Monday, November 28, 2011

Australia National Broadband Network Faces Cost Overruns, Demand Issues

Capital investment for the National Broadband Network will top $50 billion, while slower-than-expected development of digital video content could put at risk the financial returns for the ultra-fast network, a confidential report states. 

The Australian government has been told by its own corporate advisers, Greenhill Caliburn, that costs will be dramatically higher than the $35.9 billion in capital costs the government has been claiming. 

Take rates also have been lower than many had expected. So far, 11 percent to 16 percent buy rates have been seen. Keep in mind that those buy rates reflect sales by all retail providers in each market, not the share held by any single contestant.  Costs too high?
The Joint Committee on the National Broadband Network has warned that NBN Co may be showing early signs of cost-blowouts and delays, with timeframe slippage and higher than expected operating expenditure recorded during the last six months. Retail pricing an issue?

In the committee's latest report (PDF), chair and independent MP, Robert Oakeshott, said that compared to the NBN Co Corporate Plan, a lower than expected capital expenditure and higher than expected operating expenditure result had been observed.

"This could be an early warning that it is costing more to do less, when compared to the expected results in the NBN Co Corporate Plan, even though the committee has at this stage accepted the argument from NBN Co that other reasons are behind this," the report reads.

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