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

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.
Written by Chris Duckett, Contributor

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.

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