NBN is uncompetitive: pundits

Summary:A number of Australia's most senior business and economics commentators have opened fire on Labor's flagship National Broadband Network (NBN) project, claiming that the NBN Co's corporate plan released on Monday was based on flawed assumptions and demonstrated the project would wind back competition in the telecommunications sector.

A number of Australia's most senior business and economics commentators have opened fire on Labor's flagship National Broadband Network (NBN) project, claiming that the NBN Co's corporate plan released on Monday was based on flawed assumptions and demonstrated the project would wind back competition in the telecommunications sector.

University of Melbourne economics professor Joshua Gans claimed on his blog that the nation should be "outraged" by a clause in the NBN plan which states that if NBN Co did not sign a deal with Telstra to transfer the telco's customers to the NBN and shut down its fixed broadband networks, then it was "likely" that one or both of the country's hybrid-fibre coaxial cable networks (the other one is owned by Optus) would be upgraded to allow speeds of up to 200 megabits per second (Mbps) in competition with the NBN.

"We should be outraged at this. More to the point the Australian Competition and Consumer Commission should be outraged with this. Where is Graeme Samuel on this?" demanded Gans, pointing out the clause constituted a "clear statement" that three broadband networks would change into two or even one as a result of the NBN roll-out.

"This is as substantial a lessening of competition from an agreement that we can imagine," he added. "And yet our independent competition regulator — whose independence is there because government business entities are subject to the Trade Practices Act — appears to have abdicated its role."

Business Spectator columnist Stephen Bartholomeuz, one of the nation's longest-standing and most respected business commentators, picked holes in NBN Co's financial reasoning in several articles on the matter.

"If the actual NBN Co performance over the period 10 to 30 years out actually looks anything remotely like the business plan it would be a miracle and Mike Quigley would emerge as a 21st Century Nostradamus," he wrote.

Veteran business journalist Matthew Stevens, who writes for The Australian, was even harsher on the NBN. "Love it or loathe it, the unavoidable fact is that the NBN business case is pretty miserable," he wrote, bringing up many of the same points as Bartholomeuz in discussing the cost of capital required to build the NBN in relation to the company's calculations on its financial return.

Communications Day publisher Grahame Lynch is more concerned about the real impact of NBN Co's multifaceted pricing approach, which is a bit more complicated than the "$24 per month" headlines suggest. However, Lynch is also concerned about competition. "I suspect that while the NBN may achieve many things it will not make a thousand competitors bloom," he writes.

However, not everyone was as negative about the NBN's prospects, with Business Spectator columnist Alan Kohler leading the case for the affirmative in several columns on the matter written yesterday:

"Not only will the NBN not be a white elephant, it will almost certainly prove to be a great investment", he said. "In fact, without wishing to get carried away (too late do you think?) it could represent, on its own, a huge national savings plan. When it's finished the asset will be worth several times the government's investment of $27.5 billion."

Topics: NBN, Broadband

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