Budget 2012: govt's NBN liability hits $1.8b

Budget 2012: govt's NBN liability hits $1.8b

Summary: As the National Broadband Network (NBN) roll-out ramps up, the cost to cancel associated contracts has hit almost $2 billion.

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As the National Broadband Network (NBN) roll-out ramps up, the cost to cancel associated contracts has hit almost $2 billion.

As part of the 2012-13 Budget, the government has outlined the financial risks associated with the current projects it has undertaken, and the impact that these risks could have on the Budget bottom line, including those surrounding the NBN.

NBN Co has signed a number of construction, satellite, fixed-wireless and other deals in the last few years as the NBN started its roll-out across the country.

Due to the uncertainty around whether a change of government would lead to a massive change in policy that would lead to the cancellation of these contracts, the government is liable for costs associated with the termination of those contracts.

According to the budget papers, NBN Co's termination liabilities as of 31 March 2012 are estimated at $1.8 billion.

As part of NBN Co's $11 billion agreement with Telstra to lease ducts, pits and dark fibre, the government is also liable to pay Telstra up to $500 million if the deal is changed as a result of a change in policy.

As of 31 March 2012, NBN Co estimates that it would be liable to pay Telstra $209 million if the roll-out is terminated.

The Coalition has indicated that it would seek to renegotiate the government's deal with Telstra, aiming to obtain part of Telstra's copper network so it can roll out a scaled-back fibre-to-the-node network, instead of the fibre-to-the-home approach that NBN is taking today. Telstra CEO David Thodey has said that he would be willing to negotiate with the Coalition, but has warned that he will have the interest of shareholders in mind in any such negotiations.

As of 30 March 2012, the government has paid Telstra $321.55 million as part of the $11 billion deal.

The $800 million Optus deal is also listed as a potential risk if it is terminated, but the papers indicate that as of 31 March 2012, there is no financial risk from this deal.

In the 2011-12 financial year, the government funded NBN Co with $2.1 billion, with $1.7 billion funded through Aussie Infrastructure Bonds. This is less than the $3.4 billion forecast in last year's Budget, because delays to the signing of the Telstra deal delayed the roll-out of the NBN.

In 2012-13, NBN Co is set to receive $5.8 billion in funding from the government, followed by $6.6 billion in the following year, $4.1 billion in the year after and $3.6 billion in 2014-15. Of the total $20.1 billion, $9.9 billion will be spent on the fibre roll-out, while $2.2 billion will be spent on the fixed-wireless and satellite portions of the roll-out.

To "improve public understanding, address misconceptions and provide updated information about the National Broadband Network", the government also spent $20 million in funding in the last financial year.

As part of a broad-ranging trial of telehealth services over the NBN in a number of different agencies, including the Department of Human Services (DHS) and the Department of Veteran Affairs, the government has allocated $22.2 million over the next three years. The government initially announced this package in January, and indicated funding in forward estimates.

The NBN is also being used as a cost-saving measure for the government. As it pushes towards a $1.5 billion surplus next year, it is planning on making $11.2 million in savings by not upgrading ICT infrastructure for Australian government agencies stationed on Christmas Island. Instead, this service will be provided by NBN Co's satellite operation by 2015.

Meanwhile, $2.4 million has been set aside over the next two years to provide online remote access to "national cultural institutions" to help demonstrate the opportunities offered by the NBN.

According to the Budget, visitors will be able to take virtual tours of the institutions via a mobile robot.

Topics: NBN, Broadband, Telcos, Optus, Telstra

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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7 comments
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  • Telstra is not going to mind getting a payout for doing nothing so the Lib's funding from them is safe. The question is what's more important to the Lib's - party funding or taxpayer dollars?
    xBeanie
  • It is good to know the numbers, but the missing bit is that if the NBN is scrapped, its status is changed and it is no longer an investment. So, by the governments finance rules, all past, present, and future investments on the NBN will instantly become a budget expense for the year the change occurs. In other words, the budget would instantly drown in red ink...
    viditor
  • So Telstra gets handed $500 million just for a change in the deal with NBNco. No wonder they said they would be willing to negotiate with the coalition. Those clowns will be just giving them taxpayers for doing nothing. That's $500 million of taxpayers money that could be better spent on hospital beds, more roads, schools and even communications infrastructure (possibly a FTTH network) What a waste! Stop the waste!
    Hubert Cumberdale
    • Yes, HC, but what will Telstra do with all those taxpayers that you say the coalition will give them for doing nothing?

      And (a bit) more seriously, I think your suggestion of building an FTTP network is a brilliant one. In fact it's so good, it should have completely bipartisan support in parliament. After all, what politician in their right mind could possibly oppose it?
      anonymousI
    • Isn't it ironic HC, that the anti-NBN moron brigades own FUD can be thrown right back at them, but now (whereas there's has no validity due to the investment nature of the NBN funding) their claims thrown back at them, are now actually valid...LOL.
      Beta-9f71a
      • Seriously, the Abbott-and-Hockey show should have met the rotten vegetable shower long ago. I keep thinking the audience will tumble to their fourth rate under-rehearsed vaudeville, but somehow they keep getting encores.

        Turnbull tries to light up the anti-NBN hecklers with his "if my grandmother had wheels, she'd be a trolley" routine. Then there's Andrew Robb lapping up the groans with his "stop me if you've heard this before..." patter, and the bicycle horns offstage signal the arrival of Barnabus Joycini, the saddest clown in the world with his yearning to be taken seriously.

        Just declare the whole thing a fire hazard and shut it down. For pity's sake.
        Gwyntaglaw
  • I fear that if the Liberals get back into power before the NBN really gets underway, that we will again suffer a technology killer government. The NBN is about delivering 21st century communications over a new cable, not over a wornout copper cable with little bandwith.
    tonye56