What happens when NBN Co runs out of money?

The Coalition's firm $29.5bn cap on NBN funding underscores its promise of a cheaper rollout, but it may have to fork out more dough one way or another.

The federal budget doled out a bit of pain for everyone but as far as the National Broadband Network is concerned the political jousting, which will undoubtedly play out for a while, holds little import.

NBN Co isn’t wasting too much time on it, nor should it given the far more difficult challenge that lies ahead. The only number that matters is $29.5 billion, and the fact that taps are going to be shut by 2018.

The timeline and the funding cap had been flagged for a while, so this week’s confirmation and the numbers being gazetted into the budget set a very firm parameter within which Ziggy Switkowski, Bill Morrow and the NBN Co team must operate.

So what happens if NBN Co chews through the $22bn left in the bank and the job is still only half done? Presumably, NBN Co will be generating enough revenue to keep things ticking over and raise funds through private equity or debt financing.

There’s always the option of securing some bridging loans, but that will ultimately have to be guaranteed by the federal government.

Of course the key question now is just how much NBN Co can achieve within the stipulated time frame to make substantial progress with the rollout.

Success on that front translates to better rate of return, which in turn makes it potentially attractive to the private sector.  

As things stand now, there’s no way a private company or an investor would be remotely interested in taking a slice of the NBN. Unfortunately, that mood is unlikely to change in a hurry because buying into the Coalition’s NBN brings with it the political uncertainty of what a change of government could mean to the scope and methodology.

The Coalition’s multi-technology mix (MTM) network is undoubtedly limited in its vision as far as the technology is concerned, but putting a firm cap on the funding helps it deliver a cheaper NBN. Just how much cheaper the network will be when all is said and done is open to conjecture at the moment.

It would be fascinating to see how a Coalition government would navigate a situation where the options are an incomplete NBN or tipping more money in.

The funding cap saddles NBN Co with an almighty task and while the news of an imminent addition to the workforce in the Northern Territory to assist with the rollout is welcome, NBN Co doesn’t have the luxury of spending its way to a faster rollout.

It will be a delicate game of negotiations, cajoling contractors and ensuring that the myriad technology options are fitted together.

Some of this is happening now but the hard yakka can really start once that agreement with Telstra is renegotiated.

This critical piece of the puzzle, with its nebulous time frames and jaw-dropping dollar figures, has to be resolved.

We are being short-changed on technology, but short-changing the public on delivery could be disastrous for NBN Co and the Coalition.