Sunday, 15 August 2010

Say ‘no’ to government broadband

Australia’s government is trying to push the idea of a national broadband network, or NBN, through that country’s parliament.  It wants Australian taxpayers to build a A$43bn fibre network that connects 90% of homes with broadband access of up to 100Mbit/s.

To put that in context, in SA most households with Internet access are lucky to get an effective 1Mbit/s into the home.

Finland recently promulgated a law along similar lines. It is now a legal right of all Finish citizens to receive 1Mbit/s to their homes. The Finish bureaucrats want to increase this to 100Mbps by 2015. Other countries are also looking at similar laws.

In theory, this is a great idea. In practice, allowing politicians to drive any project, especially a technology project, is a recipe for disaster. Politicians should be confined to policy only.
Before I unpack this, allow me to state the obvious benefits of having an NBN in a country like SA.

In macroeconomic parlance, such a project would provide excellent stimulus for the economy. It would create jobs and the multiplier effects (other sectors benefiting) from spending money on the infrastructure would be fantastic.  It would also be great public relations exercise for SA and, if pitched correctly, could induce foreign direct investment.

For companies like Internet Solutions (the company I work for) it would likely prove to be a boon as we would sell more Internet connectivity.  We would also sell more computer server hosting space as people built new businesses on the back of this fast Internet to the home.  Many industries would undoubtedly benefit.

Sounds incredible, right?

Wrong. All of this is predicated on two fundamental assumptions. The first is that the SA government can deliver on a project like this. The second is that it is a project with a profitable payback.

The first assumption is almost certainly wrong. Just look at the “liberalisation” of the telecommunications landscape in SA as evidence of this.

The second assumption is also incorrect. There is no business case in SA, or anywhere in the world for that matter, that justifies such a heavy hand from government. Taxpayers would almost certainly be left carrying the can.

Andrew Mosey, an Australian technology expert working for a large accounting firm, agrees that these projects don’t make economic sense: “As a heavy downloader I’d be one of a very small percentage of Australians willing to pay more for a faster connection. Even then I fail to see the point of spending A$43bn on such a project,” Mosey says.

He says he’s seen nothing to suggest Australia’s NBN project has a business plan, and he doubts Australians are willing to pay more than about A$50/month for broadband.
TPG, an Australian Internet service provider, already offers 180GB on high-speed ADSL2+ lines for $50/month. Not many would be prepared to pay for a faster connection.  It’s the markets that should be allowed to determine the pace of the roll-out of broadband projects, not governments.

As a country, SA could do with more bandwidth. The Seacom undersea cable and the roll-out of national fibre networks by private enterprise has shown us this. But this is not the argument. It is about who pays.

Politicians need to stick to creating policy — policy that enables the markets to decide what is delivered. Ideally, there ought to be unfettered liberalisation of the telecoms sector. If that were to happen, private enterprise would deliver the best Internet experience over time, without government raiding taxpayers’ pockets unnecessarily.

First published on TechCentral, 13th July 2010: 

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