The NBN utility narrative

The ACCC's request for more more long-term data from NBN Co again highlights why the real focus should be on economic benefits rather than the six or seven per cent financial return on its investments.

The competition regulator’s request for more detailed expenditure and revenue information from NBN Co has again highlighted some of the underlying problems with the structure of the National Broadband Network (NBN).

The request comes as part of the Australian Competition and Consumer Commission’s (ACCC) review into the binding “special access undertaking” agreement and its demand for more long-term data from NBN Co highlights a desire to gain a better understanding of the ways in which the SAU may operate over this period.

The long-term data includes more disaggregated financial details on a range of expenditure, demand, price and the long term revenue constraint forecasting methodology over its proposed 30-year term of the special access undertakings.

Quantitative analysis of the price controls and long-term revenue constraint proposed in the SAU is a necessary input to making an informed decision. This will provide the ACCC with a more informed view on the expected length of the initial cost recovery period, and likely incentives generated by the SAU price controls.

The 30-year SAUs are on the one side essential to ensure the financial viability of NBN Co and on the other side critical for the future of a competitive and affordable broadband environment for the country. As I have argued many times before, all of this could have been prevented if NBN Co was simply established as a national utility. Its returns are the many social and economic benefits to the country, rather than six or seven per cent financial return on its investments.

Less talk, more action 

One of my arguments in relation to getting a national broadband network underway – rather than just discussing it – has always been that it will be impossible to come up with a fully-covered cost benefit plan stretching 10 or 20 years into the future. The best way is to agree to a plan that:

  • Has widespread (not necessarily full) support;
  • Is based on a national vision; and
  • Has a flexible strategy attached to it to cater for the changes that will undoubtedly occur over the period of its implementation.

When it is just a plan people tend not to pay much attention, as there is no urgency for them to address the issue. But as soon as implementation commences people will have to start thinking about what it means for them personally. Australia has followed this plan. When the NBN plans were discussed between 2007 and 2009 they had the full support of the telecoms engineering community, and that of 70 to 80 per cent of the population and businesses.

On a high level the technical and regulatory platform was agreed upon by the entire industry. The key difference that remained was more politically-driven – how much government intervention was acceptable? Something like that is rather like a religious point of view in that differences will always remain. Unfortunately such discussions make headlines and undermine the willingness of people to think more strategically about the real impact of such a plan. They sit on the fence and procrastinate.

However, when the implementation stage of a plan is reached people and organisations can no longer afford to sit on the fence and do nothing. They must confront the reality that such an infrastructure is going to become part of society and the economy.

Once the physical implementation begins and people start to see infrastructure activities in their towns and suburbs the discussion moves to the social and economic aspects – what’s in it for me?

The reality of the rollout – and the fact that by now everybody (even the Opposition) believes that Fibre-to-the-Premise (FttP) is the end solution – is now resulting in the outcomes we foreshadowed; people are waking up and starting to think about what this means for them. The effect of this turnaround in thinking is enormous. With the current financial and economic climate forcing organisations to focus on cost-cutting and improving productivity, it’s absolutely critical that our resource-focused economy has the means to improve productivity in other sectors.

A new NBN narrative

What this also means is that the NBN and questions over the viability of the infrastructure are no longer the story. Instead the focus needs to shift to new stories, new narratives that illustrate how the NBN will affect the many different components of our society and our economy.

Within that context perhaps the single most important element will be the smart use of big data. The NBN isn’t just about getting faster access to the internet but also about building the right digital infrastructure – infrastructure that has the capacity, reliability, security, etc to allow the country to increase the amount of data needed to create digital productivity, to create a smart country – not just more data but also the capability to connect that data to achieve smart outcomes.

Australia’s national R&D organisation, CSIRO’s decision to invest $40 million annually into a Digital Productivity and Services National Research Flagship, is a substantial step in achieving these outcomes. More importantly, it further highlights the need to stimulate the shift in the debate.

The CSIRO initiative is one of the most important decisions in relation to the importance of the digital productivity for our economic future, together with the decision to build the NBN and the government’s policy to place Digital Productivity at a ministerial level. And aside from its direct benefits it will further assist the country as a whole to get on with the urgently needed transformation of the Australian economy.

Paul Budde is the managing director of BuddeComm, an independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries.

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