Time for some NBN clarity

The release of the heavily-edited summary of NBN Co’s business case has produced more confusion than clarity. At this point there isn’t even any rough agreement on what the national broadband network will cost.
That’s largely due to the lack of any detailed financial information in the summary – there’s no cash flow projections, no projected profit and loss statement, no balance sheet, no pricing structures, indeed very few useful numbers at all – and partly to the way NBN Co presented the limited numbers that it did make available.
In particular, the way the summary separated its forecast capital expenditures (on the basis that the deal with Telstra proceeds) of $35.7 billion and the $13.8 billion nominal cost of that deal has caused confusion and some controversy.
While NBN Co’s explanation of the distinction it has made – that the payments to Telstra for leasing access to its infrastructure and paying for the migration of its customers are operating expenditures rather than capital items and are costs that will be offset by incremental revenues flowing from the deal – is probably technically true, there are plenty of critics prepared to lump the two together to come up with an overall cost of just under $50 billion.
The Alliance for Affordable Broadband – nine current telco chief executives and Pipe Networks founder Bevan Slattery – has had a stab at trying to work through the actual cost of the national broadband network.
It says the net present value of the payments to Telstra is $9 billion. It argues, moreover, that simply adding the $9 billion to NBN CO’s $35.7 billion to produce a $46.4 billion total for the direct investment in the network doesn’t account for any interest costs, which it estimates at about $4 billion. On that basis the $35.7 billion becomes $50.4 billion. But it also says the migration incentive payments to Telstra of $4.8 billion should also be included to produce a total project cash outflow of $55.2 billion. Read more.