Independent report confirms we’re paying a Turnbull Tax on broadband

The failure of the NBN project is no longer a matter of partisan disputation. Tony Abbott charged Malcolm Turnbull with “demolishing” the NBN and, according to Standard & Poor’s, he’s done a pretty good job of achieving just that. Moreover, the damage extends beyond the NBN to a massive misallocation of resources as rivals pour money into wireless broadband to overcome NBN’s regulated dominance of fixed broadband.

For the man who once proudly stood at the dispatch box to theatrically mock the “Conrovian” NBN to the chortles of his colleagues, the S&P report is humiliating — especially its damning of what it calls NBN’s “inferior” or “retrograde” technology mix. That’s the mix Turnbull forced on the NBN when the Liberals took power, in what turned out to be a failed attempt to both lower the cost and reduce the rollout schedule of the network. The NBN is still way behind schedule, and likely to own up to being further behind next month, while the cost under Turnbull blew out by more than $8 billion, with the crowning glory of NBN acquiring Optus’ HFC cable as part of its “technology mix” and then abandoning it entirely.

While Turnbull is fully to blame for the disaster of the “multi-technology mix” he imposed on the NBN, there’s another problem that he inherited but which he has steadfastly refused to address. The requirement for NBN to make a commercial return — and thus stay on the capital side of the budget, ensuring its costs didn’t affect the budget deficit — was a Labor decision, albeit one announced in 2009 before the financial crisis wreaked havoc with budget revenues and the deficit. That drove the NBN pricing model that produced such widespread dissatisfaction among customers last year that it was temporarily abandoned by NBN in order to ensure retail service providers bought enough bandwidth to end the nation-wide complaints of congestion.

That’s not a permanent solution, however — not without either removing the requirement for a commercial rate of return or dramatically writing down the NBN’s value. This issue has been around for a while, and the government point-blank refuses to even contemplate it, with Finance Minister Mathias Cormann regularly ruling it out. “There is no basis for such a write-down,” he repeated this week. 

The problem is, S&P have demonstrated just how much the government’s recalcitrance on that issue is costing Australians. Australia has the fifth highest monthly broadband charges of 23 countries surveyed — at an average of $65.22 it’s 27% above the overall average of $51.52. Even accounting for cross-subsidies between urban and regional users, and Australia’s large landmass/small population cost base, urban Australians are right to wonder why they’re in the running for the unwanted prize of world’s most expensive broadband. And with the NBN now having been under Coalition control for longer than it was under Labor control, blaming Labor — once plausible — is no longer tenable. 

The NBN is the prime example of the Turnbull Syndrome — problems created by the incompetence and learned helplessness of government exacerbated by ideology and malice, confirming in the minds of citizens that their government can’t be trusted to do the basics like deliver services and infrastructure (My Health Record has now emerged as another perfect example). But the NBN also comes with a Turnbull Tax — the 27% more that Australians (both consumers and businesses) are paying compared to the rest of the world for a broadband service that is often unsatisfying — or, to use S&P’s words, “retrograde” and “inferior”. Words that will forever be associated with Turnbull’s legacy on the NBN.