On Thu, 23 May 2013, "Pidgorny, Slav (GEUS)" <slav.pidgorny@anz.com> wrote:
Might be cheaper to complete NBN and recover costs by privatising it.
It would be cheaper to complete the NBN and make an operating profit on it rather than scrapping it. I believe that they have spent a lot of money on hardware that isn't yet connected, rented office and DC space that isn't yet used, and signed expensive contracts with Telstra that would require exit payments. http://www.afr.com/p/technology/nbn_co_won_recover_costs_by_defends_jEFzvoTE... But I don't think that they should aim to make a profit. From the above link (thanks Lev) it's costing $37.4G and has to give a return of 7.11%. So if they were to just give a 7.11% return directly on $37.4G that would mean an annual profit of $2.7G. https://www.cia.gov/library/publications/the-world-factbook/geos/as.html The CIA says that the Australian population is 22,262,501, that means that the NBN needs to make an average profit of $120 per annum for each Australian resident to give a 7.11% return. That is assuming of course that the initial investment was interest free and assuming that the startup years when a fraction of the country is covered didn't have to make a 7.11% return. If the NBN was accounted for in a similar manner to any other business venture then the initial investment would have an interest rate attached and a higher return would be needed at a later date to cover the opportunity cost of investing in government bonds or other things. Now a $120 per annum profit on each Australian resident for Internet access isn't the problem. The first problem is that the NBN only provides fixed service (home/office fiber and wireless to locations where fiber can't be run). So the money that is spent on mobile phones (which is probably the majority of money spent on comms) isn't going to the NBN. The second problem is that the NBN is going to the household not the person. http://www.censusdata.abs.gov.au/census_services/getproduct/census/2011/quic... According to the ABS there are on average 2.6 people per household, so that takes the per household profit requirement to $311 per annum ($26 per month) if every single household in Australia signs up. If the profit is to be $26 per month then how much would the NBN have to charge? When I attended a presentation on the NBN they were talking about the router having 4 ports for 4 different services. They had the idea that you might have an ISP, a hospital, and a cable TV company using different ports. I can't imagine someone paying the $24 per month fee they were discussing for cable TV when TV over IP could be done on the ISP channel. $24 per month for medical equipment would be a great deal for a very small portion of the population, but the majority are well enough not to need such things. I expect that the average number of ports used by NBN customers will be something very close to 1, maybe 1.01. I don't think that the NBN would get a 1.08 average port usage needed to make $24 ports give a $26 revenue, let alone what might be needed to make a $26 profit (maybe an average of 2 ports). Also I don't think that the NBN will ever get near 100% population coverage. If nothing else a significant portion of the population can have their Internet needs covered by a Kogan 3G connection for $299 per annum. The numbers just don't work, the NBN will never recover it's costs. We just have to accept that the money was invested in making Australia a more educated and technologically advanced country. -- My Main Blog http://etbe.coker.com.au/ My Documents Blog http://doc.coker.com.au/