Conroy's joy flight going nowhere

Thursday, May 28, 2009

This article appeared in 'The Australian' on Thursday 28 May 2009. An original copy of the article can be found here: http://www.australianit.news.com.au/story/0,24897,25555133-5013038,00.html


FOR its biggest project of all, the Rudd Government has brazenly abandoned its commitment to making key infrastructure decisions based on "rigorous cost benefit analysis".

Its plan to build a $43 billion national broadband network from a base of heavy debt and deficit is increasingly looking like something that was cooked up by Kevin Rudd and Broadband Minister Stephen Conroy during a couple of flights on January 21-22, without any of the rigour or financial discipline that such a massive commitment warrants.

We have learned from Senate estimates that the minister was forced to catch planes with Mr Rudd to break the news that his broadband tender process had collapsed, meaning Labor's broadband election promise was in tatters.

Considering Mr Rudd's track record on VIP planes, we know that these certainly would have been anything but joy flights for Senator Conroy.

We also suspect that these flights were the genesis of Labor's grandiose "nation building" project announced less than three months later.

It will be subjected to a nine-month "implementation study", whereas the Snowy Hydro project this Government loves to compare the NBN to would have cost an estimated $5billion in today's dollars and was five years in the planning.

Mr Rudd and Senator Conroy have repeatedly said they are simply following the advice of an expert panel and also the Australian Competition and Consumer Commission. Yet they have produced no solid evidence to confirm that to be the case.

In fact, we have learned that the expert panel provided a secret, short letter outlining "a way forward", which is presumably the advice the Government refers to.

Its refusal to release key advice in relation to this proposal makes a mockery of its pledge to deliver a new age of transparency.

And despite the scale of this project and the billions of taxpayer dollars that will be risked on it, the Government arrogantly dismisses the need for a cost benefit analysis.

It claims this network will be commercially viable, yet has also failed to produce a scrap of credible evidence to support these evangelical assertions.

We also know the project costings are rubbery, to say the least -- guesstimates with some fat thrown in to provide a buffer against the almost inevitable cost blow-out.

The Department of Finance itself concedes that the costings were based on assumptions, and the real cost will not be known until the implementation study is completed.

Regardless, the Government now admits it will be required to stump up at least $11 billion as its 51 per cent equity portion, with the private sector to contribute just under $11 billion. The currently nameless NBN $2 company will be required to raise the rest, with taxpayers ultimately responsible for at least 51 per cent of the borrowings.

The Government has consistently said it would contribute $4.7 billion in cash from the Building Australia Fund as its initial investment. We now learn that that is down to $2.4 billion, meaning the Government will need to borrow at least $8.6 billion simply to raise its $11 billion equity stake.

On top of all of this, the Government has no idea how many customers may choose to use this network and how much they will have to pay to do so in order for it to be viable.

Nick Minchin is Opposition spokesman for broadband, communications and the digital economy