The affordability of broadband is crucial to its take-up in regional Australia. A government inquiry recommended that the government establish an incentive scheme for the provision of higher bandwidth services to regional, rural and remote areas, to enable all Australians to have access to services at prices comparable to those in metropolitan areas.
In 2004, the government indicated it would spend $107.8 million over four years on the HiBIS. The scheme provides financial incentives to higher bandwidth service providers to offer services in rural and remote areas at prices reasonably equitable with those available in urban areas.
HiBIS is promoted as a pro-competitive and transparent scheme. A one-off ‘per customer’ payment is made to providers of higher bandwidth data services in areas where a defined minimum level of service, in terms of price and functionality, is not likely to be provided commercially in the immediate future. To receive the payment, providers need to offer services at prices broadly comparable to prices charged in urban areas.
Not so pro-competitive
Unfortunately, in the implementation of HiBIS the Department had set the broadband mark for the scheme extremely low – at 256/64Kb/s, ‘coincidentally’ at the lowest rate at which Telstra can offer its ADSL service. The company, therefore, is basically guaranteed to pick up the bulk of this scheme without providing Australians with what other countries see as broadband – 2Mb/s-plus.
Until mid 2006 Telstra was able to deliver ADSL under this scheme, and many rural exchanges were upgraded using this Government subsidy.
Some have argued that HiBIS widened the gap between regional Australia and metro areas, as the scheme has made it economically more difficult to build true broadband networks in competition with Telstra’s ADSL network. A combined effort is needed to get a proper competitive broadband infrastructure in place, and HiBIS, possibly unwittingly, has been undermining this process. Its successor, Broadband Connect, will try to address that issue. For more information see separate report: Australia – Broadband Connect – Historical Overview.
A more competitive environment is essential. Broadband can add billions of dollars of extra economic activity to regional Australia – without broadband it will not be able to develop viable businesses in these areas.
Where would regional Australia be if it was only accessible via dirt roads or steamboats? From a telecoms point of view, copper-based telecoms are equivalent to these old and inadequate forms of infrastructure.
With more taxpayers’ money to be used, such funds should be made available for a more future-proof investment. Previous government schemes, such as Networking the Nation (NTN), have already seen far too many investments that were not future-proof (approximately 75% of all NTN grants) we clearly see the role of government as a provider/facilitator of future-based infrastructure to regional areas (areas where, without government assistance, no new infrastructure developments will take place – and approximately 30% of the country falls into economically unviable areas).
While HiBIS, from a new point of view, has been successful, most of its extremely valuable funds have ended up in the coffers of one of the richest and most profitable companies in Australia, and indeed, the world. Surely taxpayers’ money can be spent in a much better way. If Telstra is not excluded from Broadband Connect, it should at least be obliged to develop true broadband services for regional Australia.
As it also looks like Broadband Connect ignores new developments in broadbanding – developments whereby local communities are taking the lead to broadband their local council area, etc. We are involved in dozens of such projects around Australia, where local councils are taking on a leading role in their own local broadbanding projects. There is a clear groundswell of activities in this field and this new scheme does nothing for these grassroots developments. Around the globe the local broadbanding concept is seen as the key tool in broadbanding regional areas, yet this scheme totally ignores this very important factor.
Under the scheme the Australian Government registered service providers. Internet Service Providers (ISPs) that registered received a one-off incentive payment for providing customers in regional Australia with a higher bandwidth service at a price comparable to that in metropolitan Australia. There are two payments, of $1,540 or $3,300 in areas where installing broadband access involves higher costs.
During 2004/05 Telstra received over 65% of all the HiBIS subsidies and used it mainly to upgrade its DSL network. This of course is very painful for any (potential) infrastructure provider in competition with the incumbent; however it helped many remote communities.
On the satellite side of the business Telstra took approx 30% of all the new satellite connections, which were running at 500 per week at the end of 2004.
On the one hand are the government policies aimed at improving broadband in regional Australia, and this is certainly being stimulated by the HiBIS s. It was also noted that on an international level this is one of the first government schemes that basically addresses the Universal Service Obligation (USO) requirements in relation to broadband.
The government needs to improve the coordination between the various broadband programs. For example, the program that provides broadband to schools and other government buildings often fails to lead to improved broadband in the wider communities surrounding these facilities. Furthermore, the Demand Aggregation Policy is not delivering the required outcomes and should be urgently reviewed. But the most important issue the government needs to review is the anti-competitive nature of the scheme.
Flaws in HiBIS
In September 2005 the Victorian Government released a report that showed the HiBIS is significantly flawed. ACIL Tasman was commissioned to analyse the potential impact of the HiBIS on Victoria. While the report indicated positive aspects, it also indicated that areas of real need may be missing out.
The ACIL Tasman report claimed to show that half of the new subscribers under HiBIS were in areas where there was enough demand to justify broadband services without subsidy. Telstra successfully used the scheme to receive subsidies for updating its exchanges for DSL rollouts. At the same time, large numbers of metropolitan households cannot access metropolitan equivalent services but are excluded from the HiBIS program.
The report also questions that it may not be sustainable for some of the services to be continued once the subsidy is finished.
Do-It-Yourself System For Remote Communities
At the Rural BASH conference in Coffs harbour in 2004, organised by Badja Interconnect, some interesting data was made available regarding satellite opportunities in remote communities. This data is still applicable today.
Given the cost of the wireless technology and the current cost of satellite access for very remote access Badja estimates that the following figures apply to cover a sparsely populated area of 30 users:
$3,000 – for three meshed wireless units each with 1km radius overlapping (community to supply power and sites) – a one-off cost;
$600 per month for two or more satellite service to provide 1.5Mb/750Kb – monthly cost for uncapped service.
Even with all users online at the same time, the solution provides a minimum of 50Kb to all users. With a 1/12 contention normally expected, users would statistically expect around 600Kb throughput and during quiet periods – up to 1.5Mb:
Base costs per user would be $100 installation (less under the HiBIS scheme);
802.11 external USB box (simplest installation) – say $100;
Monthly costs would be $20 per user.
Although it is expected that rural communities could provide this service amongst themselves, there are certainly pitfalls and the potential for disputes. Technology barriers will also stop some towns from using such a service. Communities would also have to gain exemptions from the regulator for any do-it-yourself model. High levels of redundancy are possible with this base configuration such that a single device failure will only slow the service down to some or all users, but not stop it.
The inclusion of an ISP/carrier to oversee the service will increase costs significantly, but will give a high level of peace of mind over the processes as well as a strong legal and regulatory position when trouble strikes. Badja expects that an ISP would provide the uncapped service for around $45 per month.