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News, Telecommunications - Written by Renai LeMay on Monday, May 14, 2012 10:49 - 262 Comments
Is Abbott consciously lying on NBN costs?
news Opposition Leader Tony Abbott appears to have again misrepresented the cost of connecting to National Broadband Network fibre infrastructure, in comments which the Government has said represent a deliberate attempt to mislead the Australian public on the issue.
In his budget reply speech last week which was nationally broadcast from Federal Parliament, Abbott questioned the need to “spend $50 billion on a National Broadband Network so customers can subsequently spend almost three times their current monthly fee for speeds they might not need?”
“Why dig up every street when fibre to the node could more swiftly and more affordably deliver 21st century broadband?” he added. “Why put so much into the NBN when the same investment could more than duplicate the Pacific Highway, Sydney’s M5 and the road between Hobart and Launceston; build Sydney’s M4 East, the Melbourne Metro, and Brisbane’s Cross City Rail; plus upgrade Perth Airport and still leave about $10 billion for faster broadband?”
It’s not the first time a leading Opposition figure has made the claim that end user retail NBN prices will cost more. Earlier this year, Shadow Communications Minister Malcolm Turnbull stated several times that NBN prices would higher than those currently on the market.
Some of the basis for the claims has come from the fact that the NBN will see a new, government-owned company, NBN Co, entrenched as a wholesale monopoly in Australia’s telecommunications market, which Turnbull has claimed is an uncompetitive structure which will eventually see prices rise. Other such claims have come from the idea that as broadband usage increases, consumers will naturally be paying more, or from stipulations in NBN Co’s wholesale agreements which are slated to allow it to raise some of its wholesale costs which it charges ISPs.
However, despite these factors, analysis has consistently shown that it is unlikely that retail pricing levels under the NBN will significantly rise, compared with existing prices available on ADSL and HFC broadband networks.
NBN Co has committed to the Australian Competition and COnsumer Commission that it will maintain wholesale prices to a reasonable level over the 30 year period governed by the Special Access Undertaking document which sets out many of the rules for its operations. The states that NBN Co’s basic broadband pricing will remain the same until June 2017, and that after that point, price rises will be limited to half of consumer price index rises in any one year. They also can’t be accumulated over time. In addition, analysis of current NBN pricing has shown that the NBN plans released by major companies like Optus, Telstra, iiNet, Internode, Exetel and others are virtually identical to their existing broadband plans on ADSL or HFC cable networks.
In a statement last week, Communications Minister Stephen Conroy said Abbott’s claim that consumers would pay three times more for broadband under the NBN was “just wrong”. “Prices for NBN plans released to date are cheaper than, or equivalent to, existing ADSL plans, but with much improved quality of service,” Conroy added. “For example, Skymesh is offering NBN services from $29.95 per month. Exetel’s entry-level plan costs $35.00 per month. A number of other retail providers, including Optus, offer NBN services starting from $39.95 and $49.95 per month. Thanks to the NBN, competition between retail providers is increasing.”
“Tony Abbott should check his facts before delivering a national address in the Australian Parliament.”
Another aspect of Abbott’s speech may also be incorrect; his statement that the funds being ploughed into rolling out the NBN could be invested instead in building transport infrastructure such as roads, whilst still leaving “$10 billion” to invest in broadband as well.
Abbott made this same claim in February. However, at the time, analysis showed that the NBN is not an expense in terms of the Federal Government’s annual budget, and cutting the project would not free up money to be spent in other areas. This is because the project is an investment expected to make a return for the government — a long-term profit. That return is currently projected to be between $1.93 billion to $3.92 billion.
According to a research note recently published by the Parliamentary Library of Australia last year, Labor is technically correct to account for the NBN on this matter, and the Coalition is wrong.
“Australia has adopted internationally accepted accounting standards, and these are applied in the budget treatment of the NBN,” the library’s Brian Dalzell, who works in its economics division, wrote in the report (available online here in PDF format). “While the applied accounting treatment depends on the specific transaction conducted between the Government and NBN Co, this treatment is governed by accepted accounting standards and is applied equally to all government business entities (GBEs). This treatment is not determined by the return generated by NBN Co (or any other GBE).”
In this sense, cutting funds from the NBN would have the potential to limit any return the project makes in the long-term, potentially even costing the Government money instead of saving it. Even if the NBN project ended up making a long-term loss on the investment, the Government’s loss in that area would not constitute the entire cost of the project — merely how much money it had lost once NBN Co’s revenues had been removed from the equation. Conroy acknowledged this fact in his statement.
“In his budget reply, Mr Abbott also pretends that investing in fast affordable broadband should be replaced by additional spending on roads,” the Minister said. “Mr Abbott clearly doesn’t understand that the NBN is classified by international accounting standards as an equity investment rather than a budget expense. This is consistent with long-standing budget treatment applied by this and previous Australian Governments.”
“The equity investment in the NBN cannot simply be shifted to pay for more roads, unless those roads are being run by a government business making a return.”
Right now, in reporting comments by the Opposition on the National Broadband Network, I — and no doubt other journalists — are facing an uncomfortable decision. When do you stop reporting that a leading political figure is ‘misleading’ Australia on a certain issue, has made a ‘factually inaccurate’ statement, or is simply ‘mistaken’, and start reporting instead that that politician is deliberately ‘lying’ on an issue in public, for political gain?
Opposition Leader Tony Abbott has taken a very consistent line with respect to the NBN over the past six months or so, repeatedly alleging that the project will increase broadband costs in Australia by up to three times, and that the Government’s NBN investment could be re-allocated to other areas such as transport infrastructure.
However, over this time, as Conroy pointed out last week, these statements have been proven false. The NBN is not, and will not, cost Australians more, and cutting the project will not free up government funding to be spent on roads, as it is an investment, not an expense.
Now, I am sure that some advisers within Abbott’s staff, and perhaps even the Opposition Leader himself, are aware that this kind of analysis has been done on the Liberal leader’s statements.
In addition, it is very common in political circumstances for leaders such as Abbott to rely on their portfolio ministers to supply input in their respective fields to major speeches such as a budget reply. In this case, it is clear that Shadow Communications Minister Malcolm Turnbull is personally aware of the criticisms of Abbott’s claims. Turnbull himself, earlier this year, was active in making many of the same claims. However, the Member for Wentworth appears to have ratcheted down his comments on these areas publicly, especially in the area of retail costs, since analysis of this area and of the NBN’s return on investment was published earlier this year.
I believe that Turnbull has become aware that some of his statements in this area were on shaky ground, and that he has modified his approach on this issue in order not to risk misleading the Australian public. So the question then becomes, has Turnbull, or even Abbott’s own media advisers, discussed with Abbott the fact that many of the statements which Abbott is consistently making about the NBN are factually inaccurate? If they haven’t, why haven’t they?
As a journalist, you can only point out when a politician is mistaken on an issue so many times before you have to draw the conclusion that the politician is deliberately ignoring commentary on the issue and is choosing to, as Conroy put it last week, “wilfully mislead” — in layman’s speech, ‘lie’ — to Australians. When that politician is an important a figure as the Leader of the Opposition, that is a very serious issue indeed. Right now, on the NBN, Tony Abbott is on very shaky ground — and it may just be on the verge of collapsing underneath him.
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