NBN: Productivity Commission criticises lack of cost benefit analysis

Productivity Commission releases draft report on infrastructure

The initial decision to proceed with constructing the National Broadband Network without a "thorough analysis of its costs and benefits" is an example of "inadequate project selection leading to costly outcomes for some users and taxpayers in general," argues a two-volume draft report on public infrastructure issued by the Productivity Commission today.

The decision of the Rudd and Gillard Labor governments to not conduct a cost benefit analysis of the NBN was a frequent target of criticism by the Coalition while in opposition, including by Malcolm Turnbull, who is now the minister overseeing the network's rollout.

The Productivity Commission has previously weighed in on the issue of an NBN cost benefit analysis. In 2011, Mike Woods, currently the commission's deputy chairman, appeared before a parliamentary committee and argued that such an analysis should "in itself should not be the basis of decision-making" but the "quantification or elaboration of the uncertainties can aid in public policy judgement."

In December Turnbull announced that a panel would conduct a cost benefit analysis of broadband and the regulatory arrangements for the network. Michael Vertigan, Alison Deans, Henry Ergas and Tony Shaw were appointed to the panel.

The terms of reference of the inquiry include assessing the economic and social value of increased broadband, the long-term ownership and regulatory arrangements for NBN Co, the government-owned company rolling out the NBN, constraints imposed on NBN Co and regulation of the company's capital investment, products and pricing.

In February the panel issued a regulatory framing paper. Its methodology for a cost benefit analysis is still being developed. A final report is expected to be handed over to the government in June.

It is one of several inquiries into the NBN launched by the Coalition since it came to power in September last year. Last year NBN Co conducted its own strategic review of the network's rollout

Most recently, Turnbull announced an inquiry into the public policy process that led to Labor's initial NBN rollout scheme.

The Productivity Commission's draft report makes a range of recommendations relating to infrastructure, including the need to overhaul processes governing the development and assessment of infrastructure investments.

The final report will be provided to the government is May. The commission is seeking written feedback on the draft and will hold public hearings next month.

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