In times of financial crisis, it's inevitable that
companies reassess their financial plans.
AAPT, in a significant step, has decided to pull out of the Terria consortium; Terria recently
said the financial crisis would force it to
re-evaluate its finance options; and the big-money financiers
Acacia consortium must be having a few sleepless nights considering
the way world credit markets are plunging into the pit of
You know things are bad when Telstra has apparently decided the
best way to raise a bit of extra dosh for the roll out is to break
into movie-making, with plans to turn that cute kid and his
lovable-oaf dad from the BigPond "rabbits" commercials
Heck, it could work; people love compelling dramas with a bit of
comic relief added in. Consider that The Dark Knight has grossed more than US$526 million, and will
likely more than double that when the DVD comes out, and maybe
Telstra is on to something.
All it has to do is throw in a few superheroes, a
smart-but-tough love interest, and maybe do some viral marketing to
encourage repeat attendance by the thousands of workers at its new
call centre in
the Philippines, and it will be able to make enough from the
movie to help fund, say, 2 per cent of the roll out.
Let's see if Titanic can stay afloat in this particular Big
Jokes aside (and there are many), it is ironic that Telstra is
reportedly looking for millions in public support for the movie
through various government film-production avenues.
This is the same Telstra that made a religion out of slamming
Optus for angling for government funding for Opel; the same Telstra
that bagged Terria for erecting a billboard at Canberra Airport
instead of investing in more network gear; the same Telstra that
spends millions each year on naming rights for major stadiums in
Sydney and Mebourne; and the same Telstra that is now fighting
tooth and nail for $4.7 billion in NBN handouts.
While something about glass houses and stones comes to mind,
suffice it to say that the structure of finance in Australia means
that very little of consequence happens without government support
Companies and people that want money have to meet certain
criteria, accept certain requirements, and weigh the risks of the
change those requirements mandate against their need for the money.
And, right now, everybody needs the money.
In this case, the government has a very strong card to play: the
fact is that the current global credit crisis is going to cause
problems for all sorts of major infrastructure projects, the NBN
included, and this is going to change things dramatically.
Terria is determined to rock on with its bid (and Conroy
believes them), but as the crisis deepens it's likely that all
NBN bidders could run into funding trouble: leery, risk-pressured
outside investors may sit down at the table, but their due
diligence may well uncover an NBN process that is masked by too
many variables for comfort.
In a worst-case scenario, I could even see the government
suspending the NBN until financial conditions improve: after all, a
$4.7 billion investment is a sizeable chunk of change, and Senator Conroy
has previously shown he's willing to axe investments if the
money can be used elsewhere.
Of course, he has also shown he's willing to increase spending
where it isn't necessary, as when he disbanded the Coalition's
digital television task force, then made up his own and tacked
about $10 million onto its budget. Even Prime Minister Rudd isn't afraid
to smash the piggy bank,
distributing $10.4 billion this week to ensure everyone has a happy
If I can go a bit
Adam Smith for a moment, however, the free market will always
find its way. What concerns me more about this whole thing is that
the free market has shown a disappointing tendency to ignore the 80
per cent of Australia that is not located in capital-city
That the NBN is being touted as a cure-all for rural
Australia's broadband problems is hardly news, but this week's
report of the Regional
Telecommunications Review raises additional concerns: Conroy
has pledged $400 million to address the findings of the review, which were
— wait for it — that regional Australia's telecommunications
infrastructure is basically as appealing as a bucket of salmon left
behind a furnace for a month.
More about that review in a subsequent column, but the bottom
line here is that — with all of this financial turmoil forcing
major telcos to reassess their priorities and NBN strategies — the
bush is in very real danger of being left out, yet again. Terria
has already publicly said its roll out will start in the bush and
work into the cities — an admirable stance that contrasts with
Telstra's capital city-based roll out — but this idealistic
approach is going to come head-to-head with harsh fiscal reality
before too long.
The NBN, after all, also depends on an investment by a huge
percentage of rural residents. And, as factories are closed, jobs
are lost, bankruptcies declared, and farms and homes repossessed,
people are going to care less and less about their broadband, and
more about the simple things. Like eating. And, no matter what the
rabbit guy thinks, you just can't eat YouTube.
What do you think? How can the bidders keep the value alive? Or
will the recession make the NBN unattainable?