Conroy defends NBN funding arrangements

The federal government has defended itself from Opposition criticism of the way in which it proposes to fund the company which will build the $43 billion national broadband network (NBN) announced yesterday.

Speaking on ABC television’s Lateline program last night, the minister for broadband, communications and the digital economy, Stephen Conroy, said the NBN company would be able to raise its own debt.

“Just like Australia Post – which raises its own debt it doesn’t fall as, and isn’t considered to be, government debt,” he said. “The government will not be up for $43 billion [to build the NBN].”

In this way, the federal government would likely only have to front half of the stated $43 billion required to build the NBN, Conroy said. However, only if it could secure private sector buy-in.

“The company itself will raise these monies - let’s say 50:50 debt to equity. It will raise 50 percent itself; it will raise $22, $23 billion itself. And the government, if there are no private sector partners will potential be up for the remaining $21, $22 billion.”

Despite the massive balance of private sector funding required, Conroy said that the federal government was confident that it convince the private sector to invest in the project.

“Optus have indicated publicly today that after talking to people in the sector we believe this is an attractive private sector investment we believe there will be private sector investment in this company,” he said.

However, Opposition shadow minister for communications, Nick Minchin, also speaking on Lateline, said securing the funding could be difficult given the high level of risk for investors.

“Telecommunications is one of the more high-risk commercial exercises you can undertake in the world today,” he said. “Telco companies around the world have lost billions on failed investments and we didn’t think in the case of Telstra that tax payers shouldn’t have billions of dollars tied up in a telephone company.”

Minchin also argued that the federal government’s decision to focus on fibre to the node as the sole delivery method for broadband service delivery was flawed.

“The government is picking one particular mechanism for delivering broadband, proposing to set up a company in which tax payers will compulsorily become share holders, and will underwrite and have to borrow $20-odd billion from the public to make this work,” he said.

“So the tax payers have their share holding at risk, they have the risk of the borrowings which the government has to undertake to make this work, and then it all depends on the private sector coming to the party, and we have grave doubts over whether it is commercially viable in the first place.”

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