Why NBN services will cost you more

Stan Beer
Thursday, 22 September 2011 12:58

Opinion and Analysis

There are few more politically emotive issues in Australia (aside from asylum seekers) than the NBN. One of the issues is the cost of services for users. Make no mistake, under the proposed mandated regime the NBN will cost more than what consumers and businesses currently pay for broadband and the reasons should be clear to anyone with a modicum of objectivity.

 

Let's digress for a moment and imagine that instead of rolling out the NBN, the Federal Government announced that it would spend $43 billion (give or take a few billion) on building a nationwide very fast train network.

The state-of-the-art fast trains would be able to ferry passengers between Melbourne and Sydney in less than 3 hours and in just a few hours from any capital to any capital.

Who would be affected by this new service? Sorry, there are no prizes for guessing.

The domestic air travel industry - airlines, airports, airport transfer services (including rail, buses and taxis) - all would be forced to compete with a viable new Government funded competitor.

No doubt the competition would be fierce, airlines would keep prices low and offer all sorts of frills and benefits not currently available. Likewise, the new train services would have to keep prices low and offer all sorts of benefits for travellers to compete with airlines so that the taxpayer funded transport business actually gets customers.

Now imagine that after paying consultants to conduct a $25 million feasibility study, the Government realises that as good as its fast train service is going to be, it simply is not going to be able to compete with the prices offered by the well established local air travel industry, which already has its existing infrastructure and loyal customer bases in place.

Therefore, the Government pays QANTAS, Virgin and other bit players big money to shut down their domestic air travel businesses and offers them a piece of the action of the new fast train network.

Of course, the above is an absurdly unlikely scenario but it serves to illustrate what is essentially the proposed roadmap for the NBN.

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