Analysts sound off on NBN Co business case summary

Analysts note the document is lacking information pertinent to a business case

Analysts have cast doubt over whether the 36-page summary of the NBN Co business case publicly released this week will be of value to anyone.

The summary was released following much debate around the Telstra separation bill in the Senate and negotiations between Prime Minister, Julia Gillard, and independent senator Nick Xenophon. It precedes the full, 400-page business case set to be released in December.

See the key findings of the NBN Co business case summary

Ovum analyst, David Kennedy, told Computerworld Australia that the document resembled a high-level business plan, but not a business case.

“The words 'business case' implies a certain sort of information with a certain level of detail," Kennedy said. "This document doesn’t meet those standards.”

“I was hoping for more detail in the document, a business case implies detail like estimates of forward revenues, estimates of connections, the average revenue per connection and operating costs,” he said. “This document really doesn’t contain that kind of information, the sort of information which would, for example, allow you to test the claim that this will deliver return on capital above the government bond rate.”

To be a true business case, Kennedy said, the document would need to have some estimates of the revenues the company expects to build over the next few years and how much the business estimates it will cost to operate the network over that time in order to judge what the ultimate level of profitability would be.

“It’s only when we know what the estimates of profitability are that we can make any real assessment of the claim that it’s actually going to deliver a return on capital.”

IDC senior infrastructure analyst, Trevor Clarke, said the document was simply a summary of information that had been seen in the past, and did not include what would normally be considered a business case.

“There are some interesting points in [the summary], such as the growth in the number of premises that will be connected but there is no mention of NBN Co’s expectations of uptake which is an important element of the commercial success of NBN Co in the long term, so that’s disappointing to see,” he told Computerworld Australia.

Shadow communications minister, Malcolm Turnbull, recently claimed he’d never seen a business plan that didn’t paint a “rosy” picture of the business’ prospects, which Clarke said was always going to be the case.

“Every business wants their business case to appear rosy to the community so I don’t know that this document actually gives any real value to anyone,” he said. “In terms of insight of NBN Co’s business and what they’re expecting to do, I think really we should be waiting for what the ACCC (Australia Competition and Consumer Commission) is going to say about the points of interconnect, because that really is the crux of getting the pricing that NBN Co is trying to achieve.”

"It would be beneficial for those looking for a cost-benefit analysis to agree on what assumptions would go into the Productivity Commission's suggested work, which by the way sounds very familiar to that already being done by IBES [Institute for a Broadband-Enabled Society] in Melbourne," Clarke said.

“There’s some very big questions there which would take some very complex modelling and some big assumptions and I’d be very interested to see what people agree those assumptions should be,” he said.

“It’s the same with particular politicians calling on universal access to broadband, I’d love some of them to actually define what broadband is, what speeds broadband is.

“I think a little bit more agreement on what we mean by universal and what we mean by broadband is necessary before we can actually get to a proper debate.”

Follow Chloe Herrick on Twitter: @chloe_CW

Follow Computerworld Australia on Twitter: @ComputerworldAu

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Tags nbn coNational Broadband Network (NBN)NBN Co business plan

More about Australian Competition and Consumer CommissionetworkIDC AustraliaOvumProductivity CommissionTelstra Corporation

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