Reminder: The government will not pay for all of the NBN
The 2016 Budget confirms that every single figure for the "cost" of the NBN is a massive fudge.
The longest-running political argument over the National Broadband Network (NBN) has been over how much it will cost. Neither side of politics has covered itself in glory on this point, with the estimates for the current "multi-technology mix" proving every bit as rubbery as the previous model. But there's one aspect which actually hasn't changed, even though it's often ignored: the NBN was never designed to be fully paid for by government.
The notion was always that it would eventually seek outside funding and effectively be "floated" as an independent company. The government was merely providing start-up finance, albeit on a massive scale. This was handy from an accounting perspective, since it meant that money spent on the NBN was effectively an "investment" and didn't clutter up the Budget as a massive expense.
The official sum that the Coalition intended to invest in the NBN was $29.5 billion. The issue is that according to the plan, this investment will finish up in the 2016-2017 financial year, and the NBN will need additional sources of funding by then. But while nbnco has been happy to boast about how the network build is going, not much has been said about the plans to get additional funding.
However, that does get a mention in the papers for the 2016 Budget. Here's what it says:
Consistent with nbn's 2016 Corporate Plan, nbn is expected to raise debt from external markets of between $16.5 billion and $26.5 billion (with a base case of $19.5 billion) to complete the rollout of the network. nbn is currently undertaking the necessary preparatory work on the proposed debt raising. In the event that nbn is initially unable to raise the necessary debt on acceptable terms, interim funding support may be required.
I imagine that nbnco executives will be working their butts off to avoid embarrassing their government paymasters by having to seek "interim funding". However, raising funding may not be straightforward. After all, as we noted earlier this week, NBN's wholesale customer list is dominated by a handful of companies, with Telstra in a clear leading position. Investors might not see that as a particularly sure bet.
None of this means that the NBN won't get built. But it does remind us that the cost is essentially unknown. At least we can get some idea when it's coming to our neighbourhood.
Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.
