NBN Losses Reported at $36 Billion

A new report released by the Australian Government's Productivity Commission has detailed that NBNCo, the public company established in 2009 to build the National Broadband Network, has accumulated $36 Billion in losses as of last financial year and is “unlikely to earn a commercial rate of return in the future if the asset values currently used to measure rates are those reported”.

The report is a result of an investigation into complaints that NBNCo was not complying with competitive neutrality obligations and benefiting from competitive advantages as a result. Furthermore, the complaints highlighted that NBNCo was not seeing a commercial rate of return. The reports states that "NBNCo has not met the commercial rate of return requirement to date and is unlikely to make a commercial rate of return in the future on its currently valued asset base." NBNCo initially projected that, from 2010-11 to 2020-21, their cumulative operating costs would sit at roughly 2% below expected revenue. Their actual operating costs are reported to be 90% above revenue.

One of two major factors highlighted in the report as causes for NBNCo's current financial outlook the "unanticipated costs associated with the degraded copper wire and hybrid fibre

coaxial networks that NBNCo was directed to use for its multi-technology mix rollout." The Coalition government originally claimed that their mixed-infrastructure model, which included using the existing copper network and cable infrastructure known as fibre-to-the-node, would be cheaper than the Labor Party's proposed fibre-to-the-premises rollout. The investigation also concluded that NBNCo's private financing does not comply with the debt neutrality requirements of competitive neutrality policy and that the company is not meeting its reporting requirements.

NBNCo has also stated that the average downtime per month for an NBN user on the fibre-to-the-node framework (FttN) is “consistently higher” than someone on fibre-to-the-premises (FttP). However, it has also been reported that for FttN, the total number of faults was 27,000 for the 2022 financial year, almost four times greater than FttP at only 7200.

The other major factor was the Australian government's requirement to first "prioritise the network rollout to regional Australia, where prices were well below those that could recover their costs and which came at the opportunity cost of revenue foregone from delaying the serving of revenue rich metropolitan areas until much later than a genuine commercially orientated business would have done."

Sources & Further Reading

https://www.pc.gov.au/competitive-neutrality/investigations/nbn-co/nbn-co-report18.pdf

https://www.theguardian.com/technology/2022/dec/01/nbn-losses-to-reach-25bn-by-2040-report-finds