Radio Interview with Fran Kelly – RN Breakfast – Wednesday 27 August 2014






SUBJECT/S: NBN cost benefit analysis; Metadata

FRAN KELLY: Jason Clare, welcome to RN Breakfast.


KELLY: A saving of $30 billion or $16 billion according to this report, whichever way you cut it, that’s a big saving on Labor’s plan.

CLARE: Well, it’s hard to take the report seriously.


CLARE: Because Malcom Turnbull promised before the election that he would do an independent cost-benefit analysis, done by the government body Infrastructure Australia. He promised that three weeks before the election.

What we have got here is a report that has been written by former Malcom Turnbull staff, former advisors to Malcom Turnbull, and some of the most trenchant and vociferous critics of the NBN. People who said years ago that the NBN was a dud, that it would fail a cost-benefit analysis. Writing a report like this is like putting foxes in charge of the hen house.

KELLY: The problem for Labor is that you didn’t do a cost-benefit analysis. So you can throw shots at this committee and say that it had links to the Government. A recent Productivity Commission, which I don’t think you could say is bias to any one particular camp, has it looked at the NBN and criticised it for being an investment without a cost-benefit analysis. Which every way you cut it, Labor fell at that first hurdle didn’t it. Do you agree with that?

CLARE: We did a number of things –

KELLY: Well you didn’t do a cost-benefit analysis.

CLARE: We got an expert panel to give us advice on the best model, they recommended fibre to the premises. We then did a –

KELLY: Of course they would, that’s the rolled gold, Royals Royce model apparently.

CLARE: It’s important that it delivers a return on investment to taxpayers and an implementation study by KPMG and McKinsey said that by investing this money and building this network, you would get money back to the taxpayers. So it is not a cost, it’s an investment.

A corporate plan delivered by the company, tested by Treasury, tested by Finance, tested by independent financial houses confirmed all of that work. That it would deliver a return to taxpayers.

KELLY: After the Government had announced that it would do fibre to the home.

CLARE: That’s right.

KELLY: So you didn’t do a cost-benefit analysis before you came up with your policy.

CLARE: My point today is that if you are going to do a cost-benefit analysis, at least make it is independent. Don’t get your mates to write the report that you deliberately want it to say that you were right.

KELLY: Are you saying that if Infrastructure Australia had modelled the NBN, that it would come up with different conclusions?

CLARE: Well we will never know.

KELLY: It’s easy for you to say that it is biased.

CLARE: Because it is. The first report that Infrastructure Australia put out, I think it was 2008 said that this was the biggest and most important infrastructure project in Australia. Number one. That was the conclusion of the first report of Infrastructure Australia.

Malcolm Turnbull should have just kept his promise and got the Infrastructure Australia organisation to do this report.

KELLY: Okay, let’s go to what this report does find. The modelling shows, it all there for you to see, that in terms of a net-benefit the Coalition’s multi-technology approach is far superior to fibre to the home, which is the Royals Royce scheme under Labor, in 98 per cent of cases. Do you dispute that?

CLARE: Well all of this depends on the assumptions that you put into a financial model. If you get the assumptions wrong, you get the wrong answers. It depends on how long it will take, how much it will cost, what revenue it will return as well as what speed people will want.

This report says that by 2023, in other words in 10 years’ time, that the average household will require bandwidth of 15 megabits per second. Well Fran, already most people are ordering 25 megabits per second or more.

The report goes on and it says that in 2023, again in a decade’s time, that the top 5 per cent of households will demand 43 megabits per second. Well at the moment, people already on the NBN, we have 28 per cent of people who are already ordering 50 megabits per second or more. It shows that some of the assumptions in this report are wrong.

I’d make another point Fran, the report says that the cost of delivering fibre to the home is going up. Yesterday, Malcom Turnbull said that the cost of building fibre to the home is going down.

KELLY: You talk about the speed, let’s stick with that. Because the speeds that the then Minister, Stephen Conroy, used to talk about were 100 megabits per second. That far outstrips anything that we are talking about now. Doesn’t that then prove what Malcolm Turnbull has always said, that the Government’s scheme was really pie in the sky, giving the sort of speeds, and paying for the sort of speeds that Australians by and large were never going to use? Sure some businesses might want it, they can pay for it.

CLARE: Let us look at what is going on overseas. It is not just Australia that is doing this. Japan is rolling out fibre to the home. So is South Korea. So is Singapore and New Zealand. Indonesia has indicated that 20 million homes will get fibre to the home as well.

KELLY: Those places are a lot smaller than Australia for one.

CLARE: Not Indonesia and you have it happening in the United States as well, where you have Google, AT&T, Verizon who are all rolling out fibre to the home.

This is a contested space, there’s different views on this but there is one thing that everyone agrees on and that is that fibre to the home or fibre to the business, is what people call the ‘end game’. The real question is, do you build it in one stage? That’s what Labor proposed to do. Or do you build it in two stages? That is what the Government is effectively doing here.

KELLY: The problem for Labor is that A) there was no cost-benefit analysis, so you could never prove the business case and the second problem was the rollout was very interrupted. It was very slow, it had a lot of problems, it had problems getting the skilled contractors able to do it, it was very slow and then it had all the asbestos problems and that in a sense just underlined the fact that it was not pre-planned very well.

CLARE: This is my major criticism of the NBN, that the rollout was too slow. Unfortunately Fran it is rolling out slower today than it was this time last year. In the last ten weeks before the last election, fibre passed by 4,200 brownfield premises on average a week. Now it is rolling past 3,600 brownfield premises on average per week.

KELLY: So the bottom line is, Labor’s position is, the Government should have stuck with your NBN.

CLARE: Well the bottom line is build the NBN, don’t break it.

KELLY: It’s 23 minutes past eight. We are speaking with the Shadow Minister for Communications, Jason Clare. Just finally another matter the Government we know is in discussion with telecommunications and internet providers about metadata retention. It’s all going to be put before the Parliament as a series of measures. Will Labor back the efforts to have the Telco’s to retain that information on the scale that the Government is now discussing?

CLARE: Well it is very important that our law enforcement agencies and our security agencies have the right powers and the right resources that they need to keep Australia safe. The head of ASIO made the point that this sort of information is used now and will be even more important in the future.

The important point here is that they get the legislation right. George Brandis made a mess of it a couple of weeks ago. They are now playing catch-up by talking to all of the Telco providers. We’ll have a look at the legislation they bring forward and deal with it constructively. It is very important also, in the model that they bring forward, that it doesn’t lead to enormous extra costs for Telco providers that would lead effectively to a new internet tax.

KELLY: Jason Clare thank you very much for joining us.

CLARE: Thanks Fran.