Time for a reality check on Labor's CBA-less NBN strategy

Summary:Labor-hating has become so popular that few bother remembering the real reason FttP was introduced without a CBA in the first place. But as the Coalition crows about a cost-benefit analysis justifying an FttN NBN 10 times costlier than Labor's own FttN policy, it's worth taking time out for a reality check.

Force of repetition has turned Labor's failure to produce a comprehensive cost-benefit analysis (CBA) for its fibre-to-the-premises (FttP) National Broadband Network (NBN) strategy into a mantra for proponents of the Coalition's substantially revised plan.

"Labor should have conducted a CBA before it committed to FttP" is the gist of such comments — which have this week been followed by some sort of indictment of the previous government's haphazard planning, as well as a loud "thank you" to the current government for saving us from economic disaster.

Is Vertigan's CBA sound analysis, or just blowing more smoke on FttN's real costs?
Is Vertigan's CBA sound analysis, or just blowing more smoke on FttN's real costs? Image: CC BY-SA 3.0, Ildar Sagdejev

The CBA has in truth done anything but that, as I will explain in greater detail in coming days, once I have had the opportunity to give this long and complex document its due consideration.

For now, however, in the wake of such constant vitriol against Labor's CBA-less NBN, it is worth remembering a simple fact: Were the previous government not so bold as to proceed with the project five years ago, we would still be trying to pretty-please get Telstra to start investing in the fibre-to-the-node (FttN) plans that it quite emphatically shelved back in 2006.

That's right: In today's revisionist mindset, it's easy to lump all the blame with Labor — but the truth is that it was during the previous Coalition government, back in 2006, that the government came to such a loggerheads with Telstra that the then freshly ex-monopolist publicly proclaimed in an ASX filing that negotiations "have reached an impasse. Until Telstra's actual costs are recognised and the ACCC's regulatory practices change, Telstra will not invest in a fibre-to-the-node broadband network."

Eight years later, Telstra still has not invested in such a network; it is happy to continue marketing ADSL2, milking profits and undertaking minimal maintenance on its network with nothing even vaguely resembling a FttN node installed. As you would expect, Telstra remains interested in profits, rather than arbitrary technological progress, believing that anything else is naive folly.

Intervening years have seen a raft of efforts to get the industry to pull itself up by its bootstraps to facilitate such an outcome; just have a look through this 2007 presentation from the multi-telco G9 consortium if you've forgotten about one of the higher-profile efforts.

Were the previous government not been so bold as to proceed with the project five years ago based on the belief that it was the right thing to do, we would still be trying to pretty-please get Telstra to start investing in the FttN plans that it quite emphatically shelved back in 2006.

The government's peace offering, in which Telstra had the chance to lodge a reasonable and fair bid to deliver FttN services under a formal tendering process, descended into farce when the company famously lodged a tender bid that was as non-committal and non-responsive as any of the company's earlier musings.

It was the failure of this process that left Labor with no alternative but to find a different way forward — and that way, as we all know, was to set in motion the plans for the current FttP network.

While few would question the value of a good CBA before a major investment, to say that the Labor government should have run a CBA before embarking on this FttP rollout remains one of the rather inaccurate mantras of the modern telecoms era.

The reality is that Labor had already run its CBA in the form of its FttN tender — in which a panel of experts weighed the various proposed paths forward and found that none would effectively deliver a value-for-money outcome. It is true that the possibility of a fully FttP network was not formally weighed against these objectives, but it is also equally true that then-Communications Minister Stephen Conroy had absolutely no other option.

At that point, it was FttP or nothing, since Telstra had shown with its December 2008 submission that it had absolutely no interest in playing ball according to the government's rules. To suggest that Labor failed to consider alternative architectures is simply incorrect; since any rationally thinking person would at that point have dismissed suggestions of buying Telstra's ageing copper network out of hand, the only other option was to build the network from the ground up.

And that meant fibre, since not even Labor was crazy enough to try to build an alternative copper network to compete with Telstra's. While Labor certainly did miss some opportunities to speed up its rollout — its lax contractor management and rejection of a compromise fibre-to-the-basement (FttB) topography remain soft spots in its telecoms legacy — the fact is that without the framework Labor put in place, we would today have no hope of improving Australia's broadband at all.

Many have forgotten that the Coalition government, the same one that was elected just under a year ago in an emphatic get-stuffed vote against Labor, went to the 2010 election with a farcical broadband policy that was credited with helping the Coalition lose that election.

Had the Coalition gone to the polls promising to spend more than AU$40 billion to implement a piecemeal and extremely expensive network whose replacement was already being discussed, it would have been laughed out of the spotlight and sent back to the drawing board yet again. But Labor lost the election for reasons entirely unrelated to the NBN, and the project has been one of the biggest casualties of the change of government.

At that point, the Coalition believed that it could fix Australia's broadband with around AU$6 billion of investment, and was lambasting Labor's commitment of AU$43 billion for the task. It was seen as a one-upping of Labor's AU$4.7 billion FttN policy, which itself was a slight nudge up from the AU$4 billion with which Telstra said it could have delivered "high-speed broadband connectivity to 4 million households" by December 2009.

Five years later, we have the same Coalition government extolling the virtues of its AU$41.7 billion plan, backed by a pair of documents whose preordained outcomes will now be used as justification for renationalising Telstra's copper access network and indulging in a telecommunications U-turn the likes of which the world has never seen.

Had the Coalition gone to the polls promising to spend more than AU$40 billion to implement a piecemeal and extremely expensive network whose replacement is already being discussed — had this been the Coalition's honest policy at the 2013 election, it would have been laughed out of the spotlight and sent back to the drawing board yet again. But Labor lost the election for reasons entirely unrelated to the NBN, and the project has been one of the biggest casualties of the change of government.

The true costs of the Coalition's policy have only become clear since it secured power, riding a wave of anti-Labor sentiment that has been extraordinarily successful in polarising normally objective observers who have failed to remember the entire context in which Labor's NBN was hatched. Once spruiked as a cut-price alternative to Labor's CBA-free policy, the Coalition's NBN has exploded in size, scope, complexity, and cost .

As expected, the CBA has justified the government's policy on paper — and loosed the chain on Turnbull's wrecking-ball NBN politics. However, once the dust has cleared, Australia's broadband future may yet look much different than anybody would have expected.

What did you think of the CBA? Were there any surprises? What would you change? And where do we go from here?

Topics: NBN, Fiber, Government, Government : AU, Telstra

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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