back to article NBN to be built even if cost-benefit analysis shows no ROI

In opposition, the current parliamentary secretary for communications Paul Fletcher and his boss, minister for communications Malcolm Turnbull, made much of the fact Australia's national broadband network (NBN) had been commenced without a cost-benefit study that would show whether or not the network will deliver positive return …

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  1. Morrie Wyatt
    Holmes

    Cost-benefit analysis

    I wonder if there has been / should be a cost-benefit analysis done on a politicians wages.

    It would probably make the NBN look like a steal by comparison.

  2. Winkypop Silver badge
    FAIL

    RIP NBN regardless

    These LNP philistines couldn't find their own arse with two hands, a mirror and an over paid consultant.

    I want my NBN

  3. bert_fe

    Hypocrisy

    Turnbull when asked 'what is the advantage of fttn over ftth'. His reply was 'as a top lawyer I stick to the letter of the law!' It is simple 'n' is a bit shorter that 't' but at least they do not be needed to be dotted. As Frankie Doyle said his smile then gives him away. It is as if his anus was entered by a sea urchin! Bert

  4. Miker99

    Cost analysis not feasable

    If everything had a cost analysis before it was done, there would be a lot of things that wouldn't be invented now.

    The laser was invented without knowing any benefit from it.

    The CSIRO's work on astronomy led to WIFI being invented and licensed, which is now worth (from memory) $300 million a year to Australia. I could go on, but you get my point.

    You cannot do cost benefit on innovation that hasn't been invented yet, or even throught of.

    Its like trying to do a cost benefit of "the internet" during the 1960's.

    1. James 100

      Re: Cost analysis not feasable

      I'm not sure the comparisons hold up - developing a new technology is different from a large-scale rollout of existing technology to the public. So yes, you *invent* the laser and the radio techniques behind WiFi - but then you figure out beneficial applications before mass-producing lasers or WiFi access points.

      Having said that, upgrading Australia's Internet infrastructure has obvious benefits, they just haven't been fully quantified yet - and perhaps can't be at this stage. At best, I expect the study could establish a lower bound on the benefits; as long as that shows break-even, going ahead should be a no-brainer unless someone can find a better option.

    2. DiViDeD Silver badge

      Re: Cost analysis not feasable

      Cost benefit analysis wasn't done on original research. So your point is? Original research is undertaken to increase general understanding. Often, useful or even revolutionary inventions and concepts come out of that research, but the invention of WiFi, for example, was not why the CSIRO was doing astronomical research, it was a by product of that reseach (or at least of the research process and methods)

      The NBN is not original research. It's the implementation of existing technology by a company (NBN Co) and its partners with the intention of making money. In that case, wouldn't it be a good idea to find out whether you can make money out of it BEFORE you start digging the trenches?

      1. mathew42

        Re: Cost analysis not feasable

        > It's the implementation of existing technology by a company (NBN Co) and its partners with the intention of making money. In that case, wouldn't it be a good idea to find out whether you can make money out of it BEFORE you start digging the trenches?

        I don't think it is essential that NBNCo make money. This is another of Labor's mistakes. It is sufficient to show that building the NBN will deliver sufficient benefits to society to justify the expense.

        For example HD video conferencing with multiple parties for mobility challenged people to socialise is unlikely to be viable option under Labor's plan because such people are unlikely to be able to afford the 1Gbps connection costs, but the benefits are clear and could lead to cost savings in transport costs.

  5. mathew42

    Labor's plan for 50% at 12Mbps

    Th reality is that Labor didn't want to run a cost-benefit analysis because the reality that their NBNCo Corporate Plan predicted that 50% would be connecting at 12Mbps and in 2028 less than 5% connected at 1Gbps would have exposed the reality that HFC and/or FTTN could meet the requirements of the majority of fixed line customers.

    Hopefully the cost-benefit analysis will consider the additional benefits for increasing speeds and the applications that are enabled at each speed tier. A sensible result of this investigation would show that Labor's touted benefits only occur at speeds faster than 100Mbps and that speed tiers do more harm than good hopefully leading to their abolishment.

    1. DeKrow
      Meh

      Re: Labor's plan for 50% at 12Mbps

      Th reality is that Labor didn't want to run a cost-benefit analysis because the reality that their NBNCo Corporate Plan predicted that 50% would be connecting at 12Mbps and in 2028 less than 5% connected at 1Gbps would have exposed the reality that HFC and/or FTTN could meet the requirements of the majority of fixed line customers.

      That argument doesn't take into account the fact the state of the copper that would be used FttN may not be up to snuff, and that HFC is owned by private enterprise and would need to be leased or purchased. It already cost NBNCo $11 billion (with a b) and that didn't include owning the copper in the ground - which is what the Liberals are proposing. MT has said, however, that the agreement with Telstra will not need to be re-negotiated for NBNCo to end up owning the copper. Some find this hard to believe.

      It's also my opinion that a CBA is too limited a study for such a large and lost-lasting infrastructure project, even more-so because it's government driven and therefore if it's deemed a long term benefit to the country, then a CBA doesn't do it justice.

      I think the CBN or MTM should go ahead even if the CBA isn't necessarily flattering, but only because that's the first step towards a FttP NBN, and it seems to be the closest thing we're going to get to a broadband upgrade under the current government.

      1. mathew42

        Re: Labor's plan for 50% at 12Mbps

        > That argument doesn't take into account the fact the state of the copper that would be used FttN may not be up to snuff

        Fair point, but the only analysis I've seen is from iiNet / Internode where they mapped ADSL speeds in Sydney. The average was close to 12Mbps.

        > HFC is owned by private enterprise and would need to be leased or purchased

        Telstra & Optus were being paid very generous amounts per customer to migrate customers to NBN infrastructure.

        > It already cost NBNCo $11 billion (with a b) and that didn't include owning the copper in the ground - which is what the Liberals are proposing

        Telstra definitely out negotiated the Labor government (no surprises there considering the track record with mining companies) so I would suggest there is plenty of room for movement.

        > It's also my opinion that a CBA is too limited a study for such a large and lost-lasting infrastructure project, even more-so because it's government driven and therefore if it's deemed a long term benefit to the country, then a CBA doesn't do it justice.

        The problem I have is I don't think a study exists which shows the benefits from increasing speeds. Labor promised 1Gbps speed only because Google launched 1Gbps fibre, yet they expected 50% to connect at 12Mbps and very few to connect at 1Gbps. The NBNCo Corporate Plan (2010 edition) included a list of applications and essentially almost all the applications needed 100Mbps or faster.

        A CBA should explain the benefits and summarise the cost for each level of speed.

    2. BlackKnight(markb)

      Re: Labor's plan for 50% at 12Mbps

      which sounds wonderful until.

      HFC owned by Telstra and optus and they have no desire to roll it out further as its already congested.

      Large chunks of the copper need redoing anyway because telstra failed to maintain it properly while cost cutting.

      All ISPs have failed to provide any decent land line service to rural Australia because its not a feesible return on investment.

      This is why it came to pass in the first place. not because 6mb/s was to slow to steal movies to watch. the concept then evolves to, Well if we upgrade everyone, thats a huge chunk of revenue we can reinvest and repay the debt with and continue, while reducing travel costs because people can actually communicate remotely with more then just voice.

      while 1gbps sounds excessive today even to most IT professionals, we know based on what we worked with 10 years ago, its probably not going to be silly in 10 years when the build is finished.

    3. Urh

      Re: Labor's plan for 50% at 12Mbps

      The prediction of 50% at 12mbps was a conservative estimate, much like many of NBNCo's figures. Actual uptake figures showed that 44% were opting for 100mbps plans. You are clearly ignoring reality, matthew. HFC is painfully congested - it can't even meet CURRENT customer requirements, much less future requirements. If anything, it's the Liberals who should be fearing a CBA, however they've just said that they'll ignore any negative outcomes (considering how farcical the strategic review turned out to be, I'm expecting the CBA to be yet another steaming load of bollocks).

      1. mathew42

        Re: Labor's plan for 50% at 12Mbps

        > The prediction of 50% at 12mbps was a conservative estimate

        Rubbish. Nothing about the NBNCo Corporate Plan has been shown to be conservative. Most parts have been shown to be extraordinarily optimistic.

        > Actual uptake figures showed that 44% were opting for 100mbps plans.

        Do you have a reference for that, the NBNCo Corporate Plan (2013) contains this statement:

        "As at 30 April 2013, 26% of NBN Co’s FTTP End-Users were on the highest available wholesale speed tier (100/40 Mbps), whilst 47% were on the entry-level wholesale speed tier (12/1 Mbps). These compare with 18% and 49% respectively forecast for FY2013 in the 2012-15 Corporate Plan."

        Essentially what has happened is that as expected early adopters selected 100Mbps in greater numbers, but as more people connect, the percentage of 12Mbps is matching Labor's NBNCo plan. What is more telling is that the long term estimates have barely changed.

  6. Denarius Silver badge
    Mushroom

    no matter

    Given the track record of the last 30 years of government policy, in 5 years time most of us wont have jobs to pay for computers, tablets of broadband. What ever will be built will go where there is already a choice. The rest of us will carry on with wet string until we cant afford that.

  7. Mark Simon

    Beside the Point

    The Gummint is in a poor position to talk about ROI. The whole point of government, if it’s doing the job, is to provide services, using the money it has hijacked from the tax payer.

    Highways, bridges, sewerage, hospitals and other services including a decent communications network all require a coordinated effort, which is what government should be providing.

    If the tax payers have indicated that they want broadband, then that should be sufficient benefit for the cost involved.

    Now let’s see the Government justifying the rest of the financial black hole that is the day-to-day business of running themselves.

    1. mathew42

      Re: Beside the Point

      > Highways, bridges, sewerage, hospitals and other services including a decent communications network all require a coordinated effort, which is what government should be providing.

      All of these services need to demonstrate that they are delivering a benefit for the investment

      * highways need to demonstrate that investment will improve travel time, reduce congestion, improve safety, etc.

      * sewerage works need to demonstrate that investment will reduce costs, pollution, etc.

      * hospitals need to demonstrate that investment will improve patient care, reduce costs, etc.

      A CBA for the NBN should deliver similar answers. Labor's policy contradictions are a clear example of why an CBA is needed, because it would have revealed:

      - areas of greatest need (e.g. suburbs established post 1970s without HFC)

      - speeds that are required to deliver expected benefits

      - eHealth is pure spin because most hospitals are very close to exchanges

      1. Originone

        Re: Beside the Point

        - eHealth is pure spin because most hospitals are very close to exchanges

        The hospital can have two latex clad exchanges inserted in its examination room and wiggled about and it still won't be able to deliver eHealth to patients on 12 meg connections or even 25 for that matter, because it's the patients connection that will always be the limit on the practicality of eHealth services.

        1. mathew42

          Re: Beside the Point

          Do you have any example of eHealth being delivered to private residential addresses that requires 25Mbps. The examples that Labor offered for eHealth were focused around patients video conferencing with a doctor in the city from a country hospital assisted by a nurse or GP.

          I'm aware of one where eHealth delivery has been shown to be beneficial - mental health consultations. However most people struggling with mental health issues also tend to struggle financially which means they are unlikely to be able to afford a fast connection.

  8. JohnMcL

    Oz telecomms infrastructure

    The situation would have been different if Australia's telecommunications infrastructure had not been included in the opening up of the telephone services market. It's pretty obvious that the infrastructure had to be given to Telstra or its share price would have been lower, but doing so forced Optus to build its own physical network. The more sensible option was to have a single government owned entity manage the infrastructure, upgrade it as necessary and sell capacity to the telephone services company. Think of it much like an organisation owning the railway tracks and having multiple train companies pay to use those tracks.

  9. Colin Tree

    nbn died

    a mate has nbn and it has fallen over, no phone, no internet, many hours spent on his mobile getting (very friendly) support, but no cigar

  10. Colin Tree

    staged rollout, no politicians

    The deployment should have been staged better without going straight to some premises.

    Resilience should have been built into the backbone. We have seen large areas of Australia blacked out by natural disasters. For some of our long distances there is only one cable, no alternate routing is possible.

    Capacity should be increased to exchanges then nodes, again with fail-over built in. It would mean a long deployment time, but when it arrived it would work.

    Politicians are limited by their 3 year term and cannot comprehend a really long term solution. It needs agreement by all parties before going forward. FTTN works as an interim solution followed, where required, by FTTP. It should be taken out of politicians hands and given to a board fully committed with a clear vision and sticking to it.

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