Economic crisis 'has made NBN unviable'

The global economic crisis has made the Federal Government's National Broadband Network (NBN) plan an expensive and risky proposition which end users won't have the money to pay for, one analyst said this week.

Guy Cranswick
(Credit: IBRS)

"The cost of money has risen and will stay high for some time to come," Guy Cranswick, advisor at analyst firm Intelligent Business Research Services told ZDNet.com.au today. "The return on investment is highly questionable... Why would you make an investment on technology that is already out of date, in financial conditions which are way below optimal?"

Apart from the difficulty of getting money, consumers were also putting their credit cards away, according to Cranswick, and were unlikely to want to pay a premium for faster speeds. "The evidence in Europe is that people are cancelling their broadband accounts," he said.

"I think the virtual collapse of the Terria consortium demonstrates the unviability [of the network]. Do they really want to face all of that?"

The analyst highlighted a speech Telstra's CFO John Stanhope gave earlier this month, in which he said that the crisis would put up the cost of building the network, and had already started to affect the level of discretionary customer spend.

Considering that, the analyst wondered what the private thoughts were of the CFO of Optus, which has been the main power behind the Terria bid, with the other members of the consortium only "acolytes". "The question, of course, is how can you withdraw from it if you have to?" Cranswick asked.

Cranswick believed the national broadband network, which he said was never a great policy, had become politically unimportant alongside other bigger worries, with the economic situation having changed dramatically since before the election. "Australians are more concerned about keeping their homes, keeping their jobs," he said.

"As a government investment there are probably better things they can do with that money than a national broadband network," ABN AMRO telecommunications analyst Ian Martin agreed.

Cranswick believed these problems would cause Conroy to delay the building of the network by ordering a six-month moratorium to see what the markets would do, although Ovum telecommunications analyst David Kennedy believed the government would lose too much politically to significantly delay or can the network, which was one of its key election promises.

It has not only been the analysts who have been questioning the network. In a statement, iiNet CEO Michael Malone said that no one in the industry thought the national broadband network was a good investment in its present form.

"It's going to increase prices for customers, with no increase in speed or performance for the majority of Australians. Some customers will even see speed drops. But it's being driven by a mindless political agenda that has nothing to do with customers any more," he said.

"The process is even crazier. In every other country where something like this has been attempted (Singapore, NZ, Netherlands, UK), the government has first run a process to work out what the network will look like.

"Once that's been clearly communicated, then the process is begun to tender (Singapore) or just build it (for the others). In Australia, the government has everything shooting in the dark, with a clandestine expert panel and a closed doors ministerial decision to decide everything.

"Tax payers should be rightly appalled at the idea that the government is embarking on the largest infrastructure program in a decade, and is doing so with no transparency. The minister hides behind his own gag order whenever he is asked about the NBN," he concluded.