Handing $3bn to NBN Co: is this good value for money?

NBN technicians carrying out fibre upgrades. Picture: NBN Co

Anthony Albanese has announced that a $3bn equity injection will be made to the NBN so that more than 600,000 premises can be given access to fibre internet connections by 2030. According to him, this is finishing the job.

You don’t even have to be particularly tech savvy to realise the job is never done in these types of cases. The 5G network is clearly breathing down the neck of the NBN, and who knows what’s coming around the corner, including Elon Musk’s Starlink. (When the cables were cut by the Russians, Musk provided Starlink connections to Ukraine to maintain internet access.)

The reality is that the government-funded and owned NBN Co was never a good idea.

In other countries, it was quickly realised that the private sector could provide affordable and adequate internet access to densely populated urbanised areas. The role of the government was to fill the gaps so that everyone could enjoy the benefits of access to the internet. This wasn’t a one-size-fits-all solution, as some people in remote areas needed to access different technology.

Many countries used this gap-filling approach, including New Zealand. The net effect has been a much lower burden on the taxpayer as well as adequate internet services in those countries.

It’s worth noting here that the NBN has neither delivered fast internet speeds nor affordable bills. According to Energy Matters, “Australia ranked 60th worldwide for average download speeds in October 2023, with an average speed of 57.9 Mbps (megabits per second)”.

“This is significantly slower than the global average of 97.5 Mbps, and behind many other developed countries, such as Singapore (220 Mbps), South Korea (178.7 Mbps), and New Zealand (119.7 Mbps). Australia also has some of the highest internet prices in the developed world.”

Let’s be clear, the NBN has been a commercial disaster. It is accounted for off-budget on the assumption that it would make a return on assets, which it never has. It turns an annual loss.

While the government doesn’t like to use the term “written off”, a large chunk of its equity has been written off.

The only piece of luck was that a great deal of the NBN work was undertaken before construction costs really took off.

It was a complete gimmick for the Labor government to legislate that the NBN should remain in public hands. No investors in their right mind would think of buying it in its current form.

It’s just another case of politics driving out good policy.

Let’s not forget here that a number of Labor politicians were running around arguing that the Future Fund should fund the NBN – it was a project of national importance and it was sure to return well. Or so the likes of Kevin Rudd predicted.

It was another piece of luck that sense prevailed and the Future Fund never became involved.

Had it done so, its impressive results would have been less impressive and it would have been forced to take a substantial haircut on its NBN investment. Of course, in the context of a government that is now spending well over $700bn on-budget each year, $3bn sounds like a small amount of money.

But, as they say, a billion here and a billion there and soon we are talking real money.

As for the “modelled” boost to output of $10bn, this is less than a rounding error over the period to 2030.

The real worry now is that Albanese will be seeking to announce a new spending initiative almost every day in order to remain in government.

Let’s just hope he recalls from his university days that there is no such thing as a free lunch.