CCC hopes Concept Economics' NBN costs ‘are their last’

The analyst firm - which has previously provided reports to Telstra - said in an ‘FAQ' [PDF] that the total capital cost of building an NBN using the favoured gigabit passive optical network (GPON) technology would likely be $40 to $50 billion alone.

Adding operating costs over the seven years of construction could add $20 billion to the project, and even more if start-up costs are capitalised, it said.

Concept Economics claimed that suggestions the Government's NBN company (NBNco) would take over existing fibre assets in exchange for equity would do little to reduce upfront costs.

"Putting them and others under the NBNco umbrella would cause NBNco's assets to resemble the Ansett fleet, i.e. a mélange of highly diverse assets of greatly varying structure, vendor, age and quality," Concept said.

"This would increase operating costs, likely materially, though it is difficult to know by precisely how much."

It is also unlikely the NBN company would be able to subsidise retail costs with advertising revenues. It was proposed in the report that the NBN company might offer subscription content providers like Foxtel a wider footprint in exchange for a share of their advertising revenues.

The report put national retail costs starting from $145 in urban areas and $565 regionally, on the basis of the network achieving a take-up of around 80 per cent.

"Of those countries [worldwide] that are providing significant public funding for NBN deployment, none is proposing to spend anywhere near as much as Australia," Concept said.

But the sensational report has been rubbished by the executive director of the Competitive Carrier's Coalition (CCC), David Forman.

"Why anyone would take seriously these proposed network costings beggars belief," Forman said.

"This is the consultancy that Telstra used to justify inflated prices that the ACCC, the industry, the Federal Court and the competition tribunal have all rejected in the past.

"Given this track record, consumers should hope that these so called ‘first NBN costings' from Concept Economics are their last."

The key thing the Australian telecommunications industry needs is competition, Forman said.

"Neither the industry nor the Government would be as irrational as to deploy a network with price tags that would kill competition," he said.

Telstra, for its part, denied inferences by the CCC that it had a hand in commissioning the report.

"Professor Ergas [of Concept Economics] made clear the report represents his own views," a spokesperson said.

"Telstra remains focused on continuing constructive discussions with the Government over its proposal for a NBN".

The Concept report comes just 24 hours after the Federal opposition released a statement "demanding answers on why the Rudd Government is now proposing to invest only $2.4 billion in up-front equity" into the NBN, rather than the $4.7 billion it flagged in the RFP.

Senator Conroy's department has been contacted by iTnews for comment.

"The Government now makes no secret of its plans to make an initial equity investment of only $2.4 billion and is happy to borrow the rest," shadow communications Minister Nick Minchin said.

"What this means is the Government will have to raise even more debt for this project in order to raise its 51 per cent stake of more than $21.5 billion.

"The other question is, what has happened to the other $2.3 billion? What will this be spent on, if not telecommunications?"