Govt economists slash NBN rural services loss forecast

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Govt economists slash NBN rural services loss forecast

Smaller cross-subsidy from telcos mooted.

The forecast loss NBN will incur for providing fixed-wireless and satellite broadband in rural and remote Australia has been almost halved in a new estimate published by a research unit within the Department of Communications.

An earlier government forecast had estimated NBN would lose around $16.8 billion until 2040 for the provision of rural and remote broadband services

Now, however, the Bureau of Communications Reasearch believes the loss will be substantially smaller at just $9 billion, a drop of 46 percent.

The BCR attributed the lowered loss estimate - which runs at odds to other forecasts such as the cost benefit analysis of broadband and review of regulation - to "differing costing methodologies rather than revisions to fixed wireless and satellite costs and revenue forecasts".

BCR head Dr Paul Paterson said the bureau arrived at the loss estimate by using a lower post-tax nominal discount rate of 6.46 percent, compared to the 9.4 percent used in the CBA.

The lower rate is consistent with the weighted average cost of capital (WACC) used in the special access undertaking (SAU) for NBN to calculate commercial return on investment, the BCR said.

BCR said its estimate of losses was based on avoidable costs, or those that would otherwise have been avoided if NBN had not provided fixed wireless or satellite services.

While BCR's approach for estimating losses with avoidable costs is consistent with requirements for government business enterprises, it differs from NBN's accounting practices and the network builder's submission to the initial rural fixed wireless and satellite service consultation paper.

A panel of financial and economic experts have reviewed the  modelling for BCR's revised loss estimate.

Thanks to the estimated lower loss, the BCR said [pdf] that a $6 (in 2015 real value) per month cross-subsidy per line from other NBN and other fixed broadband services would be required, not $6.70 as earlier forecast.

This would equal $6.75 in the 2018 year, and $8/month in 2022, based on the 2015 real value.

Communications is now seeking input on how funding of NBN fixed wireless and satellite services will run, and how other telecommunications companies can help pay for the services.

Submitters have until close of business November 3 to have their say on NBN rural and remote area broadband funding.

NBN launched its first long-term satellite into space earlier this month.

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