ESSA

ESSA

A voice of reason


Lachlan Walden

By

October 15th, 2013


While many are concerned about plans for the NBN, Lachlan Walden suggests that the indicated calm and methodical approach of Communications Minister Malcolm Turnbull may actually deliver a sound outcome.


Despite the ministerial portfolio of communications not outwardly seeming closely related to economics, in the next few years it is shaping up to possibly be the most economically orientated area outside the treasury portfolio. Key upcoming policy decisions pertaining to broadband infrastructure, as well as likely deregulation of the telecommunications and media industries, are at the forefront.

Malcolm Turnbull, the incoming Communications Minister, has signalled in recent times that he will be readily embracing mechanisms that will ostensibly facilitate optimal decision-making within his portfolio. The primary illustration of this has been the initiation of comprehensive reviews and cost-benefit analyses that will ensure policy development and implementation is economically well-grounded. Major decisions are not being rushed by Turnbull and he doesn’t seem hurried like many of his colleagues are given the political necessities of ‘stopping the boats’ and ‘axing the (carbon) tax’.

While people across the political spectrum have long respected Turnbull for his pragmatic views, reasonable policy approach and no-frills articulate communication, it is still telling that he is bucking the trend of most portfolios within the Abbott government by not dogmatically embracing a fixed set of predetermined policies.

Since the NBN project’s commencement over four years ago, to date less than 2% of the construction has actually been completed. All sides of politics, including former Communications minister (excluding Anthony Albanese’s brief stint) and unwavering NBN advocate Stephen Conroy, have admitted that the rollout has been constrained and is years behind the original schedule due to construction difficulties with contractors. Turnbull himself declares the delayed rollout of the NBN as “a shocking exercise in mismanagement right from the conception of it”.

The potential policy modifications to the NBN are a controversial issue and many people are worried about the potential ‘demolition’ of the NBN in the favour of letting the free market deliver and pay for basically all broadband infrastructure. A petition advocating for ‘Fibre to the Home’ to be the technology of choice appears set to receive close to 300,000 supporters. Furthermore, local advertisements in Turnbull’s Wentworth electorate are also being used in a desperate attempt to sway Turnbull. It’s obvious that the advertisements are going to be entirely ineffective but it really just shows how passionate NBN proponents are.

The broadband policy taken to the election by the Coalition was to deliver the NBN more quickly and at less cost (the latter both to taxpayers through lower interest repayments on debt and also ultimately consumers through NBN retail access charges). This was to be achieved by favouring ‘Fibre to the Node’ instead of ‘Fibre to the Home’. However, as outlined in their policy documents, this adjustment to the NBN was to be subject to reviews upon being elected. There is no reason to believe this is not still going to be the case.

A two-month ‘warts and all’ review started last week and is headed by the new chairman of the NBN Co board Ziggy Switkowski. It will report on 2 December and examine where the project is currently at, what it will cost with present specifications, how long it will take to deliver with present specifications and what options there are to complete it more quickly and at less cost.

However, construction of the NBN will proceed within the previous government’s parameters until both the completion of Ziggy Switkowski 60 day review and likely also a cost-benefit analysis and comprehensive audit of NBN Co’s governance. Given this, alterations to the network design are unlikely to come into effect until 2014.

Turnbull was asked when appearing on the ABC’s Insiders recently: “What if it shows if you spend less now, you might have to spend more later on? Are those sorts of outcomes going to be taken seriously by you and the government?” Turnbull responded: “Of course. As a keen student of our broadband policy, you would have noticed there is a lengthy discussion about the time value of money and the whole debate about spending money now to cater for demands that might not arise for 20 years. That’s very quantifiable and something that will be a key part of the strategic review that we are talking about right now.” The inclusion of this long-term consideration is a good sign that the flagged cost-benefit analysis will be comprehensive in nature and thus better able to enable optimal outcomes.

Barrie Cassidy went on to probe Turnbull by asking: “Future broadband requirements, will it look at that as well?” He replied: “Absolutely. That’s a key part of it. In fact, this is something that is being done in a number of markets, to look at broadband demand now and then to analyse it carefully because there has been a lazy assumption that demand for additional higher speeds, for example, line speeds, is just going to increase exponentially. You don’t have to reflect on it to realise that can’t be right.”

Given Turnbull’s above-quoted reasonable responses, perhaps there is a slim chance that a large proportion of the NBN rollout will still utilise ‘Fibre to the Home’ after all. Based on the Minister’s flagged methodical, highly rational approach, it will ultimately come down to what the outcomes of the reports and cost-benefit analysis are. In the interests of transparency, hopefully the reports and the consequent reasoning behind any NBN policy adjustments are made available to the public. The high upfront cost of the NBN project (regardless of which model is implemented), as well as the opportunity cost of investing in what may later be seen as the ‘wrong’ technology, means that this decision is of very high importance to the nation.

On deregulation, Turnbull has outlined a methodical framework he will apply: “What we are undertaking or commencing now is a study of the level of regulation, so the question is what objectives, what is the policy objectives these regulations seek to serve? Is that objective relevant any longer? If it is not, the regulation should go. If it is still relevant, can we achieve the objective more cost effectively?”

Turnbull may not have a degree in economics – he studied Arts and Law at the University of Sydney and was later a Rhodes Scholar at Oxford completing a Bachelor of Civil Law – but he has certainly shown an appreciation for its role in effective public policy formulation. If only more politicians would give economics and its many applications the respect it deserves.

Follow me on Twitter: @lachlanwalden

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

  • Owen Wakely

    Nice article Lachlan. Malcolm Turnbull is the poster child, in my mind, of responsible governance and strong sense of custodial responsibility over public money. He views the public, i.e., tax payer’s, money with as much gravity as he would shareholders’ funds in his previous corporate life. Its refreshing to see this level of responsibility and accountability to government in Australia. Cheers Owen

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