Thursday, February 10, 2011

Cost of the NBN

I started receiving calls from the media this morning about the cost of the NBN. These are prompted by the release of the report ‘Full speed ahead: The government broadband index Q1 2011' from the Economist Intelligence Unit (the research unit for The Economist magazine). The report criticises the Australian government for "... spending a colossal 7.58% of annual government budget revenues on its National Broadband Network. In South Korea, by comparison, the government is spending less than 1% of annual budget revenues to realise its broadband goals, achieving targets by encouraging the private sector to invest in the country's broadband future. ...". The full report costs US$2,950 so I just read the free summary.

From the summary of the report it appears that the EIU's researchers developed an index to rank national broadband schemes on speed, coverage and rate of rollout. More controversially they also include in the index the "... most appropriate regulations for realising targets and fostering a competitive broadband market". This makes the assumption that a market is possible and appropriate.

On these measures Australia ranks 9th out of 16 countries, just under Denmark and above New Zealand and the USA. South Korea ranks top and Greece bottom.

Any deployment of broadband across Australia which attempts to achieve equity will be difficult and expensive. Australia has large cities where deployment is easy and then sparely populated areas where there is no technology which can provide cost effective deployment. If everyone in Australia was prepared to move to Sydney, then broadband could be provided at comparable speeds and costs to countries like Singapore. ;-)

The cost of the NBN (about $43B over 8 years) should be seen in perspective with other public expenditure. As an example Australian public expenditure on education each year is 4.5% of GDP (from "Education in Australia", OECD, 2008), or about $56B (based on the OECD States Extract estimate of Australian GDP of $1,253,121.0 for 2009). If the NBN achieved a 10% saving in the cost of education, this would pay for the entire capital cost of the network over eight years.

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