Broadband in the Courier Mail

I have an opinion piece on, of course, broadband in today’s Courier Mail (over the fold).

Brakes on net speed

Joshua Gans: Courier Mail, 20th June, 2007

THE Howard Government’s long-awaited broadband response ticks their box marked “appear to do something” but, like Labor’s proposal, it only highlights just how far we have to go.

What both the Coalition and Labor have said is this: “We want to connect 98 or 99 per cent of households to high-speed broadband by some date (2009 or 2013) so, put your hands together, problem solved.”

Supposedly, everyone will have broadband internet access so we can do whatever they are doing in South Korea and Japan now.

But that is a furphy. The problem is not solved.

First, it is far from clear that the main bottleneck on speed is the last mile, from the node to the abode.

Instead, as anyone who has broadband knows, if you have faster speeds you just reach your download limits faster. For example, put in a 24Mbps connection and actually use it to download television or movies and you will get to an 80Gb limit in a matter of hours.

With most of us on limits that are a fraction of that, we are talking about one movie a month at best. So when our politicians, G9 or Telstra talk about prices of $60 a month or what have you, then one has to ask: $60 for what?

Without a download limit guaranteed, there is no real price guarantee.

Second, why do we have download limits anyway?

They don’t have them elsewhere. Non-Australians’ jaws drop when they find this out. And it is the reason why we haven’t seen more use of basic broadband for free WiFi and the like.

It appears that our problems come from a lack of capacity and a lack of competition in the provision of services across the Pacific where there are two routes (AJC and Southern Cross). Also, there are deals at the other end.

All these push up the price for Australian providers who use download limits to control those costs.

Our governments need to solve this or we will have a large garage with only a little car to park in it.

What’s more, when there isn’t an international issue there can be domestic limits.

Telstra claim their NextG network is an existing substitute for what Opel (the Government’s subsidised regional provider) will do.

But Telstra limits use on that network to a fraction of what would occur on wired ones.

I have such a connection when I am out and about – it’s fast but I’m constantly worried about downloading too much before I reach my 200Mb monthly limit (at a cost of about $60 a month).

Which brings me to the third issue: if you want to get fast broadband cheaply without lots of public money, then you need competition. And no politician has said how they will resolve that.

Yes, both sides have promised tenders but, in either case, we will only likely have two serious contenders. Is that really enough for what is supposedly a vital piece of infrastructure?

More critically, we have the on-going fact that Telstra owns the last mile to the consumer. Either the new network is given to Telstra or politicians have to deal with Telstra to allow someone else access.

Telstra know this, which, in part, explains their confidence in coming out ahead on broadband.

The hard decision on broadband has yet to be taken. Both Labor and the Coalition promise to do something about the issue of competition and regulation but neither has specified what. The Australian public should be nervous about whether either has the power to do so.

This is the roadblock to a national broadband upgrade. If you don’t specify what you will do, you have a promise that is unfunded by real decisions. The risk is that lots more public money will be required to fulfil that funding gap.

In my mind, I would prefer that our politicians abandon the promise that everyone needs high speed broadband. Instead, we should encourage local solutions so localities that really want high-speed broadband can make the investments and encourage the competition to get it.

Unfortunately, even this requires eventually dealing with, and not ignoring, the elephant in the middle of the room: Telstra.

Joshua Gans is professor of economics at Melbourne Business School, University of Melbourne. He blogs on these issues at www.economics.com.au

One thought on “Broadband in the Courier Mail”

  1. It’s not really overseas capacity – it’s more Telstra AGVC and backhaul costs that are causing the high prices. Yes, international capacity is still overpriced relative to the rest of the world and I hold great hope for Pipe Networks’ plan for a new undersea cable. If history is anything to go by they will do for overseas transit costs what they did for domestic transit costs – absolutely smash it. Combine that with new regional backhaul from OPEL to smash Telstra’s stranglehold and I predict that by 2010 costs will have been absolutely smashed.

    We also need to develop more local Internet content too – more Akamai sites would help. If Google established a local data centre here then that would have a very measureable effect on overseas link utilisation, but I don’t think they’ll do that until there is more overseas transit competition to reduce the cost of the link they would require between an Australian data centre and their HQ to keep everything in sync.

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