Mythbusters: NBN

Adam Murphy debunks some of the myths that have been obstructing rational debate regarding the NBN.

Over the time I have spent keeping abreast of developments regarding the National Broadband Network, I have noticed that several arguments in support of that network assume a similar form. Taken in toto, they comprise a myth of the absolute necessity of the NBN. It is my intention here to ‘bust’ this mythological edifice that has been erected to shield the network from scrutiny, and to place it in the proper social and global contexts that are often ignored by the network’s more devout supporters.

Myth No 1: ‘The Snowy Hydro Scheme and/or Sydney Opera House were not subjected to cost-benefit analyses, so neither should the NBN be’.

This is a classic logical fallacy, an ‘appeal to tradition’, which asserts that past practice is, ipso facto, suitable in the present. This is obviously not of itself true, for a number of reasons. Consider the bare numbers: the Sydney Opera House cost roughly $110 million. The Snowy Hydro Scheme was about $8 billion (both these figures are in 2010 dollars). We know that the NBN will likely turn out to cost in the region of $30-40 billion, if government predictions are accurate – that’s about 3 Snowy Schemes, or 360 Opera Houses. Even if those two ventures were not subjected to a cost-benefit analysis, the sheer expense of the NBN suggests the need for a more diligent approach.

Myth No 2 (a corollary to No 1): ‘The NBN is necessary simply because it is a nation-building venture, regardless of the outcome of a cost-benefit analysis’.

While social utility is an important criterion of any government project, it should never be the sole determinant of whether a project should go ahead. Large-scale government activities ought always to be subjected to a rigorous economic analysis. The days of the 1950s, when Labor opposition leaders blithely made promises to increase aggregate government spending by 50 per cent or more without a care in the world for the economic viability of such proposals, are best left in the past. As F. A. Hayek once wrote, ‘the curious task of economics is to demonstrate to men how little they really know about what they think they can design’ – idealist nation-building should never come before statistical reality.

Myth No 3: ‘I live in a remote regional community and I have no/very slow internet, therefore the NBN is necessary’.

This is black-and-white thinking at its best. It is akin to saying, ‘I do not own a car and therefore the government should purchase for me a Rolls-Royce (although it will still charge me for servicing that I may not be able to afford)’. The question is not one of ‘yes or no’, and it is disingenuous of supporters of the network to make that claim. Instead, the question is, ‘yes, but how much?’ Do we need expensive fibre-to-the-house hardware, that is not necessarily fully exploitable by ordinary households, in 93 per cent of Australian homes? Could a sufficient level of service be achieved by upgrading existing ADSL services? These are examples of valid questions that are swept under the carpet by the black-and-white nature of this particular NBN myth, and whatever decision is made regarding the future of Australian broadband would be strengthened by a frank and full analysis of them.

Myth No 4: ‘Our regional neighbours in Asia are modernising, and if we do not keep up then we will become a backwater’.

In my opinion, this myth captures well the cultural zeitgeist of ‘keeping up with the Joneses’ that has pervaded progressive thought in this country for many years (see Hawke’s ‘clever country’ for an earlier example). However, in this case, the argument spectacularly ignores basic variations in geography and economy that distinguish us from the Joneses of the Asia-Pacific region. Although countries such as Japan and South Korea are modernising their own telecommunications infrastructure, it is worth remembering that the population densities of these countries are over a hundred times that of Australia’s, meaning that economies of scale makes this infrastructure inherently cheaper for a larger number of people. China is the only country in the region that is remotely comparable in size and geographical issues to that of Australia – and do you see a fibre optic cable stretching into the home of every Chinese peasant? Even notwithstanding the obvious differences in personal wealth and level of development that influence the Chinese case, it is clear that geographical considerations cannot be overlooked.

Additionally, the economic strength of countries such as China, Japan and South Korea will always be greater than our own, and they will be ahead of us in ways that extend beyond telecommunications infrastructure. Let’s consider an analogous large-scale project in another country. Japan is currently engaged in the building of a Maglev train line, the Chūō Shinkansen, on which trains will one day travel at up to 600 km/h (twice the speed of contemporary high-speed rail systems). Incidentally, this train line will cost JR Central (a private Japanese railway company) $44 billion US. Of course, we are a long way behind Japan on the development of Maglev train systems, but how much credence do you think a politician would give to the suggestion that we ought to spend tens of billions of dollars on the construction of a Maglev link between Sydney and Melbourne? Probably very little – as the reader may well know, the current debate concerns whether we will have any sort of high-speed rail! The idea that the NBN will allow us to ‘lead the pack’, so to speak, is quite simply a ludicrous one when other countries will inevitably continue to outperform us in other ways, such as high-speed rail networks, and the opportunity cost of the NBN is obviously stratospheric. Instead, it is far more important for us to design policy around the consideration of domestic economic and social issues first before worrying about what other (more densely-populated and economically powerful) states are doing.

What Does Mythbusting Tell Us?

In conclusion, it is important to realise that the debunking of these myths is not in itself an invalidation of the whole NBN project. Although I see it as a near impossibility that the network will be ultimately successful in its current form, I am happy to be proven wrong in retrospect – after all, I am interested first and foremost in the best outcomes for this country. Thus, the purpose of refuting these myths is to help encourage a logical and constructive debate on the merits and demerits of the NBN, and to prevent that grandiose ambition from being implemented on the basis of incorrect and simpliciter justifications that obscure the very real potential for the network to fail, and to soften the sneering barbs of progressives who seek to portray dissenting voices as geriatric Luddites. By removing the myth of NBN as an absolute necessity, a more effective solution to Australian telecommunications needs is likely to result. 

Adam Murphy is an Arts/Law student at the University of Newcastle.

Broadband to Nowhere

Mark-SharmaThe free market can solve the broadband debate, writes Mark Sharma.

It’s hard to understand why our politicians on both sides of the fence feel that they have to outdo each other in monetary terms. Sometimes, it’s about who can spend more and other times it’s about who can spend less. Unfortunately for Australia, it is never about who can come up with a better plan.

This can’t be truer than the current situation revolving around National Broadband Network or NBN for short. As we know, the current impasse in the Federal parliament over this controversial topic is far from being settled. On one side we have “let’s make big promises” Labor party and on the other side there is the “let’s do nothing” Liberal party.

While Labor wants to build a massive $43 billion public company, Liberals want to spend less at about $6-$7 Billion. All the discussions around this subject have always been reported in monetary sense. It is clear that neither party is interested in what is best for Australia. People’s interest is not the primary consideration; but scoring cheap points over the other side is high on the agenda.

The reality is that both these plans are flawed and are complete waste of tax payers’ money.

Australia can have high speed broadband at almost fraction of the cost and with very little government involvement. Look at some of the other industries in Australia. Do we have government involvement in Mining, Textile or Food Production? To the best of my knowledge we don’t.

If we can produce food and clothing with no government intervention then I’m sure we can get fast broadband without bureaucratic bungling.

Instead of throwing money into creating another White Elephant, we should be looking at the private sector for assistance on this issue. Australia should organize an International Broadband Conference on the Gold Coast (don’t ask me why on GC) and invite every big and small telecommunications company from across the globe. It should be a two day event. The first day should be for discussions and next for negotiations and contracts. All the premiers from all the states, top staff from Communications and Treasury departments and the whole cabinet should be brought together for this one event. For the sake of bipartisanship, even the opposition could be invited. The object of this international conference should be about finding ways on how private companies can provide high speed broadband to most parts of Australia. Instead of Stephen Conroy and Malcolm Turnbull, let those who really know about technology tell us what they can offer to us. The Telecom sector is growing rapidly and there are many companies out there who are interested in the Australian market.

Australia’s biggest problem can also be its greatest asset. I’m referring to our very high corporate tax rate.  An incentive of reduced tax and access to wide Australian market would attract many international players. This not something new and has been used successfully in many other sectors previously.  Not only this would help in providing a real solution to the broadband problem, but it will expand the Australian telecom market. There was a time when we only had Telstra but now we have other players like Vodafone, Optus and more. All this happened due to the liberalization of the telecom sector.

Unfortunately, our current government wants to take us back in time and create another public sector monopoly. Open markets, lower taxes and less government involvement is what Australia desperately needs.

You don’t need lot of money to get fast broadband; just a healthy dose of common sense would suffice.

Mark Sharma is an Independent Conservative politician who stood as a candidate in the electorate of Watson in NSW. He writes regularly for Indian-Australian Newspaper Indian Link and on his blog Voice of Strathfield

The NBN trainwreck

Robert Candelori writes on his blog of the disaster that is Labor's NBN.

The last three years of communications policy in this country have arguably been some of the worst on record. The Australian Labor Party, in opposition, promised to build a $4.7 billion fibre-to-the-node broadband network which was to provide minimum speeds of 12mpbs to 90% of Australians.

When the ALP was subsequently elected, Stephen Conroy set up an expert panel tasked with initiating a request for tender process for the purposes of deciding which company or consortium would be given the $4.7 billion government grant. The process was a disaster, from start to finish. The major stumbling block was the absurd notion that the government would be supplying $4.7 billion to a third party in order to bring fibre from Telstra’s exchanges to street-corner nodes. Somehow, the fact that Telstra owned the exchanges and 99% of the copper network infrastructure escaped Stephen Conroy’s mind, let alone the $60 billion that Telstra shareholders paid to secure ownership of those assets.

Telstra was then excluded from the process after it failed to comply with a trivial ‘small business plan’ requirement. Telstra’s share price has never been able to recover since that decision. To add insult to injury, the ultimate outcome of the panel was that none of the remaining tenders were deemed acceptable.

Faced with this embarrassment, Stephen Conroy and Kevin Rudd did not do the honourable thing and abandon the policy, or simply continue with the $958 million Optus-Elders policy announced by the Howard government. Instead, they did what all big-government parties like to do – when a policy fails, spend more money regardless. On a short 90 minute plane trip, Conroy and Rudd devised a $43 billion broadband plan which would entail rolling out a fibre-to-the-home network to 90% of homes and businesses (later extended to 93% in the NBN implementation study).

Immediately, the rent-seeking ISPs jumped on the bandwagon. After all, not only had the original commitment increased by a factor of ten, the lure of a government-backed open-access FTTH network was just too difficult for them to resist. None of them had been particularly interested in building their own infrastructure – since engaging in price and access disputes with Telstra in the ACCC over the years was deemed a less costly and time-consuming exercise than….actually taking a risk to build a competing network. Fancy that.

The real kicker was that in one swoop, the government abandoned all competition principles by stating that the National Broadband Network would be a guaranteed monopoly, with all competitors banned from building a competing fixed line network. Not only that, Telstra would be banned from bidding on 4G wireless spectrum unless it structurally separated and transferred of its copper customers to the fibre network.

When examined from afar, it’s difficult to avoid the conclusion that the government is building Telstra Mark II. The Labor party had long-opposed the privatisation of Telstra, so unable to mount the case for a buy-back, they simply committed $43 billion to replace it. Worse, Conroy reinforced his equally ridiculous plan to impose a mandatory internet censorship regime of the likes of North Korea on this new 100mbps network.

Of course, even if a principled argument could be made against spending such an enormous amount, only to censor it and impede speeds, the Liberal Party consistently fell apart by looking aloof on the technical details, let alone the technology. What also did not help was the failure of the party to have a policy on internet censorship until 2010, some two-and-a-half years after Conroy had announced his intentions. As a party that has individual freedom at its heart, it is unthinkable that it took it so long to come to a position that should have been obvious from the start.

Nevertheless, the primary government sales pitch for the NBN has included the supposed benefits it will bring in health, education and utility monitoring. What’s hilarious is the startling lack of critical analysis of these claims by most media commentators. For example, Conroy has constantly pontificated on the new wave of e-health to beset us all as a result of the NBN, but nobody questions him on who is going to pay for the expensive camera & monitoring equipment that will enable high-definition remote video medical examinations. In regards to education, most major universities already have access to high-speed fibre connections, as do most hospitals. It beggars belief that the only way to improve connections to schools and other institutions is to spend $43 billion building fibre connections to 90% of homes as well, whether they want the connection or not and whether there is market demand or not. Then, finally, there’s the oft-repeated ‘smart meters’ meme, where all commentators fail to mention that smart metering is possible today with current technology. In fact, a 160 byte SMS can provide all the information, no expensive 100mbps fibre required.

Mark Newton, an Internode employee who came to fame at the peak of the internet censorship debate, unsurprisingly agrees that the NBN should be built. However, he at least had the honesty to dismiss the imbecilic hyperbole of the government when it comes to the benefits of the NBN:

Firstly: cut out the hyperbole. We’re all told that South Korea is “leaving us behind” in the broadband stakes, having had 100 megabit per second fibre to the home for years. But that means we know that most of the pie-in-the-sky innovative new services that NBN boosters wax lyrical about are probably hyperventilative garbage. Having had near-ubiquitous high-speed broadband for so long, the South Koreans use it in more or less the same way that we use our own internet access, only faster. It stands to reason that we’ll probably use it in the same way too.

That’s not to say that innovation won’t happen, but let’s get a grip: It’s hard to believe that the NBN will transform schoolrooms given that most schools already have broadband internet access; and I’ll believe that we’ll all make widespread use of telemedicine as soon as malpractice laws are amended enough to make my GP feel comfortable about prescribing a glass of milk and a good lie-down without an in-person consultation.

Leaving aside the government’s platitudes, we then come to the actual scrutiny of the project by the parliament. The opposition, quite legitimately, has consistently argued for a cost-benefit analysis to be conducted on the network and the size of the spend. The government has refused all such requests using ‘nation building’ propaganda, Scott Steel, author of Crikey blog Pollytics, has vehemently argued that a cost-benefit analysis would be pointless because, among other things, we cannot know what the future will hold given that potential uses for the NBN have yet to be invented. The examples of this are fairly easy to derive – copper was never envisaged to be a medium for high-speed broadband via ADSL; indeed, the internet itself was never envisaged when copper networks were rolled out. That may well be true, but the weakness of this argument is clear – are we all to remain silent, in unquestioning acceptance, when the government proposes tens of billions of expenditure on infrastructure because….we cannot know the future? That is not acceptable.

Fast forward until after the election, Malcolm Turnbull has been elevated to the front bench again as Communications shadow and has been landing several punches on the inept minority government led by Julia Gillard.

After first demanding Senators sign a 7-year non-disclosure period to see the business plan of NBNCo, Julia Gillard today capitulated, somewhat, by releasing a 36 page summary of the plan to the public in order to secure the vote of Nick Xenophon. The history leading up to this point reveals a comical aversion to transparency by the government in relation to this policy. Far from letting the light shine bright, Gillard and Conroy have systematically stonewalled attempts by the parliament to gain access to the information critical to informing their vote. They have demanded a swift vote on the legislation this week, yet refused to release the plan until December.

What is simply unforgivable, however, is the idea that a company pledging to expend $43 billion would release a business plan 18 months after inception. Under any normal situation in the private sector, no investor in their right mind would risk their money without so much as a business plan. But see, this has been the problem from the outset of this upscaled broadband policy – it was policy on the run with largesse so immense that it was hoped all serious scrutiny would be avoided.

In any event, when delving into this ‘summary’, we find that all of the pertinent detail has, in essence, been redacted. As Malcolm Turnbull wrote today:

It is a curiously inadequate document. It does not include any financial statements at all – no profit and loss statement, no cashflow statements, no balance sheets. There are a few numbers. We are told that as a result of paying $13.8 billion to Telstra in decommissioning and infrastructure payments (p.29), the estimated capex to build the NBN will be reduced from $37.4 billion to $35.7 billion (p.28)

This puts a $49.5 billion price on the total project ($35.7billion in capex plus $13.8 billion in payments to Telstra).

Wait, backup a minute. $49.5 billion. So, the project is $6.5 billion overbudget before it has even extended beyond the few select trial markets. And this is unquestioningly accepted by most commentators. Incredible.

More depressing is the fact that no semblance of rigour can be applied to any of the reported figures because there are no financials provided. All in all, the aversion to transparency has left even the most vehement supporters of the project questioning the government’s motives.

Turnbull goes on to say:

But the fundamental, threshold issue which the business plan does not and cannot address is whether the NBN is the most cost-effective means of realising the objective of universal and affordable broadband. That is why a Productivity Commission inquiry is so vital. Its main task would be to ask the question the Government has ignored: What is the most cost-effective means of achieving universal and affordable broadband? The NBN is, so it is claimed, one way of getting there. But there will be others and surely none could be more expensive than this plan.

Nobody has trumpeted the need for rigorous cost benefit analyses of major infrastructure projects more than the Rudd and Gillard Governments but on this, the biggest project in our history, they are determined to avoid any scrutiny for fear that the answer they will get will be that this is yet another ill considered, wasteful white elephant.

I’m instantly critical of any suggestion of making particular goods/services ‘universal’ – mainly because it ignores basic market principles of supply and demand. But assuming it is an objective worth realising, people in remote and regional areas would already have much faster broadband today if the OPEL project was allowed to continue. With a government commitment of just $958 million, it is a mere fraction of the cost of the Labor Party’s NBN while improving services far more rapidly.

When viewed through that historical lense, an expensive white elephant seems the likely outcome. However, even Turnbull concedes that business plans are seldom negative about the future prospects of the business in question. As such, the government’s approach is nonsensical given that it would have been far easier to defend a cost-benefit analysis that was over optimistic than defend not doing one at all. At the very least, the perception of proper due diligence being performed would have been exuded.

As it stands, the government is left deservedly bruised and battered because the opposition has the temerity to ask for rigourous justification of the government’s numbers and assumptions – and the government simply says no. Gillard has indeed thrown Xenophon a 36-page bone, except she acted out of desperation, not adherence to principles of honesty and transparency.

Robert Candelori is a law student at the University of New South Wales with a passion for technology, politics & food. This article is from his personal blog which can be found here: http://rcandelori.wordpress.com/

The NBN ‘summary’ business case

Sean-GarmanSean Garman on the NBN summary business case:

I have just read the NBN “Summary” business case and I cannot believe anyone would produce something so shoddy and then to get it signed off by parliament.

To put it into context. I recently completed a transaction where there was financial, commercial, tax, legal and insurance due diligence completed by both the seller and the buyer. In total, well over 1,000 pages worth of due diligence was read. That transaction is for a fraction of the cost of the NBN.

This project is bound to fail. The business case does not describe the take-up rates and the impact of lower take-up rates. It does not provide a revenue and EBITDA “bridge” that shows where and when the growth is expected to come from to provide enough confidence that it is achievable. It does not explain the debt structuring and whether it will be guaranteed by the government or not which is vital if it is to get debt costs anywhere near the 6% long-term bond rate.

The WACC is assumed to be between 10-11% but it does not explain how that figure is derived and the underlying assumptions (I can guess but in any investment it should be spelled out clearly). It states a risk premium takes a 15-20 year project and discounts it to a shorter-duration bond rate. In short, the financing case is not properly spelled out, the take-up rates are not sufficient for a third party to sensitise and the risk management section is so poor as to be useless.

Malcolm should be able to rip this apart.

Sean Garman works in banking in the City of London. He was Vice Chairman of Macquarie University Student’s Council, President of Macquarie University Liberal Club and currently provides policy advice to Conservative Party MPs and MEPs on economic policy.

NBN: Constitutional Mine Traps

Jai-MartinkovitsThere are several constitutional hurdles that the NBN may need to overcome before it can be a reality, writes Jai Martinkovits.

The Government announced on 7 April 2009 that it would establish a company to build and operate a new super-fast National Broadband Network (NBN). The new network will utilise Fibre-to-the-Premises (FTTP) technology, supplemented with next generation wireless and satellite technologies to deliver superfast broadband services.

A government owned company NBN Co was established on 9 April 2009 to roll-out and operate the network as a wholesale only company and provide access to the NBN to all retailers on an open and equivalent basis.

The Government says it will welcome private sector investment in the company, but their ownership restrictions would be introduced to protect the company’s wholesale-only status. It also announced its intention to sell down its interest in NBN Co within five years after the NBN is built and fully operational, consistent with market conditions and national and identity security considerations.

Telstra is warning that its $11 billion deal with Labor's National Broadband Network company threatens to unravel. (Mitchell Bingemann in The Australian, 9 October 2010). The report follows:

The telco says the deal will fall apart if it is forced to maintain its ageing copper network for people who refuse to connect to the fibre network.

Under the terms of the non-binding deal, Telstra will be paid to transfer its traffic on to the NBN and to gradually shut down its copper network as customers move to the new fibre network.

But fresh concerns over the sluggish NBN take-up rates in Tasmania, coupled with the disparate methods used by state governments to connect the new fibre cable to premises, could see large parts of Telstra's copper network maintained past its use-by date and in parallel with the new NBN.

Telstra chief executive David Thodey exposed the fragility of its agreement – a deal which industry experts say underpins the success of the ambitious NBN project – by describing the need to continue maintaining its network while servicing customers on the NBN as a value-destroying proposition.

"The commercial terms must be such that we are not left to maintain the copper in that period, otherwise the value is destroyed, so it's got to be done in commercial terms and that is why it's the government's prerogative to decide how to incent people to move across," Mr Thodey said.

Telstra spends $300 million a year in capital expenditure on its copper network and, according to analysts, as much as $1bn a year in operating costs to maintain its far-reaching asset. It's expected the vast majority of its customers will move to the NBN, but even if a fraction remain on the copper network, the costs to maintain it would continue to be high.

Under the terms of the $11bn deal, the government is supposed to relieve Telstra of its universal-service obligation to provide a fixed-line service to premises, but it is not clear if that provision will be extended to premises within the NBN's fibre footprint.

A spokeswoman for Communications Minister Stephen Conroy said no decision had yet been made in relation to switching off Telstra's copper or cable networks, but she said the NBN Co would not carry the burden of maintaining the copper network.

The NBN Co has eight years to connect 93 per cent of the nation, but a sluggish rate of activations in Tasmania – about 50 per cent – suggests this target will be difficult to achieve. This week, Tasmania announced it would introduce laws so homes and businesses would automatically be connected to the NBN unless they refused in writing.

NSW and Victoria have refused to follow Tasmania's legislative lead and adopt an opt-out system, which has prompted new fears that the first mainland sites could be subject to the same lowly take-up numbers.

If there are poor connection rates on the mainland, then it could become essential for Telstra to continue maintaining its copper network. The alternative would be to switch its fixed-line internet to a wireless service.

One matter hitherto undiscussed is that there may well be serious constitutional hurdles for the NBN.  A High Court challenge would of course be highly dependent on the NBN scheme – a confusing mix of various pieces of legislation, parliamentary and subordinate, appropriations, agreements and understandings much of which we have no idea.

The recent exemption from scrutiny by the public works committee, the refusal to undertake an independent cost benefit analysis and the government’s general secretiveness about the NBN is keeping the public in the dark.

In most Western countries it is believed that governments are ill fitted to do this.

This makes this plan for massive government involvement similar to the failed 1947 bank nationalisation which brought down the Chifley government.

What is different was that bank nationalisation was attempted just by one piece of legislation. The NBN scheme is complicated, much of it unknown and one suspects that even at this stage, undecided.

In any event there are five areas which have been flagged as potential areas for challenge.

The Commonwealth will say that it is empowered to establish the NBN under section 51 of the Constitution which provides that:

51.The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: (v.) Postal, telegraphic, telephonic, and other like services.

However this power is constrained in the several relevant respects.

Until we know what is being proposed it will be difficult to say where the problem areas are.

What is likely is that those sufficiently disadvantaged are likely to challenge the scheme.

1. Is the NBN scheme in breach of the constitutionally guaranteed freedom of trade?

Section 92 provides that trade, commerce, and intercourse among the States … shall be absolutely free.

Professor David Flint says that the High Court has moved between holding that this is just about free trade to saying trade must be left without any restriction. The word ‘absolutely’ is thought to give added impetus to the view that is more than merely about a free trade area.”

“Bank Nationalisation floundered essentially for this reason. The High Court has for the past two decades moved back to the section being about free trade. How the NBN will be viewed aginst section 92 is yet to be seen, not only as a monopoly wholesaler but in other aspects e.g., the requirement that at least Tasmanians must opt out not to become a customer of the NBN,” he continued.

Professor George Williams says “that is a bit of a long bow, it would be an unlikely area for challenge unless it discriminated against a certain state.”

2. Is the NBN legislation in breach of the constitutional guarantee of freedom of intercourse?

Section 92 also says freedom of intercourse among the States shall be absolutely free.

Professor Flint asks whether an argument could be mounted that the NBN put limits on the freedom of other potential wholesalers and on the freedom of retailers.

3. Is each appropriation of money by Parliament to the NBN or, say Telstra, made in accordance with the Constitution?

To the extent that the operation of the NBN apparently depends on billions of dollars of appropriations by the Commonwealth to this company, the appropriations power is involved.

Section 81 provides that all revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.

Professor Flint says “The High Court recently held in the Page case (Mr. Page was a publicly spirited law academic) that Parliament does not have the last word on what are ‘the purposes of the Commonwealth’”

Professor Flint also points out that “It is unlikely that the High Court would find the absence of any competent cost benefit analysis involves a breach of the power.”

“But is running a national broadband company with a wholesale monopoly a ‘purpose of the Commonwealth'? The Court may well decide it is not. Accordingly  an appropriation is beyond power,” he added.

4. Has any appropriation of property for the NBN been made in accordance with the Constitution?

“To the extent that the activities of the NBN involve the Commonwealth compulsorily acquiring property, remember that this power can be exercised on two conditions under section 51(xxxi.)," says Professor Flint.

“They are that the acquisition be 
• on “ just terms”, and,
• the acquisition can only be for a “purpose in respect of which the Parliament has power to make laws” he added.

This raises the question, is acquiring property for a corporation, one that is promised to be sold off, a proper exercise of this power?

Professor Flint and Professor Williams both agree that without the specific legislation it is impossible to speculate at this point, but identify this is an area of challenge if someone is disadvantaged.

5. The question arises whether in implementing the scheme as a whole and each of its parts the government or the Parliament is in breach of the freedom of political communication found in the Constitution.

Professor Flint points out this freedom is an indispensable incident of the system of representative government established in the Constitution.

“The High Court has pointed out its operation is not of course restricted to the election period,” he added.

He believes a challenge could be made that given the importance of electronic communications over the network, the vesting of a wholesale monopoly in any one body - especially one owned by the government - gives  the potential for government to curtail that freedom.

He says that the argument would probably not be that government has actually curtailed that freedom. It would be that it was putting itself in a monopoly position which could allow it to do so.

He suggests that analogies could be made with the creation of a government monopoly of wholesale news services, or of the print media or of broadcasting which would be arguably in breach of the freedom.

Professor Flint says “a challenge could be made here to legislation and/or subordinate legislation or decisions of the government.”

Professor Williams is a little more sceptical, adding “the ability for exploitation is unlikely to carry much weight; an internet filter is more likely to raise this. Section 92 would also be relevant to this.”

It is not of course possible to say any challenge will or will not be successful, but it should not be assumed that the government can go ahead with the scheme without being challenged in the High Court on any of these and/or other grounds.

Professor Flint says it is a mistake to believe anyone can accurately predict what the High Court will do if such a major a case comes before them.

“The High Court is always full of surprises, from validating WorkChoices, finding the existence of native title across Australia, and that closing the rolls on the day the election writs are issued is unconstitutional. Every so often the Court will take a different trajectory on an issue, for example on section 92,” he says.

Jai Martinkovits is an IT graduate, specialising in e-Business and Business Informations Systems. He is Managing Director of a J.K. Managed Solutions, a Sydney based IT consulting firm. His website is http://jaimartinkovits.com.au/.

How Do You Stop A Runaway Train?

Grant-Petras

We need to put the brakes on the train wreck that will be the national broadband network, writes Grant Petras.

This article by Terry McCrann should make for complusory reading, and if you read it then you should also get a shiver running up your back.

What a pity this sort of commentary wasn't going around before the election…then again it probably was, but not getting a fair hearing.

The analogy with rail is pertinent, as one who can remember the rail lines being pulled up and closed as road transport took over, being a faster, more efficient service to your door.

McCrann's article prompts me to ask, given that we still haven't seen any business plan or real time costings for the NBN, isn't it time that we, as a nation, paused and took a deep breath on this whole issue and asked ourselves…are we doing this right?

I was pole-axed by an American attending some conference this last week in Australia who got a run on the ABC radio saying that the US "would be watching with great interest to see how Australia got on with the NBN proposal"…excuse me?

If a country like the US, with its pre-disposition to excellent infrastructure (said by one who has spent sometime on their road system), is waiting to see "how we get on", doesn't that sound a warning bell?

Let's be reminded of the old adage of fools rush in where angels fear to tread.

So I say let's stop the train, re-evaluate, be sure that this technology is the way to go, re-affirm our costings and then decide what is our best, affordable, option.

Why? because we, as a nation, can not afford to be pissing any more money up against the wall, as Labor is wanting to do. The mining boom will not last forever, so let's get these things right and spend the money once.

Grant Petras has been a hospital board member for over 20 years, is a former Regional Health Service Chairman and former President of the Hospital & Health Services Association of SA. Grant currently manages a High Rise Accommodation building on the Gold Coast

NBN: High Technology Pink Batts

Jai-Martinkovits Jai Martinkovits questions if the NBN will provide any real value for Australians, or whether it will go the way of other major projects this government has tried (unsuccessfully) to deliver.

The National Broadband Network (NBN) is simply a High Technology version of the Rudd Government's Pink Batts! Although the concept of the NBN is great in theory, providing high speed broadband to every home, school, and workplace in Australia, can we really trust the Government to deliver this effectively and efficiently?

The Government could not handle something as simple as the one-off installation of Pink Batts into roofs without a cock up, leading to deaths, house fires, and finger pointing. Common sense is not something with which this Government is well endowed. Can anyone point to a Rudd Government initiative which has not been seriously mismanaged?

Nothing less can be expected of this latest proposal, with the Government going well outside of its core roles and functions. A venture of such a technical and complex nature should be left entirely to private enterprise which would pick up the ball only if they feel there is a demand, and more importantly when it is financially feasible.

As if not bad enough already, initial estimates of $4.7 billion have now blown out to $43 billion, an increase of almost 10 fold. When divided by 8 million households, this comes to a staggering $5,000 each! The $43bn question is who will pay for this infrastructure to be put in place; either all the taxpayers or just the users who take it up. Both these approaches will mean increased costs to Australians for a service most will not use.

Let's assume for a minute that a way could be found for anyone other than the unfortunate taxpayer to pay this project, I still see three serious flaws that have not been addressed:

Firstly, to produce a profit, industry experts suggest that a take up rate of between 80 – 90% would be needed, with the goal of completely privatising the venture – but not before fifteen years. According to a report in The Australian 10 May 2010, Doug Campbell, NBN Tasmania chairman, says that the best he could hope for is a take up rate of between 28 – 30%, just as Verizon found in the eastern US. This effectively renders the venture unable to sustain itself.

Secondly, it provides very little benefit for the average Australian. The majority of home users, even those with intensive downloading habits, can already access ADSL2+ enabled exchanges. This provides sufficient speeds for streaming movies, downloading music, and online gaming, the three activities that require the highest bandwidth. Businesses with higher speed requirements have at their disposal more expensive connections, which far exceed the scope of the Government's proposal.

Finally, Fibre To The Home (FTTH) is nothing new – Americans have had it for several years. The Government's own estimates suggest implementation will take 8 years, with the Coalition making absolutely no promise to complete the project! Even if the Opposition does complete the project, by the time the implementation is complete new technologies will have developed providing greater speeds again. We will end up constantly chasing the horizon, trying to keep up with the latest developments, but always ending up years behind.

If we are going to consider anything at all, let's do what any sensible investor would do – wait until a new technology is developed, tested and proven…then jump on board with it early, getting the maximum bang for our buck! Why should the unfortunate taxpayer be forced to pour even more money down the drain?

Jai Martinkovits is an IT graduate, specialising in e-Business and Business Informations Systems. He is Managing Director of a J.K. Managed Solutions, a Sydney based IT consulting firm. His website is http://jaimartinkovits.com.au/