NBN will change regardless of government: Analysts

Michael Reede, partner with Allen & Overy, and Justin Jameson, CEO for Venture Consulting, have told the parliamentary committee investigating the National Broadband Network (NBN) rollout that they believe that regardless of whether Labor or the Coalition win the September federal election, the NBN project is likely to change.

"Regardless of the outcome of the 2013 federal election, the form of the NBN would ultimately be driven to change as a result of inevitable economic pressures," they said in their submission to the joint parliamentary committee.

"We believe that broadband policy will need to be reset, because we remain sceptical of the projections contained in the current NBN business plan."

Similar to Shadow Communications Minister Malcolm Turnbull's criticism of the NBN, outlined in the Coalition policy released last week, Reede and Jameson questioned whether people will be willing to pay more for services on the NBN than they do over ADSL today.

"Global benchmarking suggests that this is unlikely," they said.

High costs for high-end services would also serve to constrain demand, they said. Affordability would be a better driver for uptake of services on the NBN. But this is also limited by what applications the higher-end services would be useful for.

"No one has yet been able to articulate the high-bandwidth applications that will drive demand for mass market FttP [fibre to the premises] capacity, particularly applications that promote productivity and social utility," they said. "Super high-definition television should not be rationale for an investment of this scale."

The pair clarified that 10 years ago, it would have been difficult for people to articulate what 25-megabits-per-second (Mbps) download speeds would have been useful for, let alone 100Mbps or 1 gigabit per second (Gbps), as will be available on the current NBN.

"If you ask experts today to articulate the applications that will be demanded by the mass market that require 100Mbps or 1Gbps rather than 25Mbps or 50Mbps, they generally struggle and rely on the premise that we cannot imagine what we may need the capacity for," they said.

IT consultants, architects, and people in the audio-visual industry account for such a small percent of the population that it would make more sense to have a separate solution for them, rather than a ubiquitous fibre network, the pair said.

The analysts rejected the metaphor that the NBN is like building a six-lane highway, or like buying a Ferrari for a crowded road.

"We think that the correct debate is whether the federal government should be subsidising Ferraris if consumers only need less-expensive vehicles, thereby releasing funds to spend on alternative projects that have greater value to the community."

The submission reiterates the potential options for NBN Co post-election, including splitting the company into metro and regional companies, with a new company made up of NBN Co and Telstra's fixed-line network. The third option would be for a "renewed" NBN Co, which would instead go for the most "technology-efficient outcome" that is determined after a cost-benefit analysis.

The pair is due to give evidence to the committee in a hearing in Sydney on Friday. Also appearing at the hearing will be NBN Co; the Department of Broadband, Communications and the Digital Economy; the Department of Finance and Deregulation; Vodafone Hutchison Australia (VHA); the Australian Communications Consumer Action Network (ACCAN); and the Competitive Carriers Coalition.

In a press release issued on Friday, committee chair Rob Oakeshott said that the review will look at the different policies proposed by both the Coalition and Labor.

"With the shareholders minister's letter and the Corporate Plan now fundamentally in dispute by both major parties, all witnesses will be given the opportunity to provide evidence, in detail, on the various rollout options, and the implications of different approaches," Oakeshott said.

In his last report, Oakeshott warned that because of the looming election in September, disagreements between members of the committee are increasing, and it is looking unlikely that a fifth report would be able to be produced by the committee prior to polling day.