Telco alliance says NBN will cost $55b

Summary:The Alliance for Affordable Broadband has called for clarification on the NBN business case summary, saying that its calculations put the total cost of the NBN project at $55.2 billion.

The Alliance for Affordable Broadband has called for clarification on the National Broadband Network (NBN) business case summary, saying that its calculations put the total cost of the NBN project at $55.2 billion.

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The Alliance is made up of 10 telecommunications executives from companies including AAPT, Vocus, Pipe Networks and BigAir.

In the letter released today (PDF), the Alliance called for NBN Co Mike Quigley to explain the true cost of the network outlined in the NBN business case summary released yesterday.

"In the opinion of the Alliance for Affordable Broadband, the Business Case Summary provides a disturbing insight into a substantial cost blow-out for the project of some $13 billion more than originally projected (with the build having barely got underway) with indirect admissions that NBN needs to operate as a newly installed telecoms monopoly, extracting monopoly rents from those who can least afford it," the group said.

The alliance stated that the $35.7 billion capital expenditure could not be called the total cost of the network as it didn't include the $13 billion before tax cost for getting Telstra on board or the extra $4 billion in interest repayments on the debt for the network. The alliance puts the total cost of the project at $55.2 billion.

The alliance also raised concern with parts of the document that state that prices for products on the NBN would expect to be reduced over time, except for the basic service offerings.

"This is a disturbing development. By this statement, NBN Co expects to decrease the real prices for products able to be afforded in homes with higher incomes, yet households on low incomes who can only afford the most basic service will not see any similar improvement in affordability," the letter stated. "In fact, it would appear that it is NBN Co's intention to make this product less affordable over time while at the same time removing any choice those consumers have to acquire a different cheaper alternative."

The network might not even reduce the digital divide as Conroy has often claimed, according to the letter.

"Are we to understand that NBN Co is now clearly articulating that the basic service will become less affordable for those most affected by the digital divide once customer choice is removed over time?"

The "most enlightening" aspect of the business plan, according to the alliance, is that it appeared that the only way the network is viable is if it has a monopoly on the fixed-line market, without Telstra operating its copper network parallel to NBN Co.

"We believe it is now clear that the fundamental business case for a $43 billion NBN is completely flawed," the letter stated. "If it isn't, why is NBN Co and the government proceeding on the basis that it has to create a new monopoly? Furthermore, why does NBN Co need to create a new backhaul monopoly for itself by forcing 14 [Points of Interconnect] nationally?"

Shadow Communications Minister Malcolm Turnbull welcomed the letter today, asking Prime Minister Julia Gillard in Question Time today to explain the costings in the business case summary. Gillard responded by saying that Turnbull was "making numbers up".

The Alliance for Affordable Broadband formed in August during the 2010 Federal Election backing the Coalition's proposal for a mix of technologies for a broadband network plan. Earlier this month, the group expressed support for a cost-benefit analysis of the NBN.

Topics: Telcos, AAPT, Broadband, Government : AU, NBN

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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