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NBN CO told to pretty itself up for bankers by 2017

Budget says last government cheque will land in 2017/18, well before planned completion

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Australia's NBN Co, the company building the once-FTTP now-“multi-technology model” National Broadband Network (NBN), has been given a deadline: look sexy to private investors by 2018.

That's when the government has decided it will cease funding the network in any way, with last night's federal budget setting down the financial constraints that NBN Co will work under.

The short version: beyond the $AUD8.6 billion so far provided, the government will cap further spend at $20.9 billion (a total of $29.5 billion), ending in the 2018-2019 budget year. Anything of the network that remains unbuilt at that time would have to be paid for by debt raised by NBN Co.

In other words, the government has met its commitment that its NBN would be cheaper than the previous government's, by the straightforward expedient of capping its input to the network.

It's also set a formidable and possibly unattainable target for NBN Co to meet: well before the financial year 2018-19, it has to have built sufficient momentum and service income to convince the private sector (which is more demanding about short-term returns than a government) that it's a good loan risk.

If the network isn't ready to deliver that, there's no readily apparent fallback position for NBN Co to raise its debt from the government. That leaves a possible worst-case scenario that the network could remain unfinished.

In reality, that means NBN Co will need to ramp up enough to be pulling good income through the door by financial 2016, or it'll have nothing to offer to the private sector – and that's a formidable task.

There's a very real chance NBN Co won't have a great story for private investors by the deadline. Government policy dictates the use of hybrid fibre coax (HFC) networks in the NBN, so NBN Co needs to reach agreement with both Telstra and Optus to do so. That means talking them out of their previous commitment to exit the HFC broadband business, because (contrary to popular belief), the 2012 deals did not give NBN Co ownership of the cable networks.

Even if a deal can be reached, NBN Co won't have anything special to offer HFC customers until the last quarter of 2015. DOCSIS 3.1 kit won't hit the market until the middle of that year, after which the business of specifications, equipment certification and tendering will begin.

In the meantime, the FTTN rollout can't start until NBN Co and Telstra renegotiate their 2012 Heads of Agreement.

Already late, the NBN-over-copper chunk of the network would also have to run at a flat-out sprint through 2015 to get the customers and the revenue needed for NBN Co to be able to go on a 2016-17 bankers' roadshow without it being a burlesque.

The joint ministerial release by Malcolm Turnbull and Paul Fletcher doesn't mention any contingency plan if things go wrong.

Perhaps the contingency plan is to use the 100 gigabytes-capable 4G network that MP Steve Ciobo seemed to think exists.

When corrected in the House of Representatives yesterday, Hansard records (on page 54) that Ciobo switched his estimate of 4G speed to 100 megabytes, then to 100 megabits, before deciding to talk about 5G's download speeds of "one gigabyte" instead. ®

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