David Kennedy and Kevin Noonan, Research Directors at Ovum, a leading telecommunications and broadband research company, have said that Federal Government management of projects as large as what Labour is proposing under their $43 Billion National Broadband Plan is at best “patchy”.
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“Labor’s approach is to prepare for anything that future demand might throw at it. Unfortunately, it is also expensive and disruptive. Further, it requires the government to manage a complex, long-term infrastructure project. The record of public management of such projects is not good,” claims Kennedy and Noonan.
Both men watched yesterday’s National Broadband debate at the National Press Club, at which Labour and the Coalition debated the respective merits of their ICT policies. They claim that a clear divergence has emerged between what the Opposition is proposing and the $43 Billion that Labour is proposing to spend.
In a report issued today Ovum said:
The Labor government is committed to investing up to A$43 billion in a National Broadband Network (NBN), including a 100Mbps wholesale-only FTTH network to 93 per cent of the population. Wireless and satellite will cover the last 7 per cent of the population. Pilot FTTH sites have been activated, and further sites are under construction.
In contrast, the opposition Coalition has proposed a different approach in its election policy. It will commit a mixture of grant and investment funding up to A$6.3 billion to an incremental upgrade of broadband infrastructure, including:
· A$750 million in grants for DSL and copper network upgrades to support ADSL2+ in outer urban areas
· A$1 billion in wireless investment for remaining broadband “blackspots” in urban areas
· A$1 billion in grants to construct a wireless broadband network in rural areas
· A$2.75 billion in grants to construct competitive backhaul links on rural routes currently monopolized by Telstra, to support rural DSL and wireless networks
· A$700 million to subsidize satellite broadband services in the last 3 per cent of the market.
The Coalition has guaranteed that the wireless networks will support a minimum of 12Mbps peak speeds.
Two philosophies of intervention
The difference between the two approaches can be summarised simply: Labour offers an expensive gold-plated solution; the Coalition offers a modest and incremental one. This reflects an underlying disagreement about how to manage uncertainty over future demand for high-speed broadband.
Labour’s approach is to prepare for anything that future demand might throw at it. Unfortunately, it is also expensive and disruptive. Further, it requires the government to manage a complex, long-term infrastructure project. The record of public management of such projects is patchy.
In contrast, the Coalition bases its plans on demonstrated demand, and targets investment where service outcomes fall below those in urban areas. This is much less expensive for the taxpayer. However, if demand for high-speed broadband is eventually proven then the issue must be faced afresh. And the incremental approach has its own complexities; for example, how to allocate funding, and how to avoid distorting the market.
Broadband infrastructure matters, but it is only one piece of the puzzle. A range of applications are invoked to justify investment in broadband infrastructure: e-education, e-health, and smart grids. But many of these could be delivered using existing broadband networks. There are other barriers at work.
In a panel session after the debate, the CEO of the Australian Information Industries Association (AIIA), Ian Birks, compared the broadband network to the railway network of the 19th century, which needed rolling stock to complete its value proposition. He questioned the two sides about their commitment to promoting new services to take advantage of their infrastructure investments.
In contrast to the infrastructure commitments, little was proposed. There has even been a retreat in some areas. Labour has allocated funding for further development of smart grid and e-health technologies, while the Coalition has indicated it will cut e-health funding. Labour also announced it would remove A$447 million in quarantined funding for strategic e-government initiatives, and it appears the coalition parties support this removal.
The efficiency benefits of broadband will not be realised unless funding and institutional barriers to ICT deployment are removed. The difficulty of creating a national e-health identifier is a classic example. The biggest barriers are not lack of broadband speed, but institutional inertia and perverse incentives. The effort required to lift these barriers will be just as large and important as the effort going into national broadband networks.