Communications Minister Michelle Rowland recently confirmed that Labor has abandoned plans to privatise the national broadband network for the time being, and that it will scale back proposed 3% per annum wholesale broadband price increases that the former Coalition government had directed NBN Co to implement to recoup costs.
There is also speculation that Labor will write off a significant portion of the almost $30 billion that the federal government has invested, with analysts suggesting that such a move could make it easier for the NBN to invest in faster internet access.
From The AFR:
There are 866 words left in this subscriber-only article.
Get your first month for $1
A government decision to write off about $30 billion in debt could free up NBN Co to invest in the technology required to provide faster internet, experts said.
“Prices won’t necessarily come down but speeds should keep going up,” said Gary McLaren, a telecommunications consultant and NBN Co’s former chief technology officer.
“The escalating prices were just a bridge too far for the government, but the finances of the NBN are in a very difficult spot so something needs to change to fix the situation.”
The NBN’s wholesale prices are stuck at a high level because the former Rudd government classified the project as an “investment”, which necessarily requires NBN Co to deliver a commercial return. This meant the NBN must cover its costs in addition to earn a margin on top, thus forcing NBN Co to charge ISPs high wholesale prices, which are then passed onto Aussie consumers.
The Parliamentary Budget Office reported the “fair value” (or saleable value) of the NBN at just $8.7 billion, which is less than one-third of the government’s equity investment. Using this figure as a baseline, the NBN requires a write-down of around $20 billion.
Writing down the NBN would lower the project’s required rate of return and enable NBN Co to either lower wholesale prices for ISPs (and by extension Australian consumers), or to upgrade the NBN and provide better speeds at the same wholesale cost.
Basically, the federal government needs to treat the NBN as an essential utility, instead of a commercial project seeking a commercial return.
Until it does, Aussies will continue to be charged excess prices for a substandard service.
- Weekend Reading: 13-14 August 2022 - August 13, 2022
- Soaring interest rates trap Aussies in ‘mortgage prison’ - August 12, 2022
- FWO launches action against university wage thieves - August 12, 2022