Political uncertainty hits Australian NBN

David Kennedy and Kevin Noonan, Ovum
11 Aug 2010

Labor and the coalition debated the respective merits of their ICT policies today, and a clear divergence has emerged between them.

The Labor government is committed to investing up to A$43 billion in a National Broadband Network (NBN), including a 100Mbps wholesale-only FTTH network to 93% of the population. Wireless and satellite will cover the last 7% of the population. Pilot FTTH sites have been activated, and further sites are under construction.

In contrast, the opposition coalition has proposed a different approach in its election policy. It will commit a mixture of grant and investment funding up to A$6.3 billion to an incremental upgrade of broadband infrastructure, including:

  • A$750 million in grants for DSL and copper network upgrades to support ADSL2+ in outer urban areas
  • A$1 billion in wireless investment for remaining broadband “blackspots” in urban areas
  • A$1 billion in grants to construct a wireless broadband network in rural areas
  • A$2.75 billion in grants to construct competitive backhaul links on rural routes currently monopolized by Telstra, to support rural DSL and wireless networks
  • A$700 million to subsidize satellite broadband services in the last 3% of the market.

The coalition has guaranteed that the wireless networks will support a minimum of 12Mbps peak speeds.

Two philosophies of intervention

The difference between the two approaches can be summarized simply: Labor offers an expensive gold-plated solution; the coalition offers a modest and incremental one. This reflects an underlying disagreement about how to manage uncertainty over future demand for high-speed broadband.

Labor’s approach is to prepare for anything that future demand might throw at it. Unfortunately, it is also expensive and disruptive. Further, it requires the government to manage a complex, long-term infrastructure project. The record of public management of such projects is patchy.

In contrast, the coalition bases its plans on demonstrated demand, and targets investment where service outcomes fall below those in urban areas. This is much less expensive for the taxpayer. However, if demand for high-speed broadband is eventually proven then the issue must be faced afresh. And the incremental approach has its own complexities; for example, how to allocate funding, and how to avoid distorting the market.

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