The long-awaited NBN Cost Benefit Analysis was released overnight, and to nobody’s surprise it paints the multi-technology model (MTM) favoured by Malcolm Turnbull in the most positive way possible. The problem is that the CBA also appears to make all kinds of crazy assumptions in order to score political goals.
Image from: Dion Gillard
The NBN is a political football.
It’s been that way ever since it was mooted, having been kicked around between the two major political parties, with a few stray fouls from newspapers and talkback radio along the way. For a football that’s going to cost billions, you’d think we were getting something shiny and high-tech, but instead what we’re left with is increasingly looking like a tired lump of over-inflated pig’s bladder with worn out leather creaking at the seams.
Which is the colourful way of saying that there’s no way of analysing anything to do with the NBN and its emerging state without a form of political debate and mudslinging along the way. The sad thing is that for a policy that could propel Australia’s economy forward in all sorts of interesting ways, nobody comes out looking good from either side. The Vertigan Cost Benefit Analysis is just the latest in a long line of attacks that mixes a variety of critical details with a number of assumptions that heavily favour particular use cases and scenarios.
You know, politics. It’s a grubby game played by both sides of the equation, and it would be ludicrous to paint either side as being virtuous angels at any degree. Pretending that the FTTP rollout under the previous Labor government was all sunshine would be to ignore the very real facts surrounding missed deadlines and fudged figures.
In many ways, the Vertigan CBA is just another in a long line of fudged figures, although a lot of those figures not only work to retroactively justify the MTM model, but also make some fascinating insights into what the committee felt that broadband was for.
I’m annoyed by all of this, if it wasn’t already obvious. I do understand that a CBA is designed to look at net returns based on a costs model, and that can have some utility. Equally, there is obviously only so much money in the pot for a government to spend, and it is in the best interests of everyone that they’re spent as sensibly as possible. Depending on where you choose to cherry pick, it’s feasible to dig out figures on government waste from any administration. Don’t like the Liberals? Talk about expenditure on defence budgets based on possibly wonky planes. Don’t like Labor? Talk about insulation schemes.
Having said that, the overwhelming theme of the CBA is the idea that a government project should bring a net “return”, as though government was a pure business, and not instead a governing body for the good of the people. That irritates me no end, because the role of a government isn’t to provide some net “profit” for the people; it’s to provide a common good. Under the “profit” logic, we should probably dismantle large swathes of Medicare and let people die, to pull that logic to an extreme end.
There are other assumptions and fudges that make me angry too. While much of the report focuses on download speeds and expectations, there’s significantly less focus on upload speeds, on the general assumption that the needs for uploads are lower. That may be true — we probably don’t need absolutely synchronous downloads and uploads in any case — but to suggest that there won’t be an upwards curve for uploads in both consumer and business cases is quite laughable, not to mention dangerous in the context of an increasingly digital world.
Then again, we’re not actually allowed to know what the real expectations of FTTN uploads are anyway. There’s a table on page 46 of the 196 page report that states the expected download and upload speeds for each technology type, which puts FTTP in the over 100Mbps category for downloads and over 50Mbps category for uploads. FTTN is stated as “Mainly 50-100, some 25-50 and lower” for downloads and “Mainly 20-50, some lower” for uploads, which again would seem to match with what we know about likely FTTN scenarios.
Except that in preparing the report, the panel actually had access to more data than that, noting ” the panel had access to FTTN download and upload speeds by distance from the premises to the node, but these data are not included here for commercial‐in‐confidence reasons.”
Would it be cynical of me to presume that might be because FTTN drops speed calamitously the further you get from the node, and that might not sit well with the job of justifying the MTM model? Then again, that relates back to the expectations of actual data usage, which again are on the very low side and presume that customers aren’t interested in or willing to pay for higher speed tiers in any case.
I’m not convinced that’s true in any real way. Early NBN models predicted much the same thing, in that those connected would predominantly take up the lower speed, lower revenue 12Mbps plans. Even by 2012, though, 44 per cent of those on an actual NBN plan had opted for the 100Mbps tier. That’s actual data from actual customers, not predictions or assumptions, by the way.
It’s fascinating, given the CBA’s particular modelling, that it’s opted to use the $35.3 billion pricing model for an FTTP rollout, given the near assurances that the Coalition had around FTTP costs being around the $90 billion mark. Instead, the CBA has essentially the figure the previous government used. As such, the gap between the two, ignoring any productivity benefits of an FTTP rollout which the CBA assures us just aren’t there is some $16.1 billion. That’s the net return difference that the CBA assumes.
But there’s another assumption that bothers me there. The MTM model is presented as ideal due to the faster rollout speed and lower cost, but also due to the fact that it can be upgraded at a later date. The issue there is that there’s very few real details provided for what that likely cost is going to be to manage that upgrade to an FTTP path. There’s mention of a cost saving, in that they assume that 20 per cent of the cost of upgrading to FTTP would be eliminated by rolling out FTTN first, as per page 88 of the report, but unless I’m missing something obvious, there’s no actual dollar figure attached to that likely upgrade cost in the future.
The reality here is that while the actual core technology and fibre may indeed become cheaper over time as technology progresses, the cost of the labour to do so isn’t likely to drop in price at anywhere near the same rate. As such, by failing to take into consideration any kind of likely upgrade path costing the CBA ignores a genuinely critical component of any kind of reasoned analysis. Given the scope of a real upgrade, it’s not impossible to suggest that the gap between the two could eat up that costing difference quite easily. It’s apparently perfectly fine to label the FTTP solution as near cost-neutral to doing nothing at all, but not to assess the costs of redoing labour all over again as part of an upgrade path. That’s what a truly politically neutral CBA should have done, but then I’m probably being optimistic there in assuming such a thing would ever happen.
Some NBN opponents bleat at this point about the benefits of wireless as some kind of universal panacea — in fact, Kim Williams, ex-CEO of Foxtel/News Corp Australia makes that entirely stupid point in The Age today — but that ignores both the physical limitations of wireless technologies and the fact that you need to have some kind of network behind the wireless to pump data along the airwaves. I’m certain that particular chestnut will continue to be kicked around, as will the CBA in the coming days from both sides.
As I stated at the outset, it’s impossible to hold an NBN discussion without it becoming a massive political scrum. For what it’s worth I don’t hold that the MTM model is entirely worthless. There’s clearly some benefits in scheduling rollouts to areas where there’s greater need and lesser access as part of a wider scheme. But the CBA sits in a position where it’s essentially justifying MTM as a means to an end, not a road along a technology path.
Meanwhile, Australia sits with broadband that ranks 56th in the world for download speeds and 96th in the world for upload speeds according to Ookla’s Net Index. While the NBN political football gets kicked around, we’re at best standing still, and realistically falling behind with no clearly defined goal in sight.