This week is good news for Australian internet users. Both the cyber-safety (covered yesterday) and 
broadband issues have had their moment on the election stage. We now know the details of all the major parties’ broadband policies and can do a side-by-side comparison. Which one will deliver the best outcome for Australia’s future?
Refreshingly, the Labor and Liberal broadband policies differ greatly, and represent a very different vision for Australia’s competitiveness in the 21st century.
The Government is betting big on the importance of telecommunications in Australia’s future, with up to $43 billion committed to the National Broadband Network in what amounts to the largest ever infrastructure project in Australia’s history. To recap: The plan involves laying fibre optic cable to 93% of Australian homes, with minimum speeds of 100mbps (upload and download). And just yesterday, NBN Co, the government-owned corporation managing the rollout, upped the ante by promising connections of up to 1 gigabit . Those living in areas where the fibre cannot reach will be provided with either wireless or satellite service at a minimum of 12mbps.
NBN Co will remain government-controlled until around 10 years after the rollout will be complete. This entity will have monopoly control over the national fibre network and will give equal wholesale access under the law to all service providers ensuring a level playing field and more competition for consumers.
Telstra have been a bit of a thorn in the Government’s side throughout the whole process. They basically refused to bid on the original proposal, and appeared set to compete with the Government plan rather than partake in it, rendering the whole scheme somewhat questionable. As the NBN became more ambitious, it also became more crucial to get Telstra on board. This was no easy feat given that Telstra’s key asset – the legacy copper network – is to be replaced.
A combination of carrot and stick has been employed to solve this problem. The carrot is $9 billion to compensate for the copper network and for access to to Telstra’s existing infrastructure of ducts, pits and exchanges in order to lay the fibre. Telstra have also been released from their obligations under the Universal Service Obligation, a saving estimated at a further $2 billion. The stick is the forced separation of Telstra’s retail and wholesale arms by legislation and the potential to block the company from bidding on new wireless spectrum. With Telstra now set to become NBN Co’s largest customer, the 800 lb gorilla appears to have been tamed for now.
Concerns around the NBN are that no rigorous cost-benefit analysis has been made public, and about the potential costs to consumers. With wholesale prices floated around the $40-$70 a month it has been suggested that end users could end up paying up to $200 per month for a fast connection that takes advantage of the new network.
The Coalition’s plan is much less ambitious. Clocking in at $6 billion, the main aims of the policy are to scrap the NBN and spend $1 billion on fixed wireless networks in outer suburban areas, $700 million for new satellite services, and $2.75 billion for a new fibre backbone.
The most glaring difference between the two plans is the last-mile connections to homes and businesses, which under the NBN plan will be fibre optics capable of a gigabit and beyond. Under the Coalition’s plan, existing copper and coaxial cabling will remain the predominant connection from the local exchange to the premises. With these technologies already pushed close to their theoretical maximum, it will be left to the market to upgrade this crucial infrastructure. If you live outside the inner suburbs of the capital cities, you’re probably out of luck.
The practicality of duplicating the fibre backbone infrastructure is also questionable, and the Coalition do not explicitly address Telstra’s role in their broadband world.
There also appears to be little in this alternative plan for Australian businesses who will suffer even more than end users by having to make do with what can be squeezed out of the legacy copper network for the foreseeable future. The only beneficiary is the short-term bottom line of the budget. Industry has described the Liberal plan as a “grab-bag of measures from the past” and it is hard to disagree.
The Greens have promised to support the NBN project, although they too have called for the business case to be released. They most notably differ with the Government in that they want NBN Co to remain in public hands rather than be privatised some time in the 2020s after the network is in full operation. Nobody wants to see the Telstra situation repeated, so it seems sensible that if a sell-off occurs, it does so at least with the explicit approval of Parliament.
The NBN is a big project that shows ambition and long-term vision, and this is to be applauded. The lack of a cost-benefit analysis, however, is indeed concerning. At $2000 for every person in Australia, we need to be sure that the investment will pay off. I believe that ultimately it will.
Firstly, the money is being spent to create an asset that will have lasting value, and under the Labor plan will be sold with an expected return on investment of 6-7%. Borrowing money to build an asset that will bring long-lasting returns for the nation is neither reckless nor wasteful – it’s a sound investment.
Secondly, while less tangible, the benefits to the economy of the new services and entrepreneurship that will blossom when gigabit broadband is ubiquitous are real and undeniable. A good proportion of our economic growth comes from productivity gains which will no doubt be accelerated by the advent of the NBN.
While the NBN promises exciting new services such as remote medical consultations, e-learning, and e-government, the as-yet unimagined business models and services are likely to be just as important. That’s why we feel that this is one of the most important issues being debated during this election.