OECD report finds justification in NBN cost

Report highlights four key sectors that could benefit from high-speed broadband and ultimately deliver cost savings

The Federal Government's $43 billion National Broadband Network (NBN) could be substantiated if it’s used to reduce the cost of services in other key economic sectors, according to an OECD report supporting the development of national fibre-to-the-home (FTTH) networks.

The research found that the cost of building high-speed broadband networks can be recouped through the delivery of online data services in electricity, health, education and transportation services.

The report, by the OECD Working Party on Communication Infrastructures and Services Policy, indicates cost savings in each sector would need to be between 0.5 per cent and 1.5 per cent over 10 years to justify building a national FTTH network.

“While the calculations in the paper are rough estimations they clearly highlight the fact that investments in fibre networks can be justified relatively easily through minimal cost savings in other sectors even when the savings are often discounted in investment calculations by private firms,” the report reads.

"Our very conservative estimates assume that the introduction of the new network decreases costs by a certain percentage across the lifetime of the investment.

“In reality the availability of a fibre broadband network to all households will likely continue providing efficiency gains as new secondary services appear to complement other primary fibre-based services.”

The report also states costs will be lower if the network is built down all streets, but only connected to homes which subscribe.

“In the model, installing lines to all households, not just subscribers, increases the costs by an average of 22 per cent (assuming a 50 per cent take-up rate).”

OECD rankings to June 2009 placed Australia 16th out of 30 OECD nations in terms of broadband penetration, with 24.9 broadband subscribers per 100 inhabitants and a total of about 5.3 million subscribers.

The full report is available on the OECD website.

Last month, the OECD appeared to have subtly thrown its weight behind calls for the Federal Government to do a cost-benefit analysis of the NBN.

In a report on Australia's economic outlook, the OECD noted that while the next couple of years look good for the domestic economy, the Rudd Government should be taking steps to increase the benefits.

The OECD report comes after the Federal Government's Realising our Broadband Future forum at the University of New South Wales.

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