Following my comment piece last week on the NBN and the cost to Australian taxpayers Julian Robertson wrote the following comment.
Following my comment piece last week on the NBN and the cost to Australian taxpayers Julian Robertson wrote the following comment.
The net taxpayer cost of the Govt’s plan is not $43B. At the end of the time, the Govt will OWN the network which it can sell, and plans to. I don’t know what it will be worth, but substantial. On the other hand, on completion, the Opposition’s Govt would have spent their $7B and own nothing.
And what will they spend their $7B on? On trying to correct the hopeless distortions that free competition will bring to such an infrastructure project. And Telstra will still be in an impossible situation to ensure efficiency and fairness because they will still own much of the infrastructure and suffer massive conflicts of interest at all stages.
This is NOT a suitable candidate for free enterprise solution at all as has already been proven; precisely why the Govt has ended up where it has. One glaring example was the times when THREE providers were running cable access in popular streets, and NONE in less popular streets. Hopelessly inefficient as well as hopelessly unfair.
Richards says “On the other hand competition among private companies will drive the roll out of fast broadband networks. It will also deliver competition which, over time, drives prices down, not up.”
It is true that competition brings about lower costs of implementation of given equipment by its nature. So installing a given network by a private company will usually cost less than if it were installed by a monopoly.
HOWEVER, competition means you end up with duplication or triplication of networks which is totally unnecessary, much more expensive and breeds further inefficiencies when trying to interconnect competing systems. The total cost of networks provided by two or three private companies is MORE than the total cost of a single integrated system provided by a Govt monopoly. The consumer will cover the cost of three systems instead of one. Maybe there will not be complete overlap of the competing systems, but if there is none at all (i.e. no duplication anywhere) then there is also no competition so no competitive efficiencies. Why is this fundamental fact not discussed?
A simple example already out there – we currently have 3 distinct networks (owners) of mobile phone networks. The cost of these 3 networks and associated triplicated towers, transponders, control and interconnection is much more than the cost would have been of a single integrated Govt owned mobile system, even allowing for monopolistic inefficiencies. AND, such a Govt system would have been able to provide better coverage for the same cost as three systems all covering more or less the same restricted areas.
The Government’s proposed broadband system:
– Will have lower TOTAL cost because of lack of duplication of services and less complex control and interconnection.
– Will be far more simple to comprehend for business, suppliers and consumers.
– Will obviously provide a superior and more predictable service.
– Will make competition fair without favouring Telstra or any other provider.
On another point, Richards states that most people are happy with their existing broadband speeds as an argument against spending a lot to get higher speeds. This is because they are not using their existing service for the services that will eventuate and which will inevitably require higher speed. It’s a foolish and short sighted view, of course consumers are happy with current speeds if they only download the occasional video. But when IPTV becomes the norm, what are they to do then? We may not be sure of the future, but we can be sure that bandwidth requirements will increase, and the Opposition’s plan to lock us into low speed for the foreseeable future is just foolish and again end up costing the consumer far more in upgrade after upgrade as inadequate capacity and speed forces constant catchup re-equipping.
As a footnote: Anyone who believes that the NBN is benefical to Australia should read an excellent comment piece written by Ecconomist Colin Joye at the Drum on the ABC web site.
http://www.abc.net.au/unleashed/stories/s2983739.htm
