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Apr 8, 2013

Ninety billion maybes: 13 questions about Turnbull’s NBN

Some time this week we will see “the 12-page costing” for the Coalition’s broadband policy. Stilgherrian lists 13 questions to ask as you flip through the pages.

Malcolm Turnbull

Outrage over politicians manipulating the media to their advantage is as moronic as outrage over fish swimming, so props for another prime propaganda gambit to Malcolm Turnbull.

Today’s Daily Telegraph exclusive is an uncritical rendering of Turnbull’s summary of a document no one’s seen, apart from calling it an “extraordinary” claim and adding two sentences of he-said she-said at the end. Thus the narrative for reporting the Coalition’s NBN policy is framed before the conversation even begins. Again. Hats off.

Turnbull has repeatedly complained about the broadband debate’s quasi-religious nature, though I contend that’s a bit pot-kettle. He’s also resisted publishing even rough cost estimates. “If I put out a set of financials, I want them to be right,” Turnbull said in February, while in the same conversation very carefully saying it was “BT’s experience… that the FTTN approach costs about a quarter of the cost of fibre-to-the-premises and around a quarter to a third of the time”. Clever, that.

Some time this week, the rest of us will get to see “the 12-page costing” that’ll be released as part of the Coalition’s broadband policy. Has Turnbull done the honest thing, and updated all of NBN Co’s estimates with new data based on experience and appropriate risk calculations? Or has he picked every worst-case figure he can find and screeched “cost blowout”?

That is, are mathematics and logic being deployed honestly? Or merely, as Stephen Colbert might put it, to create an impression of maths-iness?

Here’s a few questions to ask as you flip through those dozen pages:

  • What is the basis for the claim that the per-household rollout cost is 40% higher than forecast?
  • Of “the current 50% delay to the schedule” — let’s gloss over the fact that even if the delay is unchanged it won’t be 50% of the total time once we get to the end — what proportion is fixed and done, like the delay in negotiating with Telstra, and what proportion is part of the rollout itself?
  • Do these claims take into account any projected drop in the per-household cost or gain in time taken as contractors overcome initial unfamiliarity with the job?
  • Is there any evidence yet that contractors are achieving these gains, or failing to do so, and if so by how much?
  • “The Coalition’s estimates of the real capital costs suggested they would be more likely to reach $71 billion, not the $37.4 billion claimed by NBN Co’s most recent estimates,” The Tele writes. What is the likelihood of each of these and other potential outcomes, and how was that risk calculated?
  • Is this analysis based on the correct total number of premises, including business premises, or mistakenly using only “households”? (Don’t laugh. The Economist Intelligence Unit got this number wrong by six million.)

And on broadband policy more generally:

  • In February’s “Our Plan: Real Solutions for all Australians“, the Coalition promises to deliver “high speed broadband” and “super-fast broadband”. What are the definitions of those terms?
  • The Coalition promises to “upgrade broadband to all areas where services are now unavailable or sub-standard”. What is the minimum standard that must be met, and how might that standard change over the next decade?
  • “We will roll it out faster to high priority areas,” the Coalition writes. What factors determine whether an area is high priority?
  • Labor’s NBN policy promises to deliver entry-level NBN capability at the same price regardless of location — essentially a social equity and regional development goal. Does the Coalition policy also support that goal?
  • If specific technologies are mentioned, is there clear differentiation between technologies that are available off-the-shelf today and those that are only being trialled or even still just experimental?
  • If specific data transmission speeds are mentioned, is it clearly indicated whether these are theoretical maximum speeds or those likely to be obtained in real life?
  • Different broadband technologies have different capabilities in terms of upload speeds relative to download speeds, which in turn affect the ability for individuals and businesses to be creators and participants in the digital economy and culture, rather than merely passive consumers. How does the Coalition policy discuss and reflect this issue?

These questions should equally be put to Labor, of course.

Delays and cost variations seem inevitable with big projects. The Tele calling the NBN’s 4% capex increase a “blowout” is just tabloid-screech. It’s a tiny figure for an unprecedented civil project. Yet there’s a point where reasons become excuses, and if we reach that point then NBN Co and its political masters will try to smother the problems with rhetoric.

Are we at that point? “Potentially cost an extra $45 billion” sounds a bit like pick-and-screech to me but, as my maths teacher used to say, let’s see the working-out.

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45 thoughts on “Ninety billion maybes: 13 questions about Turnbull’s NBN

  1. Apollo

    NBN construction cost can be reduced if they use pico cells or micro cells for multiplex or strata buildings.

    The government should incorporate this into their plan asap.

  2. klewso

    Turnbull’s a typical lawyer, a two pot screamer – one is half full, and the other is half empty – he reaches for whichever, depending on his current position.
    You’d hardly get one of Murdoch’s rags analysing, impartially, political speak.
    More like “Maths-debation”?

  3. zut alors

    Even if the NBN did actually cost the farcical figure they’ve floated of $71 Billion, there’s no sense in opting for anything less than the Rolls Royce version – despite the expense.

    Otherwise the government (whichever party is in power) will fritter away the money on Joint Strike Fighters or other nonentities demanded by the Defence Dept or other groups with vested interests.

    Taxpayers deserve a premium fibre-optic system designed to cope with internet traffic which will multiply in coming years.

  4. Bill Hilliger

    I’e always admired how the opposition is quick and able to always quote figures on NBN latest i.e. $71bn; then in the same breath are not able to give even a rough cost $bn estimate on their alternative.

  5. Rob

    “Delays and cost variations seem inevitable with big projects.”

    Not always. Australia’s biggest communication project before this was (or even will still be) the overland telegraph in the 1870s (http://en.wikipedia.org/wiki/Overland_Telegraph).
    It was completed on time, and I understand also on budget. Someone recently converted the cost of this project (₤128,000) into today’s dollars, and it was remarkably similar to the initial projected cost of the NBN.

  6. Lachlan Hinds

    We need communications that actually step ahead of our times. Most people I know have semi functional Broadband that suffers at peak usage times and party politics in favour of a big business virtual monopoly are holding us there. We already have suffering infrastructure, why do it to the internet too? Communication plays a vital role in social wellbeing these days facilitating a lot of peer to peer interaction, amongst many other benefits. we’re already overcharged for internet usage that is below par. please give us what we deserve, fluid, efficient economical communications. It’s an investment in Australia’s future.

  7. Plane

    And . . .
    There are really many more questions that should be asked and should been asked for a very long time

    So definitely agree with the writer’s intentions of trying (finally) to get some sort of a discussion on NBN that isn’t based on:
    promises
    numbers (as many as possible)
    rhetoric
    media headlines
    media driven comment and
    political point scoring.

    Did I miss anything?

  8. Mike Flanagan

    If my memory serves me properly, Ray Williams and Rodney Adler were the last people who valued Turnbull’s incantations and advise. Both of whom spent a good period of their lives ‘making little ones out of big ones’.
    Your questions will be met with opaque obfuscations while reports, identifying the competitive nature that fibre to the home presents to the Murdoch Pay TV empire,are circulating.
    Abbott is carrying some heavy debts to his aspired anointment and they must be paid by the mogul servant, Turnbull.

  9. Achmed

    A big misconception about the NBN is how it will be paid for. A misconception endorsed and poliferated by Abbott, his MSM supperters and other Liberal supporters.

    So, in simple terms, here is an explanation of the public funding:

    The $27.5bn Government component of the NBN is funded by debt, through the issuing of Australian Government Bonds. That is, the Federal Government offers our AAA-rated bonds to investors, at an interest rate of about 4% (depending on the term).

    The NBN however, will provide a return of about 7%. This means that (once the network is operational), the NBN will begin repaying those bonds at a higher rate than what Government is paying on the debt. By 2034, the entire Government investment (including the interest) will have been repaid by the users of the network, leaving the Government owning a valuable asset (the NBN network) and no associated debt. Big users of the network (those who choose the high speed and high volume plans) will contribute more towards repayment of the debt, and actually subsidise those on smaller plans.

    Taxpayers don’t really have anything to do with NBN funding. It is users of the network who will pay to build it, whether they are taxpayers or not.

  10. michael r james

    @Achmed at 3:48 pm
    ” By 2034, the entire Government investment (including the interest) will have been repaid by the users of the network, leaving the Government owning a valuable asset (the NBN network) and no associated debt.”

    Exactly and isn’t that one of the prime reasons the Libs hate it. This huge flow of funds should be going thru the hands of big biz instead of government so that it is big biz who takes their rent. This is what they mean by “free market”, innit?

    Stilgh should also do a critique of Alan Kohler’s strange quasi-defense (if that is what it was) of Turnbull’s intentions in last week’s Oz. There was no critical assessment, simply (apparent) acquiescence to the most horrible of outcomes not even mentioned above: removal of the structural separation of Telstra. Indeed NBNCo would be forced to serve the 10-20% rural and difficult to reach (unprofitable) market segment while Telstra would have carte blanche to “compete” in the cities. Naturally this will cripple NBNCo and make it appear a failure (of a “government quango”) to be competitive in a “free market”.

    Overt is that this return to status quo ante plus FTTN, will be the creation of a two-tier telecoms system: those willing and able to pay the proposed $2,000 for the FTTH connection and the rest who will have to cope with a deteriorating copper system (which of course Telstra will manipulate to deliver even worse performance pour encourage les autres to pay up for acceptable service; sound familiar?)

    But even that has its flaws. Since residency is so fluid these days, especially amongst the young, tech-workers and upper echelon workers, what happens when they change domicile: do Telstra put in FTTH in their new home for free (or some pro-rata arrangement), and what do they charge the new occupants who could feasibly get FTTH for free?

    But Turnbull has boxed himself into a corner so it is probably going to happen despite his own best instincts (unless I am crediting him with more sense than he deserves).

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