The following proposal will finance the National Broadband Network, stimulate the economy in a positive way, and be of no cost to the government.
The broadband network will be funded by individuals in Australia taking out zero interest loans and investing the money from these loans in shares in the National Broadband Network. The money to repay the loans will come from earnings from the wholesale charges on broadband connections.
Assume the broadband network will cost $40 billion dollars to construct. Assume there are 20,000,000 Australians who will take out loans to purchase shares. Each loan will be $2,000. Assume there are 8,000,000 connections and assume the wholesale cost per month is $50 and of this $10 is used for administration and maintenance. That is each year there is $480 profit per connection. This is distributed to the share holders or for each $2000 in shares there will be a distribution of $192 per year. If half of this used to repay the loan then the loan will be repaid in 21 years and the loan holders will receive $86 dividend payments.
Individuals apply for the right to a loan and they may or may not take up the right. If they take up the loan they are required to repay it automatically from the dividends they receive from the NBN and they are required to connect to the NBN if it is made available to their dwelling.
A household with 4 inhabitants will receive dividend payments of $344 per year and pay $600 broadband connection fees. 
For this scheme to work the banks must be allowed to issue zero interest loans for this purpose and must ensure that the money is invested in shares and that the repayments are made from the profits of the NBN. If the loans are not repaid the banks do not have to cover the cost of the loan repayments.
With this scheme everyone wins. The population, not the government, goes into debt but the debt is repaid from the earnings. The NBN is owned by the population. The banks make fees from administering the scheme. The population that wants it will get fast broadband connections.
 

4 thoughts on “Funding the Broadband Network with Zero Interest Loans

  1. This sounds logical to me at first glance — but I am afraid I do not understand it.

    What is the advantage of not having the government create the money for the project and keeping all the profit?.

    Is it because the people will “vote” for the project by taking the loan and it will not take off until all the stock is sold — so at least — you will have a vote of confidence?

    Marty

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  2. If the government owned the network then we have a government controlled network with all the political problems this generates. We find that government controlled service providers generally succumb to political pressures with the associated inefficiencies. If the network turns out to be very profitable then the government will sell the network and in effect pass ownership to those who can pay and yet it is really the customers of the network who have given it its value. Networks like this are important because it is more efficient to have one network but that gives rise to monopoly pricing and abuse if there is a single owner.

    By the people who use the network also owning the network will tend to keep the monopoly issues under control because the owners get the benefit from increased prices but also pay for it.

    There is another interesting property that the value of the rights to take out a loan tell us whether we have “printed” too much money or not. If the value of the right drops to close to zero then we are spending too much on the network.

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  3. I like this. It is a pity that it is a lot easier to give Australians who lodged a tax return $900 – than it is to ask these people for a $2,000 loan.

    But great idea! Or perhaps a levy of $3,000 to get free broadband for 3 years – and those who can’t pay have to pay full fees.

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