Malcolm Turnbull and the gas light.
One of the best stories I heard during the national broadband debate of the last few weeks was that when the electricity networks were built early last century some of the politicians of the day questioned the need for such an investment, criticising the enormous waste of money needed to build such an expensive network to replace the gas lights.
They argued that using electricity would be far more expensive than burning the gas lights and that consequently very few people would actually take it up.
Malcolm Turnbull and Nick Minchen are today’s equivalent of those electricity naysayers of the last century.
The Opposition was therefore more than happy to also grab the comments of AAPT’s Paul Broad – that the new broadband network would result in people paying $200 a month for their ‘new’ Internet access (the same line of argument that was used in the gaslight example).
The way I see it is that there are two major flaws in their arguments.
Firstly, as is already the case with electricity, broadband will now also be based on a structurally separated infrastructure (low yield, low risk investment) and independent retail services (high yield, high risk investments).
The government talks about a utility company and that implies that the investment needed will be based on ROIs that utility investments are based on. I am not a financial analyst but in talking to the experts percentages of 8%-9% are being mentioned; others are saying that under the current economic circumstances you could even go as low as 5%-6%.
Sydney Water gets 2%.
I think it is obvious that by going for a utility model we would need to start looking at ROIs of this order. It would be unrealistic to look at the same ROIs that companies like vertically-integrated organisations such as Telstra have argued for.
It seems that the Opposition and people like Paul Broad are using those high ROIs (15%+) to arrive at their $200 figure. This is very hard to understand. This high level of ROI was what Telstra wanted and that was the exact reason the negotiations broke down between the previous Liberal Minister Helen Coonan and Telstra in early 2007. Her decision at that time was supported by the industry. But now it looks like that both the Opposition and Paul Broad are defending the rationale for these high ROIs.
Secondly, what both the Opposition and Paul Broad also fail to take into account is that this new infrastructure is not just going to be used to replace slow Internet access with fast Internet access (gas lights with electric lights). In both situations the infrastructure will facilitate literally hundreds, if not thousands, of applications.
The economic benefits (read ‘profits’) made by those thousands of companies offering services, applications, devices, etc far outweigh the benefits of trying to get the highest possible return from just the utility investment. The pie is obviously much bigger if you use the utility investment to enable a whole new set of activities that will lead to enormous growth in the digital economy.
Malcolm Turnbull is one of this country’s Internet pioneers and he should know better; but, rather than coming up with good ideas and constructive criticism, he and Nick Minchen don’t seem to be able to get past the word ‘no’.
This is most unfortunate as we do need a constructive national discussion with different viewpoints, different ideas, and we need to be challenged in order to get the best possible outcome for our country. During the previous government’s period in office the industry had a good working relationship with both the Government and the Opposition of the day; it would make things far more constructive if that environment could be replicated today . As for Paul Broad, I am still puzzled by his position but he has promised to explain it all to me in more detail.
Paul Budde
See:
Australia – FttH based National Broadband Network
Australia – National Broadband Network – Critical Considerations
Tagged in: Australia, Australia, New Zealand & South Pacific
