Broadband to Nowhere

The free market can solve the broadband debate, writes Mark Sharma.

It’s hard to understand why our politicians on both sides of the fence feel that they have to outdo each other in monetary terms. Sometimes, it’s about who can spend more and other times it’s about who can spend less. Unfortunately for Australia, it is never about who can come up with a better plan.

This can’t be truer than the current situation revolving around National Broadband Network or NBN for short. As we know, the current impasse in the Federal parliament over this controversial topic is far from being settled. On one side we have “let’s make big promises” Labor party and on the other side there is the “let’s do nothing” Liberal party.

While Labor wants to build a massive $43 billion public company, Liberals want to spend less at about $6-$7 Billion. All the discussions around this subject have always been reported in monetary sense. It is clear that neither party is interested in what is best for Australia. People’s interest is not the primary consideration; but scoring cheap points over the other side is high on the agenda.

The reality is that both these plans are flawed and are complete waste of tax payers’ money.

Australia can have high speed broadband at almost fraction of the cost and with very little government involvement. Look at some of the other industries in Australia. Do we have government involvement in Mining, Textile or Food Production? To the best of my knowledge we don’t.

If we can produce food and clothing with no government intervention then I’m sure we can get fast broadband without bureaucratic bungling.

Instead of throwing money into creating another White Elephant, we should be looking at the private sector for assistance on this issue. Australia should organize an International Broadband Conference on the Gold Coast (don’t ask me why on GC) and invite every big and small telecommunications company from across the globe. It should be a two day event. The first day should be for discussions and next for negotiations and contracts. All the premiers from all the states, top staff from Communications and Treasury departments and the whole cabinet should be brought together for this one event. For the sake of bipartisanship, even the opposition could be invited. The object of this international conference should be about finding ways on how private companies can provide high speed broadband to most parts of Australia. Instead of Stephen Conroy and Malcolm Turnbull, let those who really know about technology tell us what they can offer to us. The Telecom sector is growing rapidly and there are many companies out there who are interested in the Australian market.

Australia’s biggest problem can also be its greatest asset. I’m referring to our very high corporate tax rate.  An incentive of reduced tax and access to wide Australian market would attract many international players. This not something new and has been used successfully in many other sectors previously.  Not only this would help in providing a real solution to the broadband problem, but it will expand the Australian telecom market. There was a time when we only had Telstra but now we have other players like Vodafone, Optus and more. All this happened due to the liberalization of the telecom sector.

Unfortunately, our current government wants to take us back in time and create another public sector monopoly. Open markets, lower taxes and less government involvement is what Australia desperately needs.

You don’t need lot of money to get fast broadband; just a healthy dose of common sense would suffice.

Mark Sharma is an Independent Conservative politician who stood as a candidate in the electorate of Watson in NSW. He writes regularly for Indian-Australian Newspaper Indian Link and on his blog Voice of Strathfield

Comments

[Chrissy Reichle]

1.

Free markets are responsible for all the mess. Just look at the GFC. We will never get high speed broadband if we leave it to private sector.

Support NBN and stop whinging!

[Vikas Nayak]

2.

Freemarket Broadband? Such a concept will be well and truely opposed by both sides of the fence. Since 1997, "last mile" control of telecommunications has always been held under the pricing control of ACMA (which will now be shifting to ACCC and ACMA), and the liberals will always oppose the "last mile" coverage that isn't regulated by the government (because regional services are generally subsidised to the order of 44% by city areas through this regulatory system).

Labor's interest in the NBN is essentially to reform the entire system under the "Net Neutrality" (internet communism) approach, and complete government ownership is the easiest way to achieve that goal. Clearly free market broadband is out of the question for them.

Also, if you want more international competitors in Australia, you want to up the population. Noone is going to install infrastructure to compete over 3-4 million customers (according to telstra salesforce, this is the total 'shifting market' size).

[Vikas Nayak]

3.

Oh, also, Australia's corperate tax rate is lower than the US (39%), most of europe (33.33% in France, 32.5% in Germany, 28% in the UK), not to mention the ability to defer capital investments in tax calculations in Australia (such as telco infrastructure).

Australia's lagging telecommunications sector has more to do with sparsity of population and a small "shifting market" causing the industry to experience more benefit in horizontally integrating by absorbing competitors rather than vertically integrating and investing in Infrastructure.

Ironically i spent about 3 minutes discussing this paradox in my dissertation just last week (my thesis was on e-health applications).

[Mark Sharma]

4.

Totally disagree with you on "Market competitiveness and tax rate issue". Australians are hooked to internet like Greens are to Communism.

We might have 22 million people (and counting) but we have mobile phones (most cases more than 1), 1Pad, work computer, home computer, Internet TV and what not.

Plus Australia has high per capita income in comparison to many other countries. There is a massive market and totally new product which lots of people would like to buy. Remember first iPhone launch?

[Brett]

5.

uh, no, you economic illiterate moron.

[Mark Sharma]

6.

And as far as Tax issue is concerned. Australia has very high tax rates. Ask any company or individual for that matter and you hear things like "Are we making profits for ourselves or the government".

An incentive of tax cuts is a great incentive for telcos because it means the more they sell the more they can make and from Government/tax payer point of view 1.) We dont waste Billions of $$$$ in creating government companies and 2.) More tax that wouldnt have been possible if these new players were not in the market.

In my opinion this the best solution given all factors under which we operate today (Billions of dollars of debt etc)

[Vikas Nayak]

7.

Couple of problems with your argument:

1) Australia is one of the least connected countries in the world (as much as i'd like to say otherwise), We rank 11th in broadband penetration, 50th in speed and most expensive in the OECD in terms of cost.

Sources:
http://www.electronicsnews.com.au/news/australia-ranks-11th-in-global-broadband-household
http://www.comparebroadband.com.au/article_539_Australia-ranks-50th-for-broadband-speed.htm
http://www.itwire.com/it-industry-news/strategy/26893-australia-has-qmost-expensiveq-mobile-broadband-says-oecd

2) You're confusing consumption with investment.

3) Even if you have high per capita, it doesnt translate to a higher "shifting market" which is what you need for more investment infrastructure. A good example of this is San Marino and Lichtenstein (both have higher per capita than Australia), both countries do not have higher broadband penetration than we do.

If you're truely interested in the broadband Mark, i suggest you start visiting the whirlpool forums for convention information and possibly read Paul Fletchers book.

[Kieran MacGillicuddy]

8.

What an utter misunderstanding of almost every issue.

Correct:
- Public monopolies are bad
- Market liberalisation is good

Lunancy:
- A two day conference. 1 day for sales pitches, 1 night to consider and 1 day to negotiate and sign contracts?! And really I thought that dreaming up the NBN on an airplane napkin was bad...
- Seriously 1 day wouldn't even be long enough for every telco to give a five minute presentation
- Everyone in a room will magically solve everything (more quaint than lunacy I suppose)

Factually incorrect:
- Australia has a large market
- Tax incentives would help

[.]

9.

The NBN is maladministered and will never, ever be finished.

[Vikas Nayak]

10.

Actually...its very well administrated.

The problem with the NBN is the political involvement with the project. Industry is on board for the NBN, the government has its own agenda though.

[John Angelico]

11.

From Australia's point of view, I ask the rhetorical question: "WHAT crisis?"

All we got was Mr Rudd and Mr Swann screaming "the sky is falling!" and imposing a totally unnecessary bank guarantee which did more to distort the economy than if they had left it alone.

However, their mental bias is towards intervention "For crying out loud, we must do SOMETHING!"

So they copied solutions from overseas, ignoring the fact that Australia's financial system was strong enough to manage, and our economy did not have much in the way of toxic loan packages - especially none which were created by government forcings.

The ALP government's NBN plan is aimed at re-nationalising Telstra (or the core of Telstra).

And the people of Australia will be paying for it - possibly forever.

[Mark Sharma]

12.

You cant go forever....2 days are enough....I think Australian market is huge. The price you can charge in Australia will always be higher as compared to say in Asia etc. This is a great misconception that Australian market is not big enough. Also, dont forget you need Internet everyhwere.

I bet in future there will be internet in cars too...

[Mark Sharma]

13.

Its not the question of my interest. I just dont think Labor or Liberals should be allowed to waste Billions of our money (and I mean all 22 million of us)

Let the market do what it does best. All government should do is facilitate it and may be provide tax incentives at the start for new guys.

Thats about it. No wasting of money, please!

[Vikas Nayak]

14.

Mark, there are tax incentives already, the way the industry works, building up your assets allows you use the interest payments on debt incurred (through investment) to reduce your taxable income. This is how telstra, optus, vodafone, hutchinsons and pacific cable operate on putting infrastructure in the country.

What you're asking for is market subsidisation. I think your interest ought to play a bigger role if you cared enough to write this article, however Kieran is right, you got about 2 things right, and a lot of things wrong.

I can appreciate that you're taking the first step and moving away from the liberal/labor debate on $x billion vs $y billion analysis, but you're way off on some portions of your understanding of the industry.

[Kieran MacGillicuddy]

15.

Pro tip: the key to having a debate is substantiating your points.

Sure you can't go forever. That doesn't mean that two days is enough. I have negotiated major contracts and I can assure you that 1 day is insufficient time to negotiate a contract.

If you think the private sector can do it then why does government need to meet with them, let alone contract with them?

Why do you think the Australian market is huge??? Australia is physically large. We do not have a large population though. The number of devices (cars, TVs, smartphones, etc) does not matter the number of customers does. It doesn't matter that the cost per device is $X it matters that the cost per customer is $5X. Because that is the additional money they have to spend.

Even if Australia had many devices (we don't) we have few customers.

Australia has a small and sparse population which means more km of infrastructure required per person which of course means a higher cost per person.

[Chrissy Reichle]

16.

So you think ALP shouldn't have done anything? Do you realise we averted a massive disaster due to the two stimulus packages?

You Should Thank Kevin Rudd and Wayne Swann that you have a job today.

And what's wrong in nationalising Telstra? We lost so many jobs because of coalition's greed.

I don't care how much money we have to borrow to get NBN. We only have small debt in comparison to other countries. As I understand, we can borrow another 500 Billion if we need to.

[Michael Sutcliffe]

17.

Do you realise we averted a massive disaster due to the two stimulus packages?

Do you release we've committed to a long period of stunted growth rather than making beneficial structural changes to our economy? Do you realise we've undermined our global competitiveness over the next decade or so? Do you release that our quality of life will now slip over the long term, compared to what we could have achieved had we been realistic rather than wishful for a quick fix? Do you realise that retirees who have worked all their lives and saved hard to do the right thing in their unproductive years will now not be able to retire at the standard of living they earned?

And what's wrong in nationalising Telstra?

It will ensure that Australia has second-rate telecommunication services rather than a dynamic responsive industry able to meet the demands of a nation going places.

I don't care how much money we have to borrow to get NBN.

So $500Bn would be OK? What about a $1Trillion? No upper limit where the cost/benefit doesn't stack up?

[Vikas Nayak]

18.

There are 3rd world countries with nationalised carriers with better telecommunications services than Australia. Private or Public, Australia will ALWAYS have a lagging telecommunications sector. This has more to do with our geographic and population position more than anything else.

[Chrissy Reichle]

19.

"Private or Public, Australia will ALWAYS have a lagging telecommunications sector. "

Just wait and watch the NBN go. It will be one of the best in the world.

[Mark Sharma]

20.

So you are supporting $43 Billion NBN? Right?

[Michael Sutcliffe]

21.

Just wait and watch the NBN go. It will be one of the best in the world.

Just like Australia has some of the most energy efficient housing in the world from the insulation batts program, and some of the best schools in the world from the BER program, and some of the cheapest and greenest energy in the world from the home solar cells program!!

Can't wait for the NBN. With programs like this our future is looking great!!

[Michael Sutcliffe]

22.

Did I mention the best health system in the world from the GP Super Clinics program?

[Vikas Nayak]

23.

The NBN is already lagging behind, only offering GPON FTTH connections. Countries like Japan and Korea have moved onto XGPON. GPON was built on the ITU-G984 standard which is almost 15 years old now.

I'll admit the NBN is an improvement in services and quality than what Australia is currently used to, but its still late adoption of technology...especially when countries with FTTH are moving onto a newer standard.

[Kieran MacGillicuddy]

24.

I never said that.

I actually oppose the NBN because I think the private sector will deliver a fibre network if it is left alone.

The only role for govt is to break Telstra's vertically integrated monopoly into retail and wholesale arms (compensate shareholders). A debateable secondary role exists to subsidise backhaul in regional Australia.

[Andy]

25.

No Chrissy. You can lay the blame for the GFC at the US FED and US Government Housing policy.
Who would have thought Housing Prices would collapse?? What the GFC should further illustrate is why a Global Price on CO2 is a joke – let’s create a new asset class by government degree and from that degree the government will dictate it’s price – a recipe for disaster.

[Andy]

26.

LMAO
“Do you realise we averted a massive disaster due to the two stimulus packages?”
Yes, thanks to the previous Howard Government.
“You Should Thank Kevin Rudd and Wayne Swann that you have a job today.”
No they should thank me and every other private business owner who kept their businesses going during the GFC and kept their staff employed.
“And what's wrong in nationalising Telstra? We lost so many jobs because of coalition's greed.”
Actually, the Gov should have just bought TLS outright, it would have saved us the tax payer tens of billion dollars instead of building the NBN Co but then again, creating new monopoly isn’t clever policy.”
“I don't care how much money we have to borrow to get NBN. We only have small debt in comparison to other countries. As I understand, we can borrow another 500 Billion if we need to”
I think there’s a job opening for you in North Korea, Chrissy. You and your marxist’s views would fit in nicely north of the Korean DMZ.

[Chrissy Reichle]

27.

What are you going to achieve by opposing the best piece of Infrastructure that Australia is going to get?

Why would private sector deliver fibre network when we have so much land to cover and very little population??????

You are contradicting yourself!!! No wonder you are "Liberal"!!!!!!!

[Chrissy Reichle]

28.

"Yes, thanks to the previous Howard Government"

For what?? for taking my rights away at work? For bringing WorkChoices? For taking away my penalty rates on Sunday?

Thanks, but no thanks!!!!!!

[Chrissy Reichle]

29.

"Did I mention the best health system in the world from the GP Super Clinics program?"

If GP Super Clinics are so bad then why are your "liberal" MP's supporting it?

http://www.smh.com.au/federal-election/coalition-mps-cling-to-labors-mirages-20100809-11u6m.html

[Kieran MacGillicuddy]

30.

The private sector will deliver gibre where is is profitable to do so. Where the population densities are high enough.

Cities. Just look around. Telstra and Optus have HFC networks in place already. In Canberra TransACT deployed FTTC-VDSL(2) and more recently FTTH.

Wind back the clock a couple of years and Telstra were begging to build a national fibre network.

There are however areas which are not profitable to deploy FTTP. In particular rural/regional/remote areas. The government could either tell these communities to accept that this is a fact of their choice of location or alternately they could subsidise the backhaul which would make it viable for telcos to lay FTTP and deploy cell towers in towns.

[Michael Sutcliffe]

31.

If GP Super Clinics are so bad then why are your "liberal" MP's supporting it?

Because some of them are like you, they just want handouts and love the idea they'll get their hands on something that other people outside their electorate will have to pay for.

So, Chrissy, do you support a independent public cost/benefit analysis on the NBN or not? If not, why not, and don't you think the government has a duty to prove it's spending public money in a way that benefits the public?

[Andy]

32.

So long as someone else pays, Chrissy the freeloader is on board.

Chrissy said
“For what?? for taking my rights away at work? For bringing WorkChoices? For taking away my penalty rates on Sunday?”

Chrissy, instead of bitching and moaning, get off your ass and set up your own business then. Be a contributor to the economy instead of being a leech on it.

[Mark Sharma]

33.

I actually oppose the NBN because I think the private sector will deliver a fibre network if it is left alone.

The question of leaving it alone doesnt arise. This is an issue which needs to be dealt with. There is an expectation in the community that Australians should have fast broadband.

I dont think its governments job to provide Fast broadband however they are expected to facilitate it and thats what IBC would do.

[Vikas Nayak]

34.

Actually, leaving it alone is an option if the government de-regulates the "last mile" network gets rid of the provision and requirments stipulated by the RTIRC and enforced by ACMA (switching to ACCC from july 1 2010).

If you have a position that you believe government should provide/enable or intervene in any way with respect to fast broadband, then, to quote tony winsdor, "Do it once, and get it right". Fiber is ofter called "future proof" because the only physical restriction on fiber cabling is the "speed of light" barrier, while all other froms of communication suffer issues (varying from environmental to static delays and low reliability).

Essentially the backhaul built for the NBN will also fuel increased rollout of LTE (as it did with Hong Kongs large scale investment in FTTP networks back in 2003), and increased growth in mobile communications.

If you want to liken this debate to something people have a better idea of understanding, the NBN would be the metalled ashphalt roads, the copper network would be dirt tracks, wireless would be a helicopter and sattelite would be planes. You're not going to get a single "one size fits all" policy, but having better roads is considered something worth going for. While we could have private road operators, without some form of government guarentee, its really not going to happen.

Also, having roads, makes all those other services more accessible.

[Kieran MacGillicuddy]

35.

1) Since when was there that expectation? If there was then the ALP should have won the last election in a landslide.

2) See Vikas' response.

3) What exactly is the difference between "providing" and "facilitating" a network? Your 'plan' seems to be to give companies massive subsidies and hope that they deliver (unlikely given a 1-day-to-negotiate-contract).