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August 11, 2009
Chris Berg in PM's national broadband plan really is no net gain in the Sydney Morning Herald starts off on a promising note. The editor of the IPA's Review asks: "Has there ever been a major Commonwealth program more hastily conceived than the national broadband network?" (NBN)
It's a good question, and one that needs to be asked since the price tag of $42 billion is questionable and there is little prospect that NBN Co can be financially sustainable on a standalone basis. The commercial viability of the NBN is addressed in the Goldman Sachs JBWere's report.
This argues that it will take until financial year 2017 before 50 per cent of homes are passed by the network, and until 2028 before 85 per cent of homes are connected. On their forecasts NBN Co won’t be free cash flow positive until 2025. So the original concept of a giant public/private partnership will founder without massive and ongoing government subsidies.
Berg's answer to his question is that the NBN was most hastily conceived but he slips way from public policy:
After it was clear their previous $4.7 billion broadband plan was a dismal failure, it was reported Kevin Rudd and the Communications Minister, Stephen Conroy, dreamt up this $43 billion plan while on two flights between Sydney and Canberra in April.That's not just policy on the run. That's policy desperately sprinting from a horde of angry zombies while trying to pretend that the bite mark on its arm is nothing to worry about.
There was a review process with recommendations as opposed to a "horde of angry zombies". That's abuse ---name calling those who argue in favour of a highspeed national broadband network and a digital economy.
For Berg a digital economy is utopian, and government subsidies for it are akin to government subsidies for sunshine, flowers and walks on the beach. 'Utopian' is a code word for Left here since it refers to equity of access, not the neo-liberal utopia of a self-regulating market efficiently allocating scarce resources. However, Berg does comes back to policy:
The most common argument for government-sponsored broadband is productivity. But the national broadband network isn't going to be a magical productivity switch. There just aren't many potential Australian entrepreneurs having their innovative business plans stymied because their broadband isn't fast enough. Some businesses might find a faster internet connection useful, but few people seriously think our present internet speeds are what's holding the economy back.
It's more than just needing to be fast for businesses--there is also spread and access, given the problems in regional Australia. So what's holding the economy back, then? Berg is pretty clear from this paragraph:
Anyway, our hunger for ever-greater productivity might be better satisfied by allowing the private sector to build the network. (As much as four years ago Telstra was begging the government for a regulatory reprieve so it could build a new broadband network by itself.)
Wow. A company notable for its anti-competition stance, its anti-regulation, poor service, high cost products and slow backhaul is the answer. A company found to have rejected requests for third parties to install equipment in telephone exchanges across the country where space was found to have been available.
We can infer that the issue for Berg and the IPA in general is one of government intervention and subsidy. The government should not be building the network nor providing the massive subsidies needed to get it up and running.This is what is holding the economy back, and the reason why it is not good public policy.
The second reason Berg offers is that, "if it's productivity we want, perhaps the Federal Government could just reduce a few taxes. That'd give the economy a bit of a kick-along." Didn't the Government bring in tax cuts during its first budget? The issue is one of tax cuts versus subsidies in the context of the national broadband costing consumers more for the service than they are paying now.
Issues of government intervention and subsidy for the NBN are core issues and do need to be debated, but the desire to debate is blocked by Berg's turn to abuse--"horde of angry zombies". The immediate reaction to this is why bother to engage?
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From this commercial viablity link in the post I see that the economic viability of the NBN is a genuine issue. Thus:
That's dam high considering I currently pay around $80 per month for ADSL2+ The telecos are going to have drop their margins.