TECHNOLOGY SPECTATOR: NBN bluster and benefits

The NBN was embroiled in the accusations of so-called 'accounting tricks' in the federal budget, while it was also the recipient of some support funding.

Technology Spectator

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The budget and the NBN

Another budget and another promise by the government to ensure that the books are balanced and that all-so-important surplus is delivered come hell or high water. So what do the numbers revealed in the 2012-2013 budget have to say about the NBN? Well for one thing we know how much it’s going to cost the Coalition to roll back with the current amount coming in at the $2 billion mark, although this figure is going to be a whole lot higher by the time the next federal election rolls in.

The other set of figures associated with the NBN is the millions set aside by the government to spread the NBN message far and wide. There’s the $20 million provided to improve the public’s perception of the NBN, especially in the regional and remote areas where access to the NBN will be provided through fixed wireless and satellite services. There is also another $20 million earmarked to create a "national online educational portal” to help students, families and teachers make full use of the network.

In addition, the government will spend $22.2 million over the next three years in a tele-health pilot program, $5 million over three years to pilot virtual English tuition for new migrants living in regional Australia and $2.4 million over two years from 2011-12 (including $0.4 million in capital funding in 2011 12 and $0.02 million in 2012-13) to provide online remote access to national cultural institutions. The best part about that last bit of spending is the promise of virtual tours of these institutions via mobile robots. That’s right folks, robots, to show you around and impart all the important bits of information you need to know.

Creative accounting and swimming in a sea of red

Now, normally this is where the budget and the NBN would part company because most of the $36 billion cost of the network is not included in the budget. The government is expecting a 7 per cent return on its investment so the NBN appears as an asset rather than an expense.

However, that hasn’t stopped shadow communications minister Malcolm Turnbull from taking the government to task for cooking the books. According to Turnbull, the promise of a $1.5 billion surplus rests on the shoulder of shifting $430 million of spending on the network from 2012-13 to the current 2011-12 financial year. The Department of Broadband, Communications and the Digital Economy had increased its spending to $484 million in 2011-12, compared with previous estimates of $57 million but while the $430 million increase has been attributed to inducements provided by Telstra for its deal with NBN Co, Turnbull reckons the money shuffle is another example of the Gillard government’s ‘creative accounting'. He also pointed out in question time yesterday that the 2012-13 budget would actually be sporting a $12 billion deficit, if the NBN was on the books.

While some may reckon it’s a valid point that merits consideration, I think the more pertinent question would be just what the Coalition and Turnbull aim to do about this. The accounting methodology utilised by the government is not under question but what we do know is that if the Coalition decides to shake things around and the ROI is no longer guaranteed then we will be swimming in a sea of red in the blink of an eye.

Fine tuning the uptake message

The government is obviously cognisant about the uptake issue and a lot of the spending related to the NBN is geared to ensure that the public will jump on board once the network is available. The thing about uptake is that high fibre penetration doesn’t guarantee uptake. For example, 83 per cent of buildings have fibre in Singapore, but adoption rate is at 8 per cent.

According Frost & Sullivan’s vice president of ICT research for the Asia Pacific region, Andrew Milroy, the focus needs to be on applications and not speed and the government needs to encourage more industry drivers to monetise the network. Speaking at the Amdocs Insight Forum in Sydney this week Milroy said that the experience in high penetration countries – South Korea, Singapore – shows that uptake is often dictated by application. In the case of Korea, gaming and tele-health applications rule the roost, while in Singapore the tele-education benefits have proven to be more compelling to consumers.

There’s a clear message here for Australian service providers and the government: if you want better uptake you are going to have to give the public some very good reasons. You do get a sense of that in where the government is targeting its spending on the NBN. Tele-health and tele-education are two clear segments where the NBN can be a game changer and, as the recent Forrester report highlighted, the government could do well to start selling the message to businesses, many of which are yet to realise the full potential of the new network.