Friday, August 20, 2010

Postscript: broadband an election issue in Australia


In my ignorance, I wasn't aware of the extent to which broadband and the NBN had become an election issue in Australia until after I'd published yesterday's post. Oops. So here's my attempt to provide the proper context for my previous remarks.

The BBC have a general update on the current situation on the eve of the election, with the two main parties neck and neck. The governing Labor Party is led by Prime Minister Julia Gillard, who is facing a fight to the finish against conservative coalition leader Tony Abbott.

ITWire report on Julia Gillard's determination to continue development of the NBN:
"the Prime Minister said the economy "can't afford to risk" not building a high-speed broadband infrastructure for the future...the NBN would support jobs, improve education and deliver better services..."
The same article reports Tony Abbott's rather different view:
"Mr Abbott has been less keen to talk about his alternative broadband policy than to highlight the cost of government’s broadband. He has continued in radio interviews and election doorstops to highlight the lower-cost Coalition broadband plan as capable of delivering the same kinds of services..."
An excellent and much more detailed analysis of the NBN in the context of the election is available here. It's rather critical of the government's proposed costings:
"You can go on and on but it all amounts to the same thing: It costs a lot of money to build (the NBN) and the Government's projections for project length and penetration are very optimistic."
But the same article goes on to acknowledge that the opposition's criticisms of the plan have been based on costs alone. Their arguments don't consider sufficiently the potential value of the network to Australia and their proposed alternative isn't viable, in the opinion of the article's author:
"First up, you don't spend $43 billion creating an asset for it to be worthless. The Government has said it will sell the NBN after five years of it being constructed. By that time the report says it will be worth $46 billion in total, but with $16 billion of debt being attached to the project. This makes it a net asset worth $30.5 billion. Whichever way you nudge the report's figures to promote your own agenda a reciprocal asset value will be there. The upshot here is that the $43 billion figure might look high, but if you cite $43 billion as being the cost, then you must also believe that $30.5 billion will be recouped down the line. This brings the real projected cost of the NBN infrastructure to under $13 billion spent over 13 years. For a world-leading, nationwide infrastructure, that's got to be good value. 
If you double or even triple that figure and spread it over a delayed 20 years, it breaks down as some $2 billion a year infrastructure investment. And that's assuming a catastrophic fire sale scenario and a seven-year build overrun. Also, remember that this asset should last some 30 to 50 years without wholesale maintenance. Now remember that of that $43 billion, only $27 billion is public money. So you can reduce those costs by over a third if you're concerned by public money outlay. I don't know what the digital economy is worth to Australia, but I'm certain that even a $1 billion or $2 billion a year stimulus for a future-proof, world-leading Australian internet represents extraordinary value.
Opponents counter this by saying that few people will use it for anything and no companies will want to buy into it because of this. That's something of a 'glass half empty' attitude. Then there's the alternative. Opponents slam the Government's proposal for being drawn up on the back of a napkin. Well if the $25 million implementation study represents a napkin it's tricky to say what the $6 billion alternative scheme was drawn up on. Pouring $6 billion into a rotting copper network and virtually-unfeasible wireless network to achieve peak speeds that the Japanese were rolling out nine years ago is a rather depressing vision of Australia's technological future. As a value proposition, you be the judge."
If I were an Australian, I know which way I'd vote on this issue. And if I needed any further persuasion, this announcement from iiNet today would seal the deal. Some further views are expressed in a very entertaining fashion here, I especially liked the description of the NBN as "a communications network we wouldn't have to apologise for".

If only the UK could say the same.

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