I have an opinion piece in today’s The Courier Mail on broadband (you can access it here or over the fold). In retrospect, if I knew more about World of Warcraft I am sure I could have extended the analogy further.
Fun and Games
A BEAST has emerged that must be conquered. It is the beast of broadband and appears in the sinister form of a chart.
The chart plots the number of broadband subscribers per 100 inhabitants for each OECD country in a declining series of steps from first (Denmark) to last (Greece). Australia is 17th in line, squeezed between France and Germany.
The subscriber chart is sometimes accompanied by its even more sinister sibling which plots maximum broadband speed to households in a similar but steeper cascade. This has Japan and South Korea up first, with Australia closer to the bottom behind New Zealand and the UK.
For reasons that are hard to explain, these charts are now haunting our politicians and so this beast has emerged as a critical threat that must be slaughtered before the election.
The subscriber version of the beast appeared prominently in Labor’s “Broadband Future” document on Wednesday, but the policy itself was all about dealing with its speed sibling. Labor announced that it would slay that beast by spending $4.7 billion on a higher speed broadband network catching 98 per cent of the Australian population. All this to be achieved within five years.
If nothing changes to any other country during that time, this will move us from the bottom to No. 6 in the world (just above Russia).
Of course, every single country ranked above us also has the same idea, so it is likely we will not move at all.
The chart will become fuller but the beast will remain.
This is important because this suggests that the first touted reason as to why we “need” this network (and government subsidy for it) is to support our businesses in the global marketplace. What sort of support is it if, relatively speaking, little is changing?
To provide a competitive advantage would require us leapfrogging that. However, this plan will not get us to where the leaders are today.
The good news, of course, is that there are areas in Australia that already have world-leading broadband – the CBDs of our major cities. That will likely expand without any government intervention over the next five years.
So if you are a design firm or a content provider, there are places in Australia – most likely pretty close to where you are right now – that have the infrastructure you need.
What is more, that leading-edge provision is there because competition has brought it there. So the price you pay will not be too high.
So the massive government subsidy would have to be justified on criteria other than the provision of competitiveness and innovation.
For this, Labor offers uses for households. They identify “e-Education” and “e-Health” as possible uses whereby you can interact over the internet for these things.
However, the evidence from the parts of the world which have already ponied up the dollars for high-speed connections is that these applications are not (yet) to be seen.
Will they appear in five years? No one knows. Will they provide benefits that require all Australians to be able to access them? Right now, that seems to be unlikely.
So what are we left with? Put simply, entertainment. So it’s no wonder the big incumbents out there are happy with plans such as this. At present they are in the business of supplying that entertainment, and they own all the content. If you want to set up internet television, you will need to talk with them about “broadcast” rights.
But the tragedy of it is that present options allow us to obtain this content fairly well. It is arguable that any demand from households for higher-speed connections is to service their downloading of television and other content that is not now available in Australia.
Folks who don’t want to wait six months to see Lost are probably also those likely to want it to download fairly quickly. With high-speed broadband, you can start downloading and watching a television show at the same time and it will have downloaded before you finish. Just like broadcast television. But with basic broadband you have to wait an hour or two. Just like recording broadcast television on a VCR.
Is spending almost $5 billion worth it just to subsidise that additional advantage?
I think Australians need access to technologies and content that are available overseas. But subsidy and national provision are not the answers.
If we want them to have content, we need to amend our copyright laws to allow the parallel importing of media.
If we want them to have technologies, we need to ensure that competition works to bring them that. In broadband, in our CBDs we have that competition and we are at the world frontier. Everywhere else, we are beholden to one company – Telstra – and we don’t have that. Dollars likely to flow their way are not the answer.
Tougher competition regulation is the way we can attack and slay the broadband beast using monopoly rather than taxpayer blood.
Joshua Gans is professor of economics at Melbourne Business School and blogs on these issues at Core economics.
[Update: one letter writer to the CM disagrees with me.
Future lies in broadband
PROFESSOR Joshua Gans (C-M, March 22) makes a critical error in his argument that competition rather than subsidy is the best way to bring high-speed broadband out of the cities of Australia.
He writes that there is little to be gained in subsiding the network because all people would want to do is download TV shows.
This demonstrates a lack of understanding of the potential benefits to rural communities to be gained by high-speed broadband. Many of these benefits, of course, may not bring much immediate commercial gain.
Gans also downplays the existing use of “e-health” and “e-education” technologies via broadband. While it is true that the possibilities are not fully realised yet, these are just two areas that have in fact been greatly enhanced by broadband technology. A roll-out of a nationwide high-speed broadband network would mean that continued development of the existing benefits of broadband and innovation is much more likely.
Andrew Whaites, Closeburn]