The NBN's missing cost-benefit analysis

Has the government failed to provide a cost-benefit analysis for the National Broadband Network because it knows that, if it did, it wouldn't stack up?

The Opposition has been calling for a cost-benefit analysis on the NBN for over a year, yet Senator Conroy's office has refused to provide one. This from a government that established Infrastructure Australia to ensure there was rigor applied to all major capital projects.

It's safe to argue that at some point fibre to the home makes perfect sense to drive those as yet unforeseen applications that will change our world. Though if those applications aren't available yet, should we wait a while and spend the money on something else?

"Absolutely," says Leo Dobes, adjunct associate professor at the Australian National University. He says that without running an analysis on all major capital projects we miss the opportunity cost that could ensure the highest return for the economy.

Professor Henry Ergas from Monash University is a regulatory economist with an interest in telecommunications. He presented a rudimentary cost-benefit analysis (PDF), co-authored with Alex Robson, to the Senate Select Committee on the NBN. They forecast that the cost of the NBN will outweigh benefits to the tune of between $14 billion and $20 billion.

There is one great white hope. Chris Ryan, CEO of Attend Anywhere, sees high-definition video as the killer app that will deliver real benefits across a variety of sectors. "We're yet to see the groundswell of support," he says, "because it's one of those things you have to experience for yourself."

Otherwise, perhaps the economists are right. Are we putting the cart before the horse?

For further thinking on the matter, see my previous podcast on the economics of the NBN.

Running time: 29 minutes, 27 seconds