news Fact-checking media outlet Politifact has rated the controversial claim by the Coalition that Labor’s National Broadband Network could cost as much as $94 billion as “half-true”, as debate continues to swirl around the veracity of the Coalition’s own figures.
The Coalition has been making the $94 billion claim for around the past six months and especially since the launch of its own National Broadband Network policy in April, arguing that the fundamental assumptions underpinning Labor’s NBN costings are inaccurate and that the network is likely to cost much more to build than the $44.1 billion Labor estimates.
According to the Coalition’s background briefing paper (PDF), the $94 billion number will come about as the result of a number of Labor assumptions being wrong. The Coalition states that for the $94 billion figure to eventuate, NBN Co’s revenue must grow much slower than currently forecast, construction costs must be significantly higher than currently forecast, more households must pick wireless alternatives than is currently forecast, and the NBN must take 50 per cent longer to build (an extra five years) than currently forecast.
Commentators such as the writer of this article have argued that these assumptions represent a “worst case scenario” for the NBN where every cost factor blows out, and that as such, the Coalition’s premise is not reasonable. And senior Labor figures such as then-Communications Minister Stephen Conroy have accused the Coalition of lying” about the cost of Labor’s NBN and “concocting” financial figures.
However, in April Shadow Communications Minister Malcolm Turnbull responded to this claim, stating that the $94 billion figure being cited is not a ‘worst case scenario’, with the Coalition estimating that Labor’s NBN could actually cost more than $100 billion and take 20 years to deliver.
“The NBN has missed every rollout target it has set for itself. So is it so unrealistic to assume the rollout won’t be complete until 2025, four years late?” the Liberal MP asked at the time. “We also modelled NBN revenues. NBN Co assumes it can increase broadband access revenues by 9.2 per cent a year in real terms, and in doing so increase the share of household income devoted to fixed-line telecoms by 60-70 per cent. Our more realistic assumption (shared by independent telecoms analysts) is that its share of the wallet will stay constant.”
“We modelled the percentage of wireless-only households rising to 25 per cent rather than the 16 per cent assumed by NBN Co – reflecting the fact last year the number of wireless broadband accounts in Australia for the first time exceeded the number of fixed broadband accounts. And we modelled that the cost of passing each house with fibre would be 40 per cent higher than the NBN had estimated, to bring it more in line with independent analysts’ forecasts and the on-the-ground experience of Telstra’s fibre rollout in South Brisbane.”
“Our assumptions that led to the $94bn cost are far from a “worst-case” scenario; in reality the final cost could easily exceed $100bn and the rollout take 20 years to complete.”
A new analysis published by Politifact late last week (we recommend you click here for the full article, it makes for very interesting reading) concluded that Turnbull was “on strong ground” when he said the final cost of Labor’s NBN would likely exceed $44.1 billion, as most major projects run over budget. However, Politifact added, it was difficult to estimate the total cost of Labor’s NBN project.
Politifact said in general that Turnbull had “overreached somewhat. “If he had merely stated it was highly probable Labor’s NBN would end up costing more than the claimed $44.1 billion then, based on what is known he would be hard to fault,” the site wrote. “Turnbull might be taking things out of context, but based on our research and analysis, there’s more than enough of a legitimate challenge to NBN Co’s corporate plan in his estimate to push it out of False territory.”
The news comes as debate continues to rage between the two major sides of politics about the extent to which each side has properly verified the financial details of their NBN plans. For example, this week and last week Turnbull has avoided directly answering Labor’s question of whether the Coalition will submit its alternative National Broadband Network policy to the Treasury or any other organisation for costing purposes, instead accusing the Labor Government of not being transparent about its own numbers.
Turnbull believes that the Government is unfairly withholding NBN Co’s latest Corporate Plan from being published until after the election, although Communications Minister Anthony Albanese has denied that NBN Co has delivered the final copy of the document to the Government.
My view on this issue is well-known, and to be honest, it’s pretty much exactly the same as Politifact. I think it’s clear that there will be some variability around NBN Co’s budget, and I think anyone who doesn’t expect to see at least a 5-10 percent variance, for an infrastructure project of this size (the NBN is unprecedented in both size and complexity in terms of Australian infrastructure projects) is fooling themselves. I’ve been reporting on major government technology projects for most of the past decade. I have yet to see one which runs perfectly to time and budget.
However, I also believe Turnbull’s $94 billion claim to be unsubstantiated. As I wrote in an article for the ABC when the Coalition released its NBN policy:
“Among politicians, Turnbull’s speeches and policy workings are unusual in that they are usually exceptionally – if sometimes conveniently – well-referenced. However, the background briefing document released this week does not boast a sufficient bibliography to back its claims. A good example is its argument on the cost of connecting fibre to premises, which it baldly claims is $4,000, based on a single report published by Macquarie Bank’s equities department in January.
Conroy claimed this week that the Coalition had “concocted” its NBN figures. I don’t think we should go that far. But it also true that the Coalition’s claim that Labor’s NBN will cost $94 billion does not yet stand up to scrutiny, based on the available evidence.”
In short, we should expect NBN Co’s costs to blow out. But there is very little evidence that they will blow out to the extent Turnbull and the Coalition are claiming. I support Politifact’s conclusion of “half true” in terms of Turnbull’s claim, meaning “The statement is partially accurate but leaves out important details or takes things out of context.” Another fair rating would also be “mostly false”: “The statement contains an element of truth but ignores critical facts that would give a different impression.”
It’s certainly not in “pants on fire” territory.
Image credit: Office of Malcolm Turnbull