Tony Boyd
Conroy's Japanese lesson
OECD statistics used to support the government's $43 billion national broadband network also raise serious doubts about the prospects of a fibre-to-the-home project being sustainable without heavy ongoing subsidies.
The OECD broadband data released this week back up what Broadband Minister Stephen Conroy has been saying about Australia's backward broadband market.
The statistics show Australia has excessive broadband costs relative to other countries, slower connection speeds, higher monthly fees, restrictive data rate caps and middle-of-the-road household penetration.
In fact, Australia ranks as the third most expensive country in the OECD for broadband services. The average monthly cost of $US56.21 is about double the rate charged in the least expensive countries such as Japan. The data was based on a survey of internet service providers in 30 countries in September and October last year.
Conroy selected all the negative statistics about Australia to support his argument of market failure and need for the government to build an optic fibre network.
However, the minister has ignored statistics that raise doubts about whether the construction of a fibre network will be economically viable.
Data from other OECD countries with more advanced broadband networks than Australia show that consumers faced with a choice between fibre and high speed broadband over copper (ADSL2+) will not necessarily rush to connect to the fibre.
That is especially true in countries that do not have a cap on the amount of data that can be downloaded from the various broadband delivery technologies.
Japan's broadband statistics provide some insights into consumer behaviour when faced with choices of high speed broadband including fibre, cable and ADSL.
Japan has had FTTH services for many years. It has the highest level of fibre connections in the OECD at 48 per cent of total broadband connections.
Fibre broadband is offered a prices that are competitive with ADSL and cable. Despite this 38 per cent of Japanese have chosen to stick with ADSL. The remaining 14 per cent have cable access.
The broadband statistics for Japan also provide a reminder of the dangers of relying average numbers for measuring internet penetration.
Australia's penetration rate of 25.4 subscribers per 100 inhabitants is higher than Japan's at 23.6 subscribers per 100 inhabitants.
A closer look at broadband penetration supplied by the Japanese government show that in Tokyo and Kanagawa prefectures, which includes Kawasaki and Yokohama City, broadband penetration is more than 70 subscribers per 100 inhabitants.
It is a similar story in other densely populated parts of Japan. The penetration is 60 subscribers per 100 inhabitants in Osaka, Kyoto and Hyogo prefecture, which has city of Kobe.
If the patterns of consumer behaviour witnessed in Japan are repeated in Australia, the FTTH project here will struggle to be economically viable in its own right.
A study done for the OECD by an independent engineering consultancy firm, Arcadis, has shown that the monthly costs per subscriber on a fibre network are highly dependent upon penetration rates.
According to the financial parameters worked out by Arcadis, the difference in monthly price for a fibre subscriber taking the triple play of phone, internet and TV service can vary between €67.8 at 15 per cent penetration to €20.34 at 50 per cent penetration and €10 at 100 per cent penetration. These figures assume a passive fibre network also known as G-PON.
The government's role in the NBN will be influenced by the findings of the nine months implementation study due to begin in a couple of months following the selection of an expert adviser.
Conroy's promise to provide an open access network may encourage existing broadband suppliers of ADSL and cable services to switch to fibre broadband. But they will be reluctant to abandon infrastructure with high sunk costs.
If Japan is a guide to the behaviour of consumers faced with competing technologies offering similarly priced services with unlimited downloads then the government will be very conscious of the risks to the fibre business model.
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