Labor wants audit office review of NBN

Australia's national audit office should look into NBN's revenue, market share, and operating costs forecasts out to 2040, Labor has said.
Written by Corinne Reichert, Contributor

Australia's federal opposition party has called on the Australian National Audit Office (ANAO) to review the National Broadband Network (NBN) Corporate Plan, citing the Standard & Poor's report into the NBN earlier this week.

An independent review could look into the "scathing" report, a joint statement by Shadow Communications Minister Michelle Rowland and Shadow Finance Minister Jim Chalmers on Friday said.

"The NBN Corporate Plan contains various plans, projections, and other forward-looking estimates which, among other things, help the Australian people, Parliament, government, markets, and stakeholders assess the state of the business case and, by extension, the potential exposure of the Federal Budget and impact on consumers," the letter [PDF] said.

"We consider an urgent review of the long-term assumptions underpinning the latest Corporate Plan by the ANAO is the best mechanism to provide robust independent scrutiny of these matters to the Parliament. This was also a key recommendation of the NBN Joint Parliamentary Standing Committee."

Rowland and Chalmers said they have asked ANAO to carry out an "urgent assurance review" focusing on revenue, market share, and operating costs forecasts out to 2040; a comparison of the long-range assumptions throughout NBN's various Corporate Plans; and the "sensitivity of the business case to changes in these assumptions".

"Given Australians already have little faith in the Liberals' multi-technology mess, they should at least be able to see how the NBN's finances stack up," Rowland and Chalmers added.

NBN's most recent Corporate Plan from 11 months ago had seen the company reduce its peak funding estimation to the range of AU$47 billion to AU$51 billion.

NBN's Corporate Plan 2017 showed its base case remaining at AU$49 billion after the previous year's expected range of up to AU$54 billion -- which was itself reduced from 2015's range of AU$46 billion to AU$56 billion.

At the time, NBN said the lower peak funding case will hold "if the revenue drivers evolve more beneficially, the activations profile for FttN and HFC can be accelerated, and capex and opex are lower than expected".

The lower peak funding was also due to NBN reducing the number of total forecast premises to be passed by the end of the rollout by 200,000 thanks to more accurate geo mapping, meaning the rollout will be 97 percent complete by June 2019.

NBN has forecast its revenue to reach AU$1.9 billion in FY18, AU$3.5 billion in FY19, AU$4.9 billion in FY20, and AU$5.4 billion in FY21; and earnings before interest, tax, depreciation, and amortisation (EBITDA) of negative AU$3.4 billion in FY18, negative AU$2.4 billion in FY19, positive AU$0.7 billion in FY20, and positive AU$2.2 billion in FY21.

Capex is predicted to be AU$7 billion in FY18, AU$4.2 billion in FY19, AU$1.6 billion in FY20, and AU$0.6 billion in FY21; while opex is expected to be AU$2.4 billion in FY18, AU$2.5 billion in FY19 AU$2.7 billion in FY20, and AU$2.9 billion in FY21.

The S&P report [PDF] from earlier this week predicted that regulation around Australia's NBN could push the local mobile market further ahead because mobile networks have been excluded from the regional broadband scheme charge and from anti-cherry-picking laws.

"In our opinion, regulatory distortions will exacerbate the nascent trend toward mobile substitution," S&P argued.

"NBN Co's average access charge of AU$44 per premises per month simply leaves too much money on the table. This has spawned an infrastructure arms race among MNOs as they seek to bypass the NBN with their own 'wireless fiber' networks.

"The corollary, in our view, is that Australia will likely be a global leader in mobile broadband adoption."

NBN's high access charges, "opaque" services, and "inferior technology" means mobile solutions will serve as a substitute, according to S&P. The report also pointed to the likelihood of an NBN writedown and additional government funding.

Labor had last month announced that it would establish an NBN service guarantee if elected, including consumer compensation for NBN "underperformance".

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