Coalition's NBN accounting 'more honest': Hockey

Coalition's NBN accounting 'more honest': Hockey

Summary: Shadow Treasurer Joe Hockey has defended the Coalition's decision to keep the NBN off budget if it wins government in September.

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Shadow Treasurer Joe Hockey has defended the party's backflip on the accounting methods for the National Broadband Network, stating that the Coalition's NBN being kept off-budget would be "more honest" than Labor's NBN.

Since the last Federal Budget, both Hockey and Turnbull have accused the Labor government of engaging in a "charade" and using "accounting tricks" by keeping spending for the NBN off the budget bottom line, despite approval of the government's methodology from economists. Spending for the NBN is kept off budget because the investment is expected to be returned back to the taxpayer over time as customers begin to use services on the fibre, wireless and satellite network.

The Coalition backflipped on its criticism of this accounting methodology when Turnbull launched the Coalition's alternative NBN policy. Although the policy itself differs significantly from the current NBN Co rollout, which would see much of the fibre to the premise network replaced with a fibre to the node rollout that would use the existing copper line, the party opted to keep the investment into the Coalition's NBN off budget.

The background paper specifically questioned whether Labor's NBN could remain off-budget, while pledging that the Coalition's NBN would be off-budget.

"A significantly less capital‐intensive NBN such as the policy proposed here by the Coalition is the only way to ensure NBN Co can continue to have a legitimate claim to remaining off Budget, in addition to being the only way to avoid very large increases in prices," the background paper stated.

Speaking at the National Press Club in Canberra today, Hockey defended the party's backtrack on the budget accounting, and said it was "more honest" for the Coalition to keep their NBN off-budget than Labor's because it was more likely to make a return.

"Our NBN is more affordable, more deliverable, and more likely to make money than the government's NBN," he said.

It is unclear how the party proposes that their NBN will make a better return while also having lower wholesale costs. The Coalition's own policy document (PDF) suggests that the party would expect to be making less revenue in the first years of the network's operation than Labor's projections — AU$16 billion between 2012 and 2021, compared to AU$23 billion under Labor.

Hockey suggested that the NBN may be costing more than the government has let on.

"If there is a change of government, one of the great revelations will be the real cost of the government's NBN. And when Malcolm Turnbull consulted widely with industry on what they believed to be the cost of Labor's NBN, we took a conservative approach to what they were advising to identify the figure of $90 billion," he said.

This comes a week after Turnbull slammed the government for delaying funding for the NBN due to the delays in the construction of the network. The AU$90 billion figure that the Coalition has estimated Labor's NBN to cost has been rejected by NBN Co CEO Mike Quigley, who has said the project will be delivered on time and on budget.

"We are confident that we can bring in the project in on time at that end date, and on budget," he said in April.

In his National Press Club address, Hockey also indicated that the Coalition would support changes to the tax system to close loopholes that allow big multinational companies like Google and Apple to shift their profits overseas to avoid Australian taxes.

"I share [the government's] concern about multinational companies booking costs in Australia but banking profits in other jurisdictions and I think this is an issue that needs to be properly addressed," he said. "If we are elected, we will continue to pursue that."

Topics: NBN, Government, Government AU

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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Talkback

14 comments
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  • Rubbish

    The NBN return of 7.1% was chosen to keep it off-budget; it's validity questionable given what we now know.

    The NBN alternative suffers from exactly the same estimates and should be brought into the budget so all Australians have visibility of the risk they've undertaken and question the value offered.
    Richard Flude
    • Wrong

      "The NBN alternative suffers from exactly the same estimates and should be brought into the budget so all Australians have visibility of the risk they've undertaken and question the value offered."

      Labor says your wrong, the Liberals say your wrong, Treasury says your wrong and the OECD says your wrong. You may have a Masters in Fin/Ec, but you didn't actually learn anything and should consider returning it to the University of Bombay.

      Sooner or later Richard, you're going to have to be a man about it and face the fact that your either a moron or wrong, I leave it to you to decide which you want to be...
      Tinman_au
      • We'll see post Sept

        The value of NBNCo is to be audited, assuming a coalition victory.

        Then we'll see who's right (oh it's not a popularity contest).

        Rate of return critical to its recognition as GBE (and subsequent budget treatment), implausible given what we know. What is it you're claiming is wrong?
        Richard Flude
        • Hockey's Auditors

          HaHaHaHa
          What figure do you want???
          You got it
          Abel Adamski
          • So nothing?

            Typical.
            Richard Flude
  • Sure Hockey Sure!

    Every lie that you made, including the $90 billion dollar figure is just that - a lie.

    Perhaps we could use The National Party claim of #Fraudband.

    http://www.fionanash.com.au/Media/MediaReleases/tabid/84/articleType/ArticleView/articleId/213/LABORS-RURAL-FRAUDBAND.aspx

    Also, how can Coalition claim it be cheaper and more affordable, if there still a fair chunk of copper remaining? 800m is quiet a fair bit.
    DanielZenno
    • I think Malcolms 800m figure is wrong

      the only commercial FTTN network ever built in Australia (by TransACT, now owned by iiNet) had the nodes at 300m and they can get "up to" 80Mbps. The Liberal NBN is based off the old Telstra proposal, which was for 12/1 Mbps and the nodes were between 800-1.5Km from a premises.

      Mals nodes will need to be much closer than 800m if he wants to guarantee "up to" 50Mbps...
      Tinman_au
    • WOW, awesome history lesson

      I knew the background but didn't realize how the coalition had attacked it.

      I wonder how many other articles we could find showing the coalitions attitude towards FTTN before it became their plan?
      Yettie79
  • Fewer Customers x Less Revenue = FTTN fail

    The coalition cannot have it both ways, despite being frequently on record doing exactly that.

    They have magically overcome their abhorrence of off-budget funding, but failed to include the factor in Labor's NBN which makes it workable, namely the revenue stream to repay the government bonds. If FTTN gets less revenue, the bonds will fall due and taxpayers will have to pay them out.

    FTTP offers households and businesses more services to substitute existing alternatives, such as Foxtel, expensive offsite tape backup regimes, travel expenses for meetings and minor medical checkups, and so on. FTTP therefore attracts high average revenue per user, and being a monopoly it captures every user of fixed broadband in urban Australia. This is why it ticks the box as a candidate for off-budget funding.

    FTTN offers slower upstream speed, and has more field equipment that can fail. Customers are also free to use HFC or even mobile broadband, which may in some cases be close in performance to the copper options. FTTN therefore attracts fewer customers, and cannot command the high monthly revenues that a fibre service would attract.

    By proposing the same reheated 2005 Telstra FTTN proposal which even John Howard rejected for funding, by constraining upload speeds, and by allowing competition for fixed broadband, Malcolm Turnbull has guaranteed poor monthly revenue from his plan.

    FTTN will come back to bite the taxpayer, whereas FTTP will self-fund. Cost-Benefit analysis, anyone?
    umbria
    • Hockey's dreamin'

      Due to infrastructure competition from their decision to encourage rival networks in the profitable areas, subsidies in rural areas in order to maintain their "equal pricing" promise where is the return coming from?
      Considering also their copper maintenance will require 1billion PA plus all the power costs to run & cool those 60,000+ nodes on a lower customer base, customer prices will need to be a lot higher than on FTTP.
      FTTN might be cheaper to roll out short term but will cost it's users a lot more to use until it eventually becomes scrap when inevitably upgraded to FTTP down the track.
      grump-a1eeb
    • But wait, the FTTN fail only gets better..

      NBNco has stated that it deliberately chose to make its access costs low and to make the difference in speed tiers small in order to encourage uptake of data - which NBNco charges for.

      $23 per month for its 12/1 AVC product
      $38 per month for its 100/40 AVC product

      And what has happened is that NBN fibre users are now using twice the data they previously used.

      Now, substitute FTTN for FTTH and unsurprisingly NBNco's revenue falls. If FTTN were cheap - that is very cheap - it could be justified in business terms (though not for the country) A few billion dollars maybe. Not the $29.6 billion dollars revealed in the Liberal's own costings.

      But wait, it gets worse.

      We have good grounds for believing that even with sub 700m Node distances a great deal of the copper in residential areas cannot provide anywhere near the ideal speeds Turnbull has lifted from vendor's blurbs.

      Have a good read of this.

      http://sortius-is-a-geek.com/?p=2983

      The short version is that a great deal of the copper Telstra actually used has twice the loss than the copper used in the vendor's predicted speed versus distance graphs.

      What this means of course is that there is a further differential in end user value between fibre and copper. Not just raw speed, but reliability and predictability. In a market with such a Sunday spread of products, you either end up discounting the substandard copper or you end up hiking the price of the fibre products.

      Again, an illustration of why Hockey is lying and why FTTN could easily become the "white elephant" and the "burden on the taxpayer" that the Liberals were so fond of screaming about the NBN before they decided to go off budget themselves (in the pretense of doing something the Liberals have never, ever done before)

      Oh, but it gets worse.

      In his "policy" document, Turnbull talks rather too much about competition. In fact he's opening us up to the ultimate disaster. The ultimate real life, multi billion dollar demonstration of their failed ideology. And that's to allow NBNco to be overbuilt.

      So they borrow $30B of taxpayers money, in order to build a temporary network, which if opened up to competition will be overbuilt with fibre and will fail spectacularly.

      Ready for more fail?

      Either the copper will become uneconomic, or obsolete. As it is there's a billion dollars of maintenance involved in keeping the copper merely to voice standards. What happens when its pressed into service holding a VDSL carrier? Answer - the faults escalate exponentially. And, even if we were generous and take 75Mbps as being the ultimate, this thing won't go any faster, speed that few people will ever exceed, even with vectoring. That figure will be exceeded by Cisco's projections of average fixed internet speed, in 2018. Yes, that's right. 2 years after they even start building it.

      Even if FTTN could limp towards positive revenue (very unlikely given the billions in copper maintenance and possible overbuild) the break even wouldn't be until closer to 2030. But will it even be allowed to get that far? Indeed will it be abandoned even before its completed?

      Its the biggest policy disaster seen since we went to war with Iraq. And quite likely much more expensive.


      To all the bewildered Liberal fans, who are watching their Party dishonestly pretend to be going into the business of spending $30B of borrowings on a public construction project, I ask. Is this for real? Or are the Liberals engaged in fraud in the true sense. Making you believe what you want to believe because you're so desperate to "ditch the witch". Engaging in what amounts to manipulating people out of their votes with a nexus of lies. Ask yourself what else you're being lied to about? How you're being manipulated by the Murdoch media?

      Worth a thought aint it.
      Russel-07615
      • Which broadband policy should Australia adopt?

        Spot on, Russel. I just wrote the following article expounding this, and cautioning the coalition that a similar vote leakage to independents as happened in 2010 will see them in minority government. See http://newsweekly.com.au/article.php?id=5583&s=PXfHMh
        umbria
      • Excellent

        Excellent post mate, well done, this has more truth in it than most of my old school text books.

        GENIII
        GENIII
  • well, well, well

    The last time the Libs got an audit done it turned out that it was done by their mates, gave them the answer they wanted but was absolutely wrong. Maybe Joe, Mal and Tony can replace the Treasury with WHK? It's save a bucket load of cash and give only the figures we can "trust".
    KRP1950