news Communications Minister Malcolm Turnbull has appointed Henry Ergas, an open Liberal supporter and one of the most strident critics of Labor’s National Broadband Network policy, to a panel of experts which will conduct a cost/benefit analysis of broadband review regulation associated with the NBN.
The panel, appointed last week, is to conduct what Turnbull last week described as an “independent” costs/benefit analysis and review of regulation associated with the NBN. The analysis will analyse the economic and social costs and benefits (including both direct and indirect effects) arising from the availability of broadband of differing properties via various technologies, and to make recommendations on the role of Government support and a number of other longer-term industry matters.
The delivery of this cost/benefit analysis has long been an election promise by Turnbull, who had repeatedly lampooned the previous Labor administration while in Opposition for not conducting a cost/benefit analysis into the NBN project before launching it. However, the appointment of Ergas to the panel conducting the analysis appears set to severely undercut the independence of the review, raising questions about whether it can be taken seriously at all.
The Sydney Morning Herald recently reported that Ergas had handed out how to vote cards for the Liberal Party at the recent Federal Election, supporting Liberal Senate candidate for the ACT Zed Seselja, who was successful in his bid to be elected.
In addition, Ergas has long been one of the most strident critics of Labor’s previous NBN policy. In an article published in The Australian newspaper in late October this year, for example, Ergas stated that “the greatest disasters” in government bore “Labor’s mark”. In the article, Ergas compared the NBN to the problematic Collins-class submarine project, and questioned many of the bases for its existence.
Ergas has published a succession of such articles over the past several years. For example, in May 2010 he published a strident critique of the NBN implementation study through industry newsletter Communications Day, writing: “… the Study, with a degree of British understatement, rightly notes that the model the government has chosen – a public monopoly, extending, at least for the first dozen years, to the active service – “departs from the collective experience in most other markets” … Given the very high costs this project involves, and the fact those costs and risks must, on the Study’s own numbers, fall largely on taxpayers, a visitor from Mars might well wonder quite what we are doing.”
In a submission to the NBN Senate Select Committee in October 2009, Ergas argued that the costs of building the NBN exceeded its benefits by somewhere between $14 billion and $20 billion. The economist also publishes regular columns and a blog for The Australian newspaper, which has been highly critical of the NBN policy over a sustained period.
Currently, Ergas is a senior economic advisor at Deloitte Australia, and a foundation professor of Infrastructure Economics at the SMART Infrastructure Facility at the University of Wollongong. He has held a number of other senior positions notably at the Organisation for Economic Cooperation and Development in Paris, where the economist undertook the OECD’s first review of telecommunications policy.
Ergas also served as a consultant to the Department of Communications in its review of telecommunications policy in 1987-91, was a member of the Review of Telecommunications Regulation in 1996 and of the Review of Universal Service Obligations in 1997 and chaired the Australian Intellectual Property and Competition Policy Review in 2000-2001.
Ergas’ appointment is only the most recent example where Turnbull has appointed executives with close links either to him personally or the Liberal Party to senior positions influencing the NBN, since the Federal Election in September.
NBN Co head of strategy and transformation JB Rousselot, for example, has a strong personal history with Turnbull — even owning a boat together with the Minister — as does new NBN board director Justin Milne. New NBN executive chairman Ziggy Switkowski is reported to have close links with the Liberal Party. All of these appointments were reported prior to the Federal Election.
The appointments have significantly undercut the credibility of the NBN Strategic Review released last week, with many observers expressing their belief that the document reflected the Coalition’s own views about how the NBN rollout should be carried out. The Opposition has referred to the review as being carried out by Turnbull’s “mates”. It is likely that the credibility of the cost/benefit analysis will be severely impacted likewise by Ergas’ appointment.
Other appointees to the panel of experts include Michael Vertigan, a senior top-level Tasmanian businessman and executive who has also served as the secretary of the Department of Premier and Cabinet, as well as having an involvement with a number of other Tasmanian initiatives.
Also on the panel will sit former eBay Australia managing director ALison Deans, and Tony Shaw, a consultant on regulatory and competition issues who was a member of the NBN Panel of Experts established to undertake a competitive assessment of proposals for the rollout of Labor’s initial $4.7 billion national broadband network process.
Shaw was also a member of the Expert Taskforce established as part of the High Speed Broadband Network Infrastructure Proposal process. In addition, he was a member of the team that undertook the NBN Implementation Study. Shaw was also previously Chairman and CEO of the Australian Communications Authority and Associate Commissioner of the Australian Competition and Consumer Commission. The consultant led the team that developed the principles for telecommunications policy and regulation for a competitive environment and subsequently managed preparation of the 1997 Australian telecommunications legislation.
opinion/analysis
As I wrote in late November, as Ergas’ appointment was rumoured:
“To be clear, I am not casting any aspersions on the competency of Henry Ergas. I believe he is very competent in his field, and he is certainly very experienced and successful in his work. However, it’s also quite obvious that Ergas has a very well-established and long-held view about the NBN that would play into his reported position on a cost/benefit panel examining the Coalition’s version of the NBN. My advice to Minister Turnbull would be to consider this kind of appointment very carefully.”
I’m sorry, but you just can’t call this an “independent” panel when it’s got Henry Ergas on it. Not only has Ergas been one of the most vocal critics of the NBN from the start, but he’s an out and out Liberal Party supporter. There is just no way this cost/benefit analysis will be viewed as credible, no matter what it finds. That’s just reality.
You’d have to say, with this appointment, that Turnbull really just isn’t trying to hide his partisan approach to the NBN any more. You just cannot appoint an open Liberal Party supporter to a panel which should be independent, if you want it to have any credibility. Ergas’ appointment means Turnbull doesn’t care about the optics of trying to look independent any more; he is not worried about whether the NBN cost/benefit analysis which he rabbited on about for so many years looks credible or not.
Image credit: University of Wollongong
Ahh it just keeps getting worse doesn’t it.
Next they’ll be getting Alan Jones on the board.
And they’ll round it out with Andrew Bolt.
Hahaha god if it wasn’t so sad I’d be laughing my socks off.
I know you mock it, but just think of it! We could all be sending videos with LASERS!
And the tragic comedy that is the liberal party nbn continues
I think Sortius put it well in his conclusion about the so-called Strategic Review…
http://www.sortius-is-a-geek.com/fudged-numbers-abound-review/
“Essentially this review was the precursor to the shut down of the NBN completely. In some ways that would be the best thing to do at this stage, as spending $41b to take us back a decade is far from acceptable”
I’m thinking that a 3 year hiatus is better than the Dog’s Breakfast we see heading our way from Malcolm and Co…then at least we can keep our powder dry and start fresh in 3 years rather than this upcoming fiasco in front of us.
Renai,
I do wonder whether this is Turnbull’s way of flipping the bird at commentators such as yourself that have attempted to take him to task previously.
Kind of like a political “I’ll do this however I like and there’s nothing you can do about it.” sort of thing.
My comment isn’t meant to be inflammatory, but it’s just so overt, almost in your face type of stuff.
I do believe MT just gave everyone a big up yours I’ll do what I want thank you very much and who are you to tell me otherwise.
Couldn’t agree more. The arrogance and effrontery is astounding.
Given Mr Ergas’ published opinions and claims, not to mention consulting work, he has removed any doubt regarding his opinions on the NBN, and by default, by appointing Mr Ergas, Turnbull has erased any semblance of impartiality regarding the outcomes of the CBA.
Turnbull is counting on ignorance by the general population of the allegiances of those on the panel and the power of sympathetic media to progress the justification of his policy in the public arena.
It is as has been said, arrogance and cynicism of the highest order.
“…Turnbull’s way of flipping the bird at commentators..”
Yup. That’s pretty much it.
I would love a Royal Commission to go into this blatant cronyism once the Liberals are out of power (hopefully sooner than later).
Ergas is a strict Austrian school of economics, which means his starting point would be that the government shouldn’t build a telecommunications network, because there is no such thing as market failure, or more simply, the market will provide.
By magic – Austrian economics lacks scientific rigor and rejects scientific methods – enough said.
Are Austrian economists the same economists that deny the reality of a world with finite resources? Or is that another kind?
Generally all economists tend work on the assumption of no limits. No different to bankers and the endless creation of debt. Physics has to introduce some reality about the physical limits of the world.
Generally all economists tend work on the assumption of no limits. No different to bankers and the endless creation of debt. Physics introduces some reality about the physical limits of the world.
Oh and just to illustrate how much BS and superficiality there is in Turnbull’s ‘Expert Panel’ CBA & review
There are almost twice as many words devoted to the credentials and experience of the members of the ‘Expert Panel’ as there are in the terms of the review.
http://www.minister.communications.gov.au/malcolm_turnbull/news/panel_of_experts_to_conduct_cost-benefit_analysis_of_broadband_and_review_nbn_regulation#.Uq6iOyeurft
What a joke, a snow job, a farce. Turnbull is nothing better than a snake oil salesman.
Just build the FttP and be done with it… why do we need all these experts/panels/cabinets…
And so many were pissed off with Conroy… mostly for the thing he did not introduced anyway. He is a harmles baby compared to this mob
Now, we got adults to build their network (not NBN anymore). Not sure if anything can be done at present. They don’t give a f**k about anything. Maybe after next election IF Labor is back…. I like the idea of Royal Commission, they should be put behind bars for years for sabotaging Australian economy.
“Maybe after next election IF Labor is back….”
Why would Labor stick out their neck for the NBN again?
They went out on limb with their NBN policy and the voting public cut them off at the knees.
At the very least, until the Murdoch press is neutralised, don’t look to see this raised again by Labor.
Elections have consequences and a farcical NBN policy is one of those consequences.
This is off on a tangent…
@Graham: If anything ALP have themselves to blame w/ the shambolic mess that was the last election. They had decent leaders… they were just dumb enough to let somebody else call the shots for them (ie. ye olde factionalism at its finest) I mean honestly who the hell dumps a 1st term PM on their 2nd year just because it dipped to 49%… FORTY FREAKING NINE!!? Howard has had much worse pollings mid term and still held on for 3 terms. This lead to the circus of knifings which pretty much left the populace w/ the choice of “dumb or dumber”.
I’m of the opinion we ended up “dumber” though…
There you go Renai.. Make a headline, “Royal Commission called for”..I agree.
Fudged Numbers Abound In Review:Sortius
It’s interesting, you know, Turnbull has made the claim that he wanted the full review out in the open, and that NBN Co chose to redact what they redacted from the review. How convenient.
Reminds me of another story…
Malcolm Turnbull: “But I would be prepared — very, very happy — to encourage my secretary to release that incoming ministers brief”
http://delimiter.com.au/2013/11/20/ill-show-mine-youll-show-turnbull-will-open-blue-book-labor-releases-nbn-docs/
Department: “The potential for this particular advice to be disclosed could result in the Department being drawn into public controversy and potential conflict with the Minister early in the term of the new government. Such an outcome could cause lasting damage to the relationship between the Department and the Minister, which could be detrimental to the effective operation of the government.”
http://delimiter.com.au/2013/12/09/delimiter-appeals-turnbull-blue-book-censorship/
How convenient.
Similarly, Minister Turnbull apparently wants NBN Co to release the review in full, but in NBN Co doing so it would jeopardise NBN Co’s relationship with Minister Turnbull, so NBN Co chooses to redact the information that would jeopardise NBN Co’s relationship with Minister Turnbull. How convenient.
Fudged Figures Abound in Sortius’ review: steve
Sortius: “To make up figures like this is crazy. The 2013-16 CP was only missed by 22%, NOT the 55% that the Strategy Review states.”
NBN 2013-16 CP Total Premises Passed FY2013 661,000
NBN Weekly rollout metrics Total Premises Passed FY2013 234,799
Difference:426,201 (65%)
The Strategy Review has CP to Sept 2013: 846,122
NBN Weekly roll-out metrics to 29 Sept. 2013: 383,978
Difference: 462,144 (55%)
“They went out on limb with their NBN policy and the voting public cut them off at the knees.”
But the NBN (should I say our need for modern communications infrastructure) is fundamentally not an emotive issue like say whether we should be a republic. Communications enable modern life and our productivity and well-being (more so the younger you are) revolve around it. In the end you can put numbers on these things and it can be demonstrated whether it is worthwhile or not. Forward planning is not in the LNP mindset and Labor generally isn’t very good at it but eventually when we are in recession, productivity has stalled and the world average has moved significantly ahead of us then it will become an urgent thing to do and we will finally get upgraded communications infrastructure.
As to Labor going out on a limb, I don’t think that is accurate. If anything I believe the NBN saved them from a larger defeat. The Anti-NBN was not the issue that got the LNP into power.
Here’s how a CBA should look.
Both the ALP and coalition NBN versions are nearly identical in respect of satellite and wireless, and that all new (green fields) properties get fibre to premises. The difference is existing urban premises, which will number 71% of all premises by the early 2020s completion target date.
Suppose we take as gospel the costings of all-FTTP as $72 billion and FTTN/HFC/ADSL as $41 billion, before considering the $5 billion of cost savings which NBNCo proposed and Mr Turnbull failed to include in that costing of FTTP.
This puts the cost of FTTP at somewhere less than double the cost of FTTN/HFC/ADSL.
Next we consider the average revenue per user, which is stratified according to the limitations of each technology. We already know that FTTP is yielding double the revenue of FTTN/HFC/ADSL, and that this disparity will rise as much faster speeds are cheaply rolled out on FTTP, and slightly faster speeds are expensively rolled out on copper and coax.
The coalition will seek to construct a prima facie case that the limited revenue of its proposal will not see the taxpayer carrying the can for FTTN, when FTTP could entirely self-fund.
If the revenue-to-cost ratio were identical for both, then the decision must be which solution delivers the better outcome for users, which is of course fibre to premises.
But the revenue-to-cost ratio is much greater for fibre to premises, so the rational finding should be to build FTTP wherever feasible in the urban footprint. (In some buildings, having brought the fibre to the premises, it may be internally propagated on copper, but it is still brought to the premises where feasible, not terminated at a street cabinet.)
Next, the operating costs of the network must be recovered from user revenue in perpetuity, and these will be much lower with an all-IP, all-fibre deployment.
If the CBA finds otherwise then it is ideological, not based on economic reality, and also ignores the national benefit of delivering universal urban fibre sooner rather than later (or never, since this may be the only chance to do it).
Ergas is an economist whos consultancy business went belly up…!
So I agree, he’ll fit in perfectly with Malcolm’s FTTN – fuck-up to the Nation plan :)
:/ Amazing
So many appointments are blatantly in a relationship with Malcolm Turnbull.
How can this keep happening in this country? He is ensuring his own outcomes are the only ones likely.
I know he holds office but does that mean he can make decisions on appointments based on favouritism?
CBA = Labor bad, Malcolm Turnbull = Good
Hi Francis Young, this is already covered in the review, the CBA’s brief is different
“Suppose we take as gospel the costings of all-FTTP as $72 billion and FTTN/HFC/ADSL as $41 billion, before considering the $5 billion of cost savings which NBNCo proposed and Mr Turnbull failed to include in that costing of FTTP.”
The 5bn of cost savings are included in the Radically redesigned FTTP, which is $64bn.
The Strategy Review recommends MTM, which is FTTP/FTTB/FTTdp/FTTN/HFC, not FTTN/HFC/ADSL
“This puts the cost of FTTP at somewhere less than double the cost of FTTN/HFC/ADSL.”
FTTP is 1.56 times the cost of MTM
“Next we consider the average revenue per user, which is stratified according to the limitations of each technology. We already know that FTTP is yielding double the revenue of FTTN/HFC/ADSL,”
MTM includes FTTP to 26% of premises including all high revenue potential areas and businesses. FTTB/FTTN/FTTdp/HFC are primarily to household premises.
“and that this disparity will rise as much faster speeds are cheaply rolled out on FTTP, and slightly faster speeds are expensively rolled out on copper and coax.”
The problem with this hypothesis is that in countries with widely available high-speed broadband, take-up rates are similar across all technologies. The take-up rates for FTTP is similar to FTTx/HFC. And just 11% of subscribers choose plans >50Mbps.
“If the revenue-to-cost ratio were identical for both, then the decision must be which solution delivers the better outcome for users, which is of course fibre to premises.”
Both deliver fibre to businesses and studies cited in the review show that 50-100Mbps meets the requirements of well over 99% of households to 2023.
“(In some buildings, having brought the fibre to the premises, it may be internally propagated on copper, but it is still brought to the premises where feasible, not terminated at a street cabinet.)”
That is the MTM scenario.
“Next, the operating costs of the network must be recovered from user revenue in perpetuity, and these will be much lower with an all-IP, all-fibre deployment.”
Steady-state FTTP opex for is 200m (8%) less and steady-state revenue is $300m more than MTM. However steady state capex for FTTP is 900m (90%) more for FTTP than MTM. So steady-state earnings for FTTP are $400m (17%) p.a. less than MTM.
If there was a real justice system in this country some of these politicians would already be in jail with the key thrown away, and yet they linger on rubbing it in everyone’s face while sabotaging the nations future like it is some big game. Surely the day will come when justice will served and they’re fully exposed.
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