NBN secrecy creates the impression the government has something to hide
Ross Gittins November 22, 2010
I'M STARTING to get a really bad feeling about Labor's plan for a national broadband network. The more it resists subjecting the plan to scrutiny, the more you suspect it's got something to hide.
I fear Julia Gillard is digging herself in deeper on a characteristically grandiose scheme her swaggering predecessor announced without thought to its daunting implications, when she should be looking for ways to scale the project down without too much loss of face.
The obvious way to start that process would have been to accede to calls for the Productivity Commission to conduct a full cost-benefit analysis.
But as each day passes, the issue is becoming more politicised, with too much of the government's ego riding on pretending the plan is without blemish.
The case for a thorough cost-benefit analysis needs no stronger argument than that, at $43 billion, this is the most expensive piece of infrastructure this country has seen.
It's true the plan has a lot of attractions. Top of the list is the structural separation of Telstra's network from its retail business so its retail competitors get fair access to the network. This is something the Howard government should have seen to before it privatised Telstra.
I accept that, if city people are going to continue cross-subsidising the bush - as they will; it's clearly the electorate's ''revealed preference'' - there's no more sensible way to do it than ensuring the bush has access to high quality telecommunications, thereby doing what we can to reduce the tyranny of distance.
I don't have an in-principle objection to a network with natural-monopoly characteristics being owned publicly rather than privately, provided governments don't use their powers to shore-up or abuse that monopoly in a way any private owner would and should be prevented from doing.
And I admire the government's consciousness of the need for us to be ready to adopt and exploit the opportunities for benefit that future technological advances will make possible.
The Productivity Commission could be required to ensure its cost-benefit analysis ranged far wider than a mere commercial evaluation, taking account of present and potential ''social'' benefits (''positive externalities'') and acknowledging those whose value it can't quantify.
But there are three aspects of the plan that worry me. They're things economists are trained to see, but to which non-economists are often oblivious.
The first is the mentality that says, we've got a lot of messy and inadequate telecom arrangements at present, so let's scrap 'em all and start afresh. Copper wire to the home - make Telstra turn it off. Telstra and Optus's existing rival optical fibre-coaxial cables to many capital-city homes - close 'em down.
This Ruddish approach would be fine if resources were infinite, or if getting a brand spanking new broadband network was the Australian public's only desire. But resources are finite, both sides of politics have sworn to eliminate all government debt and we have an infrastructure backlog as long as your arm. In two words: opportunity cost.
Second is the idea of building a gold-plated broadband network up to eight times faster than any present application needs, so we're ready for anything that may come along one day.
If you think that shows vision and foresight, you're innocent of ''the time value of money''. Every dollar you spend now rather than later comes at an extra cost: the interest you have to pay between now and when you start using the idle capacity.
True, it's a false economy to build something today without allowing for reasonable growth in your use of the item. But there comes a point where allowing for more growth than you're likely to see in ages becomes a waste of money. Private businesses that do this - like home owners who overcapitalise their properties - do their dough. Government businesses survive either by over-charging their customers or falling back on the taxpayer.
The final worry is the way that - notwithstanding the break-up of Telstra - the plan involves deliberately reducing competition from other networks in the telecommunications market. Why's that a good idea?
And why would the government plan to do it? Because it knows its network will be hugely over-engineered and the only way of charging consumers the high prices needed to recoup that excess cost is to turn broadband into a monopoly.
If Gillard had any sense of self-preservation she'd be using the Productivity Commission to get herself off a nasty hook.
