[LINK] NBN plan has the signs of a historic stuff-up

[David Boxall]

Whatever the government thinks it's doing, it's making the natives restless:
<http://www.smh.com.au/business/nbn-plan-has-the-signs-of-a-historic-stuffup-20101121-182ld.html>
> November 22, 2010
> Ross Gittins

> I am starting to get a really bad feeling about Labor's plan for a national broadband network. The more it resists subjecting the plan to scrutiny, the more you suspect it has something to hide.
>
> I fear Julia Gillard is digging herself in deeper on a characteristically grandiose scheme her swaggering predecessor announced without thought to its daunting implications, when she should be looking for ways to scale the project down without too much loss of face.
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>
> The obvious way to start that process would have been to accede to calls for the Productivity Commission to conduct a cost-benefit analysis. The determination of governments to keep their schemes away from the commission is always prima facie evidence they know the scheme's dodgy.
>
> But as each day passes the issue is becoming more politicised, with too much of the government's ego riding on pretending the plan is without blemish. Part of the problem is the role the plan played in winning the support of the country independents.
>
> The independents and Greens are doing the government no favours in using their votes to allow the plan to escape scrutiny. Are they, too, afraid it wouldn't withstand scrutiny?
>
> This is not to support the inane demands from the opposition and the media for the government to release its ''business case'' immediately rather than in a week or two's time. Mere impatience is no virtue in the eternal quest for good policy.
>
> But by the same token, the government's implication that we can't delay the broadband rollout by pausing to check whether it's a good idea, or is being done as cost effectively as possible, is insupportable. If it's a flawed idea, better to know now rather than after the money's spent.
>
> It's no doubt true the Liberals are being quite hypocritical in demanding the release of a government report when the Howard government refused to release so many reports, and in demanding a cost-benefit analysis when John Howard never bothered with them.
>
> But such objections make sense only to those more interested in party-political point scoring than achieving good policy.
>
> The case for a thorough cost-benefit analysis needs no stronger argument than that, at $43 billion, this is the most expensive piece of infrastructure this country has seen.
>
> It's true the plan has a lot of attractions. Top of the list is the structural separation of Telstra's network from its retail business so its retail competitors get fair access to the network. This is something the Howard government should have seen to before it privatised Telstra.
>
> I accept that, if city people are going to continue cross-subsidising the bush - as they will; it's clearly the electorate's ''revealed preference'' - there's no more sensible way to do it than ensuring the bush has access to high-quality telecommunications, thereby doing what we can to reduce the tyranny of distance.
>
> I don't have an in-principle objection to a network with natural-monopoly characteristics being owned publicly rather than privately, provided governments don't use their powers to shore up or abuse that monopoly in a way any private owner would and should be prevented doing.
>
> And I admire the government's consciousness of the need for us to be ready to adopt and exploit the opportunities for benefit that future technological advance will make possible.
>
> The Productivity Commission could be required to ensure its cost-benefit analysis ranged far more widely than a mere commercial evaluation, taking account of present and potential ''social'' benefits (''positive externalities'') and acknowledging those whose value it can't quantify.
>
> But there are three aspects of the plan that worry me. They're things economists are trained to see but to which non-economists are often oblivious.
>
> The first is the mentality that says we've got a lot of messy and inadequate telecom arrangements at present, so let's scrap 'em all and start afresh. Copper wire to the home - make Telstra turn it off. Telstra and Optus's existing rival optical fibre-coaxial cables to many capital-city homes - close 'em down.
>
> This Ruddish approach would be fine if resources were infinite, or if getting a brand spanking new broadband network was the Australian public's only desire.
>
> But resources are finite, both sides of politics have sworn to eliminate all government debt and we have an infrastructure backlog as long as your arm. In two words: opportunity cost.
>
> Second is the idea of building a gold-plated broadband network up to eight times faster than any present application needs, so we're ready for anything that may come along some time in the future.
>
> If you think that shows vision and foresight, you're innocent of ''the time value of money''. Every dollar you spend now rather than later comes at an extra cost: the interest you have to pay between now and when you start using the idle capacity.
>
> True, it's false economy to build something today without allowing for reasonable growth in your use of the item. But there comes a point where allowing for more growth than you're likely to see in ages becomes a waste of money.
>
> Private businesses that do this - such as home owners who overcapitalise their properties - do their dough. Government businesses survive either by overcharging their customers or falling back on the taxpayer.
>
> The final worry is the way that - notwithstanding the break-up of Telstra - the plan involves deliberately reducing competition from other networks in the telecommunications market. Why's that a good idea?
>
> And why would the government plan to do it? Because it knows its network will be hugely over-engineered and the only way of charging consumers the high prices needed to recoup that excess cost is to turn broadband into a monopoly.
>
> If Gillard had any sense of self-preservation she'd be using the Productivity Commission to get herself off a nasty hook.

I don't agree with all that Ross says, but I can see where he's coming 
from. Perhaps this is the purpose of Tony Abbott's pathologically 
adversarial behaviour.

-- 
David Boxall                    |  The more that wise people learn
                                |  The more they come to appreciate
http://david.boxall.id.au       |  How much they don't know.
                                                         --Confucius