In the dark on National Broadband Network

THE back-of-the-envelope figures for the National Broadband Network have always been line-ball. The business plan, whose release has been squabbled over this week, cost $25 million to produce. But you don’t need $25 million to see the difficulty.

The figure of $43 billion has been bandied about without much contradiction since the project was first proposed. Even at the modest interest rate of five percent, which admittedly is enough for government bodies to raise money, it will cost more that $2.1 billion to service $43 billion.

Now let’s be optimistic here. Let’s say half of Australia’s nine million households agree to connect.

And half is optimistic. For example, my colleague Nic Stuart said on these pages earlier in the week that he would not connect. He argued he is satisfied with existing internet access and he relies on it for his livelihood. Maybe. But certainly a great number of people do not access the internet at all or access it for things that do not require high speeds – email, banking, text and low res video. The sort of stuff that can be obtained by wireless internet with ease.

Moreover, many of these people like the portability of wireless internet. Both Optus and Telstra have internet wireless networks that mirror their Next G mobile networks. I got wireless internet 100kms west of Cooktown (though inexplicably I get only intermittent coverage it 3kms from Parliament House in Canberra).

Anyway, the National Broadband Network does not give portability.

It also means that many itinerant youngsters will be less likely to get it. And as homeownership gets ever more difficult, even fewer non-homeowning young people will sign up to something a permanent as the National Broadband Network. We are seeing the same trend as people move away from fixed line telephones.

Further, a lot of people who might like high-definition-video or television services offered by the NBN are getting ever more high-picture-quality television from the free-to-air TV networks, which approach on-demand services when combined with easier-to-use recording devices.

In short, a lot of factors conspire against saturation take up of the NBN.

So let’s take half the households as optimistic. Let’s continue to be optimistic and say that people will be willing to pay $70 a month for access to a core internet service, of which $20 might go to the retailer and $50 to the NBN. That $50 by 4.5 million households, gives us $2.25 billion. After paying $2.1 billion to service the debt, that does not leave a lot over for maintenance, post-roll-out connections and the like.

Now I might be off the mark. So might economists, commentators, MPs and others. All the more reason to see the NBN business plan before making judgments about easing competition rules, allowing deals with Telstra, spending vast amounts of public money and the like.

And all the more incongruous for Tasmanian Independent (with a capital I, not a lower-case one) Andrew Wilkie to say, “I am putting my confidence in the Government that the business case will stack up.”

Fortunately other more independently minded Independents are less likely to give the Government a blank cheque.

Now it may well be that even if the NBN were to make a likely loss it would still be worth doing. It might have social benefits worth paying for. It might be a case of making a short-term loss for a longer term gain. It might be a case of accepting there will be unforeseen benefits, just as there might be unforeseen costs.

Communications Minister Stephen Conroy’s reasons for delaying the release of the business plan upon which we can make these judgments seem spurious. It is difficult to see what can be commercial in confidence about a business plan for a government monopoly.

The government clearly has not learned the lesson of the Henrry Tax review and other reports it has sat on while it attempts to manipulate media coverage and public opinion.

Even on a cynical view the Government should release these sorts of reports as it receives them. It is far easier to disown or only partly accept someone else’s report if the reaction is bad, than it is to backtrack when you hold back a report and accept all or part of it upon delayed release, as it did with the Henry report.

The way Conroy is doing it, the Government will have legislated for the NBN and cemented in a lot of detail before the business plan gets a good airing. It should not expect MPs to have to weigh up the social and economic advantages and disadvantages of reducing competition requirements unless they have a better idea of the likely costs and benefits.

Further, it may well be that the business plan might suggest other models that might deliver almost as much benefit for substantially less cost. It may well be that a lot of the medical and scientific uses can be delivered without having to lay fibre cable to every home.

As it is, the Government seems to have committed itself to the NBN and is working out the justification after the event.

As with the tax review, the Government is denying itself the use of a lot of community wisdom and knowledge. It has made a habit keeping reports secret and using its temporary monopoly of knowledge to get an edge in creating and promoting its policy position.

It should do the reverse. It should make a habit of publicising these reports as they come to hand and change or create its policy position after the community has contributed its wisdom.

One would have thought minority government would have helped Labor save itself from itself. But unless it changes its ways on secrecy and information, voters have every right to assume it has something to hide.

It should admit there are risks and there may be costs, rather than arrogantly assuming it knows best. The danger is that the way it is going, if things do go wrong, voters will be less forgiving.

I hope the NBN succeeds and provides great benefits to Australian society. But as things are, the Government is making it difficult for voters to found those hopes in reality.
CRISPIN HULL
This article first appeared in The Canberra Times on 20 November 2010.