The Abbott government's pared-back broadband plan is three times more cost effective than Labor's ambitious scheme and would leave Australians $16 billion better off, according to the first independent cost-benefit analysis of the national broadband network.
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In a scathing verdict on the Rudd and Gillard governments' plan to introduce fibre directly to 93 per cent of premises, the cost benefit analysis finds the policy is so expensive it would barely leave the community any better off in net terms than if broadband investment remained frozen at present levels.
The much-anticipated report finds households and businesses will benefit from quicker downloads but the much-vaunted societal benefits of fast broadband – such as improvements to health and education services – will probably be extremely limited.
The cost benefit analysis panel, led by former Victorian Treasury head Michael Vertigan, modelled the estimated costs and benefits of expanded broadband access from 2015 to 2040.
Communications Minister Malcolm Turnbull, who commissioned the analysis, will use the findings to justify his decision to pursue a "multi-technology mix" broadband network using a combination of fibre to the premises, fibre to the node, hybrid-fibre coaxial, satellite and wireless services.
Mr Turnbull regularly attacked Labor for failing to commission a cost-benefit analysis before launching the national broadband network, the biggest infrastructure project in Australia's history.
The report finds the multi-technology mix model outperforms a fibre to the premises plan in net economic benefits in 98 per cent of scenarios.
A multi-technology mix NBN would cost $24.9 billion to launch from 2015 compared with $35.3 billion for fibre to the premises (FTTP), the report finds.
A multi-technology mix would deliver download and upload speeds of 20-100 megabits a second, while FTTP would deliver speeds above 100Mbps.
The report finds the most cost-effective option would be an unsubsidised launch in which the free market delivers high-speed broadband to 93 per cent of homes. This would have a net economic benefit of $24 billion, but would leave 7 per cent of premises in regional and rural areas without fast broadband.
Providing fast broadband to the bush through wireless and satellite services – as envisaged under both Labor and the Coalition's plans – will cost nearly $5 billion but produce only $600 million in economic benefits.
This suggests an alternative model for a government committed to fast broadband for all Australians at a low cost: subsidising the introduction to the bush while leaving private providers to serve metropolitan areas.
Compared with the unsubsidised launch scenario, the multi-technology mix model has a net cost of $6 billion ($620 a household) and fibre to the premises has a net cost of $22 billion ($2220 a household).
Australians would be only $2 billion better off, in net terms, than if there was no further launch of broadband under a fibre to the premises model. They would be $18 billion better off under a multi-technology mix.
The report finds a multi-technology mix is more "future proof" because it can be upgraded to fibre to the premises later if demand for fast broadband booms.
"The [multi-technology mix] scenario leaves open more options for the future because it avoids high up-front costs while still allowing the capture of benefits if, and when, they emerge," the report finds.
The cost benefit analysis finds most of the benefits of fast broadband – most notably video downloads – will accrue to private users within households and businesses. By contrast, hospitals and schools require relatively low bandwidth to deliver services.
As well as Mr Vertigan, the expert panel members were economist Henry Ergas, former Australian Communications Authority chairman Tony Shaw and former eBay Australia managing director Alison Deans.
Mr Vertigan said the findings of his report show that cost benefit analyses should be mandatory before construction begins on major public infrastructure projects.
Labor communications spokesman Jason Clare said the cost-benefit analysis was "tainted" by the involvement of figures such as longstanding NBN critic Henry Ergas.
"It's hard to take the report seriously when three weeks before the last election Malcolm Turnbull said he would get this report done by the government body Infrastructure Australia and instead what he has done is got some of the most vociferous critics of the NBN, as well as former staff, to write this report," he said.
Mr Clare said the government had a "myopic" view that fast broadband was just about video games.
This is about setting us and Australia up for the future. That is why Japan, South Korea and China and New Zealand are doing it and even in Indonesia."
