The federal government should reconsider the way it pumps money into NBN upgrades, mobile towers and other communications infrastructure, because the benefits of these injections aren’t transparent, the Productivity Commission has said.
In an interim report [pdf] on digital technology released overnight, the commission criticized what it saw as a “lack of transparency” around how investments are made in digital infrastructure by the government “and which priorities are pursued.”
In particular, the commission singled out investment in NBN upgrades, such as the $480 million government injection to upgrade the fixed wireless network announced earlier this year, as well as the government’s mobile blackspots program (MBSP) and regional connectivity program (RCP).
“Allocating funding under programs such as the NBN, MBSP and RCP to specific areas or connection types means less funding available for investment in another location or technology,” the commission said.
“There is limited transparency about how such trade-offs have been weighed and if decisions made appropriately considered the relevant benefits and costs.”
The commission said these funding injections were often opaque, and that the government released too little information about its decision-making.
“For example, while it is clear that much of the MBSP program targets investment in regional and remote areas… there is opacity around how the mobile sites are prioritized and selected for government investment,” it said.
The commission said it had advocated for transparency over the mobile black spots program before, only to have the recommendation “not accepted by [the previous] government.”
“A similar case can be made for improving transparency around government decisions on providing funding to the NBN,” the commission argues.
“The 2022-23 Budget included a $480 million grant to upgrade the NBN’s fixed wireless towers.
“It is unclear how the decision was made to allocate government investment towards this connection type or to the locations currently served by these towers.
“It will be important that these upgrades are accompanied by transparency around how and why they are to be undertaken, to ensure taxpayer funds are being spent efficiently.”
The commission suggested that “periodic independent reviews of digital infrastructure programs such as the MBSP and NBN would increase the likelihood that government funding for such investments is allocated to those specific locations and technology types that would yield the highest benefits for the community.”
However, it also called on the government to reconsider its model of providing funding to such telecommunications schemes entirely.
The commission argued that the influx of smaller, regional-level infrastructure builders and operators is evidence of changing market dynamics.
It suggested the government of the day look to take advantage of this shift, contracting private sector operators to provide services to an area on a regulated but non-exclusive basis.
“Instead of allocating regional digital infrastructure funding through programs such as the NBN, MBSP and RCP, the government could offer to pay the lowest-bidding service provider to deliver connectivity to a particular area, defined at the regional level, subject to conditions such as minimum service standards and maximum prices charged to consumers,” the commission suggested.
“Successful tenders may include an upfront payment, with full funding to be provided over time as the provider delivers on their commitment – contracts should therefore be of a sufficient length for service providers to earn a return.
“A new tender would be issued after this period to ensure providers remain competitive.”
The commission continued: “If thin markets are an issue and the call for providers in a particular location leads to only one party being willing to participate in the tender, the government may need to enter into individual negotiations with that provider to avoid being held captive by that one party.
“The intent of such a mechanism would be that the government pays the least-cost private provider to guarantee a minimum service level in each location, with the cost to government determined by the market.
“It would not preclude other private sector providers from competing in that region, such as by offering more advanced or niche products that consumers may be willing to pay more for, or if they lower their costs by investing in new technologies over time.”
The commission has invited interested parties to submit comments on the proposal by October 7.
The interim report also canvases other issues, including the extent to which data generated through taxpayer funding should be shared back to government.
“Governments fund various investments and services that generate potentially valuable data in their delivery,” the commission said.
“Even though much of this data is produced and held by service providers and users, data that is predominantly funded by taxpayers should be available for use in generating value for the community, subject to privacy and security protections.”
It also recommended a review of “migration policy” to ensure close alignment with technology and digital domains that could not source enough people to fill roles domestically.