In search of Turnbull’s NBN cost/benefit analysis

Communications minister Malcolm Turnbull was quick to refute accusations from his predecessor, Stephen Conroy, that the Coalition had backed off on its commitment to commission a cost-benefit study on the NBN, but I’m with Conroy on this one.

You’ll no doubt recall that the Coalition had been harping on about the need for such an analysis ever since the project was announced and had flagged that it would get the Productivity Commission to undertake same. The ALP’s position has always been that such an analysis would be too hard.

In response to Conroy’s accusations Turnbull issued a press release citing the Coalition’s commitment to the study in its April 2013 broadband policy document “As stated in our Broadband Policy (page 13) ... the Coalition will conduct an independent cost benefit analysis of the project and a review of the regulations relating to broadband. Details of the composition of the review panel will be announced shortly,” he said.

But if this analysis is such an important part of Coalition NBN policy why was no mention made of it when Turnbull released the instructions given to NBN Co to conduct and internal review? At that time he also announced, but gave no details of, an independent audit of the project - which is not the same as a cost/benefit analysis.

On 24 September Turnbull issued a press release ‘Implementing the Coalition's Broadband Policy’ in which he announced that he had issued an interim ‘Statement of Expectations’ to NBN Co as the first step in implementing changes to Government policy.

“The interim Statement will guide NBN Co's construction and operational activities pending changes to the board and while a strategic review and independent audit of the project is carried out and a new NBN Co corporate plan is drafted,” he said.

No mention of any cost benefit analysis there, nor in the statement of expectations issued to NBN Co. It closed by saying: “You will be aware that Government policy includes developing a ranking of broadband quality and availability in all areas of Australia. The Department of Communications has commenced this work with a view to publishing results within 90 days. NBN Co should meet requests from our Departments for information as quickly as possible. Inevitably there will be matters that arise that may not be covered by this initial letter. We ask that early consultation occur with the Government on these matters.”

Surely something so important to the project as a cost/benefit analysis should have been mentioned?

However I was able to find one reference to this, prior to Conroy goading Turnbull into making a statement, and it was not positive. SMH.com.au reported on 25 September “despite repeatedly calling for the Productivity Commission to conduct the NBN cost benefit analysis while in opposition, the Abbott government now seems unlikely to use it.”

It quoted Turnbull as saying ''There are some issues with the Productivity Commission … their chairman [Peter Harris] is the former head of the Department of Broadband, Communications and the Digital Economy.” Therefore, he argued “The Commission would ''in effect be conducting an inquiry into policy that had been, in a large part, designed by its [current] chairman.” That sounds like a cop-out to me, and Turnbull offered no alternative, or if he did SMH did not report it.

My guess is that the Government is hoping the whole question of this analysis will be forgotten (no chance), because it is just too hard. Back in July I blogged about an OECD report ‘Measuring the Internet Economy’, as further supporting the ALP’s contention that a cost benefit analysis would be too hard.

You can read more here, but here’s one key comment from the OECD; “There is no widely accepted methodology for assigning an economic value to the Internet. ... There is a high level of interest ... in being able to measure the size of the Internet economy as a way to understand the effects of various investment strategies, regulatory rulings and policy decisions. There have been various studies that attempt to address this issue, but the methodologies are not always consistent with statistical standards and economic concepts.”

So much of my conclusion still stands: “Should the election go the Coalition’s way I shall eagerly await the early announcement of the NBN cost-benefit study, and wish them luck with it. They’ll need it.”