Counting the costs and benefits of government fiber beneficence

[Commentary] When Australia’s $40 billion National Broadband Network (NBN) plan to build a government-funded Fiber-to-the-Premises (FTTP) network reaching 93% of Australian residences was announced in 2008, it represented the single biggest infrastructure investment in the nation’s history. By way of comparison, its $40 billion budget exceeded estimates for the contemporaneously-approved Gorgon Gas project, which when completed will be one of the world’s largest natural gas field developments. For the Gorgon project, both shareholder investment and government approval were contingent upon detailed cost-benefit analyses (CBAs) specifying average expected net benefits and the sensitivity of these projections to key parameters. This is normal ‘good practice’ for large infrastructure projects. Therefore, it was somewhat surprising that the NBN, with a larger budget than Gorgon, was approved without any cost-benefit analysis.

[Bronwyn Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation]