Treasury docs show NBN worries evolve

Summary:While the Treasury did raise serious concerns about the financial risks posed by the National Broadband Network (NBN) two years ago, it seems that the government has gone a long way towards addressing those concerns in the intervening two years.

While the Treasury did raise serious concerns about the financial risks posed by the National Broadband Network (NBN) two years ago, it seems that the government has gone a long way towards addressing those concerns in the intervening two years.

On Friday, the Department of Treasury published a series of documents relating to competition policy and market structure aspects of the $35.9 billion NBN project dating back to 2009, following a Freedom of Information request from Fairfax.

In charge of the nation's coffers, the Treasury was concerned by the then-$42 billion project announced in April 2009, stating its views in a policy implementation report from May 2009 (PDF):

"Considerable financial risks to the Commonwealth remain, including uncertainty over the likely extent of private sector involvement. However, from a competition policy perspective, the government's announcement provides an excellent opportunity to address longstanding problems in the sector — the risk is that this opportunity is wasted or compromised.

This warning of "considerable" risks is repeated over a number of subsequent reports in 2009 and early 2010, until the release of the Implementation Study in May last year. After the study, another implementation report (PDF) showed that the Treasury was still concerned about private funding, although the risks were no longer "considerable", and were related in particular to whether the planned deal between Telstra, the government and NBN Co would go ahead.

The Implementation Study has identified that private sector involvement in NBN Co is unlikely until at least five years after the roll out is completed. Financial risks for the Commonwealth remain, in particular due to uncertainty regarding a deal with Telstra and likely take-up of NBN Co's services.

Reports for the rest of 2010 continued to highlight the uncertainty surrounding a definitive agreement with Telstra as one of the key risks for the project. By February 2011 (PDF), however, this risk was no longer addressed, with the Treasury focusing on the cost to roll out the NBN.

Financial risks to the Commonwealth remain, in particular, if the cost of the roll out exceeds NBN Co's estimates.

The evolving outlook of the Treasury reflects the evolving state of the network. A number of key pieces of legislation have been passed since 2009, including competition and consumer safeguards legislation and the NBN companies Bill, aimed at preventing cherry picking by fibre providers, which could have made achieving a return on investment for the network unviable. Alongside these changes, the roll-out of the network progressed in mainland and Tasmanian sites. Definitive agreements were also reached, with Telstra and Optus to ensure that their customers are migrated onto the NBN, as the telcos' copper and hybrid fibre-coaxial networks are shut down over the next ten years.

While the Treasury will likely perceive factors of the NBN as being a risk until the entire network is rolled out, paid off and privatised, factors that may have caused alarm for the department two years ago are not the same risks that the network faces today. And rather than being a worrying sign that the NBN is doomed, the changing nature of the concerns show that a number of the Treasury's issues have been addressed. The downgrading of risks from being "considerable" to just risks, and the Telstra concerns disappearing, show that problems can be eased or worked around. The replacement of these risks with considerations about cost blowouts is also heartening, since such a statement could be in the risk assessment of any major project, particularly one of the scale of the NBN.

Topics: Government, 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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