[LINK] NBN: That cost-benefit analysis

[Kim Holburn]

http://economics.com.au/?p=6089

> I thought it was time to pick up a theme on the National Broadband  
> Network that has been going around for sometime; the lack of a clear  
> cost-benefit analysis.
>
> First, it is never going to happen. Put simply, the political  
> rationale for the NBN is a combination of two things. First, that a  
> big push on broadband was not going to happen without a big push  
> from Government given the virtual monopoly held by Telstra and the  
> ineffectiveness of regulation to manage that. Second, there is the  
> Yes Prime Minister Trident/Hollowmen/GFC Big Ticket/Shiny  things  
> rationale that is wonderfully captured by this piece in The Onion.
>
> http://www.theonion.com/articles/nation-demands-tax-dollars-only-be-wasted-on-stuff,17704/
>
> You only want a comprehensive cost-benefit analysis if it is going  
> to change your decision. The political rationale is so strong that  
> that is not going to happen and so there is no point to attempts at  
> quantification.
>
> Second, even without a choice motive, there is a downside to the  
> lack of clear analysis: that we can’t optimise the NBN and will  
> inevitably end up causing some waste and inefficiency. I have  
> already mentioned many times that by placing the policy sales pitch  
> and broadband, and worse than that, on broadband speed, we leave  
> that as the sole metric for performance. However, the NBN can  
> potentially yield benefits of lower prices (virtually nothing in  
> fact) for telecommunications and also a revolution in government   
> services if basic broadband is freely available. The problem is that  
> the Government is not being held to account for realising those  
> benefits and this is very troublesome. That said, once the stuff is  
> in the ground …
>
> Third, and this is more worrying than the lack of a cost-benefit  
> analysis, there has been no consideration whatsoever given to issues  
> of market design. If we were serious about this, the NBN would be  
> regarded as a platform that would allow telecommunications markets  
> to evolve. Instead, it is regarded as a thing rather than an  
> institution that sets the rules of the game. That is why we end up  
> with fibre all over the place. That is why we end up with  
> engineering criterion.
>
> On that latter point, and with due respect to my colleague Rod  
> Tucker, it may well be true that only fibre can deliver the fastest  
> broadband speeds. But time and time again we find that people are  
> willing to sacrifice engineering metrics for other things. The  
> evidence is compelling that consumers will sacrifice speed for wires  
> just as they sacrificed CPU power for portability (something IT  
> people thought would never happen). For this reason, we need to be  
> cautious in how we let technological choices be made and to provide  
> rules to allow it to evolve flexibly. The problem is that that does  
> not square with the one-eyed sales pitch on the NBN.
>
> Finally, one thing we can’t quantify well in cost-benefit analyses  
> is ‘future proofness.’ That provides a reason to push forward with  
> the NBN but at the same time is the reason to ensure it is built in  
> a flexible manner. You can’t simultaneously be claiming you are  
> insuring Australia for the future without actually taking out  
> insurance on the details.
>
> Oh and by the way, there is no cost-benefit analysis for the  
> Coalition’s plan. To do that would require a consideration of  
> opportunity cost.
>
> http://www.petermartin.com.au/2010/08/theres-only-one-really-important.html
> So if the choice is between ‘do nothing’ and ‘do the NBN,’ as any  
> first year economics student will tell you, you can’t justify ‘do  
> nothing’ without first doing a cost-benefit analysis on the NBN.
>


-- 
Kim Holburn
IT Network & Security Consultant
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