The following article is a response from Minister for Broadband, Communications and the Digital Economy Stephen Conroy to Business Spectator's debate about the economics of the national broadband network between Shadow Communications Minister Malcolm Turnbull, Editor in Chief Alan Kohler and Associate Editor Stephen Bartholomeusz.
There are times in our nation’s history and development where governments have a responsibility to step in, to drive and shape our future. Australia has seen these times before with the delivery of the Snowy Mountains Scheme, and ubiquitous electricity networks. Building the national broadband network (NBN) is another nation building opportunity of similar scale and importance and the Gillard government is ensuring it is delivered to every Australian.
When you’re building Australia’s largest nation building project in our history it is right to debate the issues around it. I welcome Malcolm Turnbull’s appointment as the fourth Shadow Communication Spokesman since 2007. I welcome the energy he will bring, and the knowledge and experience he can draw on from his involvement with Ozemail. I welcome the debate, but let’s make sure we’re debating the facts when it comes to broadband.
Fact: NBN – a sound investment for Australia
Let’s be clear, the NBN is an investment by the government which will earn a rate of return to cover its cost. This is clearly outlined in the implementation study, which was carried out by McKinsey and KPMG, and is available online. The study’s detailed financial analysis includes revenue and cost modelling and confirms the NBN will have a strong and viable business case and will be able to deliver affordable prices for consumers. Mr Turnbull chooses to ignore this fact in the Implementation Study in his claims that the NBN is a waste of money. This is despite telling the National Press Club last year that ‘debt which is incurred to fund infrastructure that increases the productivity of Australia will, in time, pay for itself because it produces a stronger economy…’ (National Press Club, 6 May 2009).
Mr Turnbull’s claims that the NBN will be worth a fraction of its build cost are also misleading and based on no evidence. The implementation study shows that NBN Co will have a strong and viable business case with projected returns of 6 - 7 per cent, becoming earnings positive by year six and generating substantial free cash flows.
Fact: The private sector won’t build broadband for all Australians
For 12 years during the Howard government the private sector had the opportunity to deliver fast broadband and it failed. On coming to government, we undertook a rigorous assessment of the private sector’s capacity to build the NBN. The independent expert panel advised us that none of the proposals were value for money given our objectives.
Instead of standing by while Australia falls further behind the rest of the world – the OECD ranks Australia as the 17th out of 31 developed countries on broadband penetration – the Gillard government is delivering the NBN for all Australians.
Mr Turnbull told ABC radio recently that ‘most people live in cities’ (ABC Radio National 15 September 2010).This is insulting not only to the 40 per cent of Australians who live in rural and regional areas, but to the thousands of people in our capital cities who don’t get adequate broadband services today. The policy the Opposition took to the election, which has now been dumped by Mr Turnbull, would further entrench the digital divide and that is simply not good enough. The NBN will ensure that every Australian, no matter where they choose to live or work, can have access to affordable, high speed broadband.
Fact: Wireless is not a substitute for fibre
The implementation study and experts agree that fibre to the premises is accepted as the optimal future-proof technology. Wireless broadband will be complementary to fibre, not a substitute. The benefits of e-education and e-health are simply not possible over a wireless network because wireless does not have the capacity to cope with the download and uploads that are required for services such as remote rehabilitation and diagnosis.
Wireless is an important complementary technology to fibre to the premises and that’s why the government is facilitating the development of wireless in two important ways.
First, we are creating the infrastructure for next generation of wireless technology through the switchover to digital broadcasting. The switchover, which began in Mildura in June, will free up valuable 700MHz spectrum from the free to air broadcasters, which could be used for wireless broadband.
Second, next generation wireless, along with next generation satellite, will form an important part of the solution for the premises outside of the fibre to the premises footprint. These technologies are better suited to the low population densities found in these areas.
The Gillard government’s NBN is ensuring that we make the most of all technologies available, while ensuring Australians get the best possible service in their particular location.
Tony Abbott again highlighted his total lack of understanding when it comes to broadband last week. Mr Abbott said:
‘I mean, you look at all the people sitting in cafes using the internet. They’re all using wi-fi. Not one of them is going to thank the Government for spending $43 billion of taxpayer money, running up billions and billions of extra debt, if they’ve then got to go and find a cable somewhere to shove into their computer,’ (2GB, 21 September 2010).
Mr Abbott doesn’t understand that the wi-fi people use at home, in cafes, airports and hotels is an extension of a fixed line to those premises – it is not mobile broadband. The better that fixed line connection, and fibre is the best, the better the wi-fi service will be.
Mr Abbott has said he is not a tech-head and he’s right and therefore he should stop trying to make misguided technical criticisms of the NBN.
Fact: Increased competition is good for consumers
According to the latest OECD data, Australia has some of the most expensive broadband services in the developed world. This has been exacerbated since the Liberals and Nationals voted to privatise Telstra and create the vertically-integrated monopoly we have today.
The NBN will be a wholesale-only, open access network. It will introduce genuine competition to the telecommunications market and this will open up genuine choice of services and drive highly competitive prices for consumers, whether they live in a capital city or in rural and regional areas. NBN Co will offer a service at a uniform wholesale national price no matter where a premise is located. Already we are seeing competition in action with some very competitive introductory prices on offer in Tasmania.
Just as we look back and wonder how people ever managed without electricity, I have no doubt that our children and grandchildren will look back and wonder how we ever managed without the NBN. The Gillard government is ensuring that every Australian has access to the technology of the future.
It is right to debate projects of the scale and complexity of the NBN, but let’s make sure the facts are at the centre of the debate.
Senator Stephen Conroy is the Minister for Broadband, Communications and the Digital Economy