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The broadband cargo cult, dissected

By David Walker - posted Thursday, 2 December 2010

Occasionally a report comes along which should give people a whole new way of looking at a public policy debate. A new report on universal high-speed broadband (UHSB) via fibre-to-the-premises (FTTP), titled "Superfast: Is It Really Worth a Subsidy?", does just that. It's written by development economist Charles Kenny and his brother Robert Kenny, a British telecommunications consultant.

Before we start, an apology - I can't think of a better way than the ungainly term "UHSB via FTTP" to describe the Kenny brothers' subject . "National broadband network" is a misleading name; we already have one, in the same sense that in 1996 we had a "national Internet network". People are buying fibre access every day on commercial terms, which is fine. The question is whether we should pay more and restrict competition in order to deliver today's gold-standard service to everyone - universal HSB via FTTP.

The brothers make five points about UHSB via FTTP which are too frequently overlooked.


First, the macro-level studies which seek to show that UHSB via FTTP will bring enormous economic benefits are mostly really ropey. This has been true for a decade and is getting worse. People who understand telecoms mostly don't know how to do rigorous cost-benefit studies, or don't care.

Second, the micro-level specific benefits claimed for UHSB via FTTP in areas such as education, health and power management are mostly overstated.

Thirdly, many of the supposed benefits of UHSB via FTTP - macro- or micro-level - should be realised with the broadband we already have. It's amazing how often the debate overlooks this. The report makes particular play of the way in which estimates of the bandwidth needs of electricity "smart grids" have been recklessly overstated. The same is true in other areas, including health. To make the case for UHSB via FTTP, proponents need to show what it can do that currently available broadband cannot.

Fourthly, UHSB over FTTP is frequently claimed as the solution to our toughest problems, the intractable ones with complex social roots. For example, it is supposed to transform health care, while health IT experts battle away vainly to get the industry to digitise its existing workflows (a project that really does look like it would have big payoffs). It is supposed educate our kids and cut our power consumption. At this point, UHSB via FTTP starts to look a little like a developed-world cargo-cult.

Fifthly - and perhaps most importantly - we should be able to see high-speed broadband (HSB) via FTTP at work today. The world has had HSB via FTTP for the better part of a decade in places like Seoul and Tokyo. And Australia, like most other developed countries, has had HSB via FTTP for many years too - not everywhere, but certainly between CBDs, many inner-city areas, and the universities. The notion that we can only imagine the future is only a half-truth. As William Gibson wrote long ago: "the future is here; it is just unevenly distributed". So the incremental benefits of extra bandwidth for technologies like videoconferencing should be showing up in communications between different parts of Seoul and Tokyo, and between the Australian capital-city offices of major businesses and professional services firms. They are hard to find - harder, indeed, than I expected ten years ago. This is somewhat surprising, but also instructive. (The Kenny brothers make too much of South Korea's recent slow growth; the more telling observation is the surprising paucity of new uses for South Korea's shiny new broadband infrastructure.)

These findings bring into sharp relief a couple of peculiar features of Australia's broadband debate.


As the Kenny brothers point out, improvement in technology does not necessarily keep on delivering pay-offs in every successive generation; think of the Concorde, once seen as the logical successor to the turboprop and the subsonic jetliner. The evidence in the Kenny brothers' report and elsewhere suggests that the widespread adoption of the Internet in the late 1990s was the first-order communications revolution, and always-on middleband and slowish broadband was a second-order revolution. UHSB via FTTP is a third-order issue. Yet Australians who simply accepted the growth of the internet and the early spread of broadband believe fast broadband is worth a huge national spending effort.

And the early growth of the Internet occurred incrementally in a short period of time, without great government command or subsidy. That's unsurprising: the reality is that the Internet is well-suited to incremental improvement. Broadband is not a business like the rail network; it's more like the national milk bar network, capable of varying from suburb to suburb and street to street. Yet many Australians seem to believe that a "national broadband network" must be monolithic, and the NBN proposal plays to that view.

I admire Stephen Conroy for his energy, his patriotism, and his courage. In many ways, we need more politicians like him. But his "national high-speed broadband plan" was conceived in part for the political purpose of aligning the Labor brand with "the future", and costs far too much for what it delivers. It does not survive close scrutiny. That is why the government has been fighting to keep it away from the Productivity Commission, and why it should go there.

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About the Author

David Walker is the chief operating officer of WorkDay Media, publisher of Banking Day.

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