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  • Blog, Telecommunications - Written by on Friday, April 4, 2014 16:16 - 7 Comments

    Why broadband is too important to be left to the private sector

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    blog Remember how earlier in the week we hosted several discussions on Delimiter about Australia’s telecommunications regulatory environment and how it could have been set up differently? Remember how so many readers whaled on University of Canberra academic Michael de Percy and I for merely suggesting that it was feasible (in fact, normal, in global terms) for the private sector to do most of the heavy lifting for broadband provision, with governments normally helping out by subsidising rural areas? Yeah, good times. Well, for balance, today we present the opposing view.

    Vox Media in the US has recently published a fascinating interview with Susan Crawford, former Special Assistant to President Obama on Science, Technology, and Innovation Policy. In it, Crawford expresses a view very similar to that taken by the Australian Labor Party — that the development of broadband is too important to be left to the profit-focused private sector. A sample paragraph:

    “This is a very expensive thing to build in the first place — much like the highway system also very expensive to build. As a profit-making company what they’re going to try to do is focus on those areas where they feel they can get the highest rewards, and those are often the richest neighborhoods. They’re going to leave out less wealthy areas and places that are more remote. But we’re one country and every American needs this access just the same way every American needed a telephone line.”

    The popularity of Labor’s all-encompassing NBN policy in Australia coupled with Australians’ love for big government means that Crawford’s view, if expressed down under, would be quite mainstream. However, in the US, where free market capitalism is very much the order of the day, Crawford’s views come across as quite revolutionary — almost taboo — in that the advisor is calling for the US Government to strongly intervene in the telecommunications sector on a national basis, as Kevin Rudd’s Government tried to do with the NBN in Australia.

    As I’ve said before, I support Labor’s original all-fibre NBN vision, and I think it’s the best telecommunications policy Australia has ever had, although the implementation has not been ideal. However, I’m not naive enough to think that it’s the only way broadband in Australia can get upgraded. There are plenty of examples internationally, particularly the structural separation of BT in the UK, where a smart approach to industry regulation has also paid very strong dividends. In any case, Crawford’s view is an interesting one — and particularly coming as it does out of the United States.

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    1. Brendan
      Posted 04/04/2014 at 4:42 pm | Permalink |

      “However, I’m not naive enough to think that it’s the only way broadband in Australia can get upgraded.”

      It is not the only way, it’s just the only sane way. To match BT, or Chrous in NZ, then legislation changes would be needed to force Telstra separation, and the ACCC would have to reverse it’s infrastructure competition preference.

      Neither is likely to happen.

      Ironically, the current US situation is what could easily happen here; the logical conclusion as infrastructure owners consolidate further to gain market share and control of market.

      We may end up with Telstra, Optus and a third owner, made of the remaining infrastructure owners like iiNet and TPG.

      This is my just my opinion based on what has happened so far, and where this seems to be heading; there’s no advantage to being second, so each will be vying to sew up market space.

      Sure, that’s competition. But maybe not what was expected.

      Once the major first push out is done, market share pretty much becomes the only place left.

      • RBH
        Posted 07/04/2014 at 10:40 am | Permalink |

        +1

        Your first paragraph is a good summary.

        And now for my philosophical musings:

        Competition is not a drop in panacea that always results in greater efficiency. It is a system that requires a mature, considered understanding and a respect for law if it is to provide those benefits. In a situation like Australia’s telecoms industry you have a prevailing culture that has evolved around an extremely dominant Telstra. We are constantly reminded that Telstra is champing at the bit to find markets in which it can dominate and charge the highest rates possible. If it can’t it simply isn’t interested and that is why it knocked back the first government request for broadband upgrade and then submitted a non-compliant bid the next time around. Now with Malcolm in power and the NBN dismembered, Telstra smells blood in the water and it has come alive again in regards to fixed broadband. There is nothing about the Australian telecoms landscape to suggest that healthy competition that best serves the nations interests will suddenly spring up out of the ashes of the NBN. I believe that having a period of time (10-20 years) of retail competition such as would have been the case with the original NBN would have fostered a better environment for wholesale competition to grow from.

        It has become a folly of government and in part this is a product of media to believe that everything can be done quickly. Wisdom lets you know when an important thing just has to go at its own speed. The NBN was and is one of those things.

    2. Bern
      Posted 04/04/2014 at 4:49 pm | Permalink |

      I agree in many respects with the government-led approach.

      Mainly because broadband access has moved quite rapidly from being a luxury item, to a commodity, towards being enabling infrastructure that promotes economic growth and social well-being.

      The analogy with highways is apt. Left to the private sector, there would be some great highways – linking a select few cities, where traffic demand is great. Tolls would be substantial, too. The rest of the country would be stuck with substandard roads, at best, which would be heavily subsidised (if not entirely funded) by the government.
      Conversely, look at what the US achieved with the Interstate system. The benefits for economic growth have been substantial, and very little of it was privately funded.

      • Nexus789
        Posted 04/04/2014 at 9:08 pm | Permalink |

        You can extend that to the building of the power system, ports and other infrastructure. The private sector would never build the Snowy Mountains power scheme.

    3. Nexus789
      Posted 04/04/2014 at 9:02 pm | Permalink |

      A number of countries use sophisticated technology planning approaches and they identify having a high speed broadband network as key to national competitiveness and national productivity. Makes sense as it underpins collaboration, the value of information exchange and the creation of new business models.

      However, we don’t plan in Australia and our politicians are in a perpetual state of puerile adversarial conflict in terms of tearing down the other parties ideas even though they would be beneficial to the nation.

    4. Paul Grenfell
      Posted 05/04/2014 at 9:59 am | Permalink |

      The Post office.. Pmg, Telecom etc. Were built successfully by the Govt. Not private enterprise. I really don’t understand the hate for Govt built infrastructure. We wouldn’t have national roads, rail , power if we left it up to private enterprise.
      Crazy logic. Let the govt build the ftth nbn and quit stalling..

    5. Johnathan Nguyen
      Posted 12/04/2014 at 11:25 am | Permalink |

      The basis infrastructure, are we better off today than 20, 30 years ago ? I don’t see so. Nothing wrong with capitalism but extreme-capitalism kills, and it’s the fact. Look at tiny roads being “poorly” built in new estates by private developers, local community services being neglected or unreasonably charged with silly fee since councils run as a profit centre, electricity billing nightmares, telecommunication service SLAs, and now the proposed privatisation of Medibank, the list just goes on and on…….. It’s fine by me to let Qantas or similar Government controlled services fall in the hands of private corporations but I for any moment cannot digest how extreme-capitalism is allowed to get in the way of services like NBN, road and transport, electricity. Sure, extreme capitalist would love to see NSW RTA, VIC Roads run by private corporations too. Or is extreme-capitalism in fact the only way ahead for Australia ?




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