Before the last election many people were championing the Labor party’s National Broadband Network (NBN) as the best thing since sliced bread. They didn’t seem to care how much it cost taxpayers or whether or not it was value for money, writes Jamie McIntrye.
Undoubtedly, these types of voters don’t understand that a government should have fiscal responsibility or leave office.
I have raised serious concerns over Labor’s NBN.
I said it was a waste of taxpayers’ money; certainly not value for money. I also explained that not only would this plan be superseded but it would also take longer than necessary and blow out to over $70 billion.
I took this stand despite many criticisms and tweets with regards to my view on the matter, including the NBN Co that sent me emails trying to spin the issue.
I have always stated that we should have an NBN. However, we should have one that is built for $20-25 billion at the most and built in half the time. The current NBN plan was slated for $42 billion, but will now possibly increase to $70-100 billion and is hopelessly behind schedule.
We should build an NBN using the Pareto Principle, i.e. the 80/20 rule. This means we target the 20% that gets 80% of the results.
With the Pareto Principle we would have built a fast broadband network in the CBDs of metropolitan cities first, to cater for 80% of businesses in Australia, along with large sections of the population that live in or close to the CBD.
It would have been built for a fraction of the price and completed by 2014/15 (or it could have been built already).
Moreover, most regional areas were only ever going to get satellite anyway, something that Labor failed to disclose properly. At the initial stage of any plan, it is folly to focus on areas that cost a lot and gain minimum return.
Unfortunately the following will occur. The $42 billion rising to $70-100 billion will largely have to be written off as it will be valued at a fraction of its cost, adding to our estimated 2016 debt of $400 billion.
Because other companies such as TPG are following the Pareto Principle and building a fast broadband network for a tiny fraction of the cost, targeting the 20% areas that cover 80% of the businesses.
Doing so is smart business practice. Companies such as TPG have to be more resourceful as they are spending shareholders’ money and have to remain accountable.
TPG and others networks will undermine the NBN model devaluing it greatly and rendering large sections of it worthless.
It was such a flawed NBN strategy that no private sector would invest into it. The government had overly ambitious roll out and uptake targets.
Most of us won’t use the NBN.
Because by the time it is rolled out we will already have fast broadband access from the private sector; consumers don’t or won’t wait for a second-rate NBN that Malcolm Turnbull now has to fix.
The fix could be to scrap the rollout completely and encourage and support the private sector to build their own.
At least it would be a value-for-money NBN with no risk to the taxpayer.
Excerpted from an article originally published in the February/March 2014 issue of Think & Grow Rich Inc. magazine. If you are a subscriber to Think & Grow Rich Inc. magazine, you will receive this article in your February/March 2014 issue of TGR. If you are not a subscriber, click here to subscribe.