Cost-benefit analysis sought for NBN

The Business Council of Australia (BCA) says it is not too late for the government to undertake a cost-benefit analysis of the $35.9 billion National Broadband Network (NBN).

But the government says it is building the NBN because the commercial returns on the overall network are not attractive for the private sector.

The BCA's CEO, Jennifer Westacott, said a Productivity Commission report found the business model of the network's builder, NBN Co, could breach the federal government's own competition policy.

The commission found that NBN Co's target rate of return of seven per cent was below a commercial rate of return as required of all government businesses under competitive neutrality policy, Ms Westacott said.

A competitive neutrality policy is one which aims to promote fair competition between public and private businesses.

"The commission has recommended that the government assess the non-commercial benefits of the NBN investment to justify the network's roll-out at a lower than a commercial rate of return," Ms Westacott said in a statement on Thursday.

Communications minister, Stephen Conroy, said NBN Co was set to operate eventually as a commercial reality, but its purpose was to not expect to earn a rate of return comparable with that in the private sector.

"To earn the commercial rates of return that the report is recommending, higher prices or lesser services would be necessary in rural and regional Australia," Senator Conroy said.

"The alternative of funding of rural subsidies from the budget would create permanent uncertainty."

Opposition communications spokesman, Malcolm Turnbull, said the report found the community service obligations on the NBN did not justify the huge investment and sub-commercial returns.

"The Productivity Commission concluded any community service obligation costs carried by the NBN Co should be transparent and quantified so that their true impact on the corporate plan and commercial returns can be assessed," Turnbull said.

Ms Westacott said the government should conduct a full and transparent cost-benefit analysis of the NBN policy.

"It is not too late for the government to undertake a cost-benefit analysis to demonstrate whether this investment and its associated impacts on competition are the best way forward for developing the communications sector and lifting productivity growth," she said.

Senator Conroy said the government would not be adopting the related recommendations of the commission's report.

"As the government has said many times, it is doubtful these benefits, which are so self-evident and pervasive, could be meaningfully quantified, and even if they could, whether there would be any particular merit in doing so," he said.

The government established NBN Co to build an optic fibre cable network to 93 per cent of homes, schools and business with high-speed broadband across Australia by 2021.

The remaining seven per cent would be connected by fixed wireless and satellite technology.

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