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OECD Economic Survey of Australia 2010 « Previous | |Next »
November 15, 2010

I cannot find the OCED's Economic Survey on Australia 2010 online apart from this brief chapter summaries. Behind it sits this overview which, surprisingly says little about the national broadband network (NBN). The Australian interpreted it as a critique of the NBN---as a rejection of Labor's broadband monopoly.

So what does the OECD say? Unfortunately, the overview doesn't say that much. It says:

In the telecommunication sector, the government’s project of building a new fibre network, the National Broadband Network (NBN), holds the promise of delivering potentially large benefits. However, as the cost amounts to 31⁄4 per cent of GDP, it also entails substantial financial uncertainties. The authorities’ strategy will improve Internet services for the entire population and promote a fairer competition between private firms on retail services. Part of the plan is to shut down the existing copper network and the country’s main cable network. While establishing a monopoly in this way would protect the viability of the government’s investment project, it may not be optimal for cost efficiency and innovation. Empirical studies have stressed the value of competition between technological platforms for the dissemination of broadband services. It would therefore be preferable to maintain competition between technologies in the broadband sector and, within each technology, between Internet service providers.

I find this glib. There will be competition between Internet service providers (ISP) in terms of them selling consumers retail services from an wholesale network that they can openly access. Just like the national electricity grid.

Secondly, there is competition between technological platforms for the dissemination of broadband services---between fibre, wireless and satellite.

On the monopoly question that is raised by the OECD the national electricity grid is a monopoly just like the NBN--but there is no argument that we should have two national electricity grids competing against one another. We have competing national highways. So why do we need competing national broadband networks?

Apparently in the 160 pages of the 2010 Economic Survey (not online) there is more detail on the NBN. According to Alan Kohler at Business Spectator:

Essentially the Paris-based organisation is concerned that an NBN monopoly “could forestall the development of, as yet unknown, superior technological alternatives”. It complains that the agreement with Telstra removes competition between the new fibre network and the existing copper and cable networks, calling it a “picking-the-winner strategy”, and says it would be better to maintain competition between technologies.

This is confused. The assumption is that the copper network — if we just give it a few nips and tucks — is good enough to keep us basking in 12Mbps glory for many years to come.

The copper network will be closed down over the next 8 years because it has reached its limits. It will be replaced a fibre network which consumers can choose to use or to rely on wireless or utilize both. Secondly, the hybrid-fibre coaxial network (a good historical example of telecommunications market failure) only covers a small and carefully defined part of Australia's geography. Their networks are closed to competitors, under-subscribed and hardly at risk of being upgraded after they haven't been voluntarily extended in the past 10 years.

Presumably, replacing the old copper network and the hybrid-fibre coaxial network will not prevent further technological developments in both fibre and wireless.

| Posted by Gary Sauer-Thompson at 12:00 PM | | Comments (3)
Comments

Comments

Like standardised electricity and water in the 20th century, optic fibre will be treated as a normal part of a well-serviced 21st century community. Eventually it will replace copper.

A trenchant luddite can just refuse to take it, and use a mobile phone and snail mail.

the OECD's views are those of Treasury. Treasury wants it known, and on the record, that it does not approve of the Labor Government's plans re digital infrastructure.

I don't understand the obsession with (contrived) competition. What is wrong with a state-owned monopoly, when that is actually the natural way to do something.

After all, we've seen how well competing retailers of electricity, gas, phone services etc have worked. Why not go the whole hog and have competing road networks?