Tuesday, February 28, 2012

National ICT Policy and the NBN

Greetings from the Australian Computer Society (ACS) meeting in Canberra, where Paul Fletcher MP, is speaking on "Why the NBN business model is deeply flawed ...?". He set out to look at the business case for NBN and what lessons it has for public policy. You can also read his speech "The right role for Government in ICT Policy" at the Kickstart Forum in Queensland and his book "Wired Brown Land?: Telstra's Battle for Broadband" (UNSW Press, 2009).

The first critical issue Paul suggested was take-up of the NBN and the second is cost. He pointed out that there was no cost-benefit analysis for the NBN, just a business case. The business case only covers those benefits which can be captured by the business, not others they can't get money for (called "externalities" in economics). There may be social benefits from the NBN, but this analysis has not been done.

The opposition policy argues that a cost-benefit analysis would look at options and their costs and benefits: would a lower bandwidth speed to a smaller proportion of the Austrlaian population provide almost as much benefit, but at a much smaller cost.

Paul gave the Sydney Cross-City tunnel and other similar infrastructure projects which have been underutilized and so were both a failure socially and financially. He pointed out that some other public investments had the grounds for success, such as the Sydney Harbor Bridge, which joined existing transport hubs.

Paul argued that per person the NBN will be expensive as it replaces existing working networks. In particular the hybrid cable TV networks installed by Optus and Telstra are relatively new and can be reconfigured to carry more broadband.

Another issue is how many people will take up the fiber connection when their copper cable is disconnected. Paul argues that the number taking up a wireless connection will be much higher than assumed by the NBN business case (supported by UK experience). It happens I canceled my Transact fibre service and used wireless instead (but I am not a typical user).

Paul outlined the opposition policy for targeting areas where commercial returns will not provide a service through market measures. He argued the NBN wireless segment was similar to the previous Opel service of the Collation Government. Paul said that NBN was buying the needed wireless spectrum for a higher price than would have been the case (my recollection was the Opel consortium plan was to use unlicensed spectrum, which I considered unworkable).

ps: I am a member of the ACS Telecommunications Board, but the views expressed here are my own.

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