjusted monetary values of each investment?
- Despite multiple attempts, the Liberals have yet to offer any convincing evidence that the 2013 Business Plan was deeply flawed. It was well ahead of all its financial milestones, whereas the Turnbull legacy is a litany of successive upwards revisions, to around double the number taken to the 2013 election.
- Funding:
- Why haven't the 500,000+ Self Managed Super Funds with $600 B assets, looking for long-term, high-quality investment, been offered a large ($30B) 15- or 20-year NBN Bond?
- That not only takes the funding pressure off the Government and hence taxpayer, it actively transfers or shares Risk with willing investors and simultaneously provides an important financial sector with a perfectly targeted investment vehicle. They are patient investors looking for guaranteed returns and stable, dependable growth businesses.
- Rollout Preferences:
- Why haven't any of the ~10 M affected subscribers been offered the option to contribute directly to the increased costs of Fibre vs HFC or Copper Pair/VDSL2? Even on the inflated and manipulated MTM figures, the CapEx (not Peak Funding, the actual cost), per line is $2,300 for FTTN and $4,400 for Full Fibre. (Table 8: CPP by technology, page 67)
Why haven't subscribers been given the option to pay $1,250 towards Full Fibre, repaid over 3-5 years? - Requiring people to put their hands in their own pockets conclusively demonstrates "value in use" and their "willingness to pay". We don't have to take anyone's word for it.
- At a stroke, this would remove all the future Copper service upgrades, reduce the Capital Requirement, provide a commercially significant priority order for rollout and make the 65% of taxpayer-voters who want Real Broadband very happy.
I was seemingly the sole pre-2013 analyst to actively question the Turnbull Node Plan, to the point of being abused by Ellis, the now disgraced Staffer, for asking for basic information on their modelling - and for the majority, if not all, of the flags I raised at the time being shown correct, that it was impossible for Turnbull's plan to be executed and the asserted costs were absurdly low, failing even the simplest of sanity tests: I think I've established the right to now criticise the figures of the MTM-NBN Plan.
Turnbull's 2013 NBN 'Plan' was never "Nodes only", it always required a large (roughly equal) HFC component, but this was never stated, it was never going to be done for $29.5 billion, it was never going to have an appealing Internal Rate of Return (IIR or ROI) which contrasts with Turnbull's vitriolic, acerbic and excoriating condemnation of the 7.1% IRR of the Quigley / Young 2013 Business Plan as being absurdly low and unviable, especially for a commercial project.
Yet now under The Great Financial Wizard Trunbull, the Morrow / Switkowski 2016 Corporate Plan has a truly miserable 2.7% - 3.5% IRR to FY2040 (Page 70, 5.9 Long term financial outlook), if you can believe that figure or will we wait for yet another upward revision.
[Update June 2022]
2017: $49 billion incl $2.9 billion contingency. IRR 3.2% - 3.7%
2018: $49 billion incl $2.3 billion contingency. IRR 3.2% - 3.7%
2019: $51 billion, incl $1 billion contingency. IRR 3.2%. Plus $2 billion external debt
2020: $51 billion. no contingency? IRR 3.2%. unstated commercial debt
You've got to ask, in the light of multiple upward cost revisions without concomitant improvements in Revenue & Profit forecasts or a faster rollout, why we should even believe the latest figures. The total network has barely started its rollout. The Project staff cannot yet estimate final costs and schedules, they have simply not deployed enough to know, to even within 50% IMHO.
The Strategic Review, designed to inflate the cost of Fibre to the Premises and reduce, or hide, all the costs associated with Copper, said this. You'll note that the current MTM-NBN estimates have been kicked up another $10 B - $15B, which rather undermines these estimates.
Table 0-2: Financial outcomes including Fixed Wireless, Satellite and greenfields (1) [page 70]
That's not nearly the whole story, which is why the Liberals latest MTM-NBN Plan omits CapEx.
We're talking returns over 25 years. The IRR is the measure of the monetary returns of the investment, if the Cash had been placed in a bank account. It's the equivalent interest rate and assumes you're repaid the capital, just like with a bank account, you get you original cash back.
Over 25 years, the $56B produces $1.4B/year income, or $35 B return, on top of repaying the Capital, $56 B, for a total returned to the taxpayer of $91 Billion. This is from the Liberals own best estimates of "Leave the Quigley / Young Plan alone".
Without a CapEx figure for Aug-2015, should we assume the incorrect $33 Billion of the 'Review' or a higher figure? The Peak Funding has increased $8 billion, but we can't assume anything. All we know is CapEx is less than Peak Funding, but there's something within the current Plan that requires the CapEx to be disguised or hidden. I'm going to assume a modest increase of $2 B, or $400/DSL line, for $33 B in CapEx. [A higher CapEx improves the result - I'm attempting to be fair and improve their figures.]
Over 25 years, the $33B produces $0.891B-$1.155B/year income, over 25yrs: $22.75B-$28.9B.
With Capital repaid, a total return to the taxpayer of $55.275B - $61.875B.
Would you rather a high-risk $55B return or low-risk $91 billion return?
As a taxpayer, I'd like to know why these figures are being kept out of the debate.
On the Liberals own figures, the Quigley / Young Plan, would've returned $36 billion more to the taxpayer than the current Mixed Technology Mess.
Just why is this figure not public and not discussed??
It seems to me this is Ideologic Politics at its worst.
The Liberals, as self-styled Great Economic Managers and Financial Wizards, must be aware of these figures and be consciously and actively suppressing their discussion, deliberately choosing a course of action against the best interests of the taxpayers, voters and country. Especially SME's, small businesses who don't have the deep pockets to pay the 'premium' prices Telstra charges ($10,000/mth, per end + distance fees, for a 10Mbps (ten) fibre service).
In other news, we finally have something new about the NBN on the ABC website, admittedly an 'opinion' piece on The Drum, hardly mainstream and not 'News'.
Apparently over in Public Broadcaster Land, Real Broadband isn't a voter or Political issue or ever Newsworthy.
These are notes I've sent about that article, a precursor to this piece:
http://www.abc.net.au/news/2016-03-01/manning-what-went-wrong-with-the-nbn/7210408
What's been missed is one of the big NBN stories, and I mean “when the voters / taxpayers get it, they’ll go ballistic" stories.
They've perpetuated Turnbulls Biggest Lie:
There is none. How can that be???
Of all people, those with a background in reporting Business should know the difference between Profits, Revenue and Expenses.
Turnbull has conned all the Mainstream Media and got them solely focussing on an irrelevant number, ‘Expense’. At best it's one third of the story: Ledgers have two sides, but Business runs on Profit.
The Real numbers that should be reported are these:
Ask Quigley to talk about the proper way to discuss the financial aspects of building the NBN.
The difference between ‘Cost’, Profit and NPV / ROI / IRR - and what matters most to Owners - the taxpayers footing the bill if the project fails.
Then see if you can get an interview with Ziggy or Simon Hackett on ‘Cost’, CapEx and Profit / IRR.
If they refuse an interview, that’s telling as well.
Only in “nbn ltd”s latest Corporate Plan do they reveal their incredibly low IRR: 2.7%-3.5%.
Small wonder it's been hidden for over 2 years.
That’s on the lowered MT Equity of $29.5 B, or the undisclosed CapEx. We're not told.
Not sure over how many years, probably 25, and you can bet it doesn’t include planned network upgrades like ‘VDSL2 Vectoring’.
Quigley is already on-record saying that these high-speed copper technologies are like Mobile Phones:
If there are interviews of anyone the “nbn ltd”s board, they also need to be asked about Turnbull's 2013 election noise of “wait, some magical new technology will appear that will overthrow Fibre as the cheapest, fastest home connection”.
The real difference to the Budget and hence taxpayers between the Turnbull & ALP NBN plans would shock most electors / taxpayers and the Media should be shouting about it:
In 2013, this was 4.5% on either $30.4 billion or $29.5 billion, over the period to payback. Which was 2028 in Quigley’s plan.
Then couple that real cost with the difference in profit returned to the Budget, the 7.1% IRR vs 2.7% IRR over 25-30 yrs.
The whole difference in cost on Turnbull’s Plan, his whole ‘savings’, was 10 years interest on $900M.
This was never more than $400M, and now with ~2.5% Bond yields, is under $250M.
There’s nobody I’ve talked to about this figures that hasn’t reacted with astonishment at two things:
Turnbull's 2013 NBN 'Plan' was never "Nodes only", it always required a large (roughly equal) HFC component, but this was never stated, it was never going to be done for $29.5 billion, it was never going to have an appealing Internal Rate of Return (IIR or ROI) which contrasts with Turnbull's vitriolic, acerbic and excoriating condemnation of the 7.1% IRR of the Quigley / Young 2013 Business Plan as being absurdly low and unviable, especially for a commercial project.
Yet now under The Great Financial Wizard Trunbull, the Morrow / Switkowski 2016 Corporate Plan has a truly miserable 2.7% - 3.5% IRR to FY2040 (Page 70, 5.9 Long term financial outlook), if you can believe that figure or will we wait for yet another upward revision.
[Update June 2022]
2017: $49 billion incl $2.9 billion contingency. IRR 3.2% - 3.7%
2018: $49 billion incl $2.3 billion contingency. IRR 3.2% - 3.7%
2019: $51 billion, incl $1 billion contingency. IRR 3.2%. Plus $2 billion external debt
2020: $51 billion. no contingency? IRR 3.2%. unstated commercial debt
IRR includes "terminal value of 6x EBITDA". Final sale value a large component of return.
2021: unstated peak funding & contingency. IRR 3.7%
2022: no Peak Funding, no IRR. 12-mth forecasts only due to commercial loans.Apr 2020: $6.1 billion commercial loan taken
"$27.5 billion of external debt by June 2024", an extra $8 billion over orig $19.5B Gov loan
"refinancing Govt $19.5 billion loan by FY24"
$14.5 billion raised in external debt, repaid $7.8 billion Govt loan, $11.7 billion remaining
planning to raise total ~$27.5 billion of external debt by June 2024
The Strategic Review, designed to inflate the cost of Fibre to the Premises and reduce, or hide, all the costs associated with Copper, said this. You'll note that the current MTM-NBN estimates have been kicked up another $10 B - $15B, which rather undermines these estimates.
Table 0-2: Financial outcomes including Fixed Wireless, Satellite and greenfields (1) [page 70]
Scenario 1. Revised Outlook: $56 B CapEx, $73B Peak Funding, 2.5% IRRCompared to the Aug-2015 revision which very significantly omits a key financial measure, CapEx:
Scenario 6. Optimised Multi-Technology Mix: $33 B Capex, $41 B Peak Funding, IRR 3.1% - 5.3%
(revenue trajectory B, A)
The company's MTM approach as set out in the Corporate Plan will see the network completed by 2020 with a peak funding requirement ofWhat we have now is, on the original, unrealistic and pessimistic numbers of the Liberals own Strategic Review, that Full Fibre IRR at 2.5% is only marginally behind the current 2.7%.
between $46 billion and $56 billion
with a base case of $49 billion. [emphasis added]
That's not nearly the whole story, which is why the Liberals latest MTM-NBN Plan omits CapEx.
We're talking returns over 25 years. The IRR is the measure of the monetary returns of the investment, if the Cash had been placed in a bank account. It's the equivalent interest rate and assumes you're repaid the capital, just like with a bank account, you get you original cash back.
Over 25 years, the $56B produces $1.4B/year income, or $35 B return, on top of repaying the Capital, $56 B, for a total returned to the taxpayer of $91 Billion. This is from the Liberals own best estimates of "Leave the Quigley / Young Plan alone".
Without a CapEx figure for Aug-2015, should we assume the incorrect $33 Billion of the 'Review' or a higher figure? The Peak Funding has increased $8 billion, but we can't assume anything. All we know is CapEx is less than Peak Funding, but there's something within the current Plan that requires the CapEx to be disguised or hidden. I'm going to assume a modest increase of $2 B, or $400/DSL line, for $33 B in CapEx. [A higher CapEx improves the result - I'm attempting to be fair and improve their figures.]
Over 25 years, the $33B produces $0.891B-$1.155B/year income, over 25yrs: $22.75B-$28.9B.
With Capital repaid, a total return to the taxpayer of $55.275B - $61.875B.
Would you rather a high-risk $55B return or low-risk $91 billion return?
As a taxpayer, I'd like to know why these figures are being kept out of the debate.
On the Liberals own figures, the Quigley / Young Plan, would've returned $36 billion more to the taxpayer than the current Mixed Technology Mess.
Just why is this figure not public and not discussed??
It seems to me this is Ideologic Politics at its worst.
The Liberals, as self-styled Great Economic Managers and Financial Wizards, must be aware of these figures and be consciously and actively suppressing their discussion, deliberately choosing a course of action against the best interests of the taxpayers, voters and country. Especially SME's, small businesses who don't have the deep pockets to pay the 'premium' prices Telstra charges ($10,000/mth, per end + distance fees, for a 10Mbps (ten) fibre service).
In other news, we finally have something new about the NBN on the ABC website, admittedly an 'opinion' piece on The Drum, hardly mainstream and not 'News'.
Apparently over in Public Broadcaster Land, Real Broadband isn't a voter or Political issue or ever Newsworthy.
These are notes I've sent about that article, a precursor to this piece:
http://www.abc.net.au/news/2016-03-01/manning-what-went-wrong-with-the-nbn/7210408
What's been missed is one of the big NBN stories, and I mean “when the voters / taxpayers get it, they’ll go ballistic" stories.
They've perpetuated Turnbulls Biggest Lie:
What does the NBN ‘Cost’ to build and what does it cost the taxpayer?I challenge the Mainstream Media to do 5 minutes of real journalistic work:
find me any line-item in the last 3 Budgets for the NBN.That’s a serious challenge. Go find any Government expenditure on the NBN written in the Budget.
There is none. How can that be???
Of all people, those with a background in reporting Business should know the difference between Profits, Revenue and Expenses.
Turnbull has conned all the Mainstream Media and got them solely focussing on an irrelevant number, ‘Expense’. At best it's one third of the story: Ledgers have two sides, but Business runs on Profit.
The Real numbers that should be reported are these:
- Internal Rate of Return (on the Govt Equity or CapEx), and
- the dollar amount of that IRR, over the 25-30 year project life.
Ask Quigley to talk about the proper way to discuss the financial aspects of building the NBN.
The difference between ‘Cost’, Profit and NPV / ROI / IRR - and what matters most to Owners - the taxpayers footing the bill if the project fails.
Then see if you can get an interview with Ziggy or Simon Hackett on ‘Cost’, CapEx and Profit / IRR.
If they refuse an interview, that’s telling as well.
Only in “nbn ltd”s latest Corporate Plan do they reveal their incredibly low IRR: 2.7%-3.5%.
Small wonder it's been hidden for over 2 years.
That’s on the lowered MT Equity of $29.5 B, or the undisclosed CapEx. We're not told.
Not sure over how many years, probably 25, and you can bet it doesn’t include planned network upgrades like ‘VDSL2 Vectoring’.
Quigley is already on-record saying that these high-speed copper technologies are like Mobile Phones:
very complex signal processing needs very complex & expensive electronics which consume gobs of power for the increased processing.And it doesn’t include the real endpoint, upgrading the NBN network to Fibre to the Premises.
If there are interviews of anyone the “nbn ltd”s board, they also need to be asked about Turnbull's 2013 election noise of “wait, some magical new technology will appear that will overthrow Fibre as the cheapest, fastest home connection”.
The real difference to the Budget and hence taxpayers between the Turnbull & ALP NBN plans would shock most electors / taxpayers and the Media should be shouting about it:
The real cost of the NBN to taxpayers is primarily Interest costs (10-yr Bond Yield) of the Equity provided.
[Update, June 2022] The Parliamentary Budget Office published a report on the NBN in Dec 2016 directly stating the On-Budget Cost of the NBN was primarily the Cost of Capital - the Interest on Government Bonds.
The PBO was silent on "Final Sale Value", the dominating factor of total Taxpayer Return: a high OpEx, low Revenue Copper Network with no "in-place" upgrades possible, that doesn't own, but leases, access infrastructure from Telstra ("pits 'n pipes") is not worth much.
A Full Fibre Network can already be upgraded in-place to 25Gbps, with the potential, with off-the-shelf technology now, to run >1,000 Gbps to customer premises. [End update, June 2022]
Then couple that real cost with the difference in profit returned to the Budget, the 7.1% IRR vs 2.7% IRR over 25-30 yrs.
The whole difference in cost on Turnbull’s Plan, his whole ‘savings’, was 10 years interest on $900M.
This was never more than $400M, and now with ~2.5% Bond yields, is under $250M.
There’s nobody I’ve talked to about this figures that hasn’t reacted with astonishment at two things:
- why didn’t the ALP talk about this, why hasn’t anyone in the MSM been reporting on this? and
- Really?!??! The difference cannot be that small… That changes things completely.
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