OECD subtly throwing its weight behind the NBN cost-benefit analysis calls
- 20 November, 2009 10:02
- Comments (3)
Intentional or not, the Organisation for Economic Development (OECD) appears to have subtly thrown its weight behind shadow communications minister, senator Nick Minchin's calls for the Federal Government to do a cost-benefit analysis of its National Broadband Network (NBN).
In its most recent summary report for Australia's economic outlook the OECD noted that while the next couple of years look good for the domestic economy (it tips a rise in GDP growth of 2.5 per cent next year) there are steps the Rudd Government should be taking to up the benefits.
"To maximise the positive impacts of their investment programme, the authorities should submit proposed projects more systematically to a rigorous and transparent cost–benefit analysis," the report reads.
While the OECD has not responded to requests for clarification around which investments it believes should be submitted to "rigorous and transparent cost–benefit analysis", it is reasonable to assume they include one of the most ambitious and expensive infrastructure projects put forward in the last 12 months – the $43 billion NBN. And while the OECD gives credit to the Government for its handling of the economic downturn through its stimulus package, the inclusion of the above statements in what is admittedly only a short two paragraph summary gives some support to the calls made by Minchin.
The report, The Need for Speed: Impacts of Internet Connectivity on Firm Productivity which studied 6,000 New Zealand businesses, found while broadband adoption did boost productivity, no productivity differences where found across different types of broadband.
The implication - that high speed broadband delivered by the NBN may not result in greater productivity than that which is facilitated by current broadband speeds – was seized upon by Minchin as further evidence as to why the Rudd Government must commit to a full cost-benefit analysis.
Although the OECD may or may not be looking to enter the NBN cost-benefit analysis debate and has not offered up any views in its latest report, its view the Government should "submit proposed projects more systematically to a rigorous and transparent cost–benefit analysis" is notable for its inclusion in the half-yearly economic outlook.
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Comments
Anonymous
Any cost benefit analysis will project existing business and personal use of broadband to arrive at a projection of benefits. What we cannot measure is what business benefits will derive from those industries that do not yet exist. When the PC was invented, what was the cost benefit to existing buisnesses calcualted at?
I seem to remember that the global market for supercomputers was estiamted at 2 in 1952. This looks like the same argument to me.
Francis
What current broadband speeds?
The vague idea that "the NBN may not result in greater productivity than that which is facilitated by current broadband speeds" misses the whole point. It's main purpose as a national infrastructure project is not increased speed, but rather penetration of broadband, to those who have nothing at present. It just happens that the futureproof solution of fibre all the way to end users' premises is now feasible and has wisely been chosen as the standard, with only exceptional cases to be supplied wirelessly or by satellite, both of which are subject to congestion and have poor latency (signal turnaround times). Fibre has no theoretical speed limit. Current generation exchange switches are mostly 100-Base-T, running at 100 Mbps, and this is where that number comes from. Upgrade an exchange to gigabit ethernet and you have upgraded every downstream user. We are not talking about remote cattle stations. Hundreds of towns of a thousand or more are without broadband. How much more productive will their residents be when they have it at last. School assignments, banking, lodging forms with government departments, doing business, reading the newspaper. Things we take for granted.
As Anonymous at 13:06 wisely observed, how do you begin to do a cost benefit analysis? Well, take a million Aussies who are currently without broadband and give it to them with futureproof fibre infrastructure - I think there will be some benefits, don't you?
Anonymous
Then how does every other commercial network in the world function?
Do you think their investors just hand cash over carte blanche on the promise that "She'll be right mate!!!".
Here's a template for you...
*Describe the proposed system and its alternatives
*Present the total cost for the system across its project lifespan
*Outline tangible and intangible benefits
*Compare the costs of each alternative
*Identify the approach for the development of the system as determined in the Feasibility Study
*Presents the costs for the design, development, installation, operation, maintenance, and disposal of the proposed system over its projected lifetime
While you can't necessarily quantify intangibles to an exact dollar value, you can highlight them so they are given due consideration.
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