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OECD: publicly funded NBN could pay for itself

The National Broadband Network could pay for itself in just 10 years thanks to spillover savings in four key sectors of the economy — electricity, health, transport and education — according to an OECD report published Friday.

A cost savings of between 0.5% and 1.5% in each of the four sectors over 10 years resulting directly from the new broadband network platform could justify the cost of building a national point-to-point, fibre-to-the-home network,” says the report, Network Developments in Support of Innovation and User Needs.

The report also supports public-sector investment in the NBN. Private telcos need to see direct returns, it says, but governments can justify investments “relatively easily” through minimal savings elsewhere in the economy.

There could be cases where the social returns of broadband connectivity are potentially much larger than the costs of building the network but the operators do not invest because their private returns would not justify the investment,” the report says.

Health systems, for example, face “tremendous pressure” to improve health quality, accessibility and outcomes in an aging population.

Broadband increases the potential for more doctor-to-patient interaction between hospitals/doctors and end-users at home. Two specific areas where broadband will likely have a significant impact … are increasing the efficiency of health monitoring and reducing the costs on the system via remote consultation and intervention, particularly as the percentage of the population over age 65 rises significantly.”

The report also highlights intelligent traffic management systems to reduce fuel costs, “smart grids” for electricity networks, and the ability for industry to locate facilities more competitively — for example, placing data centres nearer to sources of cheap electricity rather than labour pools — as well other health and education benefits.

The OECD compares the rollout of an NBN, which transports digital information, with the introduction of the canal and railway networks that fuelled the innovation of the Industrial Revolution by moving physical goods, and the electrification that transformed 20th century industry and society.

There were relatively few uses for electricity when the networks were first built but that electrification quickly transformed techniques and locations of production such as the physical layout of factories … The introduction of electricity (allowed) the factory manufacturing segments to be re-arranged to accommodate the flow of production rather than the equipment’s power requirements. This turned out to be a key innovation boosting productivity.”

According to the OECD, “Telecommunication investment largely mimics GDP growth — but in a more exaggerated way.”

Meanwhile, Australia remains in the middle of the OECD pack in terms of broadband take-up. New figures based on June 2009 data show Australia has 24.9 broadband connections per 100 inhabitants, just above the OECD average of 22.8 and below the US at 26.7.

This is only a marginal increase on the figures Crikey reported in May, which placed Australia at 24.8 connections per 100 inhabitants against an OECD average at 22.5.

There are now eight nations with broadband penetration figures above 30, with Luxembourg joining Denmark, Netherlands, Iceland, Switzerland, Finland, Korea and Sweden. Netherlands is now the leader, with 38.1 connections per 100, up from 35.6 six months ago.

These OECD figures do not yet include the rapidly growing mobile broadband sector due to methodological problems including “how to separate connections used for internet access from standard 3G mobile subscriptions where subscribers have the capability to access the internet but choose not to.”

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