Telstra will pay a big price for Conroy’s NBN victory: Gottliebsen

When Stephen Conroy became Minister for Communications in the Rudd government he has an overriding aim – he wanted to be remembered as the person who delivered a national broadband network for Australia. And despite vigorous opposition he pursued that goal with a passion rare for any minister of the Crown.

Conroy’s passion had a by-product – it played a significant role in delivering Julia Gillard the Prime Ministership. Conroy is now within an ace of pulling off what will be a stunning achievement. He still requires the parliamentary vote, an ACCC approval and a favourable vote from Telstra shareholders, but is likely to win on all three fronts.

The NBN project was made “near economic” by the incredible deal with Telstra. The Telstra network and customer base was sold to the government for a price that could not have been conceived of two years ago.

It is the Telstra deal that makes the capital city and large regional centre part of the NBN deal economic. The country areas are clearly high cost and certainly not economic, but current politics dictate that the economic and uneconomic parts of the project be linked together rather than showing the subsidy.

Conroy may not want the full value of the Telstra deal to be widely recognised until he has an iron clad deal approved by Telstra shareholders, although they have little choice but to approve.

Given the support of ACCC chief Graeme Samuel for the project, I would be stunned if he caused too many problems.

Despite Conroy’s NBN passion, there are grave fears that we are building a white elephant which will be superseded by other technologies. No business case can ever overcome that doubt. That’s why the contribution to Business Spectator by John Stanton, CEO of Communications Alliance, the peak body for the Australian communications industry, is important.

Stanton is clearly biased, but he points out that a Japanese study showed that the value to the Japanese economy in the period 2011–2020, arising from the rollout of a similar network to the NBN will total 73 trillion yen ($A908 billion) – 33 trillion yen from benefits to the telco sector and to the companies involved in the rollout, along with 40 trillion yen in value accruing to other industries who benefit from the effects of the network being in place.

Stanton says that if the same assumptions held for Australia, then the Japanese study suggests that the value to the Australian economy of the NBN could be in the order of $182 billion over the same period.

Because of geographical differences our capital costs will be much higher, but so will many of the benefits – particularly in rural areas. That’s why the two independents knew they were taking a step that would boost regional Australia when they backed Gillard and Conroy .

But let’s not forget that many of the regional benefits plus the city benefits will come out of the hide of Telstra shareholders. They made the NBN possible, and much the projected value comes out of their pockets.

This article first appeared on Business Spectator.