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Monday, 05 March 2007 10:49

How to fix metro broadband black spots - wait two years

Almost two years ago The Federal Government promised $50 million to fix up broadband black spots in metropolitan areas. It has so far spent less than $250,000.

In the May 2005 Budget the Federal Government allocated $50 million over three years to fund the rollout of broadband services in urban areas where problems with network infrastructure made it unlikely that affordable broadband would be offered commercially.

There was to be $10 million available in 2005-2006 and $20 million in each of the following two years. Applications from service providers were expected to open in the second half of 2005. In August 2005, communications minister, Helen Coonan, released a discussion paper on the programme, saying that it would offer Internet service providers subsidies in return for connecting consumers in metropolitan areas who cannot currently receive broadband, to affordable broadband services. Industry and other key stakeholders were requested to provide feedback on the issues raised in the discussion paper by  31 August 2005.

Draft guidelines for the programme were release on 17 November, by which time the need for the project had reduced considerably: from an estimated 900,000 services to 200,000. Coonan explained: "Two years ago there were 900,000 premises in metro areas that could not access an ADSL or wireless broadband service. Today that number is only 200,000 for the whole of Australia...Because of constant technology upgrades and the rapid expansion of wireless broadband coverage, that number will continue to drop." What a surprise!

Coonan went on to explain how the programme would work. "[A] web site will allow customers in metropolitan Australia to identify the full range of broadband services available to them and to register their interest in receiving MBC services. This online tool will also benefit registered Internet service providers who will have access to information on where best to target their broadband roll-outs.

"The guidelines released today set out the proposed rules for the operation of the program and invite feedback from stakeholders. A final set of guidelines will be released once submissions are considered. The program will commence on January 1, 2006."

However it was not until March that the final guidelines were released. So with the first year of the programme drawing to a close not one brass razoo of the budgeted $10 million for that year had been spent and the expected number of services where the subsidy was likely to be needed had shrunk from 900,000 to 200,000, and was continuing to shrink.

Furthermore despite the year delay in getting the programme running there was to be no extension at the end: it was due to finish on 30 June 2008.

And where is it today? Well it has not really got of the ground, as DCITA revealed when questioned by shadow communications minister, Stephen Conroy, in a Senate Estimates hearing on 12 February.

A DCITA official said that only three ISPs had been registered under the scheme, for which applications had by then closed, and they had claimed an amount totalling a mere $235,381.  However, applications from a further 18 ISPs were being considered.

When asked why so little money had been spent, the official replied: "Firstly, there are problems in programme design...because the nature of the black spots in metropolitan areas is that they are largely a result of technology impairments, which mean that the black spots are very difficult for providers to identify where they are and what the business opportunity is.

"Also, the nature of the black spots in metropolitan areas has changed since the program started. Certainly, there is still a need...but it has diminished very significantly, in our estimation, largely as a result of commercial activities by Telstra to reduce technology impairment, such as pair gains and RIM systems in those areas. If you put those two factors together, prospective providers clearly have had difficulty in identifying a business case to participate in the program. But as I have indicated, we have certainly now got an increased level of interest and we are actively considering applications under the programme."

I should hope so too. If the government is to live up to its original promise it has just 15 months to hand out close to $50 million. It's easy to be wise in hindsight, but you would not have had to be an Einstein or a clairvoyant in May 2005 to predict that technology would rapidly reduce if not eliminate the problem of metro broadband black spots altogether.

Yet another example of the Government trying to micromanage the provision of broadband services rather than putting in place an overarching vision and creating the right regulatory environment for industry and market forces to fulfil it.

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