Following up from my earlier post on Labor’s broadband plan, I have got a hold of their actual document. It is no stronger on details of the actual plan than the news reports. Still $4.7b designed to give 12Mbps ‘true’ broadband to 98% of homes in a public-private partnership. It will be fibre to the node. I will follow up later on whether such PPPs as they are called are a good idea. For the moment, I want to deal with the background to Labor’s policy: why they think all this is required and the justification they give. Basically, they are perpetuating lots of myths about what ‘true’ broadband can really deliver.
True versus basic broadband
The Labor proposal is about true broadband rather than basic broadband. Basic broadband is between 256Kbps and 1Mbps and is what most of us already have or will get through the current government’s policies. There is a ton of evidence that basic broadband delivers lots of economic and social benefits and it is a ‘no brainer’ that we want it throughout the country. ‘True’ broadband is another matter. The evidence the document cites argues that this will give some $12b-$30b per annum in economic benefits appears to me to confound basic and true broadband. I suspect that the marginal benefits to true over basic broadband are far lower than this; especially, over the next five years.
Is true broadband important for small business?
The document argues that broadband is important for small business. It is argued that basic broadband is insufficient and true broadband is what is required for some internet applications for some industries (some architectural firms building big buildings). This is certainly plausible but does it mean we have to roll that out to 98% of the population. If your business really requires this and it is small perhaps it needs to be located where we already have true broadband. And if those areas need to be expanded that is a useful idea. But it is a local or perhaps a state issue. It is not a reason to build a network across the entire country. That is massive overkill.
Is true broadband important for families?
Let me answer this simply. We have true broadband and I do not think that it provides anything beyond a little convenience and some entertainment value that basic would do. Educationally, my children surf the net and can download information; they would just wait a little longer. Documentaries can easily be watched at lower quality but acceptable for computers on basic broadband. So the e-education possibilities are limited. E-health is way off and I would bet the main constraints are regulatory and practice oriented rather than technological. You can view video quite well now and if individuals have diagnostic equipment in the homes (another subsidy perhaps) then that data will likely flow just as well over basic as true broadband.
As for entertainment, there are plenty of substitutes. For television we have broadcast TV. And let’s face it, we are denied additional content not by technological limits but by the market power of media players and exclusive distribution deals. If you want homes to have access to this, then free up media and copyright laws to do so. Investing in a network will not help. So long as the content into Australia is controlled, current media players will just get an additional channel from true broadband. It is not surprising that they support it so.
The document indeed claims how important broadband is for media diversity and user-generated content. Yes, but again is this a true broadband issue or a basic one? Again, are the constraints technological or regulatory — denying easy replication of copyright material.
Is true broadband important for innovation?
I gagged when I read:
True broadband is also a crucial tool for the commercialisation of Australian intellectual property and content. True broadband will be the highway that Australian ICT and digital content companies use to deliver their products to the international market place. Broadband gives Australian knowledge economy businesses the chance to break down the tyranny of distance and connect with the global economy on an equal footing.
There is so much wrong here it isn’t funny. First, what barrier is there to Australian content through broadband? We have true broadband in many places in Australia. The Star Wars movies were made in Sydney for goodness sake. They didn’t need an Australia-wide network and neither does anyone else. They could probably use lower broadband prices but this is an issue for competition rather than massive subsidy.
Second, the Labor proposal won’t give that equality anyway. It proposes 12Mbps when the competitors ALREADY HAVE 100Mbps and are going to 1Gbps. You need truer broadband for that and that will only catch us up. What advantage could that possibly give Australian business? They will at best be competing head to head with companies who have had that advantage for years. This just isn’t going to cut it.
Finally, what possible benefit could $20m Australians having true broadband and receiving content mean for Australian companies providing content for the global marketplace? The answer is surely close to nothing.
Summary
The basis for the current broadband hysteria being drummed up and becoming an election issue of a $5b magnitude is not there. We are lagging and that is a worry. We have handed broadband investment to a single company, Telstra. And we have no plan to deal with that fundamental issue. A commitment to a big bang infrastructure roll out is not the solution. Something more economically sensible but with lower ‘headline’ value is what is needed.
[Update: this post appeared as “Is this newfangled broadband a true economic boon?” Crikey, 22nd March, 2007.]
Core Economics 
‘I think there is a world market for maybe five computers’
* Thomas Watson, Chairman of IBM, 1943
‘While a calculator on the ENIAC is equipped with 10000 vacuum tubes and weighs 30 tons, computers of the future may have only 1000 vacuum tubes and weigh only 1.5 tons.’
* Popular mechanics, 1949
‘I have travelled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won’t last out the year’
* Editor in charge of business books for Prentice Hall, 1957
‘But what… is it good for?’
* Engineer at the Advanced Computing Systems division of IBM, commenting on the microchip, 1968
‘There is no reason why anyone would want a computer in the home’
* Ken Olson, Present, Chairman and founder of Digital Equipment Corporation, 1977
‘640K should be enough for anybody’
* Bill Gates, 1981
“Broadband using the copper network could give sufficiently high speeds.
“That is very good technology and currently no one is complaining about the speeds of broadband in metropolitan areas.”
“They ought to be (happy with their speeds) in Sydney, Melbourne, Adelaide, Brisbane and Perth, certainly.”
Senator Helen Coonan, Minister for Communications
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I must agree with all the points in the article, and let me give some examples in my own life.
Currently I’m typing this on a basic broadband 512kb/s plan that has generous download limits.
For web surfing, e-commerce and youtube etc. 512kb/s is fine.
For video files, iso images etc. the generous download limits mean that I can download whatever I like and it’s ready in a day to two. Having to wait a little longer doesn’t worry me, if I want to watch something immediatetly I’ll put on a DVD or watch something on my foxtel iQ.
The most serious (economic) use broadband gets in my house is telecommuting, my wife can VPN to her work and I access my work through Citrix metaframe. For VPN 512kb/s is adequate but a bit slow, the only problem Citrix has is that page scrolling is a bit jerky. Telecommuting makes an enourmous different to work/life balance in my house and basic broadband meets those needs today.
All of the above said I am moving house in a few weeks and will get ADSL 2+ which given the distance of the house to the exchange will get me speeds close to (or if I’m very lucky, greater than) 12Mb/s. When bundled with a phone line the cost for ADSL 2+ is comprable to what I pay today, if it was much more expensive I wouldn’t bother.
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Your article only covered a very small part of the future use of broadband. Many country centres don’t even have access to basic broadband and it makes better economic sense to jump past this basic level step when rolling out into areas that currently only have dialup.
The real economic benefits of high rate ‘True Broadband’ are that it will allow the distribution of rich and powerful on-line applications that allow decentralisation of business and workplaces, making true telecommuting possible.
I’m not saying everyone stays at home, but imagine it if you could set up smaller business unit nodes in the Blue Mountains, the Adelaide Hills, or Mt Dandenong for people who chose lifestyle over convenience with the current trade off of travelling for hours on the dilapidated public transport or congested freeways.
Think of it. We can take the pressure off the price of housing, take thousands of cars off freeways and stop tonnes of CO2 being dumped into the air each day. Then take the pressure off public transport in peak hours. All this and we work and live closer to our families and get more flexible work hours as well.
High volume broadband would allow video conferencing or even ambient video presence – an always “on” window into the goings on in the head office in the CBD – so that a business could distribute its staff closer to where they want to live.
Extrapolate that out to teaching in remote communities, consultation between city and country hospitals, teaching specialist classes remotely, joining a classroom in Perth with one in Hobart, or even India to show children how everyone else lives.
Or moving whole service companies out of high-rise CBDs and into regional centres close to cleaner air, cheaper land and cheaper office accommodation (with free car parking!) Who needs to send call centres overseas? Send them to Wagga Wagga, Warragul, Shepparton, Hamilton; the mountains, rural communities that are struggling to survive.
What stops all of this happening is lack of infrastructure. This plan – if not hobbled by Telsta’s commercial interest in pricing it all out of reach – will allow a explosion of business and social activities way beyond being able to download a tired old movie from the internet.
This type of life and business is all happening in the USA now. Let’s hope it happens here soon.
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Your argument seems to be that we’re already significantly behind the rest of the (developed) world in terms of broadband speed, so we should just give up trying to improve our infrastructure. If we did that, growing our IT industry would be the least of our concerns – we would struggle to retain those IT companies already operating here.
Even if you believe that ‘true’ broadband is not required in Australia at the moment (something I disagree with), you can’t predict what our future needs will be as technology develops. Slim (above) made this point very effectively.
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Joshua:
Good analysis. However, as a previous commentor mentioned, you have not written much about the future.
The problem with Broadband is that to make sense of the investment we need to figure out all the future possibilities. This is not possible.
The comment by Slim sums it best.
I think that the Labour plan is a decent one and that there will be unknown benefits to universal true broadband.
Cheers,
Suhit
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Andrew and Slim:
Your argument may seem intuitively reasonable but you have to ask: if the benefits of ‘true’ broadband are so great, what is stopping private businesses developing this market?
(If this answer is a Telstra monopoly on the last mile, then you’re probably right, but there would come a point where – if the benefits were high enough – even that barrier would be overcome. Witness the Optus cable strung on power poles around the country.)
Sure, ‘true’ broadband might have all kinds of amazing benefits in the future (I’m sure it will), but the point is, we can just as easily build it in the future when those benefits are clearer and it costs half as much (technology being what it is).
Andrew, you say that ‘you can’t predict what our future needs will be as technology develops’. But neither can the government, with any degree of success.
Having government trying to guess what technologies or infrastructure are going to be beneficial in the future is likely to be a path to all kinds of wasteful expenditure.
We could as easily say that there are untold benefits to personal space travel, so the government should build spaceports in each major city.
Better to clear away the obstacles and let the market sort it out. Sort out the monopoly on the copper if we can, but even that will be eroded by technology – eventually.
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