In the fall-out of Telstra abandoning its plans for a national fibre-optic network, Premier Peter Beattie has announced his own plans for super-fast broadband piped directly into Brisbane homes.
But there is much less to this proposal than he makes out.
Beattie’s plan to allow potential investors use of public assets to string fibre-optic cable offers those investors nothing they don’t already have. Infrastructure builders can already use these assets. Beattie expects private companies to foot the bill, but why haven’t they done so already without the Premier’s invitation?
Australia does not rate high on international broadband rankings. This is really the fault of the Federal Government and Beattie’s frustration with the situation is understandable.
Telstra’s fibre-optic plans were cancelled because of federal regulations. Our overzealous competition regulator, the ACCC, insisted that if Telstra built the $4 billion network, then it would be compelled to offer access to that network to its competitors.
The regulator would choose the price and conditions. Telstra’s competitors would bear none of the risk — and in the highly competitive and dynamic telecommunications industry, that risk is extremely high. If the network was successful, Telstra would see its rivals competing with it, using its own freshly built network. If it were unsuccessful, perhaps because newer technologies passed it by, Telstra would have wasted its money.
It is much easier to piggyback off another company’s network at prices set by a regulator than to have to invest in infrastructure yourself. This regulatory problem has not yet been solved.
Beattie’s announcement does nothing to change the underlying disincentives to broadband infrastructure investment. He offers, as a trade for the $550 million investment that he expects the private sector to fork out, access to public assets such as powerlines and sewer pipes. But such supply channels are already available. They do not need the Premier’s agreement for their use.
Nor do commercial businesses need a politician to point out such investment opportunities if indeed they are profitable. If a company declines to build a service, it is a fair bet that either it is uneconomical to do so or an external power, like a competition regulator, has made it uneconomical.
If the business case for investing in the kind of network Beattie would prefer is so obvious, then in all likelihood the network would have already been built.
The Queensland Government is not the only government prioritising access to broadband as an urgent policy matter. Since the Telstra decision, state and federal governments have been working feverishly to develop grand broadband “plans”. Federal Communications Minister Helen Coonan expects to come out with a national broadband strategy next month. The West Australian Government promises to come up with a similar plan to Queensland’s shortly.
High-speed broadband brings about enormous economic and social benefits, but the Queensland Government should be wary of trying to chaperone telecommunications investment into the state. Governments are remarkably ineffective at predicting future technologies and consumer demand. When they try, politics always intervenes.
Earlier this year, the San Francisco council teamed with Google and internet service provider Earthlink to provide blanket wireless broadband coverage across the city, supported by advertising. Inevitably, the negotiations over this have been bogged down in politics and no wireless network has emerged. The two companies have found that running between town hall meetings trying to keep up with political, rather than commercial, demands is more work than was expected.
The San Francisco network, if it ever gets off the ground, will be a snails-pace 300kbps — a speed that the Australian Labor Party decries as “fraudband”.
An earlier citywide wireless broadband network in Orlando, Florida, was shut down in January 2005 when the city realised that only 27 people a day were using the service at a cost to taxpayers of $US1800 a month.
If Beattie’s project goes sour, taxpayers will have to foot the bill or be saddled with a sub-par network. It is not hard to imagine the Government chipping in a few million here or there to seduce investors, as various governments have done in pilot programs around the country. But doing so would invite failure, as countless taxpayer-funded and government-initiated broadband projects around the world have shown. Most end up underutilised or rely on tax money to survive.
The solution to broadband backwardness is not press releases announcing grand “plans”, but comprehensive regulatory reform. If the State Government wants Brisbane to have access to new high-speed networks, they would be better to work with the Federal Government to lower the obstacles to investment nationally.
Only removing the disincentives to investment stemming from the ACCC will allow Australian consumers to get the broadband they deserve.