Merry Xmas, NBN Grinches: here's your CBA

Summary:As we roll over into 2011 with Telstra separation passed and NBN-enabling legislation on the horizon, there is an inevitability in the air that seems to have drowned out the cries of the NBN Grinches. For those still convinced that better communications is a terrible idea, I offer a small Christmas present: a short cost-benefit analysis that shows just a couple of the many ways the NBN will pay for itself.

I have no idea whether Malcolm Turnbull is good at reading children's books out loud. However, judging by his discourse in recent months I'd suspect he is in with a chance.


(Screenshot by David Braue, ZDNet Australia)

His animated shouting about white elephants and, now, big fat monsters (illustrated, interestingly enough, with cute ducks) has turned a relatively boring infrastructure project into the biggest chance for parade-raining and smug, self-satisfied curmudgeoning since "How The Grinch Stole Christmas!".

When it comes to the National Broadband Network (NBN), Turnbull's heart has certainly been a few sizes too small. Yet no matter how he tried, he couldn't stop Labor from celebrating the release of the NBN business case [read it here]: all but hand in hand, Julia Gillard, Stephen Conroy and reluctant Labor alpha-geek Mike Quigley unleashed the document for which the project's stalwart opponents had been waiting for.

I understand that natural scepticism has led many commentators to look for negative or questioning angles on the report — but if even anti-NBN stalwart News Limited can do no worse than noting that the project will take 10 years, which we already knew, then can we not but conclude that the business plan may actually have been carefully and rationally planned? There was no smoking white-elephant gun in the business plan. The NBN is coming to Whoville, whether the Grinch wants it or not.

Inevitability has not stopped Turnbull from loading aforementioned white-elephant gun with all sorts of ammunition with all the zeal of a 1900s farrier arguing for the abolition of automobiles: the NBN is too expensive, Labor too incompetent, fibre too futuristic, 100Mbps too fast, competition laws too much at risk. He's even taken as correct (and germane) suggestions that South Korea's national productivity declined during 1997 to 2008 because broader access to fibre internet turned it into a nation of online-gaming zombies.

Can we not but conclude that the business plan may actually have been carefully and rationally planned? There was no smoking white-elephant gun in the business plan. The NBN is coming to Whoville, whether the Grinch wants it or not.

That his Goldilocks-esque complaining has served the Liberals' cause better than predecessor Tony Smith is without question, yet he still has not been able to produce the knockout blow. Every time, he has been batted down by political opponents or, simply, the weight of reality; even with the business plan released, all Turnbull could do was complain that its projected cost had been nudged upwards by a couple of billion dollars (still less than the original $43 billion estimate)and that projected retail prices would be "no cheaper" than existing plans. Oh, and that the document was too short.

Yet cheaper internet was never the point of the NBN: as I and others have repeatedly argued, it's not about price or even speed. It's about availability, equitable access, reliability, fixing Howard-era Telstra shortcomings and about future-proofing — all things that Tony Abbott's Liberals have repeatedly failed to substantially address. If we can get all that at the same prices we're paying for unpredictable, unreliable, widely varying and often-unavailable ADSL2+ today, isn't that worth something?

It's Turnbull's job to oppose the NBN, but the rest of us should be able to objectively weigh up the evidence. And if you actually do that, even Turnbull's frequent call for a cost-benefit analysis (CBA) falls flat on its face.

You want a CBA? Here you go. You know, in short form.

Consider: the NBN will become a conduit for TV and movies, something that Turnbull alleges is a frivolous waste of money. Yet TV and movies are big business and a very real part of our economy — worth $4.4 billion per year, if you believe AFACT's numbers. So are video games, with the new Call of Duty: Black Ops selling over $US1 billion worth of product globally in the six weeks since its release. And Foxtel alone is a $2 billion-a-year money spinner.

As well as the social and economic benefits they deliver — jobs, entertainment, happier people and the like — these industries deliver an absolute motza into government coffers. Foxtel's revenues translate into around $200 million of GST per year, for example. And if the NBN brings Foxtel to the other three-quarters of Australian homes that currently cannot get it, Foxtel's revenues could be quadrupled — generating an additional $6 billion in revenues, untold jobs and $600 million in annual GST revenues alone. This possibility is simply not available on Turnbull's favoured wireless option.

Then there's internet access. With NBN Co set to get $24 wholesale pricing per 12Mbps connection per month, and based on penetration of 70 per cent of, say, 10 million premises, the government will reap at least $168 million per month, or $2 billion per year, in basic wholesale revenues. If that translates to, conservatively, a $39.95-per-month retail internet service, that extra $15.95 per month will translate to $111 million per month or $1.3 billion in private-sector revenue per year, which will generate for the government a GST of $118 million per year.

Turnbull has said he can't imagine how the NBN would produce more than about $10 billion in its lifetime, but he's clearly not thinking very hard. By my conservative estimate — bolstered by an extension of current Foxtel take-up rates of around 50 per cent — NBN TV and internet access services alone will produce around $2.7 billion in additional revenue for the government per year. Ignore the revenues generated as the network gets up and running over the next five years and just these numbers will have seen the NBN pay for itself by 2025.

Turnbull has said he can't imagine how the NBN would produce more than about $10 billion in its lifetime, but he's clearly not thinking very hard ... NBN TV and internet access services alone will produce around $2.7 billion in additional revenue for the government per year.

And that's on the most conservative numbers: everything above these basic services — and there will be many new services, as well as tens of millions in wholesale revenues for mobile backhaul, enterprise services and the like — is icing on the cake.

Really, this stuff isn't that complicated. The project is ambitious, complex and politically difficult and it does require more than a few legislative concessions that will keep Parliament quite busy when everyone lumbers back to Canberra in a few weeks. But there is a plan for it and it does not at face value seem patently absurd. Bolstered by the very real figures in the NBN business case, can anyone still argue that it doesn't make sense?

Well, perhaps Turnbull can: I expect that he will spend much of the Christmas holidays figuring out new arguments to hurl at the NBN if only, like the Grinch, because it's his job. After all, he's the one that, in a recent live-chat session with The Australian, said that "building infrastructure today to enable you to do things 20 years hence you have no idea about is crazy stuff."

Turnbull may, as he did, call the NBN "bonkers". Others might call it future-proofing. Still others would call it visionary. Yet, judging by the current momentum behind the NBN, there may be only one description of the NBN that matters: inevitable.

I'm fully aware that a complete CBA would include much more than these few indicative points. But it's late. And I'm hungry. Could somebody please pass the pudding?

Topics: NBN, Broadband

About

As large as the US mainland but with a smaller population than Texas, Australia relies on ICT innovation to maintain its position as a first-world democracy and a role model for the developing Asia-Pacific region. Award-winning journalist David Braue has covered Australia’s IT and telecoms sectors since 1995 – and he’s as quick to draw le... Full Bio

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