news The independent MP who chaired the Federal Parliament’s committee investigating the NBN has lambasted the Coalition for its claim that the real cost of Labor’s National Broadband Network project was likely to be up to $90 billion, pointing out that the treasury and finance departments disagreed with the Coalition’s estimate.

The Coalition has not yet published any document to verify its claim, but this morning the Daily Telegraph reported that using modelling from key telcos and finance industry analysis of the NBN Co’s 2012 corporate plan, the Coalition had estimated the project would take four years longer to finish and potentially cost an extra $45 billion to complete. The newspaper claims to have seen sections of the Coalition’s policy analysis in the area.

However, Rob Oakeshott, the outspoken independent MP whose backing for the NBN helped put the Gillard Government in power back in 2010 and who chaired the Federal Parliament’s committee investigating the project and holding it to account, has a different view. “If today’s Daily Telegraph was true on NBN costing $90 billion, the INDEPENDENT Treasury/Finance boffins would have it on-budget,” Oakeshott said on Twitter this morning. “They don’t.”

Oakeshott further added in comments to some of his followers: ” I am being kind. Let’s see what they produce this week. This is a very big test for Tony Abbott to get his NBN policy right … rate of return, rate of return, rate of return. It is everything in business, and infrastructure – public and private.” And then, referring to the Department of the Treasury: “I’d trust their judgement over politicans/media any day of the week. Apolitical,qualified,and focussed. If not them, then who?”

The Coalition’s $90 billion claim this morning is not the first time it has claimed that the NBN would cost dramatically more than the Federal Government’s estimates. Over the past few months, senior Coalition politicians such as Shadow Communications Minister Malcolm Turnbull have repeatedly publicly claimed that the NBN could could cost as much as $100 billion to build, despite the company’s own estimates showing that it will require around $37 billion of capital injection from the Government and eventually make a return.

Similarly, in October last year, in another example, Shadow Treasurer Joe Hockey used the exact same $100 billion figure in an interview with ABC Radio’s AM program at the time.

“… we can’t trust the numbers that the Government is putting in the budget papers,” Hockey said. “Last year they said there was going to be a $22 billion deficit, it turned out to be a $44 billion deficit. There is not one contractor in Australia that believes the Government is going to roll out its National Broadband Network for $32 billion. Expectations are as high as $60 billion, $70 billion or even $100 billion for the National Broadband Network.”

Based on current evidence, it currently appears as if the Coalition is incorrect in its claims that the NBN project could end up costing between $90 billion and $100 billion in total.

NBN Co’s current corporate plan (PDF) states that NBN Co will require some $37.4 billion in capital expenditure over the next decade to construct its network infrastructure. It will also spend some $23.1 billion in operating expenditure over that period, although that figure is expected to be made up mainly from $26.4 billion in revenues over that period. Ultimately, over the long term (30 years or so), NBN Co is projecting that it will make a return of 7.1 percent on the Government’s investment in the infrastructure — meaning that it is currently projected that the construction of the NBN will actually make the Government money on its investment.

Additionally, not all of its funding is expected to come from the Government. NBN Co is currently projecting that it will require about $30 billion worth of government investment over its life, with another $14 billion to be funded through debt arrangements.

NBN Co has already locked in construction contracts for much of the next half-decade in states and territories around Australia, as well as network equipment and other related contracts, giving it significant forward visibility in terms of its costs. In addition, the company has finalised its $11 billion agreement with Telstra and its $900 million deal with Optus, and it is also seeing more Australians take up higher-value NBN plans than it had been estimating, meaning that its revenue estimates may be conservative.

In comparison, the Coalition has consistently declined to provide detailed financial information relating to its own policy, which is currently based on fibre to the node technology, as opposed to the NBN’s fibre to the home rollout. Turnbull initially stated in mid-August that the Coalition had a fully-costed policy “ready” to be released, but later rescinded the statement, telling the ABC that the Coalition was not in a position to be able to fully cost its policy before the next Federal Election.

Oakeshott has for some time been frustrated by the fraught level of political debate around the NBN. In the parliamentary NBN committee’s recent fourth report into the project, the independent MP bitterly complained about the sharp divide between the various sides of politics on the issue.

“The tradition of committee membership in Australian political culture is that adversarial politics is left at the door,” Oakeshott wrote at the time. “It is a concern to many that this culture is showing signs of changing on this Committee, where sensitivities of our oversight work as compared to political party election platforms has made the work of the committee much more difficult than it need be. In my view, this is an early warning sign that the topic of higher speed broadband technology is likely to feature strongly in political debate throughout 2013, an election year.”

opinion/analysis

I’ve only got one thing to say to the Coalition on this issue. To misquote Samuel L. Jackson’s character in the seminal 1994 classic Pulp Fiction (and apologies for the strong language here, but I feel as though it’s warranted):

“Evidence, motherfucker. Do you have some?”

It should be obvious to anyone who prefers to think rationally rather than just to make stuff up and believe things without evidence that as a senior Australian politician, you can’t just make statements like the NBN will cost double what the Government says it will without some kind of supporting evidence to back your claims. But then, Australian politics isn’t incredibly focused on rational thinking these days supported by evidence, so who knows what the Coalition can get away with at this point.

Image credit: Alex Sims, Creative Commons