[AusNOG] NBN gets another $20 billion. Predictable, predicted

[Mark Smith]

On 18 Nov. 2016 15:28, "Mark Newton" <newton at atdot.dotat.org> wrote:
>
> In Sep 2015, when NBN released its Corporate Plan, I did some number
crunching based on the Government’s commitment to fund them no further than
$29.5 billion, and their cash burn rate, and predicted that the money would
run out some time during 2017q1.
>
> The Government at the time was completely insistent on that $29.5 billion
limit, and said they expected NBNco to seek private investment to cover any
shortfall between that and their total build cost.
>
> At the time, I predicted that they would be unable to do that, because
their rate of return (also in the Corporate Plan) was hovering around 4%,
so a private investor would yield lower risks and bigger guaranteed returns
by putting their money in AMP’s listed property trust. If someone in the
private sector had $20 billion to invest, why on earth would they invest it
with NBNco, given the large range of better possibilities?
>
> Based on that, I predicted two possible outcomes:
>
> Either the Government would write the whole thing off and deed it to
Telstra, or they’d use their post-election grace period to totally forget
all about their pre-election commitment to hold their stake at $29.5
billion, and say, “Y’know what? We’re almost done. Just a little bit more,
and it’ll be finished. Great success.”
>
> <insert Iraqi Information Minister GIF>
>
> Turns out they picked the second option, at pretty much bang-on when I
said they would :-)
>
>
http://www.canberratimes.com.au/business/government-loaning-nbn-20-billion-to-finish-rollout-20161118-gssbag.html
>
> The Government is about to loan NBNCo an extra $20 billion to finish the
job, taking the total Government contribution to about $50 billion (which
is at the low end of what they think they need to complete the build)
>
> They say they’re doing it at “commercial rates.” Unless NBNco’s corporate
plan has changed significantly, they don’t make enough money to afford
commercial rates, so they’re unlikely to ever be able to pay it back.
>
> So when you see “loan,” substitute, “grant,” because the Government will
be writing it off.
>
> My guess is that they’ll carry it on their books ’til after the next
election, and the NEXT government will write it off, and if that’s Labor
the Liberal Party will claim that pissing $20 billion up the wall is
another example of ALP spending profligacy.
>
> (oh look, another prediction. Get back to me in 3 years, yo?)
>

So another recent fudging is the recent NBNco financial results.

They said they have 1.4M active services and a revenue of $181M. Simplistic
maths i.e. $181M/1.4M says ARPU of $129, well above what most ISPs are
charging retail for NBN plans. Revenue for a supplier is a cost to the
purchaser.

If you then look at their presentation, they claim an ARPU of $43.

So how can the simple maths of $129 ARPU turn into a claimed $43 ARPU?
Where'd the other $86 go?

Looking into the presentation (briefly at the time, I was in a hurry) they
claimed $12M revenue from other sources, and the rest from either tails,
broken down by type or CVC.

An RSP cannot successfully buy a tail without also buying some useful
amount of CVC. So NBN ARPU should also include CVC (because ARPU is
wholesale cost for RSP.). (181M-12M)/1.4M is an average wholesale cost per
user to the RSP of $172.42. How is an RSP going to cover a $172 average
cost per user with a retail  plan costing <$120/m?

NBNco might claim that CVC is not individual per user revenue, it is
aggregate user revenue, so it shouldn't be included in ARPU.

Ok. So let's include RSPs in your user counts because they use the CVC. The
number of RSPs (no more than 1000 I'd think, and probably way less) added
to NBNco's 1.4M tail users is insignificant. ARPU and therefore average
wholesale cost per user to the RSP is still $172.

If NBNco give away CVC for (literally) free, then this might all work.
Until then ...

>    - mark
>
>
>
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