Productivity Commission slams NBN planning

The Productivity Commission has slammed the former government's planning of the National Broadband Network project for failing to conduct a cost-benefit analysis.
Written by Josh Taylor, Contributor

The man who headed up the Department of Communications when the NBN was still in its planning stages has now said that the planning of the project should have included a cost-benefit analysis.

Last year, the Productivity Commission was tasked by Treasurer Joe Hockey to review the government's role in building national infrastructure and the costs, competition, and productivity issues associated large infrastructure projects.

The Productivity Commission's draft report, released today (PDF), stated that there were many examples where inadequate project selection led to costly outcomes for users and taxpayers, and highlighted that the lack of a cost-benefit analysis for the NBN is one such example.

"An Australian government example is the decision by the previous government to proceed with the National Broadband Network without doing a thorough analysis of its costs and benefits," the report stated.

The commission said that all analysis of the project was focused on how best to implement the government's policy objective of fibre to the premises, rather than considering the merits of different options.

"Rather than conduct a cost-benefit analysis of the project, the government commissioned an Implementation Study (released in May 2010), which was a detailed examination of the NBN project. The study was concerned with how best to implement the government's stated policy objectives, but did not evaluate those objectives," the report stated.

The report states that through making public cost-benefit analyses for projects, it improves the transparency behind government decisions, and strengthens the incentives for decision makers to focus on the overall net benefits of a project.

The Implementation Study, conducted by KPMG and McKinsey consulting firms, was heralded by Communications Minister Stephen Conroy as proof that the then-AU$43 billion fibre-to-the-premises project was achievable and viable, and would be completed in 2018.

The 2010 study was conducted following the appointment in 2009 of Peter Harris as the secretary for the Department of Communications. Harris left the department to head up the Productivity Commission shortly before the September 2013 election.

ZDNet asked the Productivity Commission whether Harris accepted some level of responsibility for the planning around the NBN in his time as the department secretary. However, the Productivity Commission did not respond by the time of publication.

Since then, NBN Co has subsequently stated that due to delays in the negotiations with Telstra and the competition regulator's decision to force NBN Co to connect out to 121 points of interconnect, the NBN would not be finished until 2021. NBN Co's strategic review conducted after the election has estimated that the current project would not be completed until 2024.

As one of the six NBN reviews commissioned since the September election, Communications Minister Malcolm Turnbull has now appointed a panel of four experts to conduct a cost-benefit analysis into broadband and the regulatory environment for the NBN. The panel is due to report back to the government in June.

The sixth NBN review announced last week will also examine the advice provided to the former Labor government between April 2008 and May 2010, when the Implementation Study was released.

The Productivity Commission is accepting submissions on the draft report until April 4, 2013.

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