Can the NBN thrive in the age of austerity?

As Labor's fiscal policy comes to resemble the hatchet job long promised by the Coalition, is it right to leave the NBN untouched?
Written by David Braue, Contributor

It was hardly a surprise that the Liberal Party's response to Labor's new Budget would mention the National Broadband Network (NBN) as an example of the financial chicanery of which it has been accusing Labor for years: "there would be no surplus if the NBN was on the books", the party's official budget reply noted. It is, like so much NBN opposition, like Groundhog Day all over again (last year's Budget also drove Malcolm Turnbull to slam Labor's NBN accounting "charade").

Yet, with the NBN firmly in business-as-usual mode, and its off-the-books treatment long ago given the tick of approval by economic powers much greater than Tony Abbott, these predictable responses mask a more uncomfortable truth: the Liberal Party faces a curious situation, where it has to criticise the same kind of razor-gang budget amelioration as it has staunchly advocated and promised, should it assume government next year. Recognising that he's in a difficult position, Tony Abbott spent more time attacking Craig Thomson in the press than discussing the details of the Budget — which is probably more like what his own would have been, were he in charge.


"Can we still build it, Julia?" "Yes, we can!*" *Subject to budget constraints, union action, skills availability and change of government. (Screenshot by David Braue/ZDNet Australia)

By the day's end, Turnbull, as ever prone to casuistry, was talking about cookbooks — er, cooked books — and apparently forgetting himself as he attacked Stephen Conroy's department for a massive blowout because it brought forward $421 million in payments to Telstra (one of Turnbull's biggest arguments for his alternative NBN policy is that the Coalition will bring forward its payments to Telstra).

The relative merits and disadvantages of this year's Budget will be debated until the proverbial bovines return to their abodes. But the kind of budget-cutting that Labor has demonstrated has not only stolen the march on some of the Opposition's opposition, but has also suggested that the NBN is, and will continue to be, viable in a climate of careful attention to budgetary constraints. The rest of the IT industry may be in neutral, as far as the Budget is concerned, but NBN Co is continuing to go hell for leather to meet its build objectives.

Labor has effectively borrowed philosophy from Bob the Builder (and, perhaps, Barack Obama's 2008 election campaign). "Can we fix it?" Bob asks his team. "Yes, we can!"they shout, although, in the real world, their unqualified enthusiasm might be tempered by the ever-present threat of union action, project-management delays, budgetary cutbacks and vociferous opposition.

[Abbott's] predictable responses mask a more uncomfortable truth...

Nonetheless, despite its most severe belt tightening ever, Labor is determined to save room for dessert. And in challenging a Budget that both takes away from the public service and gives back to the public, Abbott may just have to pick up the fork and join in. What other options does he have? It's hardly politically palatable to argue that he would slash budgets further, lay off more public servants or delay or cancel more government programs — although Victoria's Ted Baillieu recently showed that to be an entirely possible course of action.

Such is budgeting in the new age of austerity — and it's not inconsistent with the general trends we have been seeing across the telecoms industry, which recognised the need for a new way of operating some time ago. The need to consolidate infrastructure, for example, is reflected in such telecoms seismic shifts as the Foxtel-Austar merger, iiNet's purchase of Internode, M2 Telecommunication's purchase of Primus and, most recently, the expanded facilities-sharing agreement between Optus and VHA.

Abbott's Liberals have decried such moves as indicative of the NBN's power to kill off competition in the sector, but competition is about a lot more than just ensuring that there are many small operators fighting each other tooth and nail to build unprofitable infrastructure. In a world where private-sector telecoms investment has dropped off, and entire countries are staring bankruptcy in the face, the survivors will not be those that doggedly press on with growth-era business strategies.

Like the government, the telecoms industry is in an era of downsizing and consolidation that is currently borne out of strategy, but will eventually, if things get worse, become a mark of desperation. At that point, will the NBN eventually have to follow suit?

Like the government, the telecoms industry is in an era of downsizing.

Arguments will be made both ways: Abbott's Liberals, for example, will likely argue that if the government were serious about its budgetary discipline, it would scale back its expenditure on the NBN, and extend the project's timeline or reduce its scope (of course, then they would turn around and say that it's taking too long, and that their alternative NBN will be faster and cheaper).

More telling still: figures in the Budget suggest that it would now cost $1.8 billion to cancel the construction of the NBN — a cost that Malcolm Turnbull would have to figure into his cost-benefit analysis, should he attempt to wind back the project in office.

It is, perhaps, a salvation for the industry that the NBN is being handled off the books, since Labor would otherwise have had no option but to scale it back within the context of its savage budget cuts. This would have been necessary in the spirit of equanimity — it's hard to justify paring back defence budgets, but leaving communications spending untouched — but by treating the NBN as an investment, the government has been able to leave NBN Co to its own devices. And that, given the constraints imposed by the new era of austerity, may be all that our telecoms industry could have hoped for.

What do you think? By sparing the budget rod, has Labor spoiled the NBN? Should it have scaled back the effort in the spirit of austerity? And how does this Budget change the game for the Coalition's opposition?

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