The Organisation for Economic Co-operation and Development (OECD) has warned that governments need to weigh up investment in telecommunications infrastructure, which the opposition has used to pressure the Federal Government to conduct a cost-benefit analysis on its $43 billion NBN proposal.
"Policy makers need to evaluate the costs and benefits of any public investment in telecommunications infrastructure and select projects which can stimulate current demand, but simultaneously expand the productive capacity of the economy in the longer term," said the France-based OECD in a briefing pack released this week that detailed national broadband research.
The comments were immediately seized on by Shadow Communications Minister Nick Minchin as evidence for his claim that the government should carry out a comprehensive cost-benefit analysis on the NBN project before its commencement.
Communications Minister Stephen Conroy has denied the need for such a study and has insisted Minchin's stalling tactics were threatening the likely benefits of the NBN.
A spokesperson for Conroy today declined to directly respond to Minchin's comments or the OECD report, instead pointing to comments Conroy made last week in a speech.
Conroy said the NBN would cost less than the $43 billion proposal on the basis that current network owners, such as Telstra, could "vend-in" to the NBN.
"We expect that there will be substantial private sector interest in this network. This includes the possibility that companies will want to vend-in existing assets that can support the National Broadband Network for equity or some other financial arrangements," said Conroy last week.
"We expect that the actual cost to be significantly lower than $43 billion for a number of reasons, including the substantial contingency intentionally built into the estimate," he said.
But even if Minchin does force the government to submit the NBN to a cost-benefit analysis some economists say that may be impossible. Last week, a report by Australian economic research group Access Economics stated there was insufficient data to estimate the benefits of a high-speed broadband network.
Still, Minchin said in a statement this morning, "This [OECD] advice makes a mockery of Communications Minister Stephen Conroy's naive and arrogant dismissal of the need for a thorough cost-benefit analysis."
The report did, however, call for governments to make information about broadband proposals available to the public, said Minchin. A recommendation he said ran counter to Conroy's refusal to make public the ACCC and expert panel reports into the first terminated $4.7 billion NBN tender process, and a factor that is likely to be a sticking point should the government require support in the Senate from key independents when it attempts to pass legislation for the NBN roll-out.
I've argued for some years (including posts on ZDnet of over two years ago) that what affects productivity (on a national basis) is near-universal connectivity to the net, not the speed of such services per se. That way, we can stop producing paper-based directories; utilities and government will know you can communicate with people via email not snailmail; everyone can research any product, and access any electronic marketplace they like; etc.
In this respect, I was chatting to former Deputy PM John Anderson just a couple of weeks ago, saying that the Coalition's rural access (satellite) subsidy was the most effective 'broadband' strategy yet implemented by either side of politics. The reason is that the subsidy (roughly the cost of original installation of a dish plus satellite modem) just sits there, for people to utilise if they so desire. So, rather than taking wires up to the front gate of a house that does not want technology, with the satellite subsidy, getting broadband presents nil upfront costs, for anyone prepared to pay the c$45/month usage fees of a (low-speed) satellite broadband link. At around 256-512kbps (ie max download of 50k Bytes per second) it is not blindingly fast, but it gives adequate connection for all those for whom dial-up over long/bad lines was just too slow... as that was not 52kbps but practically only 19kbps or just 2k Bytes per second. So a small one-time subsidy gives the most remote users a 25x speed improvement, and permanent connectivity. Such users can monitor weather (BOM site), news, rural markets (Landmark etc) and get email and downloads. They "FEEL" connected to the rest of the world. So, how much more would their productivity go up if you upped the speed by a further 10x or even 20x...
I suggest that most of the gains have already been made. Interactive video calls are already possible with Skype on such connections.. and the people move jerkily, due to satellite latency, but would such people produce more wool, beef or minerals if the people on the screen moved less jerkily?
The Japan and Korea experience is that the biggest benefactors of higher bandwidth is interactive gaming and stored-video watching. As I noted two years ago, there is a good argument that such activity is contrary to national productivity (people get absorbed and fail to contribute).
Yes, I understand that there will be new apps - you'll have a resistance surface that makes you 'feel' like you're pushing on something on the other side of the web-link. But we can already turn on or turn off whatever valves etc we might have need to effect at a distance, and monitor results with remote cameras.... so the sensation will be more life-like, but it will not be associated with an improvement in productivity.
One big issue is the term "highway" (the term 'super-highway' seems to have been dropped), as if building this NBN will be like the US build of its major highways as an employment-boosting project of the 1930s. Real highways do generate a lot of employment. But an NBN is really more like manner-from-heaven for offshore companies like Cisco. The problem is that vehicle highways need some maintenance, but basically stay productive. The NBN is technology, so may be more like buying a PC - you do so knowing at the outset that it will be out-of-date in just a few years, and become absolutely worthless at 5x the speed of a car's depreciation, and 20x the speed of a house or concrete roadway's physical deterioration. Moreover, Cisco charges a premium for its routing gear, whereas that technology will become commonplace over the next decade and prices will continue to drop at a fast rate.
Indeed, the dual hybrid-fibre roll-out of just ten years ago (Telstra+Optus) is now so dated, that this plays no significant role in the newly-proposed NBN. That should stand as a warning. Optus cannot have made any realistic return on the $5b cost of that duplicate set of optical cable wiring serving just the s