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Brakes on net speed

By Joshua Gans - posted Monday, 25 June 2007

The Howard Government's long-awaited broadband response ticks their box marked "appear to do something" but, like Labor's proposal, it only highlights just how far we have to go.

What both the Coalition and Labor have said is this: "We want to connect 98 or 99 per cent of households to high-speed broadband by some date (2009 or 2013) so, put your hands together, problem solved."

Supposedly, everyone will have broadband Internet access so we can do whatever they are doing in South Korea and Japan now.


But that is a furphy. The problem is not solved.

First, it is far from clear that the main bottleneck on speed is the last mile, from the node to the abode.

Instead, as anyone who has broadband knows, if you have faster speeds you just reach your download limits faster. For example, put in a 24Mbps connection and actually use it to download television or movies and you will get to an 80Gb limit in a matter of hours.

With most of us on limits that are a fraction of that, we are talking about one movie a month at best. So when our politicians, G9 or Telstra talk about prices of $60 a month or what have you, then one has to ask: $60 for what?

Without a download limit guaranteed, there is no real price guarantee.

Second, why do we have download limits anyway?


They don't have them elsewhere. Non-Australians' jaws drop when they find this out. And it is the reason why we haven't seen more use of basic broadband for free WiFi and the like.

It appears that our problems come from a lack of capacity and a lack of competition in the provision of services across the Pacific where there are two routes (AJC and Southern Cross). Also, there are deals at the other end.

All these push up the price for Australian providers who use download limits to control those costs.

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First published in The Courier-Mail on June 20, 2007.

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About the Author

Joshua Gans is an economics professor at Melbourne Business School. He writes on these issues at

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