In a heritage room at Sydney’s Westin, the inaugural presentation of NBN Co’s financial results had all the hallmarks of a softening-up exercise, giving the throng of assembled brokers and investment bankers their first clear view of (an admittedly fairly dismal) set of accounts.
It wasn’t about the numbers, though. The medium was the message. It felt remarkably like a Telstra earnings presentation, if not a roadshow. By committing to release of quarterly figures, NBN Co executive chairman Ziggy Switkowski kicked off a process that will demystify the NBN and its potential, eventual profitability.
Which begged the question, when’s the float? Cue laughter all round, and Switkowski duly responded: “There is no current planning or thinking about the float.”
Switkowski went on to point out, however, “in the spirit of being helpful”, that the cost-benefit analysis being conducted by an expert panel chaired by Michael Vertigan and due in June would canvass the optimal long-term ownership arrangements for the National Broadband Network.
“Out of that may well come some thinking around ownership structure,” Switkowski said, “but then again I’m getting ahead of what they’re doing. I would look to that review for some insights, but at this stage there is no planning, no thinking, no detail.”
An NBN discussion paper released a fortnight ago — submissions close next week — canvasses the privatisation of the NBN and raises the possibility of a sale of some of the underlying networks:
“… were NBN Co to retain the role envisaged for it of primary wholesale provider of fixed network services, that need not imply that NBN Co builds, owns, operates and/or maintains all of the underlying fixed networks over which those services are provided.”
At Senate estimates last week, Greens’ broadband spokesman Scott Ludlam pressed Switkowski again:
LUDLAM: Could you just confirm for us your understanding of voices inside the coalition party who will be proposing that you be flogged off and privatised along with Australia Post, SBS and all the other stuff? …
SWITKOWSKI: … Firstly, at NBN, and that includes me, there is no conversation about any path to privatisation.
But the possibly of a sale or public float of part or all of the NBN will not go away, with the Coalition poring over a $130 billion shopping list of public assets to be sold off and with Switkowski indicating that the NBN won’t be able to borrow privately to fill an $11 billion funding gap for the $41 billion rollout. Switkowski told The Australian Financial Review: “I know that whether it’s organisations like Macquarie [which is funding an all-fibre rollout in Utah] or any other infrastructure fund, they will all stand ready to think about ways of playing with NBN at the right time.”
The National Broadband Network Companies Act 2011 blocks the sale of part of all of the NBN until the communications minister deems the network to be completed, an inquiry into ownership of the network is held by the Productivity Commission and its report considered by a joint parliamentary committee, and the finance minister has declared it is time to enter into a sale scheme.
Both the ALP and the Greens are standing by these provisions. Ludlam told Crikey the wholesale-only NBN would be a natural monopoly and, if the Greens had their way, would remain in public hands in perpetuity. Ludlam points to the lessons of of the privatisation of Telstra, which created a “deeply dysfunctional market”.
While competition should bloom among retailers, Ludlam says “the idea that you could have competition at the wholesale level is absurd”.
Ludlam says private investors would cherrypick, rolling out NBN to profitable markets in Sydney and Melbourne and ignoring the rest of the country, as occurred with the rollout of rival pay-TV networks using coaxial or hybrid fibre cable (HFC). Just like electricity and water, the NBN should be publicly funded, with uniform pricing to cross-subsidise the rollout to regions like Port Hedland, for example, says Ludlam. “Otherwise we end up with something like the HFC rollout,” he said.
While competition should bloom among retailers, Ludlam says “the idea that you could have competition at the wholesale level is absurd”.
An early NBN sale could rest in the hands of Clive Palmer, likely to hold the balance of power in the new Senate from July. The Palmer United Party has no formal policy on the NBN yet. Palmer’s spokesman said that any NBN sale proposal would be considered on its merits but early last year, in a web forum hosted by The Sydney Morning Herald, Palmer indicated he was opposed to privatisation of the “things that we have government for” and continued:
“As far as the NBN goes, I don’t think you could privatise it, because of the amount of money that’s been spent on it doesn’t give a return to anybody, least of all the Australian taxpayer.”
It might be a tricky sale, but by the mood in the room at February’s NBN results, there’ll be no lack of fee-hungry bankers willing to try.
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