NBN: Labor condemns 'flawed' Vertigan panel report

Cost-benefit analysis "not independent" says Labor's Jason Clare

The shadow minister for communications, Blaxland MP Jason Clare, has condemned the cost-benefit analysis of the National Broadband Network commissioned by the government as "flawed" and "not independent".

The Coalition's strategy of using a mix of technologies for the rollout would deliver Australia significantly greater net economic benefits compared to the Labor- and Greens-backed approach of relying primarily on fibre-to-the-premises (FTTP), according to the cost-benefit analysis (PDF).

Communications minister Malcolm Turnbull broke a promise to have Infrastructure Australia conduct an independent cost-benefit analysis, a statement issued by Clare said.

The cost-benefit analysis considered four scenarios: No further investment in high-speed broadband infrastructure, a rollout of broadband using HFC and FTTN "to areas where it can be undertaken without the need for any government subsidy", a revamped rollout of FTTP for the NBN fixed line footprint, and the 'multi-technology mix' (MTM) scenario outlined in NBN Co's strategic review and backed by the government.

"The FTTP scenario has a net cost of $22 billion relative to the unsubsidised rollout scenario," the report states.

"This is because it is more costly and slower to deliver, which delays the realisation of benefits. This means that its costs are higher and its benefits lower than the unsubsidised rollout scenario. The net costs of this scenario also include the net costs of delivering higher speeds to rural and remote areas via fixed wireless and satellite."

By contrast the MTM scenario "has a net cost of $6 billion relative to the unsubsidised rollout scenario". "This largely reflects the net costs of delivering higher speeds to rural and remote areas via fixed wireless and satellite," the report states.

"The costs for the FTTP scenario are highest, costing $10 billion more in economic terms (discounted) than the MTM scenario and $18 billion more than the unsubsidised rollout," the report states.

"Factoring in project costs, the CBA finds net benefits are $16 billion higher for a multi-technology NBN making use of existing infrastructure than for Labor’s Fibre to the Premises (FTTP) version," a statement issued by Turnbull's office said.

Read more: Telstra hits back over bandwidth pricing claims

"This strongly supports the switch from FTTP to a multi-technology NBN recommended by NBN Co’s Strategic Review in December 2013 and approved by the Government in April 2014."

The cost-benefit analysis "is the work Labor should have undertaken before unveiling the original NBN," the statement said.

Under a statement of expectations issued by the government in April NBN Co has already been given a mandate to roll out the NBN using a mix of technologies.

The government's statement of expectations backed a scenario, contained in a strategic review of NBN Co operations that foresees a mix of HFC, FTTP in greenfield areas and some brownfield areas; fibre-to-the-basement, and fibre-to-the-node (FTTN) for the majority of brownfield areas (as well as continuing to use fixed wireless and satellite in some parts of Australia).

"Instead of appointing Infrastructure Australia to do the cost benefit analysis, [Turnbull] has hand-picked former staff and some of the most vociferous critics of the NBN," Clare's statement said.

"This includes well known critics of the NBN Henry Ergas and Kevin Morgan, former adviser to Malcolm Turnbull Alex Robson and former Liberal Party staffer David Kennedy."

"To make sense of the report it make sense to examine the assumptions, see how the arguments work and makes a decision. A rebuttal based on ad hominem or ad baculum attacks serves no purpose at all," cautioned IBRS analyst Guy Cranswick.

"The Turnbull report is as politically stacked as the reports that [former communications minister Stephen] Conroy commissioned while in office and so they may have squared the political bias in these assessments," the analyst said.

Read more: NBN cost-benefit analysis signals the end of an era

"The Vertigan panel is full of acolytes and sympathisers with the broader fiscal aims of the current government," Cranswick said, though he added that the panel's report "does make a sound analysis of relative marginal investments and efficiencies to be gained over time with the mix of technologies".

"That is not appealing in an ideal telecoms sense but it is pragmatic; tariff thresholds and service delivery had to be assessed."

A statement issued by the Greens' spokesperson on broadband, Senator Scott Ludlam, said the release of the cost-benefit analysis "confirms that the government is prepared to ignore economic and technical reality and pursue a flawed broadband model."

"NBN Co’s own Strategic Review ... confirmed that an all-fibre model for the NBN could be fully completed by 2023, and would return a modest return on the government’s investment in the project, the statement said.

"This would deliver Australia a future-proof fibre network which would provide for the nation’s broadband needs for between 50 and 100 years, as well as delivering full market competition in the retail broadband sector."

The new report is "just the latest attempt by Malcolm Turnbull to justify pursuing obsolete broadband technology", the statement said.

The Australian Industry Group was more upbeat, with the organisation's CEO, Innes Willox, saying that industry welcomed the release of the cost-benefit analysis. "With the government now having a solid basis for its multi-technology approach, it is important that it ensures the network is deployed as quickly as possible," Willox said.

The cost-benefit analysis is the second report issued by the panel chaired by Michael Vertigan. The first report, released in July examined the "optimal long-term ownership and regulatory arrangements" for NBN Co.

NBN Co is currently conducting a range of FTTN design, construction and end user trials. NBN Co and Telstra earlier this year announced a deal, reportedly worth $150 million, to pilot the design and construction of around 1000 nodes.

The government last week announced that early FTTN users were achieving download speeds of close to 100Mbps.

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