NBN Co has unveiled a 7% rate of return and lower-than-expected wholesale prices as part of a set of conservative projections over the next 30 years.
The government belatedly released the NBN Co Corporate Plan this morning, (still without commercially confidential information that might affect tender processes) giving a much greater level of detail about the company’s plans and expected returns out to 2040.
Total capital expenditure for the network will be $35.9 billion, including government equity of $27.5 billion, $1.5 billion up from the $26 billion equity contribution identified in the McKinsey NBN implementation released in May. The government’s contribution would be repaid by the early 2030s.
The plan also includes first details of NBN’s planned wholesale pricing, with a base service of 12 Mbps download speed and 1 Mbps upload speed available to retail service providers for $24 a month across fibre, wireless and satellite. A 50/20 Mbps speed will cost $34, 100/40 Mbps $38 and 1000/400 Mbps $150. Bear in mind those are wholesale prices, not the cost of services likely to be offered by retailers.
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But the prices entirely discredit claims from commentators such as Henry Ergas, who claimed 100 Mbps would cost $215 a month, particularly as NBN Co stated this morning that prices would decline in real and nominal terms as usage and download speed increased.
NBN Co claims to have used conservative assumptions about a levelling off of current exponential growth rates in speed and data consumption by households, and assumes a middling roll-out rate of the infrastructure. 1.27 million households will have access to the NBN by the end of the 2012-13 financial year and 5.6 million households by 2016, with 12.2 million households reached by 2021. For most of this decade, NBN Co assumes, the bulk of residential users will access only the basic 12 Mbps (or a voice service only), and there will be no significant uptake of speeds beyond 250 Mbps until close to 2020 and beyond.
The government has also enshrined elements of the McKinsey implementation study and the corporate plan in its “Statement of Expectations” to the NBN Co Board. Statements of Expectation are the list of directions and requirements that boards of statutory authorities must operate under from governments. The NBN SOE, also released today, imposes the 93%/7% fibre/wireless and satellite split, the provision by NBN Co of fibre in new residential developments, the provision of battery backups and a range of other requirements on the NBN.
For all the detail and hysteria while parliament was still sitting, the Corporate Plan is unlikely to change the debate over the NBN. There will still be demands for a cost-benefit analysis, regardless of the financial rate of return predicted by NBN Co; economists will continue to insist that the copper network and wireless will provide high-speed downloading and uploading speeds and partisan commentators and journalists will still continue to predict that fibre will be outmoded by an as-yet unidentified technology just around the corner — presumably on the basis that someone will discover a way to go faster than the speed of light.
The only real number that counts politically is that come the next election, 1.3 million households will have access to the NBN and about 600,000 households will, NBN assumes, have connected up. By that stage the fibre rollout will be going at well over 5000 premises past per day.
The Coalition — which despite the arrival of Malcolm Turnbull in the communications portfolio has yet to identify how it will provide fast broadband beyond wrecking the NBN — has some thinking to do about what it tells voters if the Gillard government hangs on until 2013.