Broadband Internet - getting the framework right

The United Nations last month released a report on broadband policies for developing nations. Unfortunately, its recommendations provide little more than advocacy of futile, centralised, national “plans” to increase Internet availability and use.

Similarly, policy makers across the Australia are formulating grand plans to resolve this county’s broadband crisis.

In Communications Departments around the world, “plans” are in fashion.

These plans are trying to address real issues. In Australia, communications policy has comprehensively failed. Infrastructure investments are being tied up for years in regulatory negotiation, and they are abandoned when no compromise is reached. As a result, our broadband penetration is in the bottom half of the OECD rankings.

For developing nations, the lack of adequate communications infrastructure can be a significant obstacle to development.

The United Nations recommends that governments in developing nations institute a series of master plans to introduce and expand their infrastructure. These consist variously of government subsidises and interventions. Growth, and a reduction in poverty, they argue, will naturally follow.

But communications is a highly profitable business to be in. Entrepreneurs sensing a demand for communications networks, be they fibre-optic broadband or mobile, will strive to meet that demand.

What is the market failure that the lavish master plans advocated by the United Nations are supposed to address?

Institutional obstacles hold back many of these developing nations from the growth they desperately need. The popularity of mobile networks in developing nations is because they are typically unregulated, in contrast to the corrupt, state-owned telcos and rigid regulatory impediments which restrict markets in wired telephony.

Kenyan farmers, just like those in the Riverina, can now communicate with their markets to ascertain the level of demand for their produce. The waste of food and man-hours from lengthy trips to supply a demand that didn’t exist is no longer common. If you have food to sell or buy, you simply make some phone calls.

The “digital divide” is only indicative of a general economic divide between rich and poor countries. Communications networks are not the catalyst for economic development. Instead, they are built when a sufficient demand, brought about by economic growth, presents individuals and companies with opportunities to make profit in communications.

However, government policy in many of developing countries either discourages or even forbids entrepreneurial investment in communications and other infrastructure. The solution is institutional and government reform, to allow economic growth, rather than subsidies and plans.