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Governments botching the technology issues

By Nick Beaumont - posted Tuesday, 12 June 2007

There is much current discussion in Australia of a national optical fibre network: Fibre to the Node (FTTN) or Fibre to the Home (FTTH) (and business premises). There is a consensus that building such a network, allowing extremely rapid transmission of voluminous data is practical and affordable, and would have appreciable social and economic benefits.

Use (and uses) of the Internet is multiplying. Emerging applications in broadband households are multiplayer gaming, swapping music and videos on sites such as Youtube, dialogues on Myspace and other sites, and Voice over Internet Protocol (VOIP). The Internet was initially used largely to transfer text (for example, email). Now households routinely transfer digital photos, document images and videos, activities requiring dramatic increases in the network's capacity.

Business and government have transferred myriad business processes to the Web. Customers can purchase, enquire, and pay online. Firms’ internal communications have moved from paper to the web. In many respects, physical location is irrelevant, the Web can be used to move data and information instantly and accurately anywhere in the world at zero marginal cost. This has had myriad advantages for the community as a whole (paying bills online is a lot less tedious and costly than posting cheques) but those whose work has been outsourced to India may be less enthusiastic.


FTTH would allow households and businesses to exchange document images, provide more elaborate information, execute more complicated transactions, run real-life videoconferencing, and provide a cheaper and more reliable national telephony network.

It would allow households to download movies in minutes, easily interchange photographs and film clips, and run multi-multi-participant games. If FTTH’s inherent capacity and speed was available individuals and businesses, aided and abetted by entrepreneurs, would find more, presently unimagined, applications.

Electricity companies originally saw illumination as the “killer application”, only later tripping over the power point’s connection to myriad appliances.

Besotted grandparents could enjoy an "always on" link to their children's residence. Grandparents could watch and talk to their grandchildren, read bedtime stories to them, and later perhaps use e-mail to communicate with their children. Conversely, it would be easier for we middle-aged to monitor our ageing parents.

FTTH would help medicos monitor the aged. Older or ill people would have less need to occupy a hospital bed, instead staying at home and “plugging into” devices measuring their vital statistics; medical interviews could be conducted by videophone. Immobile people’s lives could be enriched by being able to play online games or talk to each other, either one to one or in groups on videophone.

Education, especially the tired lecture (in which the lecturer's notes become the student's notes without passing through the mind of either), could be rejuvenated and made available to people unable to attend the campus. This would force change in universities and schools. There would be an obvious demand for richer, multimedia educational materials that exploited bandwidth. Economies of scale would inevitably become manifest. If elaborate materials were prepared for a course in, for example, physical chemistry, the course owner could make more money by distributing it round the world. This is the kind of export industry that Australia ought to have.


Australia should build a FTTH network allowing speeds of at least 12 megabits per second (MPS) (FTTN is an unsatisfactory halfway house). Although technically possible, the current argument revolves around how the network should be funded, managed, and controlled. Telstra would have us believe that a Telstra monopoly is the optimal solution. This I doubt.

The government should build a FTTH network. Although nobody knows the exact cost, $20 billion might be a good guess. Those thinking that private capital expenditure is virtuous whereas government capex is disgraceful deserve pity, not blame. The figure is declining with technology improvements. Some suggest $5,000 to retrofit a home compared to $1,000 to install FTTH (and business premises) when new estates are built. The cost depends on the percentage of homes and premises covered (remote country residents would have to be served by satellite) and the terms on which the builder could access Telstra's ducts (now filled with copper wire).

A FTTH network is a natural monopoly that costs a lot to build, not much to maintain and administer, and almost nothing to use. From a whole community point of view, decommissioning Telstra's copper telephony network and transferring telephony to fibre (with much lower maintenance costs) would save serious money. Nobody knows exactly how much as Telstra is very secretive about its costs.

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About the Author

Nick Beaumont is a senior lecturer in the Department of Management, Faculty of Business and Economics at Monash University, Australia.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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