NBN implementation study finds network financially viable

Communications minister Stephen Conroy, who announced the release of the implementation study today, said the report’s findings indicate the Government is on the right track in its roll-out of the NBN.

Among the findings in the KPMG report are that the $43 billion price tag is a “conservative” estimate, peak investment from the Government should come to $26 billion by the end of year seven and the fibre component of the NBN should be extended to 93% and cover 1.3 million extra homes.

Additionally, the $25 million study, which is available online, recommends that entry level wholesale prices on fibre should be set at $30-35 per month for a basic broadband service.

But in a massive win for the Government, the study says the NBN Co can build a strong and financially viable business case, even without Telstra’s involvement, with returns to be earnings positive by year six and an expectation that equity investment returns should cover funding costs.

The report also states the Government’s decision to use fibre as the main technology behind the network is a solid decision, and should deliver the most benefits to end users.

In Parliament House today, Conroy said the NBN is not “an overnight solution”, but a long-term infrastructure project that should deliver solid financial benefits.

“The implementation study confirms that high speed broadband over a wholesale-only network is achievable, and it can be built on an affordable and financially viable basis.”

“The Government will provide a formal response to this report in the coming months. It’s important to note this analysis and further recommendations will be considered in consultation with the NBN Company.”

While Conroy said the KPMG report indicates the Government can build a financially viable network without any of Telstra’s networks, he confirmed negotiations will still continue in order to bring down the price of the network even further.

“The release of the study does not change the objective to negotiate with Telstra to result in a win-win outcome. At this point, negotiations with Telstra and NBN Co are continuing.”

While Conroy also said that negotiations have taken some time, the two parties wouldn’t still be locked in talks if there wasn’t a chance of success.

The study also found that the NBN business model allows taxpayers to be paid back for their investment in the project by year 15, on the basis that privatisation is completed.

“The company will earn sufficient earnings by the end of year seven, so recommended investment peaks at $26 billion. The study confirms that the NBN model establishes taxpayers will earn back between 60-70% of their investment within year five of operation.