Labor’s NBN cost benefit analysis

When the NBN announcement was first made and the issue of the cost benefit analysis came up, BuddeComm’s  comment was that it would be necessary to be aware of all the ingredients of such a plan before one could carry out such an analysis.

This is not just an issue for Australia. Other governments are also grappling with it. If the analysis were to be based simply on the use of traditional telecoms services it wouldn’t even be worthwhile starting on it, as it would not hold together.

One could argue that this is national infrastructure (as distinct from telecommunications) and that no national cost benefits analyses were provided for previous large-scale infrastructure projects.

But the reality is that we live in different times.

Nevertheless governments still have the option of launching such a project; but perhaps they should not link it to a commercial return – as soon as that link is forged the market can, quite rightly, request a proper cost benefits analysis.

One of the reasons it has been so difficult to make a proper analysis is, as mentioned above, the ingredients are indeterminate. However over recent months we have seen the emergence of some very important elements. We now know that the NBN will be used for the following projects:

  • The linking of all schools to the network
  • The Smart Grid/Smart City project in Newcastle
  • Telstra and NEC have signed agreements with medical organisations to deliver e-health services to 17,000 GPs and 28,000 retirement villages (and through them to patients via broadband-based monitoring services)
  • Medicare services will be provided to regional Australia, including video-based medical consultations.

The electricity companies also have indicated that a combined rollout of smart grids and the NBN could save $2 billion and various healthcare reports have been claiming savings of up to $10billion.

While we do not argue that this will be easy, or anywhere near full-proof, these are elements that should be used in a cost benefit analysis. The internationally well respected economic research and policy organisation OECD has already calculated that an NBN could lead to GDP savings of between 0.5%  and 1.5% and it has concluded that this would cover the costs of an NBN.

The OECD is currently working on more in-depth data and this could also be used by the Australian Government. As a matter of fact, perhaps the OECD could use Australia as a case study. The ITU/UNESCO Broadband Commission for Digital Development will launch its reports in September and these reports include important economic data that can be used as well.

So about now should be the right time to begin to look more seriously at a cost benefit analysis.

Paul Budde

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