The Future is not a consequence-free zone for Modelling Consultants

Will Abbott be a one-term PM, will the Coalition gain a second term under a new leader? The satisfaction polls have never looked good for Abbott and on-line betting odds aren't too flash, either.

If Labor is elected in 2016 or 2019, will they follow the Coalition and initiate a round of Royal Commissions? Game Theory, especially "the iterated Prisoner's Dilemma", suggests that "Tit for Tat" is close to an optimum strategy for a co-operation/trust game like Politics. It should be odds-on that Bill Shorten will initiate an NBN Royal Commission in his first 90 days, it's "just good business" for them.

Will the various Ministers, especially Turnbull, face especial treatment, as misleading the Parliament is taken seriously by them? Almost certainly.

But what about the various consultants, like Communications Chambers (UK) and Henry Ergas? Would an NBN Royal Commission find them guilty of any criminal offences?

Ergas: Using "Economics" to Lie to the Australian public

How do you turn a profitable high-growth, high gross-margin business at the centre of the current rapid transformation of the global economy into an overall negative investment? If you're Henry Ergas, you concoct a deeply flawed Economic Cost Benefit Analysis.

Henry Ergas calculated in 2009 that retail prices for NBN subscribers would be $170/mth, with $133 in the metro areas and $380/mth in non-metro areas. The costs & pricing were modelled for him by an experienced ex-Telstra employee who became the General Manager, Pricing, of NBN Co from Nov-2009 to June-2014, while actual retail prices today are one-third his 5 years old prediction.

Thus, for the most likely estimate of $170 per month, unit costs in metropolitan areas are of $133 per month, while those in non-metropolitan areas are just under $380.

Ergas quotes his own study, now proven to be wildly incorrect, in the NBN Cost Benefit Analysis, as "fact". That's the start of his falsehoods and misrepresentations.

Sanity Checking Ergas NBN Benefits: Turnbull says "very large benefits", Ergas/Vertigan find under 0.05%

Publicly, Minister for Communications, Turnbull, says of the NBN:

Fast broadband provides very large benefits for the economy and society, ... [emphasis added]

Under Turnbull, government funding for NBN Co is "strictly limited" to $29.4 billion, which over 25 years is under 0.05% of Australian GDP at current trends. Not by any definition "large".

Exposing the 'mysteries' at the heart of the Ergas "Cost Benefit Analysis".

The mystery at the heart of the Vertigan/Ergas "Cost Benefit Analysis", how you assess the highest-growth, highest gross margin Industry in the country and decide it's not profitable, won't be dealt with in this piece.

This piece is on the mysteries at the heart of the UK's Communications Chambers report, referred to in the Ergas CBA as a "Demand Forecast": Domestic bandwidth requirements in Australia, A forecast for the period 2013-2023.

The CBA is for the 25-year period, 2015 to 2040, yet the bandwidth requirement is only calculated for a single decade. Are we to believe that somehow the final seventeen years of exponential demand growth "fell behind the couch"? No, this was a very considered and deliberate decision.

Ask the Wrong Question, Get the Wrong Answer

The latest "review" of the NBN,a "Cost Benefit Analysis" is finally out and is predictably anti-FTTP, strongly at odds with reality.

Last year, the Financial Review was very clear that NBN Co was "on track" re-enforced by Mike Quigley, in accepting the highest award in his industry, laying out NBN Co achievements and their good financial performance and only a couple of days ago a story broke that new internal reports show that the FTTP rollout was cheaper than the retrograde FTTN.

Peter Martin, Economics Editor for Fairfax in this piece, falls prey to the dual Occupational Hazards of Journalists and Economics: skimming over complex topics and believing their economics knowledge uncovers all answers, even for subtle technical areas they've not sought specialist advice on.  Martin is wrong, massively so, in this piece.

NBN cost benefit analysis finds there's such a thing as too much speed