Tuesday, May 26, 2015

Dispelling Turnbull's lies: under $50M/year for the extra cost to the taxpayer for the Full Fibre NBN vs mangled mess FTTN/HFC/tin-cans

Turnbull's Big Lie in the 2013 election campaign, and underlying the subsequent Reviews, is simple, profound and very, very deliberate:
What will it "cost" (implied, 'the taxpayer') to build the NBN?[that's the Network rollout, not the company]
Turnbull always knew that the one and only difference in cost to the taxpayer between his mangled copper mess and the Quigley Full Fibre plan was the yearly interest on the difference in Equity 'injected' by the Government into NBN Co. It's why he's worked so hard to discredit the 2012 FTTP business plan, to disguise the real difference between the Plans.


The ALP had committed $30.4 billion in "Equity" to NBN Co and Turnbull $29.5 billion: just a $900 million difference.
At current record low 10-year Government Bond yields (~2.5% locked in for the life of the bond), that's $22.5 million/year extra for the Real Deal - under $250 million for the entire project, that's fantastic value!

If Turnbull's Mangled Mess takes just one year longer to payback all the Government's money, then it costs the taxpayer more than Full Fibre alternative. Because the estimated returns & profitability have never been disclosed, we simply don't know just how much extra Turnbull is going to stick the taxpayer for his sub-par Copper Mess.

Politicians trumpet every single minuscule advantage from the rooftops: if Copper Broadband was going to make good money, Turnbull would've had to lead with that detail. The total suppression of the most critical financial detail tells us it's a critical weakness of the Turnbull Plan. 

Turnbull very carefully never discussed key financial data for his "NBN-Lite": profitability, payback period or Internal Rate of Return (IRR - the equivalent interest rate on invested capital over the life of the project). This wasn't accidental, as shown when his staffer swore at me for daring to ask for this data.

Turnbull's proposal is "Lite", exceptionally so, in the one area that matters most: Profits, the sole driver making an investment different to normal "expenditure", such as on roads and highways.



Correct Answer to "Cost of the NBN?"
[not $90 billion, not $44 billion, not $30.4 billion, not $29.5 billion and not $4.7 billion]:
In the long-term, Nothing, it's an investment that will make a rather handsome profit (dividends of $75B+), will payback all the Government loans in 10 years (by 2028) and will pay taxes: GST, company tax, FBT, payroll tax, pay staff superannuation, and when sold as a going concern, will return a large multiple of the initial Equity contributed by the taxpayer. Done well, the NBN is a Gold Mine for the Government while giving cheaper, faster broadband to everyone (at the same price, Country or City).
In the short-term, the NBN costs "not very much" (~$750M/yr interest). The Fiscal Budget Impact is solely the interest on the outstanding Equity: for the 10 years NBN Co is paying back the Governments' money, it costs the locked-in 10-year bond yield rate.
I'd send you to the Parliamentary Budget Office (PBO) charged with costing the Fiscal Budget Impact of all Election Policies (current and over 4-yr forward estimates), but their post-2013 Election Report fails to cost the impact of the Liberals Broadband Policy. Without comment or explanation, it's the only major policy I could see to be omitted from the PBO report.

This conclusively shows Turnbull always knew the only difference between the ALP and Liberal Broadband plans was the amount of Equity they'd guarantee NBN Co. Somehow, that never became part of the debate in 2013.

Included in the links is a May 2013 (5 months pre-election) Research Paper on the NBN by the Parliament Library which very clearly states a) NBN Co is a company, a Government Business Enterprise, not part of the the Government and b) it's being funded as an investment with Equity provided by the Government initially and the money injected has no direct Fiscal Budget Impact, only the interest on the Bonds specifically funding it.

RBA 10-year Bond Yields
Historical Data: http://www.rba.gov.au/statistics/historical-data.html
Statistical Tables: http://www.rba.gov.au/statistics/tables/
Current 'Chart Pack': http://www.rba.gov.au/chart-pack/interest-rates.html [image below to 30-Apr-2015]