Not Too Late for Cost–Benefit Analysis of NBN Policy

The Productivity Commission’s finding that NBN Co’s business model is potentially in breach of the federal government’s own competition policy underlines the need for a cost–benefit analysis of the National Broadband Network, Business Council of Australia Chief Executive Jennifer Westacott said.

“The Productivity Commission has found that NBN Co’s target rate of return of 7 per cent is below a commercial rate of return as required of all government businesses under competitive neutrality policy,” said Ms Westacott.

“The commission has recommended that the government assess the non-commercial benefits of the NBN investment to justify the network’s roll-out at a lower than a commercial rate of return.”

Ms Westacott said the best way for the government to comply with the recommendation was to conduct a full and transparent cost–benefit analysis of the NBN policy.

“It is not too late for the government to undertake a cost–benefit analysis to demonstrate whether this investment and its associated impacts on competition are the best way forward for developing the communications sector and lifting productivity growth.

“Apart from giving the community confidence that the NBN project is an appropriate public investment that will deliver the promised benefits, the cost–benefit analysis remains important for two key reasons.

“First, it will assist potential tenderers to make decisions about their involvement in the project. Second, it will provide the basis for the government to lay out the policies that will be required to properly exploit the opportunities for productivity benefits arising from the project.”

The Business Council of Australia has consistently argued that a competitive and efficient broadband market requires the full application of competitive neutrality policy to NBN Co. The risks of failing to observe competitive neutrality are inefficient investment, higher costs to users and poorer quality broadband services.

“Competitive neutrality ensures government businesses invest efficiently and that they operate on a level playing field with private businesses. It is an important policy, observed by all Australian governments,” Ms Westacott said.