Opposition “NBN” Plan To Cost More?

Opposition communications spokesperson Malcolm Turnbull has long argued that the government’s National Broadband Network (NBN) plan is far too expensive, with $26b to come from the public purse to build it.

Information today that his alternative plan has been priced at approximately $17b fronts up some interesting questions. Although this number is $9b “less” than the government plan, a little reading between the lines is required. At this stage, the Coalition has not commented on this report.

Firstly, presuming the Coalition wins the 2013 election, we would face a two year halt in activity:

“Following the six-month cost-benefit analysis after the 2013 election, Citigroup estimates that it would take two years to the end of 2015 for the coalition to renegotiate the definitive agreement with Telstra, negotiate a new separation deal and renegotiate the HFC deals with both Telstra and Optus.”

That is two years of lost economic benefit in areas which would have had the NBN completed in that time.

Secondly, approximately $6b of the $17b figure is calculated for the FTTN component of the Turnbull plan. At such time in the future that an upgrade to FTTH is done, most of that $6b becomes waste, as almost all of the equipment in the huge FTTN cabinets – (of which it is estimated there will need to be 80,000 examples thereof, and pictured below) – will be completely surplus to requirements.

Otherwise known as wasted investment.

If we are upgrading to FTTH everywhere – (which even Turnbull admits will one day be required) – down the track, what will that cost?

Hard to tell, but let’s add $4b – (two thirds of the $6b it cost to do the now obselete FTTN component of the Turnbull plan) – to the $17b price. We’ve forked out $17b, but wasted $4b, so the “real” cost of the original Turnbull plan when looking to upgrade it to FTTH might have been $21b.

That leaves us with “only” $5b of difference between the two plans. What would be the total cost to upgrade it to FTTH?

Given that an FTTH rollout RIGHT NOW is currently priced at $26b – (the government plan) – does that take the long term cost to $47b? Could they get it done for $5b to even cost the same as the current government plan?

I doubt it.

Over time, the opposition plan will cost more than the current intention of building a full FTTH (better) network, before we even consider the lost benefits to the economy.

Cheaper broadband Malcolm?

Get real!

(UPDATE: Further analysis of the Citi report from Delimiter).
(UPDATE: The ACCC has also formed the view that Turnbull’s plans would likely be an expensive waste of money).