@newtonmark wrote an excellent article on ABC the drum site. Whilst I agreed with all his analysis on the need for broadband I parted with him on how to fund it. He argued that it should be treated as fundamental infrastructure like roads and be funded by the federal purse as forever a loss making enterprise. That doesn’t sit well with me with the way I watch business develop online. As I have written before, the way business develops online is the free market in its purest form. I really don’t believe the infrastructure that supports such an environment therefore, should be loss making. Don’t get me wrong I’m not saying I have a cunning plan either but I believe when governments artificially interfere with a market it stifles advancement in that market. Imagine what it would be like if you had to have a license to own a webserver.
I realize the NBN is different to publishing a web site but ask yourself why cant we all have on own small range TV stations? The reason is the barrier to entry is massive. 5 licensed broadcasters nationwide essentially controlled by the Government through licensing.
Then have a look at this company Neighbourhood cable. They opened an office 5 mins from my front door in 1995. I applied for a job as a salesman for selling video on demand and net access. It never went ahead because they couldn’t then get permission from the council to have their cables on the telegraph poles. I can still only get 8mbps but meanwhile in Ballarat, Mildura and Geelong, Neighbourhood cable has announced they will be delivering 100mbps within 12 months.
Regulation stopped that innovation and development here in Carrum Downs. Apparently their network currently boasts 30mbps. Regardless of what their actual speeds are they must be doing something right to have grown to that extent.
I don’t know anyone at the company or have shares. Interesting though. Gives me pause. Mark argued like roads the government should fund the NBN at a loss. However roads weren’t built in one massive rollout. Nor were they funded only from federal funds. They grew out of need for certain centres to be connected with better highways because that is where the traffic was. We’re not doing that with the NBN. We’re rolling it out whether there is traffic there or not. Imagine if we had of done that with roads. How much waste would there have been. Go and have a look at a street directory from the 1970s. Have a look at the proposed freeways and how long it took them to be built. They were built when the need demanded. Sure you could argue the growth of the Internet and the need for telecommunications has been so fast that we need to roll it out fast and “future proof”. Starting is Tasmania though, is not where I think there is most demand. The Government does not build roads in a new estate. The developer does.
I keep hearing the private sector is not interested in building an NBN but I can point to at least one instance where a business seems to be able to build a network successfully at local level. I wouldn’t be surprised if the reason we haven’t seen more of these endeavors is because of restrictions & regulations. Instead of looking for a solution that blankets the entire country, maybe we should be looking at the local level to see what barriers to entry can be removed to allow more innovation.
Imagine how much more innovation we would have seen by groups like Melbourne wireless et al if they hadn’t been restricted by the regulations surrounding wireless. These are intelligent people they’re not interested in interfering in other frequencies or devices. The growth of the Internet has shown us that even though no one is in charge and it’s extremely technical it can work without government regulation… Hmmm.
So whilst I agree with people like @newtonmark and @nightkaos about the need to improve our bandwidth I certainly disagree with how to fund it and who should build it.
Look at what is happening with Net Neutrality. The reason we are now having issues with networks is that their proliferation is dependent on Government regulation. I’m not suggesing we should let anyone hang cables like Saigon seems to. Although when I was there in 2008 there was free interent access everywhere. Every cafe, restaurant and hotel that we stayed at had free access.
I was amazed at the cabling in Saigon!
“The Internet was designed to empower users. Its open, “end-to-end” architecture means that users—not network providers or anyone else—decide what succeeds or fails online. It’s a formula that has worked incredibly well, resulting in mind blowing innovation, incredible investment, and more consumer choice than ever.” – Google. They seem to have recently changed their position. Nevertheless the above statement is true. So now we are proposing even less diversity in the network by having having the backbone owned by a single entity. It’s not clear when it will be privatised but it will be either a public network or a private one created by the public purse. Either way it’s not a good idea based on what we’re seeing with the Net Neutrality debate. Why can’t a small neighbourhood get together and pool their resources to establish their own local connectivity. If you want to share the cost of your connection with your neighbours you can’t in Australia. That is stifling innovation. I would prefer a diversity local wireless networks plugged into larger networks. We know our ISPs can work out peering arrangements between themselves to share bandwidth. If we did have a regulatory environment that enabled innovation the roads with the most traffic would be upgraded first. Not Hobart.
I believe we need a revolution in network development not more sucking on the public teat.
{ 18 comments… read them below or add one }
Hi Jim.
Calling for a revolution is all fine and good, but who’s paying for it, and how much will they charge to use it?
I’m as much a free-marketeer as anyone, and abhor government intervention in places where they don’t belong. But I’m pretty non-ideological about it, and I accept that infrastructure is one of those places that our society has accepted a major government role.
Virtually every free-enterprise market I can think of depends on government-provided infrastructure.
Furthermore, it seems to me that there’s also widespread acceptance in our society that government-provided infrastructure will inevitably fail following privatisation. Is private water distribution a market success? Electricity? Public transport? Railways? (Telecommunications?) In each case, we end up with a whole-of-society cost imposed by asset-sweating and monopoly rents. We know we’re going to suffer that cost, and we go ahead and do it anyway. Stupid, aren’t we?
So here’s the thing: My free-market heart tells me that “the free market,” is completely unsustainable in a monopoly. Private enterprise cannot beneficially exist without competition.
So what are we supposed to do in cases that economists describe as “natural monopolies,” those situations where it’s unviable to introduce competition?
We’ve tried the “free market,” and discovered it doesn’t work very well, so more-of-the-same doesn’t seem sensible to me. We’ve also tried top-to-bottom government provision of services (the old PMG/Telecom days), and they didn’t work very well either.
So I’m now inclined to think that there’s a government role in provision of the underlying infrastructure (which government usually does quite well), and a free-market role in the provision of services across that infrastructure.
Kind of like the split between government roads and private transport companies.
The “freeway vs dirt road” argument fails for me too. Firstly, I’m not convinced that handling growth by building a dirt road, then building a sealed road, then widening it, then duplicating it, then building a freeway is any less “wasteful” than just building the freeway in the first place, if the cost of the freeway happens to be “close enough” to the cost of the original dirt road.
Secondly, one of the desirable social goods from the NBN must surely be to lower the gap between regional and metropolitan business viability (I quite like the idea of building large datacentres full of webhosting firms on cheap land in country towns, for example, in the same way that Woolies builds distribution centres 75 – 100 km outside of capital cities). If that’s one of your goals, then it doesn’t make a lot of sense to entrench a model which sees inferior infrastructure being built in the very regions that need stimulation the most.
Food for thought, anyway. I expect we’ll all still be talking about this when the next election rolls around, so perhaps there’s still plenty of time to reach agreement before the NBN becomes reality
– mark
@mark as far as funding goes, how has Neighbourhood cable funded it’s rollout? Private investment. I dont know very much about their business but they seem to be doing well at a local level.
I don’t believe privatising Government infrastructure is the free market in it’s purest form. That is not a natural evolution of a business. Subsidies, caveats etc all apply. “If all economists were laid end to end they would never reach a conclusion” – George Bernard Shaw. I don’t believe we have tried the free market when it comes to bandwidth or telecommunications. We semi privatised a Government monopoly rather than breaking it up in Telstra. It wasn’t so long ago we could only plug in Austel approved devices into our phone lines. That is not real competition.
If there is a business case in regional centres to have data warehouses then surely there is a business case to get bandwidth to those centres. I’m not saying any/all Governments shouldn’t be involved in telecommunications at all. If your data warehouse needs extra capital investment to get the main road to the centre, then let’s have THAT discussion. An NBN to me seems like one size fits all rather freeing up local communities to find their own solutions at a local level. Yes we still need infrastructure to get to those local communities but we are a clever bunch and once their is incentive for local businesses and individuals to get involved we will find solutions.
Sure you may end up with a sub-standard infrastructure compared to the NBN but that assumes that the NBN is rolled out on time and on budget. By looking for local solutions to local problems though you get a solution better tailored to users needs. Some communities would be fine with wireless just as I am happy with satellite foxtel because I cant get cable. I know people who have moved house (as I am sure you do) just so they can get ADSL2. If you give more power at a local level I believe you will see centres competing based on their network infrastructure. That wont happen though whilst it is controlled by so much regulation.
You’re right of course though we will still be having this discussion at the next election.
So what’s your proposal to get from where we are now (where free enterprise fails due to the presence of the privatised monopoly incumbent) to where you want to be (where the free market prevails)?
Ask the Neighborhood Cable folks about how many headaches they’ve had due to TLS, and how much it’s cost them, btw.
As for “freeing up local communities”: I’m disinclined to think that local communities want to care about that, otherwise we’d have thousands of Neighborhood Cable style enterprises flowering up everywhere, wouldn’t we? (unless their success isn’t all it’s cracked up to be. They’ve been trading for over a decade, if their model is so sound why aren’t there more examples?)
What I do know, however, is that a taxi company in a small country town would be dead-set furious if they couldn’t get their business going without first having to convince everyone to build roads. It seems to me that if we’re at a point where we think broadband is a basic part of the fabric of society just like water, electricity and transport, then we should be at the point where we’re prepared to make it ubiquitous and equitable, and Government seems like a tailor-made vehicle for achieving those outcomes.
If, on the other hand, we still think broadband is the kind of luxury that only goes to people who can afford to finance its construction to their specific neighborhood, then your model sounds like a winner to me.
So which is it?
– mark
I think the model should be somewhere in between the NBN and Free Market.
I believe the Public purse should pay for the Highway and the main roads but I think the streets and footpaths should be funded by developers which obviously means consumers.
I see no harm in doing a full NBN type rollout in regional Australia where it’s not currently commercially viable for ISP’s to do it but I just can’t see the point in OUR TAXES paying for the NBN to be rolled out where ISP’s are alreay fighting it out for customers.
I believe the only way to have true competition is to have more than 1 wholesaler. Force Telstra to sell of either their Retail or Wholesale arm(Coalition should have sold them separately). Let the likes of iinet,internode,tpg and iprimus(Possibly new providers too) compete with them for wholesale business and then watch how quickly they scramble to put fibre almost everywhere.
I would suggest that the reason we haven’t seen more Neighbourhood cables or local wireless solutions is because of regulation. That is how it was explained to me in 95-96 by NC. 15 years is a long time to be in business. Most don’t last beyond 5. I’d say that is testimony to their success rather than ineffectiveness.
Your argument seems to be that business wont invest without the network there. But a taxi company would setup because of the need locally not because the of the highway. The population would be large enough to support it. As you rightly state, the NBN will simply allow us to work faster.
Above all else, all of the infrastructure examples you list none are controlled solely by the federal govt. Why can’t we at least remove the restrictions placed on wireless and at least give breath to innovation.
If you’re asking do I support a socialist network or a facisct one, i reject both. I think in order for us to grow as a nation we need as many Australians as possible with as much bandwidth as they need. That’s not what the nbn is though.
@mark even if i your vision worked the network would still be sold off by a govt at some point. Then you have a private monopoly. Im looking for a better way. Im not saying I have all the answers.
I thought I accommodated that by proposing that the network run at a loss, so that it can only survive with frequent government cash injections (again: Like roads).
That way it wouldn’t be sold off — at least, not without a protracted period of price rises to raise its income to the point where it’s viable as a stand-alone entity, which would be politically painful.
I’m not asking if you support a socialist network or a fascist one. Those terms are overloaded with ideological overtones (actually, no — they’re totally ideological!)
I have a non-ideological view of the network. I don’t care whether it makes money, costs taxpayers, or benefits private shareholders. I care about the outcomes. To me, the important outcomes which would justify building it in the first place are ubiquitous access and affordability.
If it isn’t going to be ubiquitous and affordable, I don’t think it’s worth doing. At all.
Given the history of the telecommunications marketplace in Australia, I’m pretty confident that the private world simply can not (or will not) deliver on those attributes.
So it’s because of the importance of those outcomes that I advocate government ownership, not because I’m “socialist” and think the government should be owning things.
– mark
It’s as I said on Twitter; the free market can work yes; but someone needs a plan. If you can come up with a plan that will effectly address all the issues like regulation and break up unsustainable monopolies, and get the house and the senate to support it; not to mention companies like Telstra; then yes; I’m sure everyone here will support it.
However; there are people who need this issue fixed now, and your plan, nobel and idealised as it might be, will take years to cone to fruitition. Not to mention even more time actually fixing the issues. The NBN can start fixing these “blackspots” tomorrow.
If and when the government starts considering selling the NBN; then we can protest that. We have proven this election that the people have a voice, so let’s get heard.
HFC networks like those run by Neighborhood Cable are so prohibitively expensive to build, because you have to cable up an entire suburb before you can advertise that your service is available in that suburb, but if nobody in that suburb goes ahead and connects to it, then the build cost is completely lost.
This is why both Telstra and Optus stopped rolling out any more HFC cable. The business case to build one and get a return on it is practically non-existent.
Why will the NBN be different?
Well, the NBN will necessarily have close to 100% uptake, despite what some say. Close to 100%? Sure.
If as the NBN rolls out, Telstra decommissions the copper network, anyone who wants to maintain an existing service provisioned over copper – (xDSL, POTS, whatever) – from ANY provider, that provider will need to migrate their customers onto the fibre network.
Even Grandma with her PSTN line and 1970′s Telstra dial phone will have had her provider migrate her service onto a fibre-based connection. She won’t notice the difference, but it will be generating return to NBN.
Every xDSL provider in a service area will have to connect up to the NBN if they want to continue servicing the area. Telstra have recommended to their shareholders to accept the $11b Telstra/NBN Co access deal, so if the NBN goes ahead, this is the scenario you’ll see.
But such a network would never exist if you left it to the industry, and all the while, the almost 70-year-old copper access network is deteriorating further and further.
While lacking the technical experitise of you folk, I’ve found this a fascinating discussion.
FWIW I agree with Mark. I think we need a core backbone that’s in public hands, but it must be guaranteed from the outset that there will be open access for all users and retailers. Likewise, there should be guartantees it must not be a censored network and world best practice privacy requirments should be legislated also.
Rather like the case of climate change, I think we would benefit from adopting realistic yet ambitious telecoms targets. These would increase over time in terms in terms of range and speed. (eg. 95% population to have access to X speeds by 2013; 99% of population to have access to Y speeds by 2016…)
I’d see access prices being set on a maintenance and management cost recovery basis. That is, users should not be expected to help recover the initiatl investment cost, but should contribute the quanta of payments required to cover network amortisation, maintenance and network management. That way the NBN is a one off capital expenditure that does not represent an ongoing drain on the budget – and users costs would be kept low.
It’s worth refelcting, i think, that we’re are fast moving into a world in which internet access will be akin to a human right – like the right to housing, health care and public education. Hence I think we’ll need to provide basic access to the network free of charge.
Although these can be represented as ‘left-wing’ ideas, I agree with Mark that getting the best outcomes is what really matters, not ideological labels.
Some things work better in a competitive framework; others are natural monopolies. In those cases, the public is foolish to allow them to be privatised.
In terms of how the NBN investment is paid for… I’m a fan of Stephen Zarlenga.
See http://www.monetary.org
By common agreement and for appropriate activity (such as wiring up the planet and greening our planetary energy production), governments can and should simply create investment money out of thin air – like the banks do, but without incurring interest.
That discusssion is OT, but IMO is a crucial ingredient missing from contemporary Australian public discourse.
@mark sorry didnt mean to infer anything about your political beliefs. Just like Ive been accused of being idealistic I think your plan of it forever running at a loss & never sold off is also unlikely. Your funding model would be more consistent I think with a defence budget rather than roads. Totally funded from federal coffers for all Australians. I don’t believe that would be sustainable esp in an industry where technology develops so fast. When Government spends more, we lose more freedom. Idealistic maybe but that is where I’m coming from.
TLS just announced an 8% drop in people using landlines yet we’re about to wire up every home with a very expensive one. No one sees a problem with this model? I just saved the Govt $1.8bil ?? That is my main concern we’re spending this money on areas where it is not required. Mark’s well thought out article is the only one I have read that gets past the bandwidth “all you can eat” pitch.
@syd dont get me started on fiat currencies & fractional reserve lending
I just bought a new hand made suit. It cost the same as a handmade toga in Roman times. 1 ounce of gold.
@michael like Mark, you seem to discount the NC exp. Why? Like Mark points out they have probably had heaps of probs with TLS and I know they have had issues at a local level with regulations. So the answer seems to be build another TLS without retail. I’m not buying that I’m afraid. Shouldnt we be stimulating innovation by removing barriers?
@nightkhaos we’re not starting with the blackspots so they wont be fixed tomorrow. I don’t have the answer. I’m immensely unqualified to proffer one too. I am puzzled though why folks better qualified than arent thinking past the FTTH excitement. Present company excepted of course.
I dont believe federal Govt will stay out of some sort of national network. So if they are hell bent on getting involved I’d prefer them to concentrate on backbones in & linking major centres AND remove a lot of the regulations around wireless & telecommunications generally. Before we get bandwidth as a right I’d like to see us at least get free speech first.
Jim
I usually keep that argument in reserve, because it typically attracts no comment at all or very banal comments.
It is, however, the ultimate response to anyone insisent on claiming that we can’t have nice things because we “can’t afford them”.
A more common way of responding “yes we can!” is to point out the sums hurled without debate at deadly new submarines, strike fighter aircraft, ASIO etc. That usually shuts ‘em up
Hwoever, we live in a debt-ridden world which clearly needs another enormous stimulus package and has a lot of crucial new infrastructure to build. Actually, that’s an OECD-centred view of the world. Many populous societies have never seen a stimulus package in their lives.
At some point an intelligent discussion about debt-free (but still fiat) finance is inevitable.
Hence I drop it into the agenda from time to time. As you’ll know if you’ve read any of Zarlenga’s material, he is not suggesting a return to the gold standard. Far from it.
In the interim, the jokers who benefit from the present system will be pleased to note that their trick of co-categorizing serious monetary reform and crop circles seems to be working.
Jim said “TLS just announced an 8% drop in people using landlines yet we’re about to wire up every home with a very expensive one. No one sees a problem with this model?”
Stay on Target Jim – TLS has seen that drop because of the move to VOIP, which is hopeless on wireless & will be just fine on FTTH. You don’t need a dialtone on dedicated copper ccts to the Exchange if you get the same from a VOIP service over Fibre, but you need the xDSL or Fibre or such Internet connectivity.
You’re missing your own point in many ways.. As you were!
Err no. Telstra have said they lost landlines because of the move to wireless. Certainly they have lost market to voip. But voip isn’t the reason they’ve had landline drop off. What do u base your assertion on? I’m reading tls announcement.
Also just read this article. http://delimiter.com.au/2010/08/30/ageing-australia-doesnt-want-1gbps-linton/ I’m not a fan of Exetel’s attitude towards their customers (got burned
) but he does pick up on the fixed line issue.
Telstra have lost landlines because they don’t count services delivered on ULLS as a landline telephony service.
So their loss is directly attributable to their competitors’ gains.
It doesn’t mean there are large numbers of houses using NextG as their primary communications service.
– mark
Not necessarily directly attributable I would argue. I think we all know some people who have done away with their landlines because they have unlimited 3G call plans. Maybe not large numbers but it is trending more toward mobile.
Not enough to make a significant difference to the numbers in Telstra’s annual report.
Having an unlimited 3G call plan isn’t terribly useful when what you really want is high-speed broadband. Like you, I know one or two people who don’t have a home phone number because their cellphone suits them better, but they invariably also have naked ADSL delivered over ULLS — Which means they’ve dropped out of Telstra’s fixed-line telephony numbers, in a way which doesn’t support your thesis of an exodus away from fixed-line broadband.
Incidentally, anyone who thinks wireless broadband has a future needs to read up on the Shannon-Hartley Theorem and the Nyquist Rate. Physical laws trump business models and technology roadmaps any day of the week
– mark