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

[Grahame Lynch]

I think you will find the ARPU was for a month and the revenue was for a
quarter. Adds up fine

On 18 November 2016 at 14:11, Mark Smith <markzzzsmith at gmail.com> wrote:

> 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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