Government NBN model outstrips ALP version in net benefits: study

Communications Minister Malcolm Turnbull said the cost-benefit analysis supports the switch to a multi-technology NBN. AAP/Joe Castro

A cost-benefit study of the NBN commissioned by the government has estimated the Coalition’s multi-technology model will deliver $16 billion more than Labor’s model in net economic and social benefits to Australians.

The study, by an independent panel headed by Michael Vertigan, has put at more than $40 billion the gross benefits between 2015-40 from increasing broadband speeds to 25 megabits per second or more.

It modelled four scenarios: no further rollout; an unsubsidised rollout; multi-technology mix (the government’s plan); and fibre to the premise (which was Labor’s plan).

The government’s plan has net benefits of about $18 billion in current dollars, compared with no further rollout, it says. This includes the cost of providing high-speed broadband in uncommercial urban fringe areas, rural and remote areas via fixed wireless and satellite. In these areas costs substantially exceed benefits.

The scheme that was being pursued by Labor, including the subsidised areas, has net benefits of about $2 billion, according to the study. The $16 billion gap is because fibre to the premises costs more and takes longer to deliver.

A purely commercial rollout would produce even higher net benefits, but this would mean Australians in non-commercial areas would miss out on access to high-speed broadband.

Drawing on research it commissioned, the study says: “Users of broadband would prefer an increase to their current speeds quickly, rather than to wait longer to gain a higher level of speed. This means consumers place a greater value on the early deployment of high speeds rather than on the slower deployment of very high speeds using FTTP.”

The research found bandwidth demand and take-up of plans with higher data rates are likely to grow far more slowly than assumed in the planning of Labor’s NBN.

It confirmed that willingness to pay for more bandwidth declines rapidly as bandwidth available to consumers increases.

Most of the benefits from higher speed accrue to private users in households and businesses. Public or external benefits – that is, outside households and businesses, such as in health and education – are a very small proportion.

Communications Minister Malcolm Turnbull said the cost-benefit analysis “strongly supports the switch from FTTP to a multi-technology NBN”, which had been recommended by NBN Co’s Strategic Review in December last year and approved by the government in April.

Turnbull said the analysis “indicates a multi-technology NBN is the most future-proof strategy for delivering a universal access to superfast broadband, because it preserves the option of upgrading to FTTP at a later date if this is justified by consumer demand.

"In contrast the FTTP locks in high and irreversible costs, reducing optionality and exposing consumers and taxpayers to more risk.”

Opposition spokesman Jason Clare said Turnbull had broken a promise to have Infrastructure Australia do the cost-benefit analysis and instead had “hand-picked former staff and some of the most vociferous critics of the NBN”.

Clare said this cost-benefit analysis “is not independent. It is also flawed. The cost to taxpayers of Labor’s NBN and the Coalition’s second-rate NBN is very similar.

"However, the difference in benefits is significant,” he said. “Under Labor they would have the real NBN, fibre to the premises, a game-changing project that would change the way we live and change the way we work. Under this government, only 24% of Australia will get fibre to the premises. The rest of Australia will miss out. They will get a second-rate NBN.”