news The Coalition has produced a controversial political pamphlet slamming, among other issues associated with “Labor’s mess”, the previous Government’s move to go ahead with its National Broadband Network project without a cost/benefit analysis, just weeks after Communications Minister Malcolm Turnbull announced the Coalition would do the same.
In Opposition, one of the central criticisms which Turnbull levelled at the then-Labor Federal Government was that it had initiated its popular NBN project without conducting a cost/benefit analysis into the project’s fundamental underpinnings. Such cost/benefit analyses are commonly conducted by government agency Infrastructure Australia.
The Coalition’s broadband policy document released in April 2013 (PDF) states regarding Labor’s NBN project: “NBN Co was created as a taxpayer-owned monopoly with a mandate to replace Telstra’s copper with fibre (and achieve a competition policy objective: the separation of Telstra’s network from its retail business). This decision was made in haste with scarcely any analysis of alternative options and with no attempt to measure its costs or benefits. ”
It further adds: “Labor’s re-establishment of a public monopoly in a crucial sector of the economy, and its archaic refusal to weigh options, costs and benefits, or seek genuinely expert advice, demonstrate disdain for the proven policy principles of the past 30 years.”
To address this problem, in mid-December Turnbull appointed a panel of experts, to be led by 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.
The panel is to conduct what Turnbull 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. It is expected to be handed down in mid-2014.
However, in a speech delivered to the CommsDay Summit in Sydney last month (and available online), Turnbull revealed he and fellow NBN shareholder minister, Finance Minister Mathias Cormann, had already given NBN Co the go ahead to significantly modify its broadband rollout plan, without awaiting the findings of the review.
The move caused extensive criticism from Australian technology commentators.
“It’s one thing to change the NBN, as Turnbull has made no bones about promising he would do. But when a Minister who was basically elected into his current position by his strong and unwavering call for better governance decides that those governance rules simply no longer apply to him because it’s inconvenient – this is cause for concern,” wrote David Braue for the ABC.
And ZDNet editor Chris Duckett added: “Any promises that NBN Co would be run in a more transparent, business-like fashion can now be laughed off as empty promises that took just over half a year to be broken.”
Turnbull subsequently denied there was any hypocrisy in the Coalition Government not waiting for the same kind of cost/benefit analysis to be conducted into its broadband policy that it demanded from the previous Labor administration, accusing his critics of being ‘stuck in a Labor mindset’ and adding that the Coalition’s version of the NBN could be modified once the Vertigan review was complete.
This week Cormann announced the Coalition had published a 64 page Liberal Party booklet entitled “Labor’s mess” which claimed to detail ‘the legacy that Australians have been left by Labor’. The document, available online in PDF format, contains several pages of detail on the Coalition’s view of Labor’s NBN project. It states:
“After dumping their 2007 election commitment to deliver a broadband network for $4.7 billion, Labor then proposed a $43 billion National Broadband Network (NBN) without a cost- benefit analysis …This is the largest and riskiest infrastructure project in Australia’s history, embarked upon without any cost-benefit analysis.”
The report also quotes from the Productivity Commission’s March 2014 Draft Report into Public Infrastructure, in which the Commission states: “There are many examples in Australia of inadequate project selection leading to costly outcomes for some users and taxpayers in general … an Australian Government example is the decision by the previous Government to proceed with the National Broadband Network without doing a thorough analysis of its costs and benefits. The need for a comprehensive overhaul of poor processes in the development and assessment of infrastructure investments is the key message of this draft report.”
The Coalition has not followed this advice from the Productivity Commission in its own approach to the NBN project.
The document contains a number of other questionable claims. For example, it claims that an independent analysis of the NBN project found it would cost $73 billion to complete — “some $29 billion more than the Labor Government’s forecast”.
This figure is drawn from the Strategic Review NBN Co and a bevy of consulting firms conducted in late 2013, following the September Federal Election. While the review did find that Labor’s version of the NBN would cost $73 billion to complete if it progressed unmodified, it also found that that number could be cut down to $54 billion if the project was reworked and if the Government supplied all of the capital, which it is able to do. This detail can be found in the table below, taken from page 17 of the document.
The report also found that in almost every scenario, NBN Co would actually make a modest return on the Government’s investment in the project, ranging from 1.7 percent to 5.3 percent. This means that the Coalition’s rival multi-technology policy would make slightly more money than Labor’s Fibre to the Premises option — but neither will, in the long-run, cost the Government anything. The money will be recouped through monthly broadband subscriber fees.
The document also states: “Because of these cost overruns, Labor’s NBN was going to add $43 per month to a typical household’s broadband bill.” However, there is no evidence of such increased costs, with current retail prices on the NBN infrastructure being directly comparable to those on existing ADSL broadband networks, but with significantly enhanced services. In addition, NBN Co has committed to locking in its wholesale prices at the current level for five years, and limiting future increases to less than the rate of inflation for 30 years.
The document does make a number of more accurate claims — such as the fact that the project has passed only several hundred thousand premises with its fibre infrastructure and the fact that as a whole, the project is significantly delayed. In addition, it accurately points out that a report delivered yesterday by NBN Co found the company’s planned satellite and wireless infrastructure would need to be substantially expanded to meet demand — but within NBN Co’s current capital funding envelope.
The news comes as Turnbull has personally made several statements in public recently with respect to the project which the Minister is aware are not true, on radio stations such as Triple J and Alan Jones’ show on 2GB.
Unbelievable that the Coalition is still pushing the NBN cost/benefit analysis line just weeks after deciding itself to go ahead with its own NBN plans without waiting for its own cost/benefit analysis. I don’t think I’ve seen such hypocrisy in politics in the technology portfolio for many years. The lies and hypocrisy are becoming overwhelming at the moment. I’m sorry to put this in such blatant terms — but at this stage I don’t quite know how else to write about these issues.
Image credit: Coalition political pamphlet, NBN Co