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Thursday, 22 September 2011 12:58

Why NBN services will cost you more

By

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.

CONTINUED


 

As a mainland capital city dweller, like most Australians, including those who live in major regional centres, I'm spoiled for choice for broadband services. I can get HFC cable, ADSL2+, pretty fast fixed wireless and, depending where I happen to be, good mobile broadband. In addition, I'm finding more and more of my favourite coffee hangouts offering free WiFi.

I realise of course that 10-15% of Australians who live in the bush and smaller regional areas aren't as lucky when it comes to broadband. Some can only just get ADSL1 and a few are lucky if they can even get decent wireless.

However, for around 85% of us, good reasonably priced broadband is available and, as a result of competition and sensible regulation of the dominant carrier, prices are getting cheaper not only for broadband but also for voice services.

Now the NBN arrives courtesy of the taxpayer and, lo and behold, a number of the larger ISPs are now offering NBN broadband, to the few places that can get it, at prices that are comparable and in some cases even cheaper than DSL services.

Now if the NBN comes down my street and it turns out to be cheaper than my HFC service, I'll seriously consider switching. But that's not going to happen is it (rhetorical)?

The reason I won't get to choose between the NBN, HFC and ADSL2+ is because the Government has mandated that there will be no competition between the three networks. The two perfectly acceptable and functioning HFC and ADSL2+ broadband networks will be switched off and decommissioned so that there will be no obstacles to the take-up of the NBN.

So instead of making the Australian fixed line telecommunications market more competitive by offering a new additional competing service, the Government is proposing to recreate the Government owned monopoly we used to have, which was slowly being broken down when Telstra was sold and heavily regulated, allowing competing carriers to emerge and drive down prices.

So let's imagine what life will be like under the proposed new Government owned fixed line NBN regime.

The Government will once again be the sole wholesaler of fixed line telecoms services including voice and broadband. There will be competition among retailers to resell the same services of course but the delivery network and wholesale prices will be the same.

Unless of course the players with deep pockets like Telstra and Optus get better prices because of their ability to buy bigger chunks of bandwidth - which should make the smaller players happy'¦NOT!

Now the Government, absent of any competition from other fixed line network providers which have been disintegrated, advised by its advisors, will set the wholesale prices of broadband and those prices will be regulated by'¦'¦the Government! What a great business!

In case you were wondering whether wireless could possibly save you from being forcibly dragged back into a fixed line telecoms monopoly, well you can stop right now.

As we all know and are repeatedly told, wireless broadband such as LTE and beyond, will never be able to compete with NBN fibre because it defies the laws of physics.

But, just in case the physicists haven't covered all their bases - however unlikely that may be - advertising wireless broadband as an alternative to the NBN will be verboten and must only be sold in olive green packaging.

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Stan Beer

 

Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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