NBN could cost Aust taxpayers US$8.6B

The Australian government will foot about a quarter of its A$43 billion (US$33.5 billion) National Broadband Network proposal, and adds implementation study will determine private sector investment.

Minister for Communications Stephen Conroy told the Senate Estimates hearing Tuesday that the government would foot A$11 billion (US$8.55 billion)of its A$43 billion (US$33.5 billion) NBN proposal, but admitted its implementation study would determine private sector investment.

Conroy gave his estimate on the basis that the NBN would operate as a government-controlled commercial entity that could issue its own debt in order to cover the estimated A$38 billion (US$29.5 billion) to A$43 billion (US$33.5 billion) cost of the project. The figure included the A$4.7 billion (US$3.7 billion) allocated in the recent Federal Budget.

"We are assuming that it could be funded with a 50/50 debt-equity ratio, and that of the equity the Commonwealth will hold 51 percent. This means that, at this stage we are envisaging the Commonwealth's commitment to be in the order of A$11 billion (US$8.55 billion)," Conroy told the hearing on Tuesday.

While Conroy expressed confidence there would be "substantial interest" from the private sector, he also admitted that interest hinged on the findings to come from its NBN implementation study that has yet to commence. The government allocated A$53.2 million (US$41.4 million) to the study at the 2009 Federal Budget.

The study is expected to be critical in determining both the level of interest from the private sector and the extent to which the government can redeploy existing network infrastructure to that envisaged under the NBN.

"I recognize that consideration of these complex issues amongst others will be fundamental to the success of the network," said Conroy. "The study will determine the operating arrangements, detailed network design, and ways to attract private sector investment."

Private sector interest, which Conroy reckons could cut down the US$33.5 billion estimate he has promoted as the cost, included the "possibility that companies will want to vend-in existing assets that can support the National Broadband Network for equity or some other financial arrangements."

The study will look at the configuration of the network, prices that will be offered, future adoption rates, and access services on the FTTP network, said Conroy.