What the NBN cost-benefit review doesn't tell you

By Mark Gregory

The CBA is entirely based on the material provided in Section 2. 2 and no alternative data sets are provided or used, which is unusual and places too high a reliance on data provided by an organisation that does not hide its scepticism of the need for fibre, ensconced in its belief that internet growth will be glacial over the next decade thanks to improved data compression techniques and that consumer expectations will be adequately met by existing applications. Section 2. 2 appears to be a snapshot in time, one that occurred about five years ago and the data refined to match the data set.

Irrespective of its origins, the substance of the material is out of date and does not adequately reflect current knowledge of how the internet will change and grow in the decades ahead. Yet Section 2. 2 states that "a number" of Australian internet service providers were contacted "both to test the modelling methodology and to obtain (confidential) data necessary to implement the model". “The completed model findings were then further tested with internet service providers who provided feedback and comments.

A careful look at Section 4. 1 (CBA page 46) highlights an assumption that the speeds for FTTN, HFC and FTTP used in the CBA model are “held constant over the period to 2040”. Table 4. 6 on the same page provides assumed download and upload speeds for each technology.

In a 2012 Gartner report on 10 Critical Tech Trends for the Next Five Years IT demand in 2017 will be characterised by network bandwidth demand growing by 35 per cent per annum and everything will have a radio, GPS and be connected to the network. Yet Chart 2. 2 (CBA page 34) builds upon Chart 2. 1 (CBA page 33) in an attempt to paint a picture that by 2023 only the “top 1 per cent of households have demand of 45 Mbps or more”.

What this means is the CBA model is very simplistic, utilises unjustifiable assumptions and does not appear to be capable of coping with even single dimensional variables changing over time. Section 4. 5 (CBA page 50) is interesting as it describes a FTTP rollout that conforms to the changed circumstances provided in the Coalition’s NBN-related strategic review.

The problem is that there is no qualitative and quantitative evidence that the data set is accurate, we are simply told to accept it as it is. When you read Section 4. 1 to learn about the scenarios evaluated you cannot move past the rather audacious assumption that technologies should remain static for 26 years so that the model can provide results for a comparison.

Read more here: Business Spectator


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