news Communications Minister Malcolm Turnbull has appointed Henry Ergas, an open Liberal supporter and one of the most strident critics of Labor’s National Broadband Network policy, to a panel of experts which will conduct a cost/benefit analysis of broadband review regulation associated with the NBN.

The panel, appointed last week, is to conduct what Turnbull last week described as an “independent” costs/benefit analysis and review of regulation associated with the NBN. The analysis will analyse the economic and social costs and benefits (including both direct and indirect effects) arising from the availability of broadband of differing properties via various technologies, and to make recommendations on the role of Government support and a number of other longer-term industry matters.

The delivery of this cost/benefit analysis has long been an election promise by Turnbull, who had repeatedly lampooned the previous Labor administration while in Opposition for not conducting a cost/benefit analysis into the NBN project before launching it. However, the appointment of Ergas to the panel conducting the analysis appears set to severely undercut the independence of the review, raising questions about whether it can be taken seriously at all.

The Sydney Morning Herald recently reported that Ergas had handed out how to vote cards for the Liberal Party at the recent Federal Election, supporting Liberal Senate candidate for the ACT Zed Seselja, who was successful in his bid to be elected.

In addition, Ergas has long been one of the most strident critics of Labor’s previous NBN policy. In an article published in The Australian newspaper in late October this year, for example, Ergas stated that “the greatest disasters” in government bore “Labor’s mark”. In the article, Ergas compared the NBN to the problematic Collins-class submarine project, and questioned many of the bases for its existence.

Ergas has published a succession of such articles over the past several years. For example, in May 2010 he published a strident critique of the NBN implementation study through industry newsletter Communications Day, writing: “… the Study, with a degree of British understatement, rightly notes that the model the government has chosen – a public monopoly, extending, at least for the first dozen years, to the active service – “departs from the collective experience in most other markets” … Given the very high costs this project involves, and the fact those costs and risks must, on the Study’s own numbers, fall largely on taxpayers, a visitor from Mars might well wonder quite what we are doing.”

In a submission to the NBN Senate Select Committee in October 2009, Ergas argued that the costs of building the NBN exceeded its benefits by somewhere between $14 billion and $20 billion. The economist also publishes regular columns and a blog for The Australian newspaper, which has been highly critical of the NBN policy over a sustained period.

Currently, Ergas is a senior economic advisor at Deloitte Australia, and a foundation professor of Infrastructure Economics at the SMART Infrastructure Facility at the University of Wollongong. He has held a number of other senior positions notably at the Organisation for Economic Cooperation and Development in Paris, where the economist undertook the OECD’s first review of telecommunications policy.

Ergas also served as a consultant to the Department of Communications in its review of telecommunications policy in 1987-91, was a member of the Review of Telecommunications Regulation in 1996 and of the Review of Universal Service Obligations in 1997 and chaired the Australian Intellectual Property and Competition Policy Review in 2000-2001.

Ergas’ appointment is only the most recent example where Turnbull has appointed executives with close links either to him personally or the Liberal Party to senior positions influencing the NBN, since the Federal Election in September.

NBN Co head of strategy and transformation JB Rousselot, for example, has a strong personal history with Turnbull — even owning a boat together with the Minister — as does new NBN board director Justin Milne. New NBN executive chairman Ziggy Switkowski is reported to have close links with the Liberal Party. All of these appointments were reported prior to the Federal Election.

The appointments have significantly undercut the credibility of the NBN Strategic Review released last week, with many observers expressing their belief that the document reflected the Coalition’s own views about how the NBN rollout should be carried out. The Opposition has referred to the review as being carried out by Turnbull’s “mates”. It is likely that the credibility of the cost/benefit analysis will be severely impacted likewise by Ergas’ appointment.

Other appointees to the panel of experts include Michael Vertigan, a senior top-level Tasmanian businessman and executive who has also served as the secretary of the Department of Premier and Cabinet, as well as having an involvement with a number of other Tasmanian initiatives.

Also on the panel will sit former eBay Australia managing director ALison Deans, and Tony Shaw, a consultant on regulatory and competition issues who was a member of the NBN Panel of Experts established to undertake a competitive assessment of proposals for the rollout of Labor’s initial $4.7 billion national broadband network process.

Shaw was also a member of the Expert Taskforce established as part of the High Speed Broadband Network Infrastructure Proposal process. In addition, he was a member of the team that undertook the NBN Implementation Study. Shaw was also previously Chairman and CEO of the Australian Communications Authority and Associate Commissioner of the Australian Competition and Consumer Commission. The consultant led the team that developed the principles for telecommunications policy and regulation for a competitive environment and subsequently managed preparation of the 1997 Australian telecommunications legislation.

opinion/analysis

As I wrote in late November, as Ergas’ appointment was rumoured:

“To be clear, I am not casting any aspersions on the competency of Henry Ergas. I believe he is very competent in his field, and he is certainly very experienced and successful in his work. However, it’s also quite obvious that Ergas has a very well-established and long-held view about the NBN that would play into his reported position on a cost/benefit panel examining the Coalition’s version of the NBN. My advice to Minister Turnbull would be to consider this kind of appointment very carefully.”

I’m sorry, but you just can’t call this an “independent” panel when it’s got Henry Ergas on it. Not only has Ergas been one of the most vocal critics of the NBN from the start, but he’s an out and out Liberal Party supporter. There is just no way this cost/benefit analysis will be viewed as credible, no matter what it finds. That’s just reality.

You’d have to say, with this appointment, that Turnbull really just isn’t trying to hide his partisan approach to the NBN any more. You just cannot appoint an open Liberal Party supporter to a panel which should be independent, if you want it to have any credibility. Ergas’ appointment means Turnbull doesn’t care about the optics of trying to look independent any more; he is not worried about whether the NBN cost/benefit analysis which he rabbited on about for so many years looks credible or not.

Image credit: University of Wollongong