How to write an NBN cost-benefit analysis

How to write an NBN cost-benefit analysis

Summary: Have you ever wondered why the government hasn't produced as cost-benefit analysis for the NBN? Is it because, as some argue, they know it won't stack-up? Or is it because many of the potential benefits are in the future, and can't be valued because we don't know what they are?

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Have you ever wondered why the government hasn't produced as cost-benefit analysis for the National Broadband Network (NBN)? Is it because, as some argue, they know it won't stack-up? Or is it because many of the potential benefits are in the future, and can't be valued because we don't know what they are?

If it's the latter, the folks at the Institute for a Broadband-Enabled Society (part of the University of Melbourne) have the answer — measuring benefits based on a willingness to pay. I talk to Richard Hayes from the institute about the approach. Can we really trust individuals to put a value on the benefits that will be derived from the new network?

One thing's very clear — Communications Minister Senator Stephen Conroy needs to get the work done quickly. While Shadow Communications Minister Malcolm Turnbull goes on the assault, talkback radio is rife with people questioning the merits of a $43 billion investment. It could easily be the next resources super-profits tax that, as you'll remember, successfully brought down a Prime Minister.

In this week's program we'll hear some of the public opinion on the issue, followed by a more constructive chat with Hayes about how to get cracking on measuring the benefits.

Running time: 31 minutes 33 seconds

Topics: NBN, Broadband, Government AU

About

Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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Talkback

54 comments
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  • The trouble with this debate is it is starting to lose rationality and objectivity and becoming politicised. (CPRS anyone?)

    I have seen many false posts about the technology on forums trying to sway opinion, the same is probably going on radio.
    * Fibre will be obsolete in 5 years
    * Fibre cannot tolerate heat
    * Wireless/Satellite can provide the same speeds
    * What we have is fine - ADSL2+ speeds are available to everyone

    The benefit side is really hard to measure (the cost is easy), there will have to be assumptions or projections made. Any single one of those assumptions in a cost benefit analysis will be subject to vigorous attack or cherry picking , interpretation by an opposition that does not seem to be offering constructive criticism but is only interested in delaying or 'destroying' the project.

    Maybe the first part is to do a cost / benefit analysis of doing nothing and letting the copper network rot, watch Australia slide down the OECD rankings and measuring the resultant loss in productivity and market competition of allowing the monopoly influence of telstra to continue.
    n_piper
  • A CBA for the NBN is a completel waste of time and money. People who are calling for a CBA just can't stop thinking about the NBN as providing "fast web browsing only" and that it MUST be a profit making business. The NBN is complete infrastructure, just like roads, rail, phone lines, power lines, gas lines, etc.

    Pollytics explained this point of view perfectly with this blog posting:
    http://blogs.crikey.com.au/pollytics/2010/09/17/cost-benefit-delusions-of-the-nbn/
    GTRoberts100
  • The Crikey commentator is wrong to say Cost Benefit analyses are limited to private benefits - and this is discussed in this podcast. There has to be some analysis otherwise, what's to say an even greater public benefit can't be provided investing the $43 billion elsewhere, at least for now. I think you'll find all roads, rail, power, gas etc are subject to a cost benefit analysis - but, yes, its harder for communications because it touches so many other areas - as discussed in the podcast. Have a listen to it sometime.
    phildobbie
  • Bingo...GTR42 kudos...

    and thanks for the URL.
    RS-ef540
  • Ooh and n_piper, nice work too!
    RS-ef540
  • Can I see a cost benefit analysis of stopping to boats, or buying M1A1 tanks or staying with the JSF program? or maybe continuing to fund public health?

    Why is this particular chunk of money more important than any other chuck of the budget?
    mpm123
  • "... Stopping to (sic) boats, or buying M1A1 tanks or staying with the JSF program...."

    Flawed analogies... as with most other government-owned infrastructure and equipment they are not being installed to generate revenue and run at a commercial profit. The NBN is to be sold off to private enterprise and its sell price will probably be based on multiples of earnings (profits) rather than replacement cost, the cost to build or acquire the network.... hence transparency is required.

    btw: M1A1 and JSF have/are undergoing a range of reviews on benefits, TCO, follow-on replacements, etc, before and after purchase... prolly a little more than the Cowboy's back of a postage stamp estimates, followed by the back-slapping consultants report that said Conroy was only out 0.5% on his $43billion estimate... when there was no technologies selected, no technology mix, no identification of areas to be served with what, no idea of how much existing infrastructure would be used or what current owners would charge. Turnbull maybe should be trying to find out how many 'discussion drafts' were reviewed before the report was accepted by Conroy's office.
    FiberLover
  • Phill, that's simply more repeated, baseless FUD.

    As it stands, no one has put forward a rational reason for not building the NBN! They (you) have two desperate claims.

    Can't be built because a CBA (actually a CA, in the coalition's eyes) hasn't been done...!

    It's too expensive...!

    Umm, nationwide infrastructure is expensive, that doesn't mean it isn't wise or necessary (remember the dilapidated copper) and regardless of the findings a CBA is meaningless.

    So apart from the cost and a CBA, please list "actual downfalls (with factual evidence to support you)" as to why an NBN shouldn't be built...thank you.
    RS-ef540
  • By the way, I'm not for or against the NBN. If you listen to the podcast you'll hear that I merely make the point that popular opinion is turning against it, and a CBA might help stop that shift in opinion.

    But RS, attitudes like yours will help the government lose the argument - asking for facts to argue against something which doesn't need to have facts to support it.

    For example; I want to spend $43 billion building a fast rail link to regional centres. It will provide a better result for the economy than the NBN. I won't substantiate my claim but give me the facts to prove I'm wrong.

    Again, I repeat, this program was not to see whether the NBN is a good idea or not. It was about how, avoiding creating a cost benefit analysis, is providing a lot of ammunition for those opposed to it and, I suspect, that number is rising all the time.
    phildobbie
  • So says you Phil...who isn't against the NBN, but walks and talks like a duck...! So...

    A CBA, especially the way the opposition want it, i.e. a CA (don't worry about the B) is a total waste of time and here's why, now listen carefully because questions will nbe asked...

    There are two simple, lowest common denominator outcomes from a CBA (disregarding all of the associated economic benefits, as pinpointed by the OECD, WB & UN, which those against the NBN simply choose to ignore)

    1. The NBN is deemed a profitable investment
    2. The NBN is deemed a non-profitable investment

    Labor’s take on 1 - See the NBN is profitable, we were right to build it and when it’s built, we will be on par or ahead of our global competitors.

    Labor’s take on 2 - See we were right to build it, it isn’t profitable, so if the government doesn’t build it, private enterprise never will and Australia will slip behind our global competitors!

    Coalitions take on 1 - As the NBN is profitable we call on the government to cease the NBN build immediately and leave it to private enterprise.

    Coalitions take on 2 - See we told you, the NBN is a white elephant and should be ceased immediately.

    So enough FUD… a CBA is just “another costly, desperately lame excuse” and will benefit no one.
    RS-ef540
  • RS - a CBA doesn't look at proftability - it looks at the opportunity cost of spending the money on it. So, taken in conjunction with other CBAs are there things the $43 billion could be spent on which create a greater benefit.

    As to walking like a duck, look back on previous Twisted Wires and you'll find I have looked at it from all sides. ALL sides.
    phildobbie
  • Ye, yes Phil...in a perfect world!

    But the coalition are pinpointing the $43B as massive waste and tying that in with the CBA to claim the NBN isn't viable...

    Surely their motives are obvious?
    RS-ef540
  • Apologies for the duck quip...!
    RS-ef540
  • That's alright.
    phildobbie
  • ... and all those businesses and ISP's that are clamoring for the NBN have motives other than looking after No 1 (at the taxpayers expense of course!)? - yeah right.

    ISP's are still queuing up at the ACCC in October 2010 to try and get Telstra Wholesale cheaper and they have been in the "we want Telstra cheaper" queue for 13 years now, I expect the "we want the NBN cheaper" queue at the ACCC to stretch into infinity also.
    advocate-d95d7
  • The debate is 'becoming politicised'?

    That's rich keeping in mind the original NBN decision was a quick political decision made on the back of the failed Labor FTTN tender so that Labor could try and save some 'face' from that debacle.

    It does not come more political than that.
    advocate-d95d7
  • RS, If the cost benefit is focused correctly you will have many things to look at to make up your own mind currently we only have figures which Wayne Swan and Stephen Conroy have made up. A Cost benefit Anaysis would give us an idea of the Cost and benefits so we could make up our mind. The Liberal party will be on a hiding to nothing if the figures come out in labors favor and continue their rants. the CBA needs to be done it's done for EVERY other investment the government makes so why isn't it done for this?

    How do we KNOW the will be good for the economy?
    How do we KNOW there will be services?
    How do we KNOW the take up rates?

    We don't even KNOW what NBN co will change us per month! Currently they are giving it away for FREE because they can't work it out!

    No one in their righ mind believes
    * Fibre will be obsolete in 5 years
    * Wireless/Satellite can provide the same speeds
    * What we have is fine - ADSL2+ speeds are available to everyone

    People are question whether
    * wireless can provide our needs in to the future (there is so much happening here you can't definitively say this is not the case)
    * ADSL evolutions may give us enough bandwidth with out the requirements for this massive cost. (there are many options here which have simply been thrown out)

    I would like a link to someone who said "Fibre will be obsolete in 5 years". Actually I found it. Now that is funny! What is funnier is NO one questioned it! What a ****
    I thin you could say "Fibre to the HOME could be irrelevant in 5 years" but not obsolete, and not to every fibre. Fibre is a backbone technology and I have not seen anything come online that will supersede it as yet.

    Fibre does have heat issues with relevance to fire especially if it is stung up on over head poles.
    schneider82
  • oh advocate 0 + and -10 (and I haven't voted yet, so -11) in just 1 hour says it all...LOL!
    RS-ef540
  • schneider82 says - "RS, If the cost benefit is focused correctly"... Exactly my point and I agree with most of what you say!

    But again my point, which seems to not be being understood (perhaps I'm not saying it correctly) is... the opposition are calling for a cost analysis only, hiding behind the mantra of a CBA.

    This is purely dollar driven for one purpose, to find anything they possibly can to back their previous claims that the NBN is waste. They aren't interested in the benefits and will ignore them, imo...! They said, even if a CBA found the NBN to be beneficial, they still wouldn't support it, so...really!

    As for not knowing, we have research carried out by the OECD, World Bank and United Nations...! And business leaders who are also calling for a real CBA, saying you'd be mad not to think the NBN will be beneficial...! What more do we need, dinky di research carried out by Barnesy and Farnsy

    As I said to Phil - "the coalition are pinpointing the $43B as massive waste and tying that in with the CBA to claim the NBN isn't viable...Surely their motives are obvious"?
    RS-ef540
  • Funny, you simply give people a wrap (who have many thumbs up) and you get thumbs down...

    Hmm, perhaps some personals coming out now...LOL!
    RS-ef540