So much for Monks wild claims of tele health and pie in the sky benefits. Completely debunked.
Turnbull: Labor got its NBN forecasting wrong
The price of broadband. Source: TheAustralian < PrevNext >
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Turnbull: Labor got its NBN forecasting ...Newspaper Works
THE former Labor government’s decision to pursue a fibre-to-the-home, super-fast, broadband network would have a net cost to taxpayers of $22.2 billion, but the Coalition’s model still leaves them paying billions to deliver access to the bush and urban fringes, a landmark cost-benefit analysis reveals.
The Coalition-commissioned analysis finds the expense of providing high-speed internet access to people who live in uncommercial rural and regional areas, as well as urban fringes, would cost nearly $5bn but the benefits are only a fraction of that.
It also reveals the median household will have applications downloading about 15 megabits a second (Mbps) in just under a decade — far less than the 162Mbps that the average NBN user was expected to purchase in 2025 in the original corporate plan released in 2010.
Modelling for the analysis, to be released today, shows that video is a key driver of internet traffic and suggests that internet TV viewing could grow from about 80 minutes a month to 47 minutes a day for all adults by 2023.
NBN: Percentage take-up of each speed band
Research used in the analysis finds that households are more willing to pay to go from slow speeds to fast speeds than they are to go from fast to super-fast speeds, while the benefit to the public at large from services such as health and education made possible by the NBN would be worth no more than $2.2bn.
The review by a government-appointed panel led by former Victorian Treasury official Michael Vertigan is likely to set off a political firestorm. It fulfils a key Coalition election promise after Labor refused to do a cost-benefit analysis of Australia’s largest infrastructure project.
Mr Vertigan said yesterday: “We hope and we believe that undertaking an exercise like this strengthens the case as to why quality cost-benefit analysis should be undertaken before major policy decisions are taken with respect to major infrastructure projects.”
Last night, Labor’s communications spokesman Jason Clare attacked the analysis as “not independent”. He said that, instead of appointing Infrastructure Australia to do the cost-benefit analysis, Mr Turnbull had “hand-picked people that he knows will give him the answer he wants”.
The findings on the expense of providing access in uncommercial areas threaten to inflame tensions between the Liberals and the Nationals. Late last night, Communications Minister Malcolm Turnbull acknowledged that the cost-benefit analysis showed that city users of the internet would wind up paying a big subsidy to support the service of country users. “It is a tax on all users of the NBN to subsidise the remote areas,” Mr Turnbull said.
The cost-benefit analysis found that, compared to a market-driven — or unsubsidised — network, a fibre-to-the-premises (FTTP) NBN had a net cost of $22bn as it is more costly and slower to deliver.
(Labor had promised to provide super-fast optic fibre to the premises of 93 per cent of Australian homes, while the Coalition is now promising a “multi-technology mix” that makes heavy use of Telstra’s existing copper network for the final few hundred metres to homes).
It shows that no further rollout, comes at a net cost of $24bn, compared with a market-driven network, because of the high cost of the deal done between the former Labor government and Telstra. Payments to Telstra account for about two-thirds of the cost of fibre-to-the-home compared with an unsubsidised broadband service. By contrast, the multi-technology NBN had a net cost of $6bn relative to the market-driven network.
Mr Turnbull is set to pounce on the $16bn difference between the multi-technology model and the FTTP model to argue his promised switch away from Labor’s Rolls-Royce model has strong support. The model was recommended by a strategic review in December last year and agreed to by the government this year.
Given the Vertigan panel’s analysis found the net benefits of an unsubsidised rollout, compared with no rollout, were $24bn, then the net social and economic benefits of the Coalition’s multi-technology mix were $17.9bn, while Labor’s all-fibre model left the community about $1.8bn better off. According to the analysis, the gap of $16.1bn is because the Coalition’s NBN can be delivered more quickly and avoids high upfront costs, while still leaving open options for the future. (The cost-benefit analysis was based on a “radically redesigned” FTTP contained in the strategic review, which strips out costs such as those relating to truck rolls, and therefore could be considered conservative. Labor has strongly questioned the accuracy of the strategic review.)
“It is, in that sense, far more ‘future proof’ in economic terms: should future demand grow more slowly than expected, it avoids the high sunk costs of having deployed FTTP,’’ the analysis says.
“On the other hand, should future demand grow more rapidly than expected, the rapid deployment … allows more of that growth to be secured early on, with the scope to then upgrade to ensure the network can support very high speeds once demand reaches those levels.”
However, the analysis also highlights the costs involved in providing the NBN to people in the bush and urban fringe areas using satellite and fixed wireless services.
It costs $4.8bn to provide fixed wireless and satellite, but the benefits are just $600 million, in part because the willingness to pay is less than the cost of delivering higher speeds in these areas. “The net social cost is equivalent to almost $7000 per additional premises connected through the provision of fixed wireless and satellite services ... This outcome represents the net cost of providing access to high-speed broadband to rural and remote regions of Australia,” the analysis says.
“The result is a substantial net cost to the community.”
At the moment, the rollout of the NBN to the bush is cross-subsidised through the prices that urban consumers pay, as a result of a promise that Julia Gillard made in 2010 to regional independents whose support she needed for a second term of Labor.
Mr Turnbull acknowledged that it would be more transparent if the government directly subsidised the cost of providing broadband to the bush, but added: “It is not something that my colleague the Treasurer would be very excited about.”
Mr Turnbull said an alternative would be to require the NBN to be explicit about how much the cross-subsidy was, so that it would at least be clear how much of the wholesale cost of broadband was supporting the bush.
On demand, the cost-benefit analysis suggests that growth in demand for bandwidth had been over-estimated during the Labor era. Mr Turnbull said last night that the mistake made by the former Labor government was simply to extrapolate demand from existing trends.
“My predecessor Senator Conroy was fond of saying ‘Yes, we don’t have the applications to need that speed now, but think of 20 to 30 years’ time’,” he said. “That is obviously a very poor guide to investment.”
Mr Turnbull said Labor’s planning for the NBN had confused the growth in the amount of traffic with the need for additional bandwidth. It requires more bandwidth to carry video than web pages but not more to increase the volume of video.
