Australian NBN Gets Government Loan to Finish Build

Rare is the major capital construction project that finishes on schedule and on budget. The Australian National Broadband Network (NBN) apparently is not exempt. The NBN is getting a loan of A$19.5 billion ($14.3 billion) to finish up the wholesale access network.

The loan is expected to be repaid upon the planned future privatization of NBN Co after 2020.

The NBN expects to provide wholesale access to 11.9 million premises, and also expects its retail customers to actually connect eight million homes and businesses, generating annual revenue of $5 billion.

The NBN is investing in a number of access platforms, ranging from satellite to fixed wireless, hybrid fiber coax and fiber to home. That is not an unusual choice, as there always is debate about which platforms are sustainable for different customers in different settings.

To be sure, fiber to the home is touted as future proof, and that arguably is true, where the investment is feasible (urban and dense areas). The big problem is that there are many scenarios where that investment is quite risky (lots of competitors, including facilities-based competitors)  or physically impossible (oceans, mountains, very rural areas).

That will not be the key issue for the NBN, which essentially is a monopoly wholesale provider of access capabilities. So take rates should not be a major issue.

Instead, the issue is the level of services consumers decide to buy. Some argue that unless large numbers of consumers choose to buy higher speed services that generate more gross revenue, the business model will suffer.