Two new separate submissions to the Senate Select Committee on the National Broadband Network have offered widely disparate views on the economic benefits of the planned network.

In an unusual move, a major stockbroker has lodged a submission with the Opposition-led committee warning that the federal government’s $43b NBN plan will lead to major price rises for end consumers. But economist Professor Joshua Gans reckons concerns about NBN prices have been over-stated and that the proposed build will provide consumer benefits that have been ignored by critics.

Southern Cross Equities has repeated previous claims that the NBN as proposed might lead to a doubling of end consumer prices for telecommunications and broadband prices—in order to achieve a mere 10% re-turn on investment. Using government assumptions about how the project will be financed and built, Southern Cross calculates that average wholesale prices would have to rise to $100 for the network to be viable, resulting in end retail prices of around $200 or more.

The firm is also critical of the “trans-sectoral” approach to the NBN that has been pushed by lobbyist Paul Budde, stating it will take a generation of change in consumer behaviour to manifest and does not provide a business case for the proposed build.

Southern Cross says that the government’s plan may have some unintended consequences: it may discourage foreign investment as it may be perceived to increase sovereign risk, it may depress the value of Telstra shares and the value of the Future Fund, and it may distort metropolitan prices by making them unreasonably high, thus encouraging non-NBN arbitrage and by-pass. Sources close to the government have previously sought to dismiss Southern Cross’ views as influenced by its interests in Telstra share trades, as have similar findings by Concept Economics been characterised as motivated by chairman Henry Ergas’ association with Opposition leader Malcolm Turnbull.

GANS TALKS BENEFITS: Meanwhile, Melbourne Business School Professor Joshua Gans has urged the Committee to look at the social as well as the economic case for the NBN– although interestingly he reaches similar conclusions to Southern Cross on likely price points for the NBN.

In his submission, he makes the assumption of 7.2m paying households for the service and says “let’s take $4.3 billion per annum as a desired target for revenues from this. Taking these two numbers together we have about $600 per annum from households on average or $50 per month. (By the way, if your desired rate of return was 15 percent, that number would rise to $75 per month. Alternatively if only half of potential users use the NBN services, that becomes around $1,200 per annum or $100 per month per subscriber).”

That last price estimate accords with the Southern Cross numbers, which assume 50% take-up of the NBN. But Gans postulates that it is likely that households will pay considerably less for some forms of telecommunications usage than is currently the case and that, as a result, there will need to be a net consumer benefit that needs to be contemplated when evaluating the merits of the government plan.

Gans was previously a strong critic of the government’s prior broadband plans but says NBN Mark 2 is exactly the policy he previously proposed. But he has also urged flexibility in how the NBN is operated, saying there is no reason for it to be one monolithic network as it could also incorporate local initiatives.

The Senate committee re-opened submissions after the government “re-booted” the NBN process in April. It intends to hold more hearings and report in November.

Grahame Lynch