Write down the NBN? Write the whole thing off

We’ve spoken before on the utter disaster that is Australia’s National Broadband Network and how it was unlikely to ever achieve its stated goal and also cost significantly more than budgeted.

Well, things just got a whole lot worse for the beleaguered Australian taxpayer as it would seem reality is starting to rudely impose itself on the business model, such that it is: The NBN will need to write off a huge chunk of value, if that’s even possible now.

Crikey (in the vernacular), who ever could have predicted that?

Oh yes, everyone.

From the article:

It is self-evident that you can’t write $20 billion off a $10 billion (or less) equity base.

Ya reckon?

Rue made the point that when people called for a write-down, what they were actually calling for was a dramatic reduction in wholesale prices. It’s a mechanism, not the objective.

There are alternatives to a write-down that could lower wholesale prices, although they would involve heavy costs for government.

Hold on one second, sunshine…. heavy costs for whom?

The government? Nope, don’t think so. The government only has money for one of the following reasons:

1. Taxes paid by citizens (yes, that includes corporation tax – who do you think buys their goods and services?)

2. Borrowing on behalf of the public….which will be repaid by, yep, taxes

Read this with that in mind:

If the federal government were to cash out the $7.4 billion of subscriber payments and buy out the lease agreement, it would effectively inject more than $20 billion of value into NBN Co by carving those payments from its cost base and boosting its cash flows.

The substantial change in its economics would enable NBN Co to pass through the savings to retailers without damaging its ability to generate a positive IRR.

Or, in English; if the government spent more money it would make the NBN company seem like it was less of a turd.

Bill’s Opinion

The lesson every generation of voters always has to learn the hard way is, if you really want to fuck something up, and I mean really fuck something up and stay fucked up for a bloody long time, get the government to do it.

13 Replies to “Write down the NBN? Write the whole thing off”

  1. It could have been worse. In my country there would have been a few fingers in the till as well. NBN would have been set up as a quango with private shareholders who could loot the treasury to their hearts’ content.

    1. You clearly don’t know Australia that well. It won’t be as obvious but there’s bound to be a massive procurement or sub-contracting scandal that’ll surface eventually.

      Import Italy and Ireland, get Italy and Ireland.

        1. @MvR

          I followed with interest the headlines surrounding the recent spate of arson attacks on the Cape Town rail system. Something like 50% of its rolling stock have been torched to destruction in a relatively short space of time.

          A spokesman for the local Cape Town Taxi Trust said that he was absolutely saddened at such wanton and pointless destruction of this vital and crucial public transport service. Furthermore, he reassured the stranded Capetonians that as a gesture of good will and selfless service that they were going to increase the number of taxis (small white busted ass minivans loaded to the gunnels) on the streets and throughout the province in order that the stranded rail commuters would suffer as little disruption as possible by now being bale to utilize this expanded taxi service.

          MetroRail Cape Town has lost half its fleet to arson attacks and vandalism


      1. “massive procurement or sub-contracting scandal”

        I would say that there already has been many hidden scandals, maybe small enough and unpalatable enough that it hasn’t made the front page.

        About five years ago, we were offered a package of network installation in Brisbane, I was intrigued going to that meeting as our junior engineer who had been avidly “developing the opportunity had said that we had been offered a couple of thousand meters of “supply and install if we could do it for their budget price. That never happens in real life, turns out that the price to do it would have left us upside down. A connection pit alone which there would have been a few hundred off, say cost $100 to supply only, the contract price on offer was something like $90 to supply, install and connect. We never took them up on their offer.

        Voodoo economics for sure.

        1. I’ve heard similar tales from another potential sub-contractor, also about the price of the pit.
          Perhaps there’s two possible explanations; 1, something corrupt is going on between the subbies and the client, or 2, the subbies are making money on the other elements by using cheap material?

          1. Or just put a wireless modem in each pit, with no cable connection between them, and still bill them for the Full Monty.

  2. What would be good if you could publish your entire coverage of this subject over the years, you couldn’t call it a gravy train as nobody is making consistent effortless dosh on it , not quite sure what to call it these days. It would make interesting reading following the unfolding disaster from woe to go, from your other gaff, although there still is a bit to go on this one.

    It’s now 129 years since Nikola Tesla discovered wireless transmission of energy, they didn’t like him for it.

    1. Yes, I’ve written a fair bit on each incremental cock up over the years, but Paul Wallbank probably has first dibs on the book, “NBN – An Biography of Failure”.

        1. I’ll ask him next time we have a beer. I have told him he’s got to write it.

          Have you ever read Dot Bomb? I reckon it would make that seem sensible.

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