Business Features

Australia's broadband battle gets ideological (News Feature)

By Sid Astbury Feb 11, 2011, 5:02 GMT

Sydney - The United States and Australia share a vision: to have nationwide networks providing high-speed internet coverage.

US President Barack Obama is promising his 310 million countrymen that he can do the job for 18 billion US dollars while the quote from Australian Prime Minister Julia Gillard for linking up her 22 million people is a whopping 27 billion Australian dollars (27.17 billion US dollars).

Why the enormous disparity?

Obama's money would go to incentives to get the private sector to build the infrastructure whereas Gillard envisions a government-owned network.

And while Obama is relying on wireless to reach 98 per cent of customers, Gillard is committing to fibre optic cables running to 93 per cent of homes and offices.

Australia intends to spend more public money than any other nation on its broadband plan.

It is 'an extreme example of government intervention,' according to the London-based Economist Intelligence Unit, an offshoot of Economist magazine.

The unit estimated Canberra would spend 7.5 per cent of annual government budget revenues on its broadband dreams. Compare that figure with South Korea, where national coverage is costing less than 1 per cent of annual government revenues.

The cost is so huge because, unlike everyone else, Australia is building a national broadband network from scratch. The network would be a government-owned monopoly provider run by state-owned NBN Co.

There are those delighted their government is going for broke. 'The proposal envisages the role for government to be defining the national interest, helping fund the investment and setting the regulatory rules - this is how it should be,' said Ziggy Switkowski, who used to run Telstra Corp, the former monopoly telephony provider.

Paule Budde, an independent telecommunications consultant, was also on side, praising the Labor government for eschewing the cheapest option in favour of the best one.

'Experts around the world are saying that fibre is by far the most cost-effective way of doing that,' Budde said. 'It's not just a matter of the up-front cost but also the maintenance.'

The divide in the argument often relates to ideology with interventionists on the left cheering the government and free-marketeers on the right jeering the civil servants.

'Every major infrastructure project should ideally be funded by the private sector,' Business Council of Australia president Graham Bradley said. 'Only in cases where there's a complete failure of the market or completely uncommercial projects should the government be involved.'

Communications Minister Stephen Conroy, who is in charge of the network, said detractors were motivated by the 'ideological dogma' that holds that 'public sector investment is bad and private investment is good.'

Conroy argued that the government is spending more than any other country on connecting households because Australia is such a big country and has relatively few people.

Grahame Lynch, the editor of the newsletter Telecommunications Day, discounted Conroy's arguments, noting that 99 per cent of Australians live in 25 per cent of the landmass.

'The populated areas of Australia have much more in common with densities found in other countries than it might seem looking at a blank map,' he said.

His other big gripe was that Conroy holds fast to the notion that NBN Co is a commercial venture like any other with investment, eventually to be recouped through a listing on the stock market, rather than the reality that it is a quasi-government department engaged in infrastructure spending.

No bank would cough up billions on the basis of NBN Co's wing-and-a-prayer business plan, he said.

The opposition Liberal Party is dead against the network and pledged to discontinue funding if it gets into office.

'It's a massive, reckless waste of taxpayer funds,' opposition communications spokesman Malcolm Turnbull said. 'The government's spending tens of billions of dollars more than it needs to spend.'

Read more about Australia Technology

Read more about Politics