Should we Believe the Opposition on Broadband?

 I've been forwarded an item written by Michael Wyre on his blog headed, 'Should we believe the Opposition on Broadband.'  Michael says I have changed my views on NBN, and cites a recent speech where I said things he thinks are inconsistent with my 2009 book Wired Brown Land.

I disagree.  Let me respond to a few of his points.

In the book I say the Optus HFC network was a financial failure; in the speech I say NBN is a high risk business model, and this is inconsistent

I say in my book the Optus HFC network was a financial failure due to poor take up – but Michael says that with NBN Co the take up point is being addressed because the government plans to shut down the Telstra and Optus networks and move the customers across to the NBN. 

Michael is right, that is the government's plan.  (Whether it will work, and whether it is good public policy or unacceptably anticompetitive is another matter, but that is the plan.)  

However, that is no answer to the quite separate point I was making in my speech: experience teaches us that the IT big bang often ends in tears, and the NBN strategy is very much a big bang: brand new company, three new networks (fibre, wireless, satellite), new IT systems for billing, business support etc, all being rolled out at once across the country.  An incremental approach would be much lower risk.

In the book I said the broadband network proposed by Telstra in 2005 would deliver economic and social benefits and stimulate usage and yet in my speech I said you can't mandate take up.

I've always believed that a broadband network upgrade will deliver economic and social benefits.  The key question is how much benefit you get, and what does it cost you to get it. That's why it is so important to have a cost benefit study.

When you consider cost versus benefit, you have to start by asking what is the state of broadband infrastructure and take up today, and what increase in take up do you expect as a result of the money you intend to invest.    

Telstra's 2005 proposal discussed in my book was for Telstra and the government to jointly fund a 6 Mbps network to 98 per cent of premises, with the government contribution being $2.6 billion. And the expected benefit would have been greater because the starting point was so much further back at that time: given that average speeds were much lower and take up was much lower than today. (According to the ABS, in mid 2006, only 156,000 households had speeds above 1.5 Mbps; by mid 2011 4.1 million had speeds of 8 Mbps or faster : ABS, Internet Activity, Australia, June 2011.) 

Of course Telstra would not have been guaranteed of getting extra usage in 2005. It would have faced a sales and marketing challenge to win customers onto the new network.  As I said in my speech, you can't mandate take up.  But the amount of increased take up it needed for benefit to exceed cost was much lower than NBN requires today.  Put another way, the risk that NBN Co will not succeed in stimulating take up to the requisite degree is vastly greater with the plan now being pursued that with the 2005 plan I was writing about in the book.

 "Should we believe an opposition front against the NBN – (members of whom have sold out their personal beliefs of just a few years ago) – who are just being deliberately and antagonistically negative towards a government policy they want to cut down. Where has their personal integrity gone?"

Michael closes with these impassioned words, accusing the Coalition of not supporting the NBN.  Quite true – we think it is a bad way to achieve the uncontentious objective of upgrading Australia's fixed broadband infrastructure.  I am puzzled why Michael thinks this automatically means that we have sold out our personal beliefs and have no personal integrity.  For my part, I have no such belief about Michael – I just disagree with him.