Mar

23

Broadband recap

March 23, 2007 | 7 Comments | Joshua Gans

The thing that I have learned over the last 48 hours is this: if you even hint that giving money to broadband might not be a good idea, you are the equivalent of the devil. Well, maybe that is strong but I have been called a short-sighted economics professor, a ‘rightie‘ and, this is the best one, ‘an internet monkey.’

Anyhow, I thought I should recap on my position(s), since it is the aggregate of many posts:

1. (I love broadband) As regular readers know, I love broadband and can’t live without it. It gives me a ton of private benefits and I am a ‘lead adopter’ of it as with all similar technologies.

2. (Not everyone loves it as much as I do) That said, I am happy to recognise that those benefits are not for everyone and are mostly private. That means that government intervention to promote more than basic broadband is not warranted.

3. (One solution does not fit all) Even if it was warranted, it is not clear that its benefits are equal across the entire Australian population requiring a national rollout or universal service obligation.

4. (Users are not the main winners) Even if you wanted to roll it out to the entire Australian population, the beneficiaries are unlikely to be consumers but instead content providers and if consumers do benefit, they are likely the more wealthy. So what you have hear is the poorer members of society subsidising the rich; which, last time I looked, was an undesirable goal for a government policy.

5. (Better ways of doing it) Even if you were determined to subsidise a national network, there are better ways to do it than a competitive tender for national provision and a public-private partnership. In terms of ranking policy options mine would go (1) User-level subsidies for high speed connections; (2) funds for local government tenders for neighbourhood networks; (3) a stringent access regime on copper pairs; (4) handing over ownership of the copper-pairs to establishments (which might be possible by State governments); (5) a government-owned national network; (6) a public-private partnership with a stringent access regime; and (1000000000) whatever Telstra currently thinks it will get from a Labor government.

Hopefully that clears it up. What I would like to know, however, is how to reconcile Telstra’s love for Labor’s plan with analyst views that it would be the clear loser!


Comments

7 Responses to “Broadband recap”

  1. Warwick on March 23rd, 2007 4:36 pm

    I agree with pretty much all you say here, and certainly would favour options 1-3 over current proposals.

    My view – the analysts don’t understand or underestimate the significance of the point that it will be nigh on impossible to build the network without Telstra’s cooperation. Too expensive and too difficult technically to overbuild and anything else requires renationisation for assets the Government has just sold. Telstra still holds most of (all of) the cards.

  2. Bill on March 25th, 2007 12:51 pm

    Great post Joshua. This seems to be an issue that is plagued by self-appointed experts, dogma and simplistic thinking. Someone asks some questions and challenges the convenient majority position. They get pigeonholed and insulted. It makes you wonder – is it possible to implement public policy if the case for doing so requires people to think beyond the obvious? Is modern politics capable of doing anything other than following public opinion?

  3. CoreEcon » Blog Archive » Interesting reactions on March 27th, 2007 8:56 pm

    [...] it comes up on the blogger’s dashboard (in my case, WordPress). That is how I found out about some strange reactions to my broadband views. But today, this interesting post appeared by Andrew on a blog called The Salmon Conversations [...]

  4. The Pencil Guy » Archive » By request: an assessment of Labor’s broadband policy on March 29th, 2007 8:51 pm

    [...] is the best way to go about fixing the problems in Australia’s broadband. After reading Joshua Gans and Ross Gittins, I’m thinking it’s a step in the right direction, and way ahead of [...]

  5. CoreEcon » Blog Archive » Broadband in New Matilda on March 30th, 2007 4:44 pm

    [...] McAuley misrepresents my views in New Matilda when he writes: Melbourne Business School Professor Joshua Gans has been quick to condemn the proposal on the basis that Australia does not have the population [...]

  6. CoreEcon » Blog Archive » At last a solid broadband solution on April 1st, 2007 6:05 pm

    [...] regular readers know, I had several problems with Labor’s broadband plan. These included the reliance on the wired solution, not resolving the “last mile” [...]

  7. CoreEcon » Blog Archive » Coonan’s opinion on April 4th, 2007 7:51 am

    [...] so, I ranked Labor’s policy at No.6. I hope this means that the government is going to choose 1 through 5 when they come to announce [...]