Economic crisis 'has made NBN unviable'

Economic crisis 'has made NBN unviable'

Summary: The global economic crisis has made the Federal Government's National Broadband Network plan an expensive and risky proposition which end users won't have the money to pay for, one analyst said this week.

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The global economic crisis has made the Federal Government's National Broadband Network (NBN) plan an expensive and risky proposition which end users won't have the money to pay for, one analyst said this week.

Guy Cranswick
(Credit: IBRS)

"The cost of money has risen and will stay high for some time to come," Guy Cranswick, advisor at analyst firm Intelligent Business Research Services told ZDNet.com.au today. "The return on investment is highly questionable... Why would you make an investment on technology that is already out of date, in financial conditions which are way below optimal?"

Apart from the difficulty of getting money, consumers were also putting their credit cards away, according to Cranswick, and were unlikely to want to pay a premium for faster speeds. "The evidence in Europe is that people are cancelling their broadband accounts," he said.

"I think the virtual collapse of the Terria consortium demonstrates the unviability [of the network]. Do they really want to face all of that?"

The analyst highlighted a speech Telstra's CFO John Stanhope gave earlier this month, in which he said that the crisis would put up the cost of building the network, and had already started to affect the level of discretionary customer spend.

Considering that, the analyst wondered what the private thoughts were of the CFO of Optus, which has been the main power behind the Terria bid, with the other members of the consortium only "acolytes". "The question, of course, is how can you withdraw from it if you have to?" Cranswick asked.

Cranswick believed the national broadband network, which he said was never a great policy, had become politically unimportant alongside other bigger worries, with the economic situation having changed dramatically since before the election. "Australians are more concerned about keeping their homes, keeping their jobs," he said.

"As a government investment there are probably better things they can do with that money than a national broadband network," ABN AMRO telecommunications analyst Ian Martin agreed.

Cranswick believed these problems would cause Conroy to delay the building of the network by ordering a six-month moratorium to see what the markets would do, although Ovum telecommunications analyst David Kennedy believed the government would lose too much politically to significantly delay or can the network, which was one of its key election promises.

It has not only been the analysts who have been questioning the network. In a statement, iiNet CEO Michael Malone said that no one in the industry thought the national broadband network was a good investment in its present form.

"It's going to increase prices for customers, with no increase in speed or performance for the majority of Australians. Some customers will even see speed drops. But it's being driven by a mindless political agenda that has nothing to do with customers any more," he said.

"The process is even crazier. In every other country where something like this has been attempted (Singapore, NZ, Netherlands, UK), the government has first run a process to work out what the network will look like.

"Once that's been clearly communicated, then the process is begun to tender (Singapore) or just build it (for the others). In Australia, the government has everything shooting in the dark, with a clandestine expert panel and a closed doors ministerial decision to decide everything.

"Tax payers should be rightly appalled at the idea that the government is embarking on the largest infrastructure program in a decade, and is doing so with no transparency. The minister hides behind his own gag order whenever he is asked about the NBN," he concluded.

Topics: NBN, Broadband, Government AU, Telcos

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at ZDNet.com.au as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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8 comments
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  • The NBN is a joke.

    The entire NBN proposal is a joke from start to finish. The equity problems are the least of its problems.
    anonymous
  • Worse than that...

    Telstra will want a minimum return of $89/month for any customer who uses it.

    What a f___king joke!

    Fixed lines are being massively undermined by Wireless anyway, so the whole concept of a NBN based on the rotting copper network is EVEN MORE OF A JOKE.

    Conroy, you're a disgrace!
    anonymous
  • $89

    Where the hell did you get that number from?

    I only found that number in one place ... up your A$$!!
    anonymous
  • Terria - calling all Morons, Calling all . . . . hi Matt

    Worse than that matt the idiot cant think.

    For whatever price Telstra charges, if its too much,
    a/ a custumer can choose not to buy it,
    or
    b/ gives a perfect opportunity for a competitor to sell them something for less.

    Because if Telstra doesnt get the NBN, you can gurantee Telstra will fight and win customers off whoever does.

    Good luck with poison chalice Terria, some in the team have perhaps woken to that fact !

    Go Terria, "its just a flesh wound"
    anonymous
  • NBN is crtical to Digital Success of Australia but this article on Economic cris

    Dear editor,
    Thanks for this article on Economic crisis 'has made NBN unviable' , however, in my opinion, it is politically motivated 'hit piece' to stall the momentum picked up by the tender deadline drawing closer. People who lost in the last election do not want this NBN to be successful, that's why they are trying to put this spin of "unviability".

    I think digital success of Australia depends on NBN. Without "speed" and "availability" of digital services to Australians, you can not have the economic boons every one is seeking here.

    Digital economy needs the National information Infrastrcuture which is this NBN. Long time ago, US Vice President Al-Gore put this to the world, the GII and NII framework. NBN is a catch-up to that world vision. Australia is already lagging behind the world, if curremt government fails to have the NBN built, then surely Australia will miss the boat of having the digital future every one wants. Our future generation will not forgive this governement.

    So let's hope for 'objective journalism' to prevail and governement to behave responsibly.

    Alam Nur
    anonymous
  • waffle

    The only morons around here are the Tel$tra patsys looking to suck the last few dollars from the wallets of our hard working mum and dad consumers.

    Enjoy your $11.9B loss in shareholder value Tel$tra fans, because structural separation certainly isn't off the cards yet.
    anonymous
  • Rise of wireless

    Considering whitespace networking equipment has been given the go ahead in the US by the FCC im wondering why that isnt being implemented instead of a outdated fixed line system.
    anonymous
  • @Waffle

    You Trully are Moron.

    1/ telstra has not asked for any money.
    It tried to spend $5 Billion plus (without a cent from the Govt) to run FTTN in the capital cities.
    As the ACCC chose not to agree to Telstra's suggested wholesale price, Telstra chose not to go ahead and invest.

    2/ The Govt NBN tender is not offering $4.7 billion dollars as a grant. It is to be taken as either debt to be paid back or equity (give the Govt a share of Telstra's business / asset)

    3/ The $4.7 billion dollars will go towards increasing bandwidth / running comms to rural Aust. (98% of pop.) An amount thats not nearly enough for running fibre. And even if it were, that customer base could never make a basic ROI against that expense. Not a viable business case. But necesary as a function of GOVERNMENT NOT PRIVATE ENTERPRISE, TELSTRA.

    And in light of current overwhelming economic disaster, should not do the NBN.

    Compounding that are the abundant established IT&T and media company's that Telstra can now take an interest in at rock bottom prices.

    Thanks for the delay Optus, you have saved Telstra a fortune, and set it up to make a fortune.

    Stay tune for the multiple big announcement coming up.
    anonymous