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.
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.
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.