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NBN cost-benefit analyses are so 2011

A year ago, Malcolm Turnbull repeatedly proclaimed that a coalition government would stop the NBN in its tracks and conduct a cost-benefit analysis on the NBN. These days, the analysis doesn't even get a look in. Is the idea dead forever — or could it still offer some value?
Written by David Braue, Contributor on

It wasn't too long ago that one of the rallying cries of the Coalition's NBN opposition was its insistence that Labor conduct a full cost-benefit analysis, comparing the government's fibre-to-the-premise (FttP) strategy with alternatives such as fibre to the node (FttN) and wireless.

By avoiding a formal cost-benefit analysis, Malcolm Turnbull argued over and over, the Rudd and Gillard Labor governments had broken the party's promise for greater transparency on infrastructure projects — and pushed the country along a precipitous course towards what he has repeatedly lambasted as a policy disaster of the worst imaginable sort.

Malcolm Turnbull once promised to subject Labor's NBN to a cost-benefit analysis. But have we now passed the point where it could be useful? (Image by US Navy, public domain)

On the first point, he is correct: Labor certainly seems to have forgotten its commitment to subject major infrastructure spending to the cold calculations of Infrastructure Australia, which seems to have become a cheerleader for infrastructure investment, rather than an independent assessor of it; a post last year by the Institute of Public Affairs described the body as "all but derailed".

The government seemingly remains convinced that a cost-benefit analysis would be inappropriate (Turnbull may prefer the word "inconvenient"), because the current plan does not require the comparative evaluation of two possible uses of public funds.

This is not an entirely baseless conclusion, given the explicit approval of the government's treatment of the NBN as an "off-budget" investment; if we are to take this treatment as gospel, it would be incorrect to position a cost-benefit analysis comparing FttN with FttP, because only the latter involves the direct spending of public monies; the latter is, the government has continually asserted, an investment. Each is a different type of spend, with different parameters and assessable risks.

Whether you buy that argument or not, the Coalition hasn't been talking about cost-benefit analyses much recently. It was just a year ago, remember, that Turnbull was promising that the first act of a Tony Abbott government would be to halt the NBN in its tracks and embark upon a comprehensive cost-benefit analysis to prove once and for all what was the better alternative.

It was just a year ago that Turnbull was promising that the first act of a Tony Abbott government would be to halt the NBN in its tracks.

These days, Turnbull seems to be more pragmatic. He recently admitted that the Coalition would likely leave most of the NBN intact, and has not been repeating — in public, at least — his previous determination to put his foot on NBN Co's proverbial neck. I contacted his office to ask about the status of the cost-benefit analysis, but they declined to comment. However, he didn't mention the cost-benefit analysis at all in his latest major industry speech.

Little surprise that he's speaking more softly; as Mike Quigley said recently, you don't just stop a 2000-person company overnight; there are revenues to be earned, infrastructure to be rolled out and people to be paid. There is also an entire industry that has steadily adapted itself to life in the NBN world — and none of these stakeholders would benefit from, or take kindly to, the kind of arbitrary shutdown to which Turnbull had previously been so committed.

But what of the cost-benefit analysis? Surely, Turnbull's response to the budget revelation that stopping the NBN would incur $1.8 billion in cancellation penalties confirms that even he has conceded that a cost-benefit analysis would favour a continuation of the project, at this point. Labor's NBN now has so much momentum that it seems almost inconceivable for any analysis to find that it would be better to throw the project into chaos and embark on an entirely different course of action in the blind hope of saving a few billion dollars.

If it's elected next year, will the Coalition still run a "we-told-you-so" retrospective cost-benefit analysis?

Does that mean a cost-benefit analysis would be pointless? This is something the Coalition will have to consider if it's elected next year: would it spend time running a cost-benefit analysis on a project that's already in progress? Would the terms of such an analysis potentially include the option of shutting down the NBN, as Turnbull and Tony Abbott had so often promised? Could the updated NBN business plan provide more fuel for the Coalition to argue that a cost-benefit analysis is more relevant than ever? And, if it's elected next year, will the Coalition still run a "we-told-you-so" retrospective cost-benefit analysis in the hopes of securing the moral authority it has claimed for so long?

You'd think so, although it might come off as petty and wasteful for the Coalition to push for such a seemingly pointless cost-benefit analysis out of spite; the black-and-white FttN versus FttP debate became moot some time ago. And yet, there might be residual value in a cost-benefit analysis that compares the two options now on the table — continuing FttP as per Labor's plan, versus keeping what NBN Co has rolled out or committed to up until the election, and injecting FttN into the mix in areas where ADSL2+ actually works well.

This would, if nothing else, put some real weight behind the Coalition's still-rhetorical argument that its plan will be cheaper and faster to implement. Of course, the second option would also have to factor in to the presumably significant costs of renegotiating access arrangements with Telstra, or even of purchasing the copper network outright. And that cost, we may read from Turnbull's recent silence on the cost-benefit analysis question, may have turned out to be the thing that killed the prospect of the analysis for good.

Update: subsequent to the publication of this column, Malcolm Turnbull's office has advised that the Coalition is still committed to an NBN CBA, to be conducted by the Productivity Commission.

What do you think? Why are we not hearing about cost-benefit analyses anymore? Could the Coalition still conduct a meaningful cost-benefit analysis if it were elected next year? Or is there simply no practical point in discussing alternatives anymore?

Updated at 4.49pm: added comment from Malcolm Turnbull's office.

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