NBN investment should be split up, says Pipe

Ry Crozier | Apr 20, 2010 2:36 PM
Roll out regionally for social benefits, not commercial returns.

The Government should carve out a multi-billion dollar portion of its NBN investment, pump it in under-serviced or un-serviced regional areas and not expect to make a commercial return on that part of the network, according to Pipe Networks founder Bevan Slattery.

In a typically blunt Slattery address to the CommsDay Summit  - conservatively titled, 'Why NBN 2.0 will fail...', Slattery issued a blunt warning that a commercial return on a $43 billion network investment in Australia was unlikely and that corners would have to be cut - or alternate rollout options considered - to ensure the network achieved at least some of its ambitious aims.

He proposed the option of dividing the network into a section that might attract buyers because it could generate a commercial rate of return and another - primarily for regional and rural areas that had no or "suckful" broadband - where the investment was made to generate productivity, economic and social benefits in those communities.

"Let's not build for people that already have HFC, ADSL and 3G [services]," Slattery said.

"Let's get equivalence in this country. We need to accept that is an investment without a commercial return."

He proposed - for argument's sake - a figure of $10 billion out of the up to $43 billion to be invested in the NBN be given over to deploy backhaul and carrier-neutral tower infrastructure in regional and remote towns. Such infrastructure, he believed, would attract the attention of 3G carriers who could offer broadband services to residents - a clear improvement on the lack of services currently available in many places. He called the proposal 'NBN 2.1'.

"This is a serious bunch of coin for regional communities that have been strung out time and time again," Slattery said.

"It also means the pressure to get a commercial return is not on $43 billion but on $25 billion or $20 billion. I think that's what's really required here... socially responsible investment in non-commercially viable areas."

Slattery had warned earlier that Australia couldn't "get a commercial return on building out a $43 billion network."

"You can't do it," he said. "I firmly believe you cannot get a commercial return on this [NBN] infrastructure."

That harsh reality would become apparent at some point in the project, he believed, and present significant challenges both for the Government and NBN Co.

Slattery believed cancelling the project was a "genuine option" because it preserved taxpayer funds and stalled momentum for what he called "negative change". Examples of such change included the Government creating a "monopoly that has to get a commercial return on the asset" and the uncertainty surrounding whether NBN Co could have a retail offering - despite assurances it was focused on wholesale only.

Continuing the project in the knowledge it would not generate returns promised would cause issues for Government down the track - such asaccusations that it misled Australians - and "burden taxpayers with debts and requirements for the next 30 years," he said.

"Ultimately I think the [fibre] rollout will go to between 65 and 80 percent of homes," Slattery said.

"I don't think it will go much further beyond that. When this thing's not paying out I think that will be a problem [to push ahead to 90 percent].

"The Government ownership of NBN Co could also be 100 percent - prepare yourself for that. I also don't think they will sell out their stake in NBN Co because they can't attract a commercial return for the asset."