As the National Broadband Network juggernaut rolls on, one has to wonder if any thought has been given to the obvious danger that the NBN may fail. NBN supporters assume that it will succeed. This crash through or crash approach is a very dangerous way to pursue government policy objectives.
In this context, failure can mean a number of things. For starters, the NBN could fail financially. This could include construction costs spiralling out of control where, for example, labour and skills shortages drive up project costs.
The NBN Corporate Plan itself reveals that at the height of construction up to 6,000 premises per day will be connected to the NBN. That’s a lot of premises and a lot of skilled labour which means lots of risk to the NBN. Any delay in connecting such a larger number of premises would delay completion of the NBN. Any delay would substantially increase project costs and threaten the financial viability of the NBN.
Another significant risk for the NBN would be a disastrously low take-up rate by consumers concerned that the price of NBN services were simply too high. The NBN is going to be a very expensive project and its costs need to be covered by a sustainable revenue stream. In addition, if the costs of building and running the NBN increase, then that revenue stream would need to increase even more if the NBN is to have any chance of being financial viability.
Increased costs need to be covered by increased revenues and that means higher prices for NBN services. The higher the price for NBN services, the fewer the number of consumers that will be able to afford the NBN services, especially the higher end services. That would reduce the take up rate for NBN services and further reduce the NBN’s ability to make a return for taxpayers who are ultimately funding the NBN project
Since the take up rate of NBN services is critical to the NBN’s success, any adverse impact on the take-up rate will undermine the NBN’s financial viability and could quite easily turn the NBN into a white elephant. Put simply, high prices for NBN services would adversely affect the take-up rate for NBN services. Competition from fast wireless broadband offered by NBN competitors would also adversely affect the take up rate for NBN services.
Competition from fast wireless broadband is a real threat to NBN as the speeds being achieved by wireless technologies are increasing off the back of technical advances. Irrespective of how comparable the speeds of wireless technologies are or will be to NBN in relation to the higher speeds to be offered by the NBN, wireless broadband is currently capable of delivering strong competition to the basic 12 Mbps service to be offered by NBN.
Financial failure is just one possible failure in relation to the NBN. Another failure would be a failure by NBN Co to actually complete the project. There is a real risk that the blowout in construction costs could be so devastating that the project could be shut down early as no Government could politically stand by and indefinitely allow NBN to bleed financially.
All in all, the failure of the NBN remains a real possibility and the consequences of such failure should be considered if for no other reason that it focuses the attention of those involved with delivering the NBN project.
The first consequence of any NBN failure would be that taxpayers would not have received a commercial return for the money the Federal Government poured into the NBN. It needs to be remembered that there is an opportunity cost to using taxpayer money on one project as opposed to another project. By using taxpayer money on the NBN project it’s clear that the money is not being used for other worthwhile projects. If NBN failed financially, then the taxpayer money spent on the NBN would have been used in a less effective manner than it could have otherwise have been used.
As with any infrastructure project that fails financially, any failure of the NBN Co would reduce the financial value of the investment in the project and the value of the NBN Co itself. While a successful project would be able to be sold at a healthy price, a failed project may need to be sold at a much lower price and may even need to be sold a price well below the amount of money actually invested in the project.
The financial value of NBN Co is very important given that the Federal Government proposes to sell the NBN once it’s completed. In the meantime, the financial value of NBN Co throughout the life of the project is also important for the simple reason that taxpayers need to receive value for the money being spent by the Government on the NBN.
Another consequence of the NBN’s failure would be the various casualties of the failure. All those people and organisations that have hitched their bandwagon to the NBN locomotive would be exposed to varying degrees. No doubt heads would roll if NBN failed. The biggest casualty could be the Federal Government itself as it relied on the NBN to secure on a second term.
The next casualty of a failed NBN would likely be Stephen Conroy, the Minister for the project and most vocal cheerleader for the NBN. Conroy’s passionate advocacy of the NBN may be admired by some and questioned by others, but one thing is certain and, that is, if the NBN fails there will be a lot of curly questions for Conroy. Is that fair? Yes, if you believe in ministerial accountability.
Who would buy a failed NBN? The scariest prospect is that Telstra would end up buying the NBN at a fraction of its cost. Wouldn’t it be ironic indeed if Telstra ended up owning NBN, the very entity that the Federal Government and Stephen Conroy have told us would break the longstanding dominance of Telstra?
With the consequences of a failed NBN being so dire, it’s essential that all steps are taken to ensure that taxpayers get real value for money throughout the whole project. One such critical safeguard would be the appointment of an NBN Commissioner, a statutory office holder that would oversee all aspects of the NBN project and act as an independent watchdog.
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