Australia $897m worse off under Telstra national broadband network: report

A report released today by the Centre for International Economics (CIE) claims that Australian consumers would pay 15 percent more for broadband services if Telstra wins the contract to build and manage the new national broadband network (NBN).

The report, titled "Telstra return on a national FttN network: community impacts", claims Telstra would reap an additional $897 million a year from consumer's pockets, based on the telco's initial estimate that the NBN would cost around $9 billion to build (including the government's $4.7 billion contribution).

The CIE figures are based on comparisons of what consumers would pay for broadband services from an alternative operator, with a rate of return based on benchmark market returns achieved by other telecommunications providers.

CIE director Kerry Barwise will present key findings of the report to Senator Conroy's expert broadband panel, senior government officials, telco industry experts and local and international speakers at an industry event in Canberra today.

The report has no basis in fact. It is a dishonest distortion designed to delay the process

Telstra

Telstra Wholesale managing director Kate McKenzie responded swiftly, calling it "a completely bogus report paid for by a bunch of competitors".

"The report has no basis in fact. It is a dishonest distortion that is designed to do nothing but delay the process," McKenzie said.

The report labelled comments by Telstra Group director of communications Phil Burgess to the Weekend Australian that the company needs a return "north of 18 percent" on the NBN as potentially "consistent with the abuse of market or monopoly power".

The G9 Terria consortium said if it wins the NBN contract it would be happy with a ROI of 13 percent.

The CIE report also considered two other cost scenarios:

Telstra CEO Sol Trujillo has recently claimed that network build costs could escalate to $15 billion. If this was the case, Australian's would pay an additional $1.4 billion a year for broadband services.

Last year Telstra proposed with the then federal government to build a broadband network to capital cities and the Gold Coast at a cost of $4.6 billion. If Telstra were just to build this network, it would cost consumers an additional $443 million per annum.

All three scenarios, the CIE claims, would increase inflation, reduce national growth, lower wages and reduce national consumption.