NBN good for economy, ROI not so easy: Report

Peter Dinham
Monday, 11 May 2009 11:30

Business IT - Technology

The proposed National Broadband Network (NBN) will potentially deliver significant long-term benefits to the Australian economy but it will be a major challenge just to get private funding into the project, let alone give investors a good return on their money.

At least, that’s the opinion of market analysts and consultancy firm, Frost & Sullivan, who, in their latest market insight report, predict that the government's proposed fibre-to-the-premises (FTTP) NBN can potentially deliver significant long term benefits to Australia's economy, but warns that it will face a number of challenges including, it says, “the difficulty of achieving a return on investment, pricing for NBN access, and the growing migration from fixed line to wireless access.”

Questioning whether the “massive investment” in the NBN “will pay off”, Frost & Sullivan stresses that one of the earliest challenges confronting the NBN is the need to attract sufficient private sector investment.

According to the firm’s senior research manager for Australia and New Zealand, Phil Harpur, to achieve its goal of attracting private investors, the federal government will need to explain how it plans to ensure sufficiently competitive pricing for high-speed broadband services to win over the majority of Australia's existing broadband users.

According to Harpur, early analysis estimates that for the government to achieve even a modest return on its investment, the new NBN is likely to have to charge access prices to the wholesale network that would result in substantial increases in retail charges on current standard access broadband plans.
 
“Similar investments in other national FTTP projects have only so far occurred in countries such as Japan, Korea and Singapore, and centres such as Amsterdam, where the geography and demographics keep infrastructure costs lower and more manageable than is the case in Australia.”

What’s more, Frost & Sullivan, caution that the government will need to consider, what it says is, the accelerating trend of users migrating from fixed to wireless broadband access.
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