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Conroy releases broadband network study -

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Communications Minister Stephen Conroy today released an assessment of the financial viability of
the national broadband network. And if the opposition was hoping the report would deliver proof the
numbers on the national broadband network don't stack up it may have been disappointed.

Transcript

TRACY BOWDEN, PRESENTER: Having decided to reject the tender process and go it alone in developing
a new National Broadband Network Communications Minister Senator Stephen Conroy today released a
long awaited assessment of the financial viability of the NBN - the so-called "information
superhighway".

Costing $25 million, it was an exhaustive study - 500 pages of analysis co-authored by accountants
McKinsey and Company and KPMG, who made no less than 84 recommendations to the Government.

If the Opposition was hoping the document would deliver proof the numbers on the NBN simply don't
stack up, it may have been disappointed.

In a moment Political Editor Chris Uhlmann will be speaking live to Senator Conroy but first this
report from Business Editor Greg Hoy.

GREG HOY, BUSINESS EDITOR: Digging the trenches.

With great fanfare in Tasmania and North Queensland 540 kilometres of a target 6000 kilometres of
fibre optic cable have already been laid for the national Broadway network, touted as the largest
infrastructure project in Australian history.

Digging today to deliver tomorrow the technological wonders of the Information Superhighway - to 93
per cent of Australian homes and businesses.

The good news today, the $43 billion investment risk, $26 billion of that for tax payers may have
been over guesstimated.

SENATOR STEPHEN CONROY, COMMUNICATIONS MINISTER: In fact the study finds that this is a
conservative high end estimate and that there are opportunities to significantly reduce the total
build cost.

GREG HOY: And it was mostly good news, it seemed, as the Federal Communications and Finance
Ministers released the fruits of a $25 million implementation study they commissioned from McKinsey
and Company and KPMG, who together scrutinised the project's financial viability.

STEPHEN CONROY: The study finds that NBN Co can build a strong and financially viable business
case.

Importantly, the study confirms that this is the case even without the participation of Telstra.

KEVIN RUDD, AUSTRALIAN PRIME MINISTER: Let me be very clear - this government is determined to
build a National Broadband Network and will not let anything get in its way.

LINDSAY TANNER, FINANCE MINISTER: What the advisers are saying is that over that 15 year period you
will get back your money and a modest return of 6 or 7 per cent - so maybe a little over the
current bond rate but certainly not in a zone that would trigger a kind of ordinary commercial
investment.

But nonetheless, the Government will earn a return.

GREG HOY: And so begins the end game as the Government digs in on its NBN.

In election year 2010 this subject is set to become trench warfare, with the Opposition adamant
that if elected it would scuttle what it sees as Senator Conroy's exorbitant folly.

TONY SMITH, OPPOSITION COMMUNICATIONS SPOKESMAN: We've made very clear we don't support going down
this path. We wouldn't have gone down this path. We won't go down this path in government.

And yes we would, if we attain government later this year, seek to save taxpayers from this
ill-conceived Rudd adventure.

LINDSAY TANNER: Mr Abbott in his usual loose-tongued way has been suggesting recently that he will
cancel the broadband project and could therefore have up to $43 billion of savings available to him
to spend in other ways.

Well I've got bad news for him - he won't. He doesn't.

GREG HOY: The accounting logic goes that if the NBN cost qualifies as investment rather than
spending - hey presto - it won't be reflected in next week's budget deficit figures.

But there remains a big elephant in the cubicle: Telstra.

Today's report urged government to help strike a truce between the NBN and its big foe to cut costs
by buying Telstra's cable infrastructure and absorbing its wholesale customers.

But the Government has found that that's easier said than done, with what's believed to be about a
$4 billion difference of opinion on the value of Telstra's assets.

And without Telstra, opinion is still strongly divided on whether the NBN's numbers will stack up.

MARK MCDONNELL, TELECOMMUNICATIONS ANALYST, BBY: The study shows that providing you accept that all
of the underpinning assumptions are realistic.

And what I'm suggesting to you is that there's one very big assumption in here which I and I think
a lot of other people would suggest is quite a risky assumption and frankly quite an unrealistic
assumption in an environment where there is competition and alternatives and where you have to have
a very high level of commitment - really across the industry - for that level of utilisation to
occur.

And that's far from guaranteed.

PAUL O'SULLIVAN, OPTUS CHIEF EXECUTIVE: The report shows that the NBN can be rolled out and can be
economically viable even if Telstra chooses not to participate and to support it.

In fact I think the consequences are probably more serious for Telstra than for the NBN. Because as
more and more of the broadband network gets built - and as it's accepted by households, that's
fewer and fewer customer who will be left to buy off Telstra's legacy networks.

So there business and their assets will be less valuable to them.

GREG HOY: So to cooperate or compete? That's the $10 billion question facing Australia's old
telecommunications giant as it faces its new challenger.

It's a battle of the cable trenches and it seems it's far from over.