Labor’s NBN gold-plated

By Leith van Onselen

The Coalition’s 196-page cost benefit review into the National Broadband Network (NBN) has been released and finds that Labor’s plan for fibre-to-the-premises (FTTP) broadband is markedly ($16 billion) inferior to the Coalition’s multi-technology mix (MTM) solution.

The study compares four main scenarios:

1. leaving things as they are with no further progress;
2. an unsubsidised rollout of hybrid-fibre coaxial (HFC) and fibre to the node (FTTN);
3. a full fibre to the premises (FTTP) rollout with wireless and satellite in high-cost areas; and
4. a multi-technology mix (MTM) scenario using a combination of FTTN, FTTP, HFC, fixed wireless and satellite.

The key findings are outlined below:

[A] way of understanding these results is to consider how each scenario compares with the no further rollout scenario and with each other…

The unsubsidised rollout scenario using HFC and FTTN in the fixed line area (up to 93 per cent of premises) provides the greatest net benefits.

The MTM scenario extends high speed broadband to all premises through investment into higher cost areas serviced by fixed wireless and satellite. It also includes around 15 per cent of premises serviced by FTTP. This reduces net benefits by $6.1 billion or $600 per Australian household (compared with the unsubsidised rollout scenario).

The FTTP scenario provides higher speeds within the fixed line area at higher cost and with a slower rollout. This reduces net benefits by a further $16.1 billion or $1,600 per Australian household. The FTTP scenario only makes the community $2 billion better off, in net terms, than under the no further rollout scenario.

The degree to which demand for high-speed broadband would grow in the future was a “key uncertainty” for the study, although the MTM scenario was prefered in most analysed growth rates, due primarily to its easier upgrading.

According to the study, the willingness to pay had to grow by a whopping 250% over 10 years (13% per year for each of those 10 years) before the FTTP became the preferred option over an MTM without upgrades (see next chart).

Personally, I like the rationale behind the NBN – particularly the notion of providing rural and regional areas with similar broadband services to the city, thus assisting the nation to decentralise.

However, I have also always thought that Labor’s model is gold-plated – i.e. delivering more than is needed at too higher cost.

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