International study cans "wasteful" NBN rollout

Stan Beer
Monday, 29 November 2010 12:59

IT Policy - Government Tech Policy

A newly released international report examining the benefits of fibre to the home (FTTH) has concluded that it is a risky waste of money. The 47-page report singles out the Australian Government's commitment to spend US$23 billion on implementing the NBN saying FTTH is ultimately not worth the price and no more worthy of subsidy than the now defunct Concorde supersonic passenger jet.

The paper titled "Superfast: Is It Really Worth a Subsidy?" was written by Charles Kenny, a senior fellow at the US Center for Global Development, and his brother Robert Kenny, a British telecommunications consultant.

According to Charles Kenny, governments around the world are investing multiple billions to support the roll-out of fiber despite evidence that basic broadband has contributed significantly to economic growth is decidedly mixed, and points to low returns for (expensive) superfast upgrades.

"This is especially the case given that many of the applications used to emphasise the supposed benefits of fibre to the home can be delivered by basic broadband or by superfast to business and government rather than to homes," says Kenny.

"In addition, other high speed broadband infrastructures (such as cable, and in time wireless) are often simply ignored when making the case for fibre, and fibre rollout is credited with bringing benefits that would in fact require major systems and social change in other parts of the economy."

Kenny warns against spending billions on fibre in the current economic climate.

"We do not argue that there is no commercial case for rolling out fibre, nor do we argue that fiber brings no societal benefits," says Kenny. "But we do believe that those benefits have been grossly overstated, and that therefore, particularly in a time of tight budgets, governments should think very hard indeed before spending billions to support fibre roll-out."

According to the report, evidence subsidies based on the premise that FTTH brings substantial benefits is "surprisingly weak" and there are several errors that are made repeatedly when making the case for FTTH. In particular:

* The evidence that basic broadband contributed to economic growth is decidedly mixed, and some of the studies reporting greater benefits have significant flaws

* Time and again, data that basic broadband brings certain benefits is used to justify investment in fibre - but the investment in fibre must be based on the incremental benefits of higher speed, since (in the developed world) there is already near universal basic broadband

* This error is compounded since other high speed broadband infrastructures (such as cable, and in time wireless) are often simply ignored when making the case for fibre

* Fibre is credited with bringing benefits that would in fact require major systems and social change in other parts of the economy, such as a widespread shift to home working, or remote medical care. In practice, these changes may never happen, and even if they do they will have significant additional cost beyond simply rolling out fibre

* Frequently business or government applications, such as remote medical imaging, are used to make the case for FTTH. But these applications require fiber to certain major buildings, not to entire residential neighborhoods (and these buildings often have high speed connections already)