NBN cancellation liability rises to AU$2.3 billion

NBN cancellation liability rises to AU$2.3 billion

Summary: Australian taxpayers would be liable to pay out AU$2.3 billion in compensation if the contracts associated with the NBN were cancelled.


The Australian Department of Broadband, Communications and the Digital Economy (DBCDE) has flagged that the cancellation of the contracts surrounding the National Broadband Network (NBN) roll-out would cost taxpayers AU$2.3 billion.

The department's annual report (PDF) revealed that the government's liability for the AU$37.4 billion NBN increased by AU$500 million between March 31, 2012, and June 30, 2012, from AU$1.8 billion to AU$2.3 billion.

The liability covers a range of NBN Co's contracts, including the AU$11 billion deal with Telstra to migrate customers over to the NBN, which accounts for AU$210 million of the liability.

The AU$800 million deal with Optus is not included as part of the liability, because the company has yet to start migrating customers from its hybrid-fibre coaxial (HFC) network onto the NBN.

As the 2013 federal election draws closer, Shadow Communications Minister Malcolm Turnbull has said that the Coalition would likely honour much of the existing contracts that NBN Co has in place, including the contracts for the construction of the satellite and fixed-wireless service. Turnbull has been reluctant to price his own policy, in part because he is not clear on the extent to which a coalition government would be stuck with NBN Co's existing contracts.

"Our policy will be costed in the sense that we can provide very hard, reliable estimates of the relative cost of our approach, but we are not in a position to provide an alternative, if you like, to the NBN Co's corporate plan, because we simply don't access the contractual information," he said last month.

"We don't know the extent to which they have made commitments, or the terms on which those commitments are made."

The government is looking to exempt the newly formed Parliamentary Budget Office from Freedom of Information requests, which would allow parliamentary parties to have their policies costed without the risk of the information about that policy being revealed to the public.

Administered expenses by the department increased in 2011-12 to AU$537.8 million, due to payments to Telstra as part of the deal worth AU$421.5 million. The Commonwealth's investment in NBN Co stands at AU$965.5 million as of June 30, according to the report.

Topic: NBN


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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  • Great deal if you can get it

    Department wages up 10% to 58.7m from 52.8m the year before. Not bad for a dept that oversees people doing work;-) Check out the defined benefit supperannuation plan expenses. I didn't know these were still offered (gotta love the public service).

    Taxpayer "investment" in the NBNCo is $965.5m, 13,500 active users (all technologies) @ 30 June. NBNCo is currently costing $71k per subscriber (or over yearly average male earnings).

    I'm confused why people continue to use the capex figure of $37b not total expenditure of $63+b for the costing. The money spent to date and number of subscribers shows the falacy of this position. The $63b doesn't include the departmental oversight costs;-)
    Richard Flude
    • Richard is confused

      Your point being?
      Perhaps you should drop 2 letters from your surname, the L & the E?
      • Sorry Richard but

        The above comment is quite amusing.
        Blank Look
    • Sigh

      Oh Richard... points for pushing the perpetual, one-eyed FUD (even harder than Turnbull)... but why?

      Once again the NBN has only begun... how many people used the harbour bridge prior to completion?

      You may well scream personal attack in relation to grump3's comment, but the truth about obvious, mindless FUD, isn't a personal attack.
    • Richard "Offender of Common Sense" Flude?

      "NBNCo is currently costing $71k per subscriber"
      Yes that's what happens when you plan, test, and rollout technology to an entire country. You do realise that more people are going to be connected over the next 9 years, right?

      "I'm confused why people continue to use the capex figure of $37b not total expenditure of $63+b for the costing."
      Because the government isn't lending NBNCo all of that $63bn. Simple really.

      "The $63b doesn't include the departmental oversight costs;-)"
      Yep, running a government costs money. Good thing that's what we pay 'em for, hey?
      • What testing?

        The technologies being depolyed by the NBNCo weren't invented by them. The slow deployment is a result of their lack of experience not thebtechnology.

        $71k per subscriber in their 2-3 year is defendable?
        Richard Flude
        • Rollout testing

          The testing I'm referring to is the test sites they had, I'm sure you've heard of them. They needed to test out their plans and methods before jumping in the deep end. Surely anything else would have been reckless.

          "The technologies being depolyed by the NBNCo weren't invented by them."
          Good thing too. They are rolling out access to the entire country, what they need is tried and true technologies, which is what they are using. They don't need to be spending billions of dollars on some risky new tech, especially when it's the government's money.

          "$71k per subscriber in their 2-3 year is defendable?"
          Absolutely, because that statement is rooted in fallacy. The $965.5m of investment hasn't gone into only those 13,500 active users' services, it's gone into the first part of the rollout. Some of that money is being used right now to build services for new users. That's the nature of investment, you have to spend money to put yourself in a position to provide somebody a complete service before they are going to pay for it, so of course you're going to be in the negative at the early stages.
    • "I'm confused"

      I'm not surprised...

      "The money spent to date and number of subscribers shows the falacy of this position."

      Only if you fail to understand the finer details and present a simpletons view of the project.
      Hubert Cumberdale
  • FUD using historical data?

    You should be talking up the great result; dept wages grow by only 10% in difficult times, $71k a steel for broadband customer generating $30/mth, unfunded defined benefits super for publi servants is a great thing for taxpayers, etc

    If the information is incorrect I'm happy to correct; if it is just embarrassing to your position then the "FUD" is actually valid criticism.

    Those of us expected to pick up the bill (i.e net taxpayers) are unhappy at the waste.
    Richard Flude
    • Think for yourself.

      "Those of us expected to pick up the bill (i.e net taxpayers) are unhappy at the waste."
      I think this is the one purely truthful thing I've ever seen you say. Problem is, you're not going to pick up the bill, and it's not waste, everybody KNOWS that at this point, except for the most loyal LNP voters who have been hoodwinked by the party they believe in.
    • "Those of us expected to pick up the bill"

      Those of us expected to pick up the bill are the users. We pay a monthly fee for a subscription with an ISP who then passes that money onto NBNco who then pays back the money which was used to construct the network. Hope that helps.
      Hubert Cumberdale
      • Why the need for taxpayer guarantee?

        If there's no risk the market would be rushing to buy NBNCo securities;-)
        Richard Flude
        • Are you "confused" again?
          Hubert Cumberdale
        • Err

          NBN specific securities aren't available as yet! So no they wouldn't and no they cannot.

          For someone who claims to know everything you don't seem to have a grasp on too much do you? Although you do 'now' know who the panel of experts were (no need to thank me).

          However, it said in the official NBNCo documentation that they are planning to make them available in 2015 (iirc).

          Ironically when the rollout has progressed further, the Telstra and Optus migrations have kicked in and ergo take up rates improve... got it now? Remember the question you didn't answer... "how many patrons used the Harbour Bridge before it was completed"?

          But one can purchase general issuance bonds, which part thereof are used to fund the NBN...

          Glad you are finally understanding your Commerce Masters and seeing that the NBN is not funded by ones hip pocket taxes.
  • And...

    You should stop intentionally going off topic, to divert, because you are unable to accept the topic.

    But speaking of off topic (since you insist) - I'm still awaiting you to show us all your successful comms (or was it IT) projects, you told us about?

    Don't be shy ;)
    • I'm off topic?

      I lead a company with over 10k data acalquisition devices in the field; sending data to our analytics backend. It does this over a variety of LAN and WAN technologies; we've used them all.

      Much like trying to call me out with NBNCo's VoIP offering I've done what many of you can only talk about.

      You label people "uneducated" with qualification beyond the majority of our peers and well above your own.

      You mih like to argue the topic in future.
      Richard Flude
      • Bravo

        Good for you Richard (seriously, that's impressive), but bear in mind that what you say here goes both ways.

        I spent 10 years as a data analyst and network admin for a large Govt department. A sibling did groundbreaking research that led to VOIP and ADSL2. My experience and sources are what I rely on, and they say the opposite of what you're saying.

        No disrespect, but I'm going to trust my experience and sources that tell me FTTH is the better option, and by a long way. Plenty of others who post here have similar experience in the field. Point being, remember that what you say applies to yourself as well.

        With experience also in accounting, I'm pretty satisfied the numbers add up as well.

        One very simple thing summaries it for me nicely. Labor has a plan to get the costs back - the users effectively paying a standard amount back to the Government. The Liberals dont.

        You talk about the expense of building the NBN, but in the end we're getting an NBN one way or the other. Which ends up cheaper in 30 years? The one that will need replacing (and every expert in the world agrees FttN will need replacing) or the one where there is a plan for the Government to recoup the costs?

        I dont want Telstra owning our network again, its a bad bad idea. Yet thats what the Liberals are doing.
        • Is it worth the cost? What about the delays?

          I was responding to RS-ef540. I give my experience and qualifications in response to his ad hom attacks; they don't make me authoritative on the topic (no one is; dismiss all appeals to authority - also popular with RS-ef540).

          "No disrespect, but I'm going to trust my experience and sources that tell me FTTH is the better option, and by a long way. Plenty of others who post here have similar experience in the field. Point being, remember that what you say applies to yourself as well."

          I welcome your considered position. It's not me (or you) that has been accusing others of being Liberal members, of being MT himself, of being uneducated when correct with their analysis, of not knowing VoIP or data offering commercially available, etc.

          "I'm going to trust my experience and sources that tell me FTTH is the better option, and by a long way."

          Why? Is it worth $63b of borrowed money guaranteed by taxpayers? Given NBNCo missed their own rollout targets in corp plan 1 by considerable margin isn't there a concern the project may be struggling? Are the delays defensible?

          Do you defend the mothballing of fibre coax networks at taxpayers expense which could be
          used to provide similar data services. What's wrong with xDSL delivering in the medium high speed data services for billions less and faster rollout? What if the later is finance by the private sector?

          "With experience also in accounting, I'm pretty satisfied the numbers add up as well."

          And I; both academically (Masters of Commerce Accnt & Fin) and commercially.

          The numbers add up on what level; they failed to meet the all forecasts in corp plan 1 except over on expenditure. $63b is a lot of value to create.

          "I dont want Telstra owning our network again, its a bad bad idea."

          What's the different between Telstra and NBNCo? Surely a monopoly supplier is the problem not a particular supplier; competitive markets the solution. Labor's policy guarantees a new monopoly funded entirely by taxpayers.

          I don't have the confidence that govt, especially this one, has the skills to operate such a massive project competently. All historical data supports my position; NBNCo own results and all other projects this govt has been involved with (BER, Pink-batts, *-watch, etc).
          Richard Flude
          • Correction: max taxpayer guaranteed borrowing forecast to be $44b

            not $63, thats expenditure to forecast break-even pt in 2021.
            Richard Flude
          • More inaccuracies Rich

            "fibre coax networks ... could be used to provide similar data services"
            No, they couldn't. To start with, the government doesn't own those networks, how exactly can it use them?

            Now here's a nice list of the reasons that they are not similar:
            - You can only get Telstra or Optus services over them, NBN Co services are available to any RSP.
            - Latency is much higher on HFC.
            - Upload speed is much lower on HFC.
            - HFC is a shared medium, ie. the more people use it, the less speed each person gets. Considering HFC is only slightly better than a decent ADSL2+ connection, this means that to put more people on the HFC networks you'd have to upgrade them.
            - While the download speed of HFC could be considered similar (at a stretch) to the available plans on the NBN right now, HFC cannot be upgraded to offer 1 gbit speeds, as the NBN will do within a couple of years.