Malcolm Turnbull (Leader of the Opposition)comments on the economics of the NBN today in the Australian - http://www.theaustralian.news.com.au/story/0,25197,25329883-5015664,00.html
Since no comments seem to be making it in, here is my comment on the Opposition leaders assumptions.
Prime Minister Rudd, and Opposition Leader Turnbull.
My assumptions are online at : https://web.archive.org/web/20120410065801/http://www.thejoie.com/welcome/docs/NBNcosts.xls (archive.org)
Background: Investment $43B, fibre to the home to 90% of homes, plus wireless to rest, giving 100Mbps to fibre homes, and 12 Mbps to rest. Prices, and consumer takeup unknown. Business case not provided. Announced here
Mr Turnbull makes some good commercial sense in his article. I have made some estimates on prices and takeup, as well as costing the investment with interest and depreciation, and make the following comments.
Operating expenses 50%, depreciation 5%
Takeup of homes 50%, rest with competition
ISP $100pm, NBN (Ruddnet) 70% of $100pm : gives no economic return on investment
Spreadsheet is online at: http://www.thejoie.com/welcome/docs/NBNcosts.xls.
Depreciation same, Interest as for depreciation
Takeup $200pm 10%, $150 20%, $100 30%, $75 40%, $50 60%, $30 80%
On these assumptions, even with no operating costs (and I think 50% is very high), interest and depreciation (5%) at $180m per month each, swallow the revenue of max $240M, leaving a shortfall per month of $120M plus operating costs, and excluding competition, and ISP profit.
Other benefits accrue to businesses, who also use the network. Looking at small, medium and large, I guess small might pay $200 20% takeup, $150 30%, $100 40%, and medium $2,000pm 10%, $1,000pm 20% and $500 30%, large $20,000pm 10%, $15,000 20%, $10,000 30%.
Even with business cost savings on Telstra prices of 50% for large, and 20% for small, and revenue expansion for large 5%, Medium 10% and Small 20%, the most extra revenue and benefit I can get to is about $80M per month.
Still a shortfall of $40M per month, plus operating costs, plus competition, plus ISP share.
So, there are a lot of variables here, and it is worthwhile to think through what they are, and what they are worth to us individually, as a family, and as a nation.
If a national project is worth $40M of national fervour (per month) then maybe it is worth it. If we can find another $40M of benefit elsewhere eg international reputation, proactive problem solving, then maybe there is value in the NBN.
Other downsides would include potential impact on other telecoms share value, to shareholders.
Long ago, Pliny once said: fortuna fortem favet, not long after Mt. Vesuvius erupted. Sometimes life is for living, and doing the big important things to make the world a better place. Fortune favours the brave. The NBN might cost us $40M a month ($2 per person per month), but setting an example to the world - PRICELESS.