There’s more to the NBN than YouTube

The government released the business case for its National Broadband Network yesterday. In a marathon media conference, Prime Minister Julia Gillard, Communications Minister Senator Stephen Conroy and NBNCo CEO Mike Quigley talked up the high points.

In a nutshell, it boils down to: the business plan was examined and found to be good. At the most conservative estimates of uptake, taxpayers would still see their investment (now set at $27.5 billion) returned with a 7% gain. Wholesale prices range from $24 per month for 12 Mbps to $150 per month for 1 Gbps. Pressed to give an idea of what a retail figure might be, Conroy favoured the questioner with a pitying look and pointed out that you don’t show your hand when you’re trying to build a competitive market.

So, for about $1.5 billion more than originally announced, the minimum expected outcome is to pay back the investment and then some. The wholesale prices are far below the hundreds of dollars that were bandied about by the Coalition during the year. The country will be thoroughly connected, and the regions won’t suffer if the demand is likely to be low. The NBN will be available in places that private companies would consider too remote (read: unprofitable) to connect.

Cue the storm of criticism. On the mild side of things was the Coalition’s predicted response of, ‘Yes, yes, that’s all very well, but where’s the cost-benefit analysis?’, which is a question deserving of an answer. You might be forgiven, however, for missing that in the hysteria that’s building now.

Perhaps sensing that the average viewer really didn’t care about the difference between a cost-benefit analysis and a business case, the Coalition reverted to more high-flown rhetoric. It’s a $50 billion white elephant! It’s monstrous! (And no one can say ‘monstrous’ in those terribly disappointed tones like Shadow Communications Spokesperson Malcolm Turnbull.)

Senator George Brandis hinted darkly that the government must be hiding something. The NBN business case was supposed to run to 400 pages, but only 160 pages were released.

There was this from the Sydney Morning Herald. The NBN will cost $24 wholesale per month? Why, that’s outrageous! We can get ADSL2+ already for about that. Why should we be forced to pay for something we don’t want?

In The Australian, there was this assertion: we ‘know’ that most people will only want 12 Mbps, so why should we pour all this public money into building something faster?

The Herald-Sun cried, ‘Won’t someone think of the networks?’ After all, it warned, the NBN will kill free-to-air and pay television, because everyone will watch the internet instead.

And my personal favourite: the questioner in yesterday’s media conference who asked, in tones of confected outrage, why the government was willing to spend all this money on the NBN while people were stuck in traffic in Western Sydney and waiting for operations in hospitals. Is it so important to allow people to upload videos of themselves at high speed? What about our schools?

That’s a lot of objections. Taken at face value, they paint a picture of a fatally-flawed plan that no one wants and that will drag the country into financial ruin.

Funny thing is, most of those criticism just don’t stand up under scrutiny.

Let’s start with the ‘$50 billion white elephant’. This figure has been a favourite of the Coalition for months now. In fact, they’ve done a reasonable job of muddying the waters with it. Unfortunately, it’s a mythical number. The amount of money allocated from public funds is $27.5 billion. That’s it. The remainder, adding up to approximately $43 billion, is to be sourced from private investment – so even the total amount is less than the Coalition claims will be ripped out of ‘taxpayers’ money’.

Where did the $50 billion figure come from, anyway? Well, it’s debate hyperbole. It’s a figure that the Coalition used during debates on the Telstra separation bill and in Question Time to scare-monger about the NBN. How do we know it will cost what the government says, they asked. Maybe it will be $50 billion … maybe 100. We just don’t know. Except we do.

Then there’s Brandis, with his deep suspicions that the government are hiding a terrible secret in the unreleased pages of the business case. Why can’t we see them? What have they got to hide? The answer, according to Conroy, is just a bit anti-climactic; they’re ‘hiding’ commercial-in-confidence data. This is absolutely no different to any other business case. It’s common sense; if you’re trying to build a project with commercial and competitive intentions, you don’t go telling the world your fall-back position or your planned tactics to get the best possible return. You just don’t.

How about the claim that people will be forced to sign up to the NBN? Frankly, I’m embarrassed for Fairfax. This story was put to bed months ago. To trot it out again now just looks like fear-mongering. It’s very clear; there is nothing in the NBN plan that will remove choice from people. Everyone is free to opt in or to stay with their current situation. The fibre will be laid; that doesn’t mean you’ll be forced at gunpoint to sign on. In this, it’s no different to a telephone line. New houses are automatically supplied with the cabling for a telephone line – but the tenants are in no way required to sign up to a Telco.

Then there’s the ‘no one wants this’ argument. The thinking runs something like this; your average household probably doesn’t ‘need’ stupidly high speed connections to the internet. We can upload our videos now, so why would we pay more for something that won’t get us anything?

This is a pretty sneaky one. It’s arguable that many households won’t want more than about 12 Mbps, at least at first. The problem is that not every user of the internet is one of these homes. If you’re running student accommodation, you’re going to want a service that doesn’t slow to a crawl the minute half of the residents log on. If you’re a small business moving data, you want something fast. If you’re big business, an educational institution or a department at any level of government, it’s a no-brainer.

(And just by the way, there are plenty of homes out there with several members all wanting to access the net at once – and if you’re stuck on ADSL2+, you know the frustration that comes with watching your bandwidth grind to a halt because just one more person needs to do their email.)

And that’s without even looking at potential future needs. Conroy pointed out over and over that the NBN was ‘future-proofed’. What that means is that yes, right now it might be a bit more than the family at 47 Generic Street need so that they can do their homework and download movies – but the applications for internet communication are growing all the time. In ten years’ time, we don’t want to be in the position of having to start all over again, just to meet the demand. It’s called forward planning.

The dire warnings that the NBN will kill television might sound familiar. That’s because they’re recycled, with very little change, from the same warnings that were sounded when pay television first came to Australia. If people have pay TV, they won’t watch free-to-air, and people won’t invest, and there will be no good programs, etc. etc. Well, in over 20 years, that hasn’t happened. There are more free-to-air channels than ever, showing first-run quality programs from both overseas and made here in Australia. New programs are still being made here.

And there’s no reason to think this won’t continue when the NBN is implemented. Internet TV – either live stream or download – already exists. It hasn’t killed television networks anywhere in the world yet, even in those places where high-speed broadband is in place. The idea that we can have one or the other, but not both, stems from a false assumption – that there’s a finite amount of viewing out there, and not everyone can have a share of the pie. In practice, the reverse seems to be true.

What Internet TV is likely to do is democratise television. Currently, there are a few community broadcasters in Australia that limp along, supported largely by donations. They often have very weak signals, and can’t be picked up by many televisions – and if you have pay TV, forget it. Your tuner won’t even acknowledge community broadcasters exist. Using the internet removes the need for massive capital outlay just to get set up – signal towers, just for a start, become irrelevant. The internet creates a space, and where a space is created, it tends to be filled very quickly. In this case, it will be filled by those who don’t have the profile or money to compete with the big television networks and production companies.

Will these new internet channels be good? Well, as with current television, I suspect we’ll see a fair amount of rubbish. But it’s hardly the End Of TV As We Know It.

And so we come to the ‘people-are-dying-in-gridlock-waiting-for-operations’ criticism. When asked this, Conroy responded with barely-contained anger – and not without cause. This argument, frankly, is rubbish.

For a start, many of the problems cited are the responsibility of the States. Last time anyone looked, the Federal government had not nationalised roads or hospitals. Schools are slightly different; they exist in a strange limbo where both governments get to look after them (and, all too often, neither do).

Then there’s the implication that, by building the NBN, the government is somehow taking away money that can be ‘better’ spent on things that people ‘really’ want and need. This is called rank populism. There’s no basis to it at all, but it sounds good. No government projects have been starved of funds to pay for the NBN.

Far nastier is the insinuation that the government just doesn’t care about the real needs of the battlers. If they did, they wouldn’t be spending our hard-earned money on a ‘video entertainment system’ (to quote George Brandis on AM Agenda this morning). Conroy’s response was scathing; he detailed a series of initiatives that were either already in place or to be implemented next year directed at schools and hospitals, and joint projects with the State governments on roads and infrastructure.

To drive the point home, Conroy listed a handful of the benefits of the NBN. For health: E-health, the ability for ageing people to stay at home and be properly monitored, and better communications between health services in metropolitan and remote areas. For education: online learning, access for those in remote areas to real-time learning environments, and whole-class access to virtual learning environments all over the world. He even had an answer to Western Sydney’s gridlock: high-speed tele-commuting.

All of that is a far cry from the accusation that the NBN is good for nothing but allowing people to take stupid videos with their mobile phones and upload them to YouTube or Facebook. (And do we detect a note of snobbery in those who deride the idea of people uploading their personal videos and displaying them to the world? Why, I believe we do.)

So what’s left? Well, it pretty much comes down to the objection that there is no cost-benefit analysis. This is a question that keeps coming up – and the answers seem a little wishy-washy. Either there’s a problem with commercial-in-confidence data, or it’s just not possible to adequately do such an analysis on future benefits as yet unknown. The Coalition, of course, is having a field day with the latter idea.

Mind you, when was the last time we saw a cost-benefit analysis for a defence material purchase? Or new medical imaging equipment for hospitals? Now, some might object that we don’t need one for things that are self-evidently ‘good’.

But we’re talking about a massive infrastructure upgrade that will touch almost every area of Australian life – from traffic lights to train switching, health monitoring to real-time consultation, online and virtual learning to tele-commuting. We’re talking about putting in place a system with capacity to expand in the future and potentially transform the way we live. Might we not then argue that very high-speed broadband, made available throughout Australia, is also self-evidently good?

When did we lose sight of the idea that not everything in life has to be about profit? When did we give up the idea that quality of life may be just as important – if not more – as how much money rolls in?

We’ve seen higher education suffer because, somewhere along the line we got the notion that universities should be places of profit rather than of learning. We’ve seen health suffer because we figure that it’s more important to have a good profit margin than extend affordable health care to everyone in the country.

Maybe we should learn from those disasters and try looking at the NBN as something that builds and enhances the nation, rather than a bunch of numbers on a balance sheet.

And if that means we see a few thousand more drunk videos turning up on YouTube – well, I’m sure the country will be able to withstand the onslaught.

After all, we’ve managed to cope with reality TV and talk shows …

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10 Responses to There’s more to the NBN than YouTube

  1. The whole telecommuting debate is an interesting one. It is estimated that by 2020 – (about the time the NBN would be completed) – that Australia will lose $20b a year in lost GDP brought about by way of traffic congestion – ( http://www.bitre.gov.au/publications/49/Files/wp71.pdf ) – if the NBN encouraged even 10% of that traffic off the roads, that’s a general saving of $2b of lost GDP. Every year. And the remaining 90% of the traffic will be able to move faster, more than likely creating a greater than 10% benefit. Add to the that question of how much it would cost in dollar terms to reduce vehicular carbon emissions by that same 10%, and now you have a clear environmental benefit to the existence of the NBN.

  2. […] “down with the NBN!” catchcries, check out Marian Dalton‘s thoughtful piece at The Conscience Vote document.getElementById("post-569-blankimage").onload(); Tags: fallacy, infrastructure, NBN, […]

  3. […] A Notion by Marian Dalton – Originally Posted at The Conscience Vote […]

  4. irtie says:

    Thank for sharing. Keep writing..

  5. Bilko says:

    The Canberra Times has dragged up a Prof Zumbo to throw a dampener on the NBN and has followed up today with an article also written by him, I think I will rename him Prof Dumbo.
    People who say I have 12mbs connection make me wonder what speed they first had when connected to an ISP and why they changed because no one started out with that speed, but the “I am alright Jack attitude” says heaps about themselves when so many people are still on dialup because the country’s monopoly carrier could not give a stuff about them, mostly in country areas where you would think the National Party would be helping their constituents not hindering them.
    At least Sen. Fiona Nash did not speak out against the NBN unlike her fellow National party stooges. ALan Kohler’s article in Crikey says it all have a read.

  6. Peter__ says:

    Nice and cogently argued. Mostly.

    But I don’t think you really nailed the cost-benefit-analysis argument. A cost benefit analysis is not all about profit, (in fact it’s hardly about profit at all), but about what you’re giving up an what you’re getting back. Maybe we get less than what we put in, well fine, maybe there are still good reasons for pursuing it, but let’s know. But probably not. Economics is easily capable of incorporating future benefits, social benefits, envirnomental benefits (and their corresponding costs) into a cost benefit analysis. Quantifying and comparing them can be tricky, but that’s where human, governmental and political judgement comes in.

    The hardest thing about a the cost benfit analysis is the fuzzy nature of the benefits. We know that people are going to continue to create app.s and systems that rely on high-speed broad band, and that we’ll take them up and find them useful and probably indispenable. But we don’t know what they are. So how do we quantify them? Well there are techniques, but none that I’d bet my house on.

    Frankly I’d just tell Abbott and Turnbull that they can find the cost benefit analysis in the parliamenary library right next to the one for the phone network.

    Frankly we’re making a call. Do you think high-speed digital communication is the way of the future, and will allow Australia to succeed economically in the long term. Or not.

  7. Rhiannon Saxon says:

    “When did we lose sight of the idea that not everything in life has to be about profit?”

    I don’t necessarily WANT a country with a huge surplus and crumbling infrastructure!

    Like Terry Pratchett said in Maskerade – ‘You put money IN and you get opera OUT’.

    Presumably we put money IN and get a functioning society out. Or that is the way it is supposed to happen anyway!

    I would LOVE 12mbps! I am sooooo heartily sick of the people that say ‘if it only takes 2-3 seconds for a page to load, who really needs faster internet than that?’
    I live in a regional area with a population of 250,000 and sometimes (regularly in fact) in can take 2-3 MINUTES…or MORE for a page to load up. I am itching for the NBN to arrive!

    Apologies for the excessive use of exclamation points.

  8. […] This post was mentioned on Twitter by Marian Dalton. Marian Dalton said: The Conscience Vote: There's more to the NBN than YouTube. http://wp.me/pZfPj-6A #auspol #nbn […]

  9. Fergie says:

    “When did we lose sight of the idea that not everything in life has to be about profit?”

    Amen!

  10. heath says:

    Amen to that. I was quite pleased to see what they presented.

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