white elephant

Everyone bar the Government those that the NBN will be a dudd..

"Broadband network will be $43bn white elephant Malcolm Colless From: The Australian March 16, 2010 12:00AM

THE present federal budget describes the Rudd government's $43 billion national broadband network as the single largest building infrastructure project in Australian history. But it could end up as one of Australia's biggest and costliest infrastructure debacles. And that's saying something when you look at the financial disaster that has engulfed the home insulation program and the amount of taxpayers' money wasted on the mismanagement of the primary school building revolution.

What has emerged from these multi-billion-dollar spending splurges is an absence of good governance. Political rhetoric and spin have taken precedence over economic common sense.

The NBN is no exception. It is just that the financial cost of failure is so much higher. The project's operating body, NBN Co, is flying by the seat of its pants on a mission from Kevin Rudd to deliver a national high-speed fibre-optic broadband network at the cutting-edge of world standards.

That this project has not been the subject of any cost-benefit analysis has not stopped Communications Minister Stephen Conroy from tipping hundreds of millions of dollars into its initial rollout, particularly in Tasmania, which goes to the polls next weekend with Labor against the wall. Total spending in Tasmania is expected to exceed $830 million and it is clear that Conroy is keen to make this a template for a successful national rollout .

Until NBN Co gains legislative exemption from trespassing laws, it needs householder permission to install the fibre-optic cable. Company sources dismiss as unfounded suggestions that many Tasmanians are concerned at the intrusion and cost involved in taking up this broadband service. They say no surveys have been undertaken on customer response and there has been no discussion about costs with the community.

"There has been no pushback. In fact there has been a lot of interest and excitement," one official told The Australian.

But cost to the consumer is a critical and as yet undefined factor in the success of the NBN and it is not confined to the cable, which the government wants connected without needing permission to more than nine million homes, schools and businesses across the country. Once NBN lays the cable a retail service provider will install a set-top box inside or outside the premises. This box, which will cost several hundred dollars, will be the gateway for broadband, phone, television and other services into the home.

Who will bear the cost of this box, which has a shelf life of no more than four years before it will need replacing, is not clear. But what is clear is that the cost of internal rewiring required in most established homes to operate this new system will have to be met by the householder. And this is before the regular bills for using the new broadband and wireless services start flowing in.

Once the coin drops on this it won't be long before the government comes under intense pressure to subsidise these associated costs to offset public confusion and hostility in an effort to keep the NBN project alive. The hard reality is that the volume of traffic will be driven predominantly by price, not speed. Telstra already offers the same 100 megabits per second service to more than a million homes in Melbourne on a $269 a month two-year contract. But just 200 have taken up the service and the company has shelved plans to extend it to other capitals.

The NBN is another example of the government's "father [Kevin] knows best" approach to the country's administration. In this case it wants to prove it can run a national communications network better than anyone else. In the process it has put Telstra on the rack to try to force it to publicly endorse this strategy by agreeing to separate its retail and wholesale businesses. So far all it has achieved is to trash Telstra's shareholder value, including the significant stake held by the Future Fund, and raise further doubts about the government's big-ticket infrastructure policy.

The government is confident Telstra will roll over in the face of threats to prevent it from acquiring spectrum for 4G wireless service, used by the free-to-air television networks for analog broadcasting. If Telstra calls the government's bluff, the NBN and Conroy could be in big trouble.

Meanwhile the Greens have successfully mustered the numbers in the Senate to demand that Conroy table, by tomorrow, a $25m implementation study conducted by McKinsey and KPMG on how the NBN can operate as a viable business venture. But communications industry insiders predict that the report will be seen as vacuous and lacking in convincing propositions.

That wouldn't be surprising. After all, it would be hard, in a democracy, to mount a compelling business case for a government owned or controlled organisation to wire up most homes in the country, at the taxpayer's expense, to deliver a broadband service that many people don't want.

Or as one industry expert predicted last night: "Within 10 years at the latest the use of 4G wireless services will show that Rudd's decision to extend the broadband rollout from the node into the home was just plain stupid."