$24 billion cost to stopping the NBN rollout: Report

Putting a stop to the roll out of the National Broadband Network would cost the economy $24 billion, according to a federal government report containing a cost-benefit analysis on four possible scenarios for a rollout of the NBN.

The report, dubbed the “Vertigan Report”, was conducted by a panel of experts appointed by the government, led by Michael Vertigan, with the modelling assisted by the Centre for International Economics.

It is the latest in a string of reports into the NBN conducted by the Coalition since coming to power last year.

In the first scenario examined in the report, there is no further rollout of any broadband technology, although this is explicitly included as a “purely illustrative scenario” used to illustrate the benefits of fast broadband.

Under the second, broadband would be rolled out only to areas where hybrid fibre coaxial (HFC) and fibre to the node (FTTN) technologies can be implemented without any additional government subsidies. The report predicts up to 93% of premises will eventually receive these technologies under a “no subsidy” model.

The third scenario is the current government’s multi-technology mix (MTM), which also includes rolling out fixed wireless and satellite solutions to remote, rural and regional areas.

The fourth is the previous Labor government’s policy, which included fibre to the premises (FTTP) being rolled out to all Australian households.

When compared to the “no subsidy” model, the report found not rolling out a NBN would have an additional net cost of $24 billion. By comparison, the FTTP network would attract an additional net cost of $22.2 billion, while the current government’s MTM plan would have a net cost $6 billion.

The report attributes most of the additional cost of the government’s MTM plan to the additional cost in rolling the NBN out to rural and regional areas, which it claims will provide little economic benefit.

“Providing fixed wireless and satellite services costs nearly $5 billion but the benefits are only just above 10% of that. The result is a substantial net cost to the community. The net social cost is equivalent to almost $7000 per additional premises connected through the provision of fixed wireless and satellite services,” said the report.

The report examines the economic costs of each option, rather than financial costs, with transfer payments to Optus and Telstra excluded and all future amounts discounted to the present, in order to account for inflation.

Technology commentator Stilgherrian told SmartCompany there is some merit in the Coalition’s overall MTM policy.

“Really, the thrust of the Coalition’s argument is that for MTM, you can in theory get some increase in speed sooner,” says Stilgherrian.

“So – just plucking some numbers out of the air – instead of someone waiting 10 years for a connection that’s 10 times faster with FTTP, you might wait two or three years for a connection that’s two or three times faster.”

“Yes, FTTP is the long-term choice, but it was seriously falling behind in its rollout.”

However, Stilgherrian cautions against taking the cost and economic value of the national broadband network at face value, noting that there is a wide array of potential variables at play in each possible NBN scenario.

These variables include, for example, how far apart fibre optic nodes are placed, which would affect the cost of FTTN when compared to a FTTP rollout.

“My understanding is that all those variables are so great you could make any argument you want, based on your assumptions,” he says.

Meanwhile, the executive officer of Tasmanian IT lobby group TasICT, Dean Winter, says the critical issue will be what it means for the rollout to local businesses.

“According to NBN Co statistics, only 122 Tasmanian premises were passed by fibre in the three months to 14 August,” Winter says.

“The continuous flow of reviews isn’t helping Tasmania. It’s only adding to uncertainty.

“Minister Turnbull should come to Tasmania, tell us what NBN technology we will be receiving and outline a plan to get the project back on track.

“Tasmania has been the big loser out of the last 12 months of uncertainty. We’ve seen only around 6,000 premises passed by fibre in the first six months of 2014 – only a quarter of what was promised.”