The United Nations last month released a report on broadband policies for developing nations. Unfortunately, its recommendations provide little more than advocacy of futile, centralised, national “plans” to increase Internet availability and use.
Similarly, policy makers across the Australia are formulating grand plans to resolve this county’s broadband crisis.
In Communications Departments around the world, “plans” are in fashion.
These plans are trying to address real issues. In Australia, communications policy has comprehensively failed. Infrastructure investments are being tied up for years in regulatory negotiation, and they are abandoned when no compromise is reached. As a result, our broadband penetration is in the bottom half of the OECD rankings.
For developing nations, the lack of adequate communications infrastructure can be a significant obstacle to development.
The United Nations recommends that governments in developing nations institute a series of master plans to introduce and expand their infrastructure. These consist variously of government subsidises and interventions. Growth, and a reduction in poverty, they argue, will naturally follow.
But communications is a highly profitable business to be in. Entrepreneurs sensing a demand for communications networks, be they fibre-optic broadband or mobile, will strive to meet that demand.
What is the market failure that the lavish master plans advocated by the United Nations are supposed to address?
Institutional obstacles hold back many of these developing nations from the growth they desperately need. The popularity of mobile networks in developing nations is because they are typically unregulated, in contrast to the corrupt, state-owned telcos and rigid regulatory impediments which restrict markets in wired telephony.
Kenyan farmers, just like those in the Riverina, can now communicate with their markets to ascertain the level of demand for their produce. The waste of food and man-hours from lengthy trips to supply a demand that didn’t exist is no longer common. If you have food to sell or buy, you simply make some phone calls.
The “digital divide” is only indicative of a general economic divide between rich and poor countries. Communications networks are not the catalyst for economic development. Instead, they are built when a sufficient demand, brought about by economic growth, presents individuals and companies with opportunities to make profit in communications.
However, government policy in many of developing countries either discourages or even forbids entrepreneurial investment in communications and other infrastructure. The solution is institutional and government reform, to allow economic growth, rather than subsidies and plans.
It isn’t surprising that we have the same problem in Australia.
In the aftermath of Telstra’s cancellation of their fibre-optic cable to the node plans, politicians around the country have been spurred into action. Queensland Premier Peter Beattie announced last month a broadband initiative for Brisbane, which, incidentally, offered Queensland entrepreneurs nothing they didn’t already have.
The West Australian government has announced $1 billion worth of funding for a broadband network across their state. In New South Wales, the government has announced plans for free wireless broadband throughout Sydney.
And Federal Communications Minister Helen Coonan, has announced a range of grand initiatives to deliver broadband to regional Australia.
Many of these plans are similar to the existing subsidies being trialled in rural regions around the country. Taxpayer’s money will be transferred to businesses and individuals who would prefer slightly faster speeds than are currently available.
Like the United Nations’ master plans, these Australian broadband plans are a mere bandaid to cover the real issues in economic policy.
The Australian government administers a regulatory framework which actively discourages investment in infrastructure by forcing entrepreneurs to share their investments with their competitors, at a price chosen by the regulator. Telstra’s reluctance to build a new network and have its control immediately handed over to the Australian Competition and Consumer Commission is understandable. This is a failure not of the private sector, but of government.
The obvious solution is to reform access regulations to encourage investment. Competition regulation which does not do so is regulation which holds back economic growth.
Grand government initiatives aren’t needed to encourage telecommunications investment. Entrepreneurs merely need to be granted the freedom to build on terms of their choosing. On this measure, the Australian government, not the private sector, has failed.
No comfort should be taken in the enthusiastic proclamations of plans and initiatives by politicians.
The lesson for rich and poor countries are the same. Get the frameworks right, and the rest will follow.