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Wednesday, 11 August 2010

Exactly how fast does broadband need to be?

With the Australian federal election campaign in it's final weeks, the focus yesterday turned to the 'National Broadband' plans of the two major parties. The incumbent Labor party has embarked on a $43 billion dollar scheme that aims to provide access to 100 megabits per second to 97% of the Australian population (apparently it's vitally important for everyone to have fast internet - except for the 3% or so of Australians who live in the remote outback where even Labor concedes providing optical fibre would be too expensive). Supposedly we'll all want to sign up for fast internet once it's available (at around $100 per month), and to ensure maximum uptake (so the government can try to sell off the NBN and recoup the cost) it will apparently be 'opt-out' ie. your house will be connected up unless you say no (I wonder how many households will let their homes be connected, at government expense, but then never agree to open an account and pay for using the NBN?)

The coalition (Liberal/National parties) plan is to 'only' pour about $6 billion of government money into fast broadband, leaving it up to the private sector to invest in providing as much fast broadband as people want.

I think both plans have pitfalls - the Labor plan seems awfully expensive (over $2000 per man, woman and child in the country!) and assumes that everyone needs 100 Mbps internet access. I use the internet a lot for my uni studies, online financial transactions, share and CFD trading etc. and the modest speed of 3.6 Mbps download and 0.1 Mbps upload provided by my cable connection is fine. Unless I wanted to download movies every day, I can't see any need to faster access. So the coalitions plan, providing 12 Mbps to 97% of the population (and up to 100 Mbps in some cases) seems more than adequate. However, by just providing limited funding and relying on the private sector, some areas (with lower demand) will end up missing out - so spending the extra $36 billion will undoubtedly help address 'social equity' concerns (but not, for example, aborigines living in remote settlements in central Australia).

A recent poll by the SMH showed less than 20% of people supported the coalition's 'cheap' option - apparently everyone would like fast internet (as long as the government is footing the bill). As usual, there is a disconnect between the voters desire for lower taxes, a balanced budget, and massive government spending to provide 'free' services.
All in all, I'm dubious that it will turn out to be worthwhile spending $44 billion dollars to 'fibre up' Australia - as with most high technology fields, there is likely to be a faster and cheaper option available within a few years, making the current expenditure a) wasteful, and b) unlikely to be recouped by selling off the NBN once it's up and running. I also doubt that more than 10% of the population has any economic/business need for the NBN. Spending about $6,000 of public money per household to provide fast download of movies and video phone calls seems a huge waste.

Many of the critics of the coalition's NBN-lite policy appear to have vested interest in the government spending $44 billion on NBN - for example Optus sees the NBN as a means for the government to strip away a large part of Telstra's residual infrastructure advantage. And some commentators, such as Rod Tucker appear to be both biased (since he is paid as Director of the Institute for a Broadband-Enabled Society (IBES) and Director of the Centre for Ultra-Broadband Information Networks (CUBIN)) and misguided. He wrote that "Building a broadband network will, as the government has pointed out, have the same kind of transformational impact as the railways in the 19th and 20th centuries" - I suggest he reads up on the 'railway bubble' of the late 19th century in the UK. At that time everyone was entranced by the revolutionary technology of the railway line, prompting dozens of schemes to build myriad railway lines to every urban centre in the UK. Vast fortunes were lost when most of the schemes were found to be uneconomic (not enough patronage), although in that fiasco it was mostly private investors who paid for their folly. In any event, the 'revolutionary' technology of railway transport was soon competing against the motor car and later on with air transport.

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Darren said...

I totally agree with your statements here.
For the economy, I believe the billions would be better spent on a fast rail link up the east coast incl Canberra.
Fibre to the premises is a noble goal, and the cable itself will withstand the test of time, but I don't see the need to cable up all regions. After all, why should a household have a 'human right' to 'super fast' broadband when a piped mains gas or even piped water or sewerage is not such a right. IMO the regions won't see the same benefit as cities, other than for educational purposes where 20mbps should suffice I think.
Where I do think the coallition has it wrong is persisting with the Telstra monopoly that has limited us to date.

Anonymous said...

the NBN is not just about internet, but a complete replacement for the copper loop. It will replace your phone line with a VOIP solution. It will also allow for payTV services to be delivered without the need to a satelite or hybrid cable. Using fibre allows for an almost unlimited number of services to be delivered to your door.

mOOm said...

I can see a coordinating role for government here and maybe some investment in the core infrastructure and that seems to be covered by the Coalition's plan. After privatizing Telstra why does the government again want to be a monopoly telecommunications provider? IMO this was just more Rudd megalomania for centralization. OTOH the Howard government hesitated too much in these areas and try to protect the existing free to air TV companies too much. Somewhere between these extremes there is a sensible policy...

Flare said...

I think Fibre is the way to go, look at Korea and see some of the side benefits of having fibre everywhere (e.g online gaming leagues etc). I live in a metro area of Sydney, there are 70 copper connections between me and the exchange, just over 5Km away. The copper is old, corroded and badly maintained by the private sector. If water gets into any one of the 70 contact points along my connection it fails. As it is the line quality is so poor that I get 1.5Mbs, this is not good enough for services now, let alone future services. The final mile is the problem and needs addressing. No private company will rectify this situation as they get no financial reward for upgrading it. The coalitions policy is just a "dinner invite" so they can all talk about doing something whilst actually not. The biggest problem with Sydney re wireless networks is trees and hills, when it rains wet leaves love to absorb those wireless signals and the hills ensure not everyone can receive a good signal for a quick connection.