Broadband in The Age (Day 3)

Today’s installment of “is there really enough to this debate to write five articles on broadband?” is about the type of broadband we get and the type of broadband we want. Tomorrow: the competition and regulation mess.

Symmetry, no caps and roving usage will be real gains

Joshua Gans, The Age, 12th November, 2008.

THE past two days I questioned the private and public value of broadband. It is perhaps more realistic to evaluate investment in high-speed broadband — at least 12Mbps across 98% of Australia — as a political objective. So, what is the most efficient way of achieving that objective?

To be sure, the Government has committed itself to more than just that: it has promised a wired solution where optic-fibre is used at least to the node (that is, many street corners). But my belief is no one would be fussed if an equivalent service was delivered by another means. After all, all subscribers see is what is on their computer screens; not how it got there.

There is more to broadband than just download speeds. For starters, there is upload speed. In Australia, most services to households are asymmetric in that they provide much more download bandwidth than upload. For instance,my house has 40 megabytes per second download speeds but often 1-2Mbps upload speed. You start to notice this if you want to upload photos or videos to the net as a form of backing up to a cloud computing facility.

But this would really matter if we wanted to use high-speed broadband for next-generation telecommunications and video conferencing. This is critical if we hope to use high-speed broadband to change work habits and commuting patterns. Even the surgeon/remote patient example I mentioned the other day would rely on equally fast connections both ways. Of course, it is just this sort of two-way communication that would threaten existing telecoms. And since they are the same folk who want to provide broadband access, they have an inherent conflict.

A second critical aspect of the type of broadband we are getting is, of course, the usage limits. Overseas, these limits did not exist and whole businesses and consumer habits have grown on the basis that users don’t have to worry about usage. Not so in Australia. The cause may be the high fees our providers pay for international backhaul. Or it may be a lack of competition that allows our providers to opt for pricing that requires those who use more to pay more. Regardless, we have lived with bandwidth limits.

The problem with this is that if you have a high-speed connection, those monthly limits look small indeed. For instance, if the one gigabyte limit that most households are on does not change with the National Broadband Network, you may be back on dial-up speeds within the first day of every month.

Finally, the problem with the fibre-optic broadband investment is that it fixes the service geographically. Consumer behaviour makes it clear that they place the highest value on connectivity precisely when they are not at home or work. People are willing to pay $1 per MB for mobile voice services and a huge $1000 per MB for mobile SMS but only about 10¢ per MB for the internet at home. From this perspective, the Government’s fixation on connecting homes rather than people seems misplaced.

Wireless broadband services have taken off precisely for this reason. Providers are simply following the money. What is more, the speeds that can be achieved over spectrum, while not as great as a wired option, are well in excess of the Government’s goals.

The terms and fine print of the Government’s goal for high-speed broadband are at least as important as the goal itself. Whether it be provision for symmetric upload and download speeds to allow communication and not just connectivity, the lifting of caps on use or having open enough standards to allow for wireless access, it will be these factors that determine how efficient the investment will be.

Joshua Gans is an economics professor at Melbourne Business School. He testified before the Senate on these issues in October. For details, see www.mbs.edu/cite