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The Abbott government remains committed to subsidising the roll-out of fast broadband in rural areas despite a cost-benefit analysis finding the economic and social benefits of doing so are dwarfed by the costs.
The cost-benefit analysis, released on Tuesday, found providing fast broadband to the bush through wireless and satellite services will cost nearly $5 billion but produce only $600 million in economic benefits – a return of just 10 per cent.
The government commissioned the report, which was led by former Victorian Treasury head Michael Vertigan, last year.
The report backs an "unsubsidised roll-out" model, where broadband is provided only in the areas where it will make money and not need government subsidies. This would have net economic benefits of $24 billion but leave 7 per cent of the population without high speed broadband.
By contrast the Coalition's "multi-technology mix model" has a net cost of $6 billion and Labor's original fibre to the premises has a net cost of $22 billion.
In a video interview with Fairfax Media, the Communications Minister said subsidising broadband in the bush is "fiendishly expensive" but said there was no other option.
"The alternative would be to have enduring inequality in access to telecoms," he said on Tuesday.
"That wouldn't be fair from a social point of view; it's not politically acceptable."
Mr Turnbull said the government had limited options to modify its broadband plan following the report due to contracts and other spending locked in by Labor.
"If I could turn back the clock I would not have the government building this project at all," he said.
Labor communications spokesman Jason Clare said the report was "tainted" by the involvement of figures such as longstanding NBN critic Henry Ergas.
"It's hard to take the report seriously when three weeks before the last election Malcolm Turnbull said he would get this report done by the government body Infrastructure Australia and instead what he has done is got some of the most vociferous critics of the NBN, as well as former staff, to write this report," he told the ABC.
Mr Clare said the government had a "myopic" view that fast broadband was just about video games and failed to see its wider social benefits.
Ending the broadband roll-out in regional areas would cause a "civil war inside the Coalition", Mr Clare said.
Mr Turnbull said Labor was "in denial" about the NBN's failures under its watch and that Mr Clare needed to break his "chain of dependency" to former communications minister Stephen Conroy.
"The most important thing about this cost-benefit analysis really is that it shows you the type of insights you get through a rigorous process like this," he said.
"The screamingly important message is: why wasn't it done beforehand?
"There must never again be a big government project undertaken without a cost-benefit analysis."
The cost benefit analysis finds most of the benefits of fast broadband – most notably video downloads – will accrue to private users within households and businesses. By contrast, hospitals and schools require relatively low bandwidth to deliver services.
A Telstra spokeswoman declined to comment, saying the cost-benefit analysis was a matter for the government.
Telstra and NBN Co are renegotiating the terms of access to Telstra's copper network for the delivery of the mixed-technology model. The original $11 billion contract between the two parties provided for the copper network to be decommissioned.
With Lia Timson
