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Is Australia behind the times as far as Broadband Goes

Attached Press report by the Canberra Times

Friday, 23 March 2007 Report what Labor will do (Opposition Government) Sorry it is Long

A high-speed sales pitch from Labor

ANY AREA of social or economic infrastructure in which Australia is said to be falling behind the rest of the world has the potential to figure as a prominent election issue provided political parties can exploit it. The wringing of hands that has always accompanied suggestions that internet access lags well behind the rest of the industrial world makes broadband one such issue.
Slow internet access speeds and low broadband penetration Australia ranks at the bottom half of OECD rankings are no cause for celebration, and all political parties have talked up the need to improve internet availability and use. The big telecommunications companies, too, have long been committed to greater broadband investment with mixed results, according to international comparisons.

The most recent corporate initiative was Telstra's April 2005 $3.2billion plan (with some $2.6billion in public money) for a fibre-to-the-node network delivering six megabits a second. However, Telstra dropped the plan after failing to resolve questions of pricing and access with the Australian Competition and Consumer Commission.

Perhaps because it is exhausted after negotiating the protracted privatisation of Telstra, or because it recognises the difficulty of resolving the broadband problem, the Federal Government has confined itself to offering up piecemeal proposals for improved broadband availability in rural and regional Australia.

The national regulatory framework, which discourages investment in infrastructure by forcing players to share access with competitors and which the Government has shown little interest in reforming, has contributed to the inertia.

In any event, the Opposition believes it can do better this week floating a plan for an open-access, independent national broadband network capable of delivering a minimum speed of 12 megabits a second, enough to allow 98 per cent of Australians to access entertainment in "real time", and which will slash phone bills, facilitate children's education, and, it is claimed, boost economic activity by $30billion annually all for the relatively modest price, to taxpayers, of $4.7billion (comprising $2 billion from the existing Communications Fund and $2.7billion from the Future Fund) spread over five years. The rest of the bill will be met by the corporate sector, with Labor proposing that the network be built by public-private partnership.

It is a bold plan, even allowing for the fact that PPPs are now regarded with suspicion in some quarters as a result of unexpected cost blow-outs and heavier-than-expected bills from tollway and tunnel projects in several states.

The money for the ALP plan is to come from the Future Fund, established by the Coalition in part to underwrite the Commonwealth's emerging superannuation debt to public servants, and financed with proceeds from the privatisation of Telstra.

Sensing another opportunity to raise queries about the ALP's economic management skills, Treasurer Peter Costello has likened the plan to a smash-and-grab raid on the savings of future generations, though Labor has countered with the argument that the plan is nothing if not an investment in Australia's future and that the Act governing the fund allows governments some discretion in accessing part of the fund tied up in Telstra T3 shares.

Whatever the validity of Costello's argument and it is unlikely that it has resonated with ordinary voters the real issue is whether the proposal itself is practicable or sound. Insofar as it promises open access, thereby ensuring enthusiastic private sector backing, the financial viability of plan would not appear to be in doubt. But Telstra, because it owns the existing network on which the new network will have to be based (and because it still has ambitions to build its own network) is the big potential stumbling block.

To get around it, a future Labor government might have to legislate to prevent a parallel network being built or force Telstra to use the proposed network not a difficult thing to sell to voters, but unlikely to be enthusiastically received by Telstra, which has a demonstrated record for spending billions to protect its natural monopoly. Labor's plan will receive a fillip if Telstra is unable to reconcile its differences with the ACCC over its own broadband plans.

Another potential problem for Labor is ensuring that the network has a wholesale price structure that does not lock out consumers in rural areas. Inevitably this will involve cross-subsidies a contentious issue for investors and operators looking to maximise their return on investment.

Even if Labor's plan does win Telstra's active support (and it is unlikely to be viable without it), there's still the problem of its being made obsolete by new wireless technologies. For now, the enticing prospect of information delivered at 12-megabit speed makes this plan a potential vote winner with everybody who recognises the enormous potential of a broadband internet. But voters would be well advised to read the fine print.

Posted: 03/22/2007 @ 08:04 PM (PDT)

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