In April 2009 the Federal Government announced it will establish a new company that will invest up to $43 billion over 8 years to build and operate a National Broadband Network (NBN) delivering superfast broadband to Australian homes and workplaces.
The government hopes the NBN will provide a better, faster broadband service and promote competition.
This announcement has received support from a wide range of industry and economic commentators.
The primary virtue of the proposed NBN is that it will sweep away the number one structural problem in the Australian communications industry. At present competition is stymied because the largest retailer of communications services – Telstra – is the monopoly owner of the copper wire network which all land based communications services must use.
This is not a question of whether you like or don’t like Telstra. Telstra is unpopular with many consumers, and Choice has been very critical of its anti competitive pricing. But it does do some things better than its rivals – for example it offers a higher level of consumer protection for customers of Mobile Premium Services.
The NBN has also been welcomed as opening the way for a range of new services direct to the home. The problem is no one has really given a reasonably coherent description of what these services would look like and how they will benefit consumers. And there are certainly no actually existing business plans available to evaluate. Nevertheless there is past evidence of undreamed of services coming to fruition once infrastructure bottlenecks are cleared.
The two main worries about the NBN are whether we really need to spend this much money on fast broadband, and whether the cost of fast broadband services will be reasonable for consumers.
CHOICE has been critical of the rush to build high speed broadband in the past (see 'Is fast broadband just Boosterism?'). We still don’t think that the case for rapid deployment of fast broadband is overwhelmingly made – in particular the initial direct beneficiaries will not be the majority of consumers but particular industries with commercial reasons for a high use of video.
CHOICE surveys show that the majority of current ADSL2+ users are satisfied with broadband speed. It is the consumers in both metropolitan and rural areas that do not have access to ADSL2+ that are currently suffering.
We are pleased therefore that the NBN will first be rolled out in areas where ADSL2+ access is poor or non existent. We are also please that the NBN announcement includes a commitment to making the current telecommunications regime work more effectively during the transition to the National Broadband network.
There is much current debate as to what the NBN will cost consumers. This will likely depend on the extent to which new services are create to take advantage of the network capacity and thus help defray its overall costs. This is very much unknown and unknowable at present.
Our understanding however is that the risk will be borne by the investors and/or government rather than consumers. Consumers will continue to have access to ADSL2+ services and wireless alternatives. That kind of competition across platforms as well as over the NBN appears to us to be a very good outcome.