NBN heat is on and it'll keep rising

THE broadband network has become a make-or-break test for Gillard Labor.

WHILE the idea of a National Broadband Network retains popular appeal, this issue is undermining the economic reputation, financial credibility and governance standards of Gillard Labor.

Labor is going to pay a high price for its icon of the future. Its model has been criticised by the federal treasury, the Organisation for Economic Co-operation and Development and a range of industry operators. Labor will not subject the NBN to independent scrutiny, opposes any cost-benefit analysis by the Productivity Commission and is delaying release of the NBN's business plan.

What does this tell you? It means Labor has something to hide. It means that its cherished NBN, its trump card against Tony Abbott at the election, the policy that was pivotal post-poll at swaying the rural independents to Labor, is cracked at its foundations. The government's justifications this week for refusing greater scrutiny of the NBN were weak and unconvincing.

New opposition communications spokesman Malcolm Turnbull has made significant progress recasting this debate into a financial governance issue. The Coalition, having been outmanoeuvred on the NBN during the election, was emboldened enough this week for Abbott to launch a sustained attack. The critical vote for Labor came on Thursday morning when the House of Representatives voted 73-72 to defeat Turnbull's bill to submit the NBN to the Productivity Commission.

An opposition success would have been lethal for Labor. The vote showed a razor-thin yet firm political majority for the NBN, with Labor supported by Green MP Adam Bandt and three independents, Tony Windsor, Andrew Wilkie and Bob Katter. The final independent, Rob Oakeshott, voted with the Coalition.

Knowing he faced defeat, Turnbull's summary before the vote testifies to the transformation of this issue. He said: "The government, in pursuing the NBN, are confusing the means with the end.

"They have established as their goal the building of a fibre-to-the-home national network for a cost of $43 billion to 93 per cent of households. That is the means. The end is the provision of universal and affordable broadband across Australia.

"It is clear enough to us that that goal of universal and affordable broadband can be achieved for a tiny fraction of the $43bn bill that the NBN will involve, but the government does not want to know that and so it has resisted this legislation and refused to have it referred to the Productivity Commission - this notwithstanding that the government's principal economic adviser, [Ken] Henry, has said on many occasions that every major infrastructure project should be subject to a rigorous cost-benefit analysis and any that does not pass that test necessarily detracts from Australia's wellbeing. And, of course, the government established Infrastructure Australia to do precisely that job of prioritising, analysing and performing a cost-benefit analysis on major infrastructure projects. So common sense dictates that this project, the biggest of them all, should be subject to a rigorous cost-benefit analysis."

The national parliament voted no to reject Turnbull's case. Julia Gillard's justification is that the Coalition is playing a delaying game as part of its plan to try to wreck the NBN. The real point, however, is that Labor is irrevocably tied to the NBN concept. It has hitched its political fortunes to the NBN. It cannot unhitch them and it cannot invite more criticism and analysis that will tarnish the idea. As Labor's standing sinks, it clings to the NBN as "the vision thing" that unites the party and wins the public.

The government boasts about its superior economic report card from the OECD, yet it is reduced to feeble obfuscation over the OECD's critique of the NBN in the same document. While the OECD said the project may "significantly improve internet services within a relatively short time frame", it warned against a "de facto restoration of a public sector monopoly"; it highlighted the risk of forestalling superior hi-tech options; it criticised a weakening of competition in wholesale broadband services; and it called for both a more prudent approach from government and a "better assessment" of NBN's "costs and potential benefits". In short, the OECD distrusts the model.

Communications Minister Stephen Conroy said this week that the NBN will be a key nation-building project, stimulate the economy, boost productivity, transform service delivery in health and education, and connect our big cities, regions and rural communities. Got the message? In short, it is Labor's saviour. The NBN will make or break the reputation of this Labor era.

A series of bills is needed to give effect to Labor's telecommunications vision. This week the House of Representatives voted on Conroy's pivotal reform of separating network ownership from retail operators.

Turnbull has helped to bring the Coalition to acceptance of this reform, recognition of the Howard government's mistake in privatising Telstra without a competitive marketplace.

The most important question, however, is unresolved: does NBN constitute a viable project? Turnbull in his means-ends distinction smashes Labor's public relations defence. The government, in effect, asserts that because universal broadband is a virtue, Australia must have the NBN. This logic doesn't work. The proposition has not yet been demonstrated. Indeed, Labor is determined to avoid any such demonstration.

When the independents (Katter excepted) decided post-election to install Gillard as Prime Minister, they put much emphasis on the need for financial transparency, political accountability and responsible policy costing.

Abbott was traduced for his campaign costing errors. We were solemnly told the Coalition failed to meet the financial transparency standards required by the independents. Yes, they laid it on thick.

Cut this week to Turnbull's comment after the vote against his bill. Labor, he asserted, had abrogated its responsibility to taxpayers and consumers. They had been "supported in this recklessness" by Bandt, Windsor, Katter and Wilkie. Laying his charge, Turnbull said: "Every anti-competitive act by Labor's vast new monopoly communications carrier will be the direct responsibility of those who voted to duck their obligations to consumers. Every misstep, every setback, every failure of the reality of the NBN to live up to Senator Conroy's promises will be the direct responsibility of those who voted against transparency and independent analysis."

Turnbull and Abbott have set their trap in the cold light of day. Every NBN problem will be sheeted home. The critical issue will hinge around pricing. Gillard insists that under the NBN internet prices will be cheaper. Turnbull's charge is that a gigantic monopoly means "less affordable broadband", so Australia's digital divide "will get deeper and wider". Another case of Labor stacking more costs on households.

There is no escape from the core conundrum: Labor boasts the NBN as the nation's greatest infrastructure project, yet denies the inquiry to test whether it is financially viable.

Defending his stance, independent Windsor has offered several justifications. First, he told the ABC the nation had "fiddled round with this long enough" and had lost the best part of a decade. It was time to get cracking. Second, cost-benefit analysis was difficult and if done on the Snowy Mountains Hydro scheme then probably "it wouldn't be a viable operation". Third, the NBN offered great benefits for the country and his constituents and, not surprisingly, he had no objection to the cross-subsidisation taking place.

This is the basis on which Labor's grand concept is proceeding. It reflects a culture deeply embedded in Australia's politics and history: the invocation to a nation-building far too important to be impeded by economic assessment or notions that funds might be better deployed. It is a generational throwback as a public policy to the spirit and rhetoric of the old Country Party of John "Black Jack' McEwen and the old Labor Party of R.F.X. Connor, big men in stature and ideas who would never allow a cost-benefit analysis to stand in their path. The trouble is that the flaws in their public policies are now documented before the world.

At week's end Abbott, arguing for release of the NBN's business plan, said the last time Labor said a policy was "too important to be delayed" was the pink batts program. He asked: why was the government so keen to steamroll the parliament into making the most important decision of this term without the evidence?

Yes, the heat is being applied on the NBN and the temperature will keep rising.