Budget 2014: NBN rollout to be privately funded after mid-2018

Budget 2014: NBN rollout to be privately funded after mid-2018

Summary: The Australian government has announced in its 2014-15 budget that it will contribute funding to NBN Co until mid-2018, after which, it will need to rely on the private sector for funding.

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TOPICS: NBN, Government AU
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Minister of Communications Malcolm Turnbull has announced in today's federal budget that the government's equity contributions to NBN Co will halt after the 2017-18 financial year.

Over the next four years, the government will contribute equity up to the AU$29.5b funding cap announced by Turnbull in April last year for the rollout of the National Broadband Network (NBN). On top of the AU$5.2b of equity provided since 2008-09, approximately AU$3.4b will be injected as equity into NBN Co this year, followed by AU$5.2b, AU$6.4b, AU$6.9b in the next three years. The last amount of equity injected into NBN Co will be AU$2.4b in the 2017-18 financial year.

After that time, it is expected that the rollout of the multi-technology mix (MTM) NBN Co will be funded by the private sector. This compares against the plan of the previous Labor government, which was to see the government contribute AU$37.4b in equity for a network that would see 93 percent of premises receive fibre-to-the-premises connections.

Turnbull has previously blamed existing contracts for why the MTM NBN is only AU$7.9b less than Labor's NBN.

The new 2017-18 cutoff for government equity funding for NBN Co is three years before the termination of the NBN Co Equity Agreement the former government signed that formalises the role of the commonwealth to fund the rollout, and leaves the commonwealth responsible for funding the costs of any termination of the project.

The budget papers state that as of the end of February this year, termination liabilities were estimated to be AU$5.7 billion.

"The Government is changing the National Broadband Network to ensure it will be delivered faster and at lower cost to the community," the government said in the budget.

As part of its changes to the network, the government said that renegotiating the NBN Co agreements with Telstra and Optus for access to fixed-line infrastructure will see the amount of equity needed reduced, with the equity provided in 2013-14 reduced from AU$3.5b to AU$3.4b.

"This new approach to NBN implementation will save AU$32 billion in funding costs, get the NBN finished four years sooner and enable nine out of ten Australians in the fixed-line footprint to get acces to download speeds of 50Mbps or more by 2019," Turnbull said in a statement.

Last week, NBN Co announced that it was spending AU$1.7b to increase the size of the footprints of its fixed wireless and fibre-to-the-node networks to manage demand expected on its satellite service to be available in 2016.

NBN Co stopped taking new customers on its interim satellite service late last year after demand far outstripped the capacity of the service. In February, the government committed AU$18.4m to access increased satellite capacity from Optus as a short-term fix.

The government said in the budget papers that equity payments to NBN Co made up approximately 14 percent of its capital budget.

Mentioned in the budget papers as a capital expense, but without an actual indication or estimate of the money needed for the project, was the upgrade of the Bureau of Meteorology's supercomputer, which is expected to reach its end of life in mid-2016. The new supercomputer will have a mid-life upgrade in 2018-19, and be used for weather forecasts and warnings across Australia.

"The expenditure for this measure is not for publication due to commercial-in-confidence considerations," the budget papers said.

Topics: NBN, Government AU

About

Chris started his journalistic adventure in 2006 as the Editor of Builder AU after originally joining CBS as a programmer. After a Canadian sojourn, he returned in 2011 as the Editor of TechRepublic Australia, and is now the Australian Editor of ZDNet.

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6 comments
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  • Financial Risk

    First we don't know what the costs will be for the Pay TV network or for the copper

    Considering the Opex for the dogs breakfast and the weather vulnerable street mounted tin boxes, plus the Cherry Pickers robbing MALCO of it's high value areas, any borrowings would of necessity be at a high interest rate.

    We are going to have several years of a strong el Nino commencing with a sweltering summer this year, going to be interesting to watch how it pans out.

    The infrastructure Government is intentionally destroying the the long term Nations essential National Communications infrastructure, once again putting all it's eggs in the one basket.
    The Lucky Country
    Poor Fella Australia

    http://www.businessspectator.com.au/article/2014/5/12/technology/fat-lazy-executives-are-holding-australia-back?utm_source=exact&utm_medium=email&utm_content=752013&utm_campaign=ts_daily&modapt=
    Abel Adamski
  • And nothing changes

    Wow, governments break election promises all the time, I get that, but they were outright lying and are now washing their hands of the whole thing right?

    Let's be serious - private investment WILL NOT HAPPEN for the people who need it. So the people in bad/rural areas with current speeds of UNRELIABLE < 1Mbps or NO CONNECTION AT ALL will still be left in the lurch come 2018. Something the government ownership would prevent as per original NBN build guidelines. Private companies are not going to roll out new infrastructure to the people they can't make a decent return off.

    So, instead of just hating Malcolm right now, I've decided to be officially disgusted by this poor excuse for a human being. I just don't get how this guy sleeps at night. Probably rolling in the kick-backs and financial thank yous from Big Media. What a waste of space this guy truly is. How does one become the minister for communication when you don't give a shit about actually improving communication for your constituents?
    Ramrunner-5dd3e
    • It's Lie_beral Party Policy.

      To promise something then do the opposite.
      Turnbull has been Allbullsh*t from the start when they announced their 'fully costed, ready to go' fairy tales at Foxtel Studios with Rupert pulling the strings.
      So in other words: Malcolm Turnbull has announced he will continue feeding us bovine excrement as usual.
      grump-a1eeb
      • Correction

        MALE bovine excrement
        Abel Adamski
  • Faster, Lower, Slower

    "The Government is changing the National Broadband Network to ensure it will be delivered faster and at lower cost to the community," they forgot to say "Slower" (speed) and thats if the copper will even handle that, if it hasn't corroded, I can't even get 1Mb ADSL2.
    tonye56
  • Tin can and string NBN.

    I live in South West Sydney. I check on the NBN roll out map to see when my area will be started. Well it is slated to start some time in the next 3 years. So going by the budget for the 2014- 15 year I will expect private enterprise to build the NBN for our area as it will be privately funded by then, what a joke this is.
    We will have a 3 tiered network by 2017 those with FTTP or FTTN & HFC, the rest of us will receive what ever the owner of the NBN gives us, I bet it will be NBN dial up.
    NBN co boss states they need to do 6000 premises a week however they are not doing no where near that figure. So much for the promises of faster cheaper and sooner NBN from this Lib pie in sky plan.

    This NBN plan will become the next white elephant like the F35 JSF that is so over budget, years behind production huge issues with software.
    It would have been faster to just keep FTTN and divide Australia into regions and have tenders placed to build it in those areas.
    NBN is just a pipe dream
    Mudrat70