Broadband and the election

It seems to me that one of the worst things that could happen in the broadband debate is that it could become an election issue. With the government under real threat for the first time in a decade, policy announcements during the election are likely to be haphazard and unconstrained by fiscal discipline. We will likely suffer from too many decisions made too quickly for it to be good policy.

Broadband has all the hallmarks of this sort of issue. First, it has a measure of ‘progress’ that can quickly targeted — broadband availability and speeds. Second, the main interested incumbent, Telstra, supposedly fresh from its government shackles, lacks no shame in calling for government subsidies and protection. Third, left to itself, the market will evolve to a decision but we won’t know what it is until years from now. Add all this together and you have a scenario whereby the government wants the issue resolved prior to the election in order to shut up the incumbent and have a measured outcome. The Opposition will be forced to counter with its own plan and that will be that.

And what is this likely to be. On the government side, to shut up Telstra it will either have to amend the Trade Practices Act, intervening in the independence of the regulator, the ACCC, and/or provide a massive subsidy to broadband investors — most likely Telstra. The opposition will counter this by going the other route and backing a proposal like the G9 — giving them a subsidy and protecting them from potential over-build by Telstra. So we will end up with a new network, hastily constructed in major metropolitan areas with lots of government money and a regulatory regime overlaying it all.

It seems to me that a better alternative would be for the government to do the whole thing themselves. First, it will employ the same workforce as the construction will have to be contracted out. Second, it will avoid the need for a regulatory regime as the government can just provide access to the network for virtually nothing. The only downside would be the usual issue that such public provision can mean a poor technical choice but this downside also exists for the subsidised private investment route we appear to heading down. So we are left with the ironic situation that when politics makes outcomes a poor one, rely on government provision to fix the mess!

3 thoughts on “Broadband and the election”

  1. Seems like an interesting response. The problem is that the Government would have to agree to buy Telstra’s copper back – even though it has just sold it!

    Otherwise, you’ll just end up in the High Court arguing about whether Telstra was provided appropriate compensation. Telstra won’t give up its best asset cheaply!


  2. From Crikey (15th March 2007):

    Chris Berg, research fellow with the Institute of Public Affairs, writes: Joshua Gans (yesteday, item 12) argues that if Australian broadband becomes an election issue, it could result in poorly conceived public policy. He is overly generous to the government – isn’t existing telecommunications policy already poor? But in order to avoid “haphazard” fiscal indiscipline, Gans recommends, as a solution, systematic fiscal indiscipline. Gans proposes a re-nationalisation of the telecommunications industry, with the government itself rolling out new communications networks across the country. He argues that a range of subsidies already exist for broadband investment, so why not just combine them into one massive subsidy? But it would be much better to simply eliminate those subsidies. In the United States, Verizon has invested US$18 billion in fibre-optic cable straight to the home. This investment would not have been commercially possible if the Verizon was required to give access to the facilities to all other parties at a price determined by a regulator, like it would be in Australia. It’s a risky investment. The industry is so dynamic that new technologies can outflank the best thought plans. But at least, if it doesn’t pay off, US taxpayers won’t be left with the bill. However, under Gans’ socialised infrastructure plan, Australian taxpayers will assume all the risk of network investment, and telecommunications companies will assume the reward. Instead, it would be much more sensible to allow companies to build networks free from the threat of over-bearing regulations. But Gans sets a high bar for regulatory reform, arguing that if a government ever amends the Trade Practices Act, it will compromise the independence of the regulator, the ACCC. This is to elevate the current law embodied within the Trade Practices Act to something other than what it is; an Act of Parliament. Problems with the Trade Practices Act are obvious from the fact that its provisions on such matters as forced access to infrastructure are far more draconian in Australia than in other jurisdictions. This is exacerbated by activist regulatory bodies wilfully interpreting the Act’s provisions to enlarge their own powers.


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