Today the Abbot government released their cost-benefit analysis of the NBN and their own, mixed-technology model. Not surprisingly (for a report commissioned by the Government), the analysis finds that the Coalition’s fibre-to-the-node NBN is more cost-effective than Labor’s fibre-to-the-premises (FTTP) model. The case for FTTP isn’t good, according to this document. The mixed-technology model comes out $16b ahead in terms of value for money.
I discussed this report on the The Project in the evening. Have a watch below.
Setting aside the issue of the impartiality of the study, one can assume they have the costs in the ball-park at least. But what about the benefits? This is where the debate will be, because some of the assumptions about the value to the country of faster broadband are highly questionable.
Here are some issues that I noted in my first reading of the document. They defy common sense and require some detailed analysis.
Source: Independent cost-benefit analysis of broadband and review of regulation, Volume II
The Coalition have always seen the internet as an entertainment device for nerds and not as the engine of the future economy. While they can appreciate that being able to stream TV has some value, say on the order of a few tens of dollars a month, the flow on effects in terms of economic growth, productivity and opportunity afforded by ubiquitous high-speed broadband go unstated. Personally, I imagine them to be virtually limitless, but even with a more sober approach this surely must be quantified somehow.
What’s more, these benefits are amplified by the number of people that enjoy them. Communications technology is only useful if the people you want to communicate with are similarly empowered. To coin a phrase, “if you don’t build it, they won’t come”. The chicken of next-generation services in health, education, entertainment and god-knows-what-else requires the egg of plentiful broadband; and the demand for that broadband will be driven by those services. This won’t be an incremental process, struggling to reach 13% a year. It will be exponential. Unless its growth is stunted by an infrastructure bottleneck – such as the one recommended by this study.
Imagine where our economy would be if communication was still by letter and fax, photos had to be developed before they could be used and international phone calls were an expensive luxury. The way communications technology has completely remade our society and economy in the last two decades has not and cannot be captured solely in the private benefits enjoyed by individual users. I don’t know the magnitude of this multiplier effect but whatever it is I do not see it in this cost-benefit analysis.
I am looking forward to hearing from experts in industry and academia. This analysis, even if it turns out to be flawed, could kick-start a bit of a debate about the benefits of broadband. It is a debate that hitherto has been sold well short.