NBN "only $11b" of government money

Stuart Corner
Wednesday, 27 May 2009 11:22

IT Industry - Strategy

The private sector could not come up with the about $5b in debt or equity finance needed to top up the government's $4.7b contribution to NBN mark 1, but the government thinks it will have no trouble raising a much larger sum for NBN mark 2.

Communications minister Stephen Conroy provided his most detailed outline yet of the government's views on funding the NBN, when he opened the Senate Estimates Committee hearings on Tuesday 26 May. "We have stated that [NBN Co] will operate as a commercial entity. As such it will have the capacity to issue its own debt. Therefore, for the purposes of funding this exercise, I have said that: the total cost of the network will be no more than $43 billion; we are assuming that it could be funded with a 50/50 debt-equity ratio, and that, of the equity, the Commonwealth will hold 51 percent; this means that, at this stage, we are envisaging the Commonwealth's commitment to be in the order of $11 billion."

When it announced NBN mark 2 on 7 April the government released an extract from the Expert Panel's report on NBN mark 1 which said: "There has been a once-in-75-year deterioration in capital markets that has severely restricted access to debt and equity funding. As a result all national proponents have either found it very difficult to raise the capital necessary to fund an NBN roll-out without recourse to substantial support from the Commonwealth or have withheld going to the market until they have certainty that their proposal is acceptable to the Commonwealth."

NBN mark 1, which was based on the premise that fibre to the node would be used to deliver broadband at up to 12Mbps to 98 percent of the population, was slated to cost about $8 billion of which the government promised to provide $4.7b.

Conroy later told Senate Estimates, according to shadow communications minister Nick Minchin, that the Government would be investing only $2.4 billion from the Building Australia Fund (BAF) into its $43 billion National Broadband Network, not the $4.7 billion it had previously committed and Minchin suggested that "With the Government ultimately responsible for this project, it could be faced with the prospect of borrowing all but $2.4 billion of the $43 billion estimated cost."

• 70 meetings to date on NBN
Conroy also told Senate Estimates that, since announcing the project "We have consulted widely with local and state and territory governments, telecommunications companies, electricity companies, the building industry, other Commonwealth Departments and consumer groups. This consultation occurred around the proposed regulatory changes, options for rolling out new fibre backbone networks and the greenfields policy. In total the Department has had more than 70 meetings with people interested in the national broadband network policy."