The National Broadband Network (NBN) project, which will cost Australian taxpayers $43 billion, is one of the biggest individual financial investments the country will ever make. When it was first announced, taxpayers were only going to shoulder $4.7 billion of the total cost of the project.

Following an analysis by McKinsey and KPMG, the estimates rose to $26 billion because it was found that private investors would not accept the project's risk profile during the early years. On the basis that the project will end up being wholly funded by taxpayers, which is likely due to the fact that returns are low and uncertain, it will increase the national debt of the country by roughly 30 per cent (this is assuming the project sticks to its budget). The project is also estimated to cost every household in Australia about $5,000 before they are even charged for using the NBN service. On its own, the interest repayments on the debt would come to about $2.4 billion per annum. This is assuming, of course, that long-term interest rates do not increase.

The total cost of the NBN, on a per capita basis, is between six and eighty times more expensive than what countries such as Singapore, South Korea and New Zealand are spending on similar solutions. This is besides the fact that Australia has similar or higher levels of urbanisation. In spite of this, the project has been subjected to little amounts of public scrutiny. The Treasury has not published a detailed cost-benefit analysis on why the NBN is the best possible use of up to $43 billion of taxpayer's cash. The Productivity Commission has performed no independent inquiry to determine whether the amount of money that the nation would use to subsidize high-speed broadband is worth the benefits compared to the use of technology such as WiMax or ADSL2+, which could be supplied by the private sector at no additional cost to taxpayers.

The truth is, the NBN project was designed hastily following a dispute with Telstra in the middle of the GFC. This was at a time when government spending was back in vogue.?It also raises concern that the project's claim of central 100 megabits per second 'speed,' which is being used as the selling point of the NBN, does not currently cover about 70 per cent of all internet traffic the country. This traffic covers overseas websites or Australian websites that are hosted offshore. The connectivity speed for such traffic is not determined by NBN's capabilities. Instead, it is determined by submarine cables that link the country with the rest of the world and by the bandwidth that ISPs are willing to make available.

Current restrictions would limit such traffic to around 2Mbps. This rate is constant whether the NBN is in place or not. There is probably a good explanation why the NBN has not been subjected to proper cost-benefit analysis. The benefits of the project are so uncertain, and the opportunity costs so great, that it is difficult to justify spending for the NBN. This is probably the reason why government advisors reduced the expected contribution from the private sector by more than half the initial estimate of $38.3 billion to just $17 billion.

The biggest threat to the takeup of NBN's service is wireless. Wireless, which covers around 30 percent of all Internet connections is growing at a double-digit rate. Users are moving towards use of mobile devices, such as iPads, Blackberries, and laptops. This trend is expected to strengthen due to an increase in smart-phone penetration and the improvement of wireless speeds.

Broadband is not a 'public good' that the private sector is incapable of cost-effectively providing. The truth is it does and will continue to do so.