The public-private NBN divide

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After years of ignoring broadband, we at last have a Liberal politician putting forward the ‘right’ opposition argument on the National Broadband Network. Malcolm Turnbull says it is a private good that does not justify large government expenditure and it is better to leave these things to the market. Here is Chris Joye with a similar line.

Now I think about that because when Labor, then in Opposition, came out with its fibre to the node, $4.7b plan (when that was considered a lot of money), I said much the same thing. See here, here, here, here, here, here, here, and enough already; I should put out a collected works volume. And I remember how tough an argument that was to put forward. It is hardly surprising that it has taken 4 years for a politician to do so.

The NBN, however, has the potential to be a public good and a justifiable expense on that basis. This is something Stephen King and I articulated recently in a paper published in the Australian Economic Review [over the fold]. First, it is the only proposal put forward by any Government in recent times that has a chance of breaking the competitive problems in telecommunications that have really held Australia back. The Coalition’s plan, ont the other hand, gives over broadband policy to Telstra. Second, a basic level of broadband service could be provided free with the NBN charging for faster speeds. This would allow broadband to be ubiquitous and remove a barrier to its use by private and public interests alike. Third, if the Government invests in public applications — notably, eHealth services and also Government services online (as recommended by the Cutler Innovation Review) — this will lead to additional savings but also a higher quality of public services. (I note that the PM announced a move in this direction today).

The Government are vulnerable to the Turnbull line of attack because they continue to sell broadband as a private good — as if it were a handout dressed up in economic and technological rhetoric. That sales pitch is flawed and the sooner it is pulled down as such, the sooner the Government will get serious about the NBN and actually develop it as a public good. At the moment, that development is surely lacking.

[Update: Malcolm Turnbull tells me he made the same argument in 2009.]

‘Big Bang’ Telecommunications Reform

2 Responses to "The public-private NBN divide"
  1. Well! after 12 years of fudging the issue, the pennies begin to drop.  The industry generally – except Telstra – has ALWAYS seen it like this. The NBN was the alternative to the ‘competitive’ regime that ultimately failed, and in 1996 the gov’t chose it for the dollars against industry advice. So, in terms of cost .. when was the last time anyone saw a business case for the billions spent on the widening and dual laning national highway system?  did anyone seriously consider that the trucking firms would fund the road upgrades?
    Its clear that the reaction to the coalition plan shocked the proponents, but it was too late changing it – they would look stupid.  Flogging the same horse however has the same effect and also condemns them to old thinking – if a coalition government could not alter Telstras monopolistic ways in 12 years despite changing the rules several times, why does anyone except the drongoes think that trying it again will ever work?

  2. The NBN may or may not be a good scheme, but I’m sick of the Panglossian BS about how wonderful the current arrangements are. Why do I get a statement in the mail every month for a credit of $2.72 from Telstra. The current arrangements suck – having a quasi monopoly that you have little choice but to deal with them no matter how contemptible their behaviour is. I have ADSL2+ – it’s not “fast enough”, there are also problems with the line that can’t seem to be solved. There is also the usual massive ideological blind spot that economists like to cultivate that ignores all the government funded research and infrastructure that made the current technology possible. So when a smug twit says “It’s called Skype. My wife and I use it all the time when communicating with our IVF doctors in the US. The best news is it costs taxpayers nothing.” nobody bats an eyelid.

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