Tuesday, April 07, 2009

Aussie Gov re-entering the telco game

Optical fiber provides cheaper bandwidth for l...Image via Wikipedia

The Rudd Labour Government has announced that rather than tendering building fibre optic broadband network to a private consortium or telco, they are going to do it themselves. At a cost of AU$43bn over 8 years.

The logic sounds nice nice on-going stimulus during a time of economic crisis that is productivity enhancing. Broadly I agree with the sentiment. Broadband is a viable stimulus that will have positive benefits in productivity. The larger the pipe the greater the economic opportunity and productivity.

I have two problems with the announcement though.
  1. It does seem like an idealogical policy to get the government back into the telco game - not something that is warranted or needed
  2. More importantly the value of the Government involvement is limited
Where the Government should be involved is creating a national conduit system which is open and easy for any company or organisation to run their cables. The largest cost in building a broadband network is digging up the ground and putting in the conduits to carry the cables. By doing this the single biggest barrier to entry into the provision of broadband is removed which will do more to increase competition and improve services than all the regulation and legal proceedings.

Laying their own cable is an unnecessary expense, but given that this is likely to happen then I hope the Government learns the lesson of KPN in The Netherlands that open access to the network benefits not only the consumer, but the owner of the network. Open Access has to be a requirement for the Government network and must be a requirement if the network is ever sold to the private sector.

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