Access Economics’ Telstra-commissioned broadband economics analysis last week may have been pilloried as another piece of self-interested propaganda, but its flaws notwithstanding, it is a very valuable addition  to the high-speed broadband debate.

The analysis’ headlines came up with some quite self-evident and pro-Telstra findings: if you delay the NBN you lose economic benefits, likewise if you build outside-in, you lose some of the gains that could be captured by rolling out in population centres first.

Likewise it even came up with the obvious finding that the NBN’s economic benefits would be magnified in a recession—basically because it creates jobs.

But there were some other findings in the report that I found fascinating. For example, how interesting that the net economic benefits of high-speed broadband would be less in Australia than the US, ostensibly because they have a major IT-producing sector that can directly gain from the creation of a high-speed broadband market and we do not. The same conclusion could presumably be made about the appeal of high-speed broadband in South Korea, Japan, China and Singapore as matters of public policy, although the report didn’t directly make that point.

Another conclusion of the analysis was that high-speed broadband in the Australian context was more useful to import-intensive industries than to export-intensive ones.

While the Access analysis has its shortcomings, it adds a much-needed dose of economic reality to the debate. The Australian NBN process takes place in a global narrative of increasing public funding interventions in broadband investment across the world, seen as far and wide as South Korea, Malaysia, New Zealand, Singapore, France and now the US.

There has been even more activity at the provincial and municipal level: Esme Vos’ Muniwireless website identifies hundreds of such efforts across the world. But the track record of these public interventions is far from uniformly successful, indeed, arguably more the other way given their often mediocre outcomes: ditto, it’s astonishing how little rigourous independent economic analysis has been conducted on them. Access Economics’ analysis lists only a dozen or so external economic studies in its reference list, some of them little more than magazine articles or short white papers.

If the NBN is going to be all about providing economic benefits, then, as a nation, we also must quantify the costs it entails so we can actually construct a balance sheet on its utility.

· Will mandating a separated, open access network with no recourse to alternative or downstream revenue flows increase its financial risk and hence its financing cost and user prices?

· Will these increased costs genuinely be offset by the competition benefit of such a network model?

· Does this create a scenario of moral hazard where taxpayers as well as users will be expected to pay for its social policy aspects and potential losses into infinity?

· What private investment might be crowded out or stranded by the NBN, i.e. DSLAMs?

· Should the fact that its exclusion from the NBN process has wiped billions off Telstra’s share price and, hence private and national wealth via the Future Fund, be considered as a factor when evaluating the overall economic benefit of the NBN to the nation? Ditto for delayed investments by others.

· What are the threats to Australia’s perceived sovereign risk and ability to service capital account deficits if the Commonwealth makes a conspicuous attack on Telstra’s property rights and competition treaty obligations in order to deliver the NBN—specially given that the Commonwealth sold the same company as an attractive investment a matter of years ago?

· What about the creative destruction that publicly-stimulated and funded high-speed broadband might bring in old world media sectors—for example, will it accelerate the decline of newspapers and television? What are the social and economic consequences of this decline, especially in potential monetary costs such as France’s proposed cash subsidies for newspapers, or the likely long-term Australian policy response—dramatically increased funding for the ABC? Should governments take responsibility for the losses caused by economic disruptions they help stimulate?

· Will high-speed broadband cause increased losses or disincentives for creators of intellectual property such as musicians, movie makers and television producers? What are the costs to society and producers of increased piracy as speeds and presumably quotas increase exponentially?

I certainly don’t pretend to have answers to these questions and I’m not even sure what view I take. And to be fair, I don’t perceive that Conroy suffers from cognitive dissonance on the potential downsides and costs of the Internet revolution—his support for ISP content filtering is testament to that.

What I do know is that the constant flow of rhetoric in favour of open-access, structurally-separated, ubiquitous high-speed broadband is definitely not accompanied by any sober analysis of the costs—especially those unintended ones—of getting there through a process such as the one we have now for NBN.

In hindsight, it might have been very good public policy for the ALP to go to the last election promising an RFP, but only after running its ideas through a substantive Productivity Commission analysis.

Unfortunately that didn't occur. The simple reality of politics in this country is that the ALP has embarked on a path of trying to deliver as much of an RFP process, to the letter, as possible for political face saving reasons, not because it actually can be demonstrated by any form of independent analysis to deliver a net economic benefit for the nation.

The process has become more important than the problem it was supposed to solve. That is not necessarily Labor’s fault—the dynamics of our two-party system, unreasonable public expectations of political omnipotence and the constant framing of policy execution through the media as a sporting contest guarantee it. It’s our political culture—and it’s not helping the cause of good NBN policy one little bit. 

Grahame Lynch