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December 21, 2010
The business case (or corporate plan ) for the National Broadband Network (NBN) has been released by the Gillard Government. It will offer $24.00 wholesale and $53-58 retail per month for the basic 12 Mbps / 50GB NBN plan; have an internal rate of return on investment of just over 7 per cent; 70 per cent of businesses and homes expected to use the NBN eventually; and in the short term about half will stay with the most basic service of 12 megabits a second.
It wasn't just the Liberal Party, who basically said it wasn’t worth spending government money on a telecommunications upgrade which would primarily be used to fuel the nation’s passion for high-end video and gaming content. The NBN is essentially a video entertainment system for them.
The reaction in the mainstream media was hostile. The editorial Murdoch's naysaying Australian said that the business case is not a cost-benefit analysis; does not assess the opportunity costs of spending billions on this project rather than other services or infrastructure; does not negate the need for a comprehensive analysis by the Productivity Commission; and is not considered an important area of policy reform by business executives. Therefore, the NBN is not in the national interest and it is not the best value for our money.
Jennifer Hewitt in saying that the business case is more about political cover for a government nervous about increasing public doubts over whether the promise of the National Broadband Network offers value for money. Or Michael Stutchbury saying that if the NBN were such a smart-money bet, then private investors would be rushing in, which they're not. Therefore, the NBN is flawed.
The hostility is not limited to Murdoch's naysaying Australian. At Fairfax we have Adele Ferguson saying:
The federal government's much awaited business plan for its national broadband network is three parts puff, two parts smoke and mirrors with a pinch of fact thrown in. And while the government's twin messages that the network will be transformational and the billions of dollars in taxpayers money will be repaid with interest may sound impressive, dig deeper and it is based on a lot of assumptions and hyperbole.
There is no argument provided to justify the claim. It is Ferguson's piece that is puff and smoke and mirrors.
Katharine Murphy, in contrast, acknowledges that her qualified coming around to the NBN has been a slow process has largely been driven by the competition policy principles that rest beneath the whole idea. She refers to the market model (Telstra) failing to meet national needs:
Without the promise of a national broadband network, the government would not have been able to undo 20 years of terrible policy in telecommunications. John Howard's single greatest economic policy mistake was turning Telstra from a public monopoly to a private one with the capacity to strangle competition and innovation at the retail level, leaving us less well-off for communications services than other comparable nations. That mistake is now on the road to being rectified through the breaking up of Telstra, the concept the pointy heads call ''structural separation''.
But the positive note ends there. Murphy says:
The NBN project is full of risks. Some of the myriad assumptions in the business case are more than likely flawed. Costs have already blown out and could well again. (Remember when this idea cost $4.7 billion? Now it's $27.5 billion of taxpayers' money.) There may not be sufficient skilled labour to deliver the rollout on time and on budget....The attack lines Turnbull has been running (transparency, value for money, whether the technology will be future-proof) are all solid.
Assumptions may be flawed because they are assumptions. The difference between the cost $4.7 billion and the $27.5 billion is for two completely different projects--fibre-to-the-node and fibre-to-the-home; a difference Murphy fails to acknowledge. So we either have deception or ignorance. How does the fibre will be obsolescent argument go?
These kind of articles indicate that we have vested interests opposing the NBN. They want it to fail; to see it destroyed. So they spread misinformation to those people who do not understand the NBN making it seem “pointless” and not worthwhile.
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Murdoch must be worried about Foxtel if high speed broadband does the same job ---eg., a streaming IPTV service such Fetch TV, or online video on demand such as Netflix-- and by the looks of it it may be cheaper.
The NBN is bigger than being just a video distribution network. Then again, doctors performing procedures is a form of video. School lessons and lectures are a form of video. Real time meetings are a form of video.
The NBN will provide for all our fixed communications services – phone, TV, internet.