Don’t sell NBN to Telstra

Telstra has embarked on a major restructuring as it gears up to purchase the National Broadband Network (NBN) from the Australian Government:

The restructure involves creating three separate legal entities under a Telstra Group umbrella, which Mr Penn and Telstra chief financial officer Vicki Brady said could theoretically be spun off as separately listed companies, or sold in the future…

[Penn]  told The Australian Financial Review, it was in part designed to make it feasible for the company to buy the NBN off the government in future.

“That is not the only thing motivating it, but the government’s policy has always stated that the NBN could not be owned by a vertically integrated operator, so InfraCo would have to be demerged effectively”…

Rival telecommunications companies have responded angrily, arguing a sale to Telstra would harm taxpayers, competition and consumers:

Optus’ vice-president of regulatory and public affairs Andrew Sheridan said Telstra had already gleaned huge financial rewards from agreeing to relinquish its infrastructure dominance to the NBN, and that a spun-off Telstra division would not be sufficiently independent to prevent the kind of lopsided commercial agreements that existed before NBN’s inception.

“I think it would be a terrible outcome for Australian taxpayers, competition and consumers to think that we can somehow allow Telstra to buy back the NBN, when that would effectively shred 10 years worth of competition policy,” Mr Sheridan said…

Of five rival telecommunications companies spoken to by The Australian Financial Review since Telstra’s announcement, only Aussie Broadband welcomed the idea.

The Herald-Sun’s Terry McCrann has also slammed the idea, describing a sale to Telstra as “astonishingly stupid” and “vandalism on a national scale”:

The NBN… is the single most important foundational infrastructure for the Australia of the 21st century.

It must remain publicly owned.

Apart from anything else, otherwise we would get into exactly the same sort of mess — but worse — that we had by selling Telstra into the private sector with its monopoly core (20th century) telco infrastructure…

That’s “pre-plague”; it made no sense to sell the NBN.

Now it makes even less sense and indeed it tips all the way over into national vandalism, because of two things: The reality of near zero interest rates and massive and all but permanent budget deficits.

Whether the government lends money to the NBN or “invests” equity capital into it, the actual reality is that all such money will be borrowed, be part of the budget deficit, and add to the government debt which as we know is headed to $1 trillion, then $1.5 trillion and still going.

Talk about being penny wise and pound foolish: let’s sell it for — $20bn? $50bn? — so that when the debt was going to hit $1 trillion it’ll only be the (more likely, on a $20bn sale) figure of $980bn.

And instead of $1.5 trillion, only $1.48 trillion. Whoopee!..

Enter interest rates. The government can borrow the, say, $50bn to fund the NBN at 1 to 2 per cent, depending on term and maturity and timing.

So the cost to the taxpayer of hanging on to our most important national asset is $500m to $1bn a year.

As I said, it would be vandalism and utter, utter stupidity to sell it and “pay off” an utterly insignificant amount of debt…

Indeed, the government — we — get a much better return on $50bn borrowed for the NBN than $100bn borrowed for JobKeeper.

Too right. One of the reasons why the NBN is so expensive is because Telstra received $11 billion in instalments from taxpayers in exchange for its fixed line customers migrating to the NBN.

This deal was struck by the Gillard Government in 2011 in a bid to fix the structural mess created when the Howard Government privatised Telstra in the late-1990s, which created an integrated vertical monopoly by handing Telstra control of both the wholesale and retail fixed line networks.

To sell Telstra the NBN would be a case of history repeating by creating another vertically integrated monopoly, damaging competition, taxpayers and end-users. The Coalition must not make the same mistake twice.

Unconventional Economist
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  1. Hold on,
    Why would Telstra want to buy NBN when new 5G from US supplier will kill it from 6 different angles and make obsolete?
    Uh oh!

    • It’s almost as though Telstra thinks the NBN is likely to be a 50+ year cash cow like the copper network was. Of course they would have no idea at all about any of that sort of stuff…

    • Once Telstra buys NBN, the government will demand all 5g connection to pay $20 a month to Telstra to ‘protect the competition’. Telstra is not buying technology, they’re buying legalized private taxation.

    • 6G or 7G might do that but not 5G. Anyone saying 5G can kill NBN, especially proper NBN like fibre to the house, has no idea how this tech works and lacks vision on what other services will be offered when 1Gbs and 10Gbs connections become a norm.

  2. @Djenka

    Some parts are working pretty well, I have just upgraded my old HFC cable connection to 947/47 (home ultra fast 1000/50). That s fast, I can wait a long time before having a workable 5G with unlimited data to my house.

    • happy valleyMEMBER

      For a techo neanderthal like me, what’s all the above mean and who was your retailer for that service?

      I think we ended up with HFC cable from the Telstra street pit to our home, when the NBN was installed a couple of months ago.

      I am paying $95 a month to one of the big brutes for 100Mbps/20Mbps download/upload and getting that fairly consistently, if not slightly better, which is a quantum leap from my old 30Mbps/2Mbps service from the big brute..

        • happy valleyMEMBER

          Thanks. Keep hearing good reports on Aussie. My problem also is that my business email address of 22 years’ standing and known to many clients and contacts includes big brute’s name as part of it.

  3. Hmmmmm…..I don’t think that it’s really accurate to describe any of the corrupt dealings undertaken by our government as mistakes. This allows for the idea that they weren’t fully cognisant of exactly what they were doing the whole time.

    • You’re’ not suggesting that only The Stupid and Uneducated; who wouldn’t get another job otherwise, and The Corrupt go into politics I hope?!
      Unlike the really Smart People, (Oh – and another subset of The Corrupt, who overlap politicians like the common area on a Venn Diagram) – who go into financial enterprises of all kinds, and run rings around the aforementioned.

    • working class hamMEMBER

      Pretty much par for the course now.
      It’s a done deal, by offering up the big “mistake” narrative, it makes the article complicit in the crime. Maybe if the articles raising these issues, used language that was more inline with the actions being discussed, the politicians involved would be held to account.
      This is criminal.

  4. The govt sold off Telstra as a monopoly and extracted a high price for it – $7.50 a share if memory serves. The govt then reamed these shareholders by creating the NBN and monopolised this service. I think the govt should give the NBN to Telstra for free and Telstra should give back the $11B.

    • happy valleyMEMBER

      Off memory, Telstra was sold in 3 tranches – retail punters paying per share, around $3.50 in T1, around $7.40 in T2 and around $3.70 in T3. Not sure what the blended price would have been.

  5. happy valleyMEMBER

    “The Coalition must not make the same mistake twice.”

    Kerry Packer apparently said of Alan Bond in regard to the original sale of Nine to Bond for a motza ($1bn ?) and then the cheap buy-back from him: you only get an Alan Bond once in your life.

    But with our best-ever LNP gubmint, maybe you can be twice lucky?

  6. Right now most people have 4K TVs and some moving to even higher resolution and many have decent quality audio systems but no one is actually streaming 4K and high res audio because of bandwidth limitations. Yeah 5G can do that. Lol
    Imagine holographic adds or porn being streamed and it is coming.. on 5G? Telstra will love it though but who can afford $20k per month plan?