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Broadband is just a toy for bored geeks, right?

The Coalition’s independent NBN modelling appears to be based on spurious (and sometimes laughable) assumptions about the way Australians use the internet, now and in the future, writes board member of Electronic Frontiers Australia Colin Jacobs.

The Abbott government’s “independent cost-benefit analysis” of the NBN has clearly failed to settle the debate about Australia’s broadband future, with politicians and industry rounding on the report for bias and questioning its conclusions.

One of the report’s obvious eyebrow-raisers is its assumption regarding low growth in consumer demand for broadband, as Stilgherrian discussed yesterday. There’s not much wiggle room in the costs of either approach, so in order to get the desired (if not preordained) finding that Labor’s fibre plan is too costly, some other assumptions had to be made. They appear to heavily discount the benefits of connectivity for Australia.

The reference case used to compare the two models was an unsubsidised roll-out of faster broadband by industry. This reference case had the best net benefit — namely zero. This implies that the benefits of the broadband to society are only worth the money spent on them by industry and don’t warrant further government investment. Another way to say this is that the full benefit is gained in the commercial return the investment brings to industry, and the value for money received by consumers. The spillover benefits to society are of limited value.

This means that the Coalitions own multi-technology mix (MTM) model, involving continued reliance on the bottleneck of the copper network, itself brings a -$6.1 billion net benefit. This is chiefly because the cost of bringing broadband to regional Australia outweighs the benefits — by a factor of nine to one. Thats $6890 of net loss to society per household outside the cities. What does that say about the assumed value of being connected in the bush? About its power to bring services to the regions and enable people to stay in communities that might otherwise wither?

Setting the costs aside for a moment, according to the study, the benefits of a full fibre-to-the-premises rollout are $4.7 billion lower than the MTM model. In other words, even if FTTP cost the same as FTTN, the government’s model would still be the wiser choice. How can this be? Because the slower roll-out (by up to four years) of fibre reduces the benefits enjoyed in the short term.

It is certainly true that Australians need and want faster broadband sooner. But it’s hard to see how, even with a four-year delay, the benefits of ubiquitous gigabit-ready fibre and of being rid of the old copper network do not outweigh the benefits of the slower, more complex and difficult to upgrade hybrid model. Over the span of a few decades, the advantages of fibre are self-evident.

This highlights the limitations in a narrow, micro-economic view of broadband’s benefits. Using consumer willingness to pay as a measure of economic utility gained is standard in economics — but it is a less robust measure when we are talking about national infrastructure with the potential to change the economy itself. It is particularly flawed in this case, as it is combined with projections of growth in demand that are incremental at best. There is no hint of the technology revolution still to come in a statement suggesting demand is not expected to grow at all for higher speeds (greater than 50 Mbps download or greater than 9 Mbps upload)”. I imagine that in 2030 this sentence will make for amusing reading.

But perhaps most controversial are the assumptions around the broader benefits as summarised by the report: The majority of the benefits from higher speed broadband accrue to private uses within households and businesses … benefits accruing outside individual households or businesses such as in health and education … are a very small proportion of the total benefits. They estimate broader benefits to society of greater broadband at about 5% of the total benefit.

This gels with the Coalition’s apparent view of the internet as an entertainment device for bored geeks. You might say it downplays the NBNs potential slightly. I trust that this part of their modelling will receive special scrutiny in days and weeks to come.

As a thought experiment, go back 10 or 20 years and imagine what a similar analysis would have predicted in terms of the benefits of getting Australia online. It wouldn’t have captured the transformative effect that the internet has had on education, travel and government; or on the complete revolution it has brought to business. Yes, these benefits would be of an order to dwarf the costs of either proposal.

In the game of political football the NBN has become, discussion about why we need a broadband policy at all has been poorly served. The good thing about this analysis is that it might stimulate debate about the real benefits of communications technology — and what we think it can do for the society we want to be this century.

24
  • 1
    mikeb
    Posted Friday, 29 August 2014 at 2:12 pm | Permalink

    The problem seems to be that most of the Govt and its cheer squad think that fast internet is only good for downloading movies and porn. Science, health and educational uses are all a bit foreign to them, and best left to future 457 visitors.

  • 2
    Ulor Boxo
    Posted Friday, 29 August 2014 at 2:46 pm | Permalink

    In the early days of electrification, electric motors replaced steam motors and electric light replaced oil light.

    Since then electricity has been used for intelligent control of a wide range of industrial and domestic processes.

    In the early days of broadband, downloads replaced DVDs and TV.

    After that the internet of things will allow intelligent coordination of large sectors of social and economic activity - but not under this government

  • 3
    Dogs breakfast
    Posted Friday, 29 August 2014 at 5:27 pm | Permalink

    Not sure whether the authors of this report were dolts, neanderthals, Luddites, or just deliberately obtuse.

    It is a classic economists argument, measuring the cost of everything and the value of nothing.

    This will be seen in future as one of the great visionary ideas of the early 2,000’s, people will line up to argue how quickly they got on board to support it, economists will be doing sums to work out how many tens of billions of dollars it cost the Australian economy by not going full-steam ahead, and how much was lost by this ridiculous hybrid model that relies on copper wires which are already at the end of their life.

    It’s laughable, and yes, much of this report will be held up as a case study in stupidity and short-sightedness for decades to come.

  • 4
    graybul
    Posted Friday, 29 August 2014 at 6:54 pm | Permalink

    Abbott Govt. continues to redefine future of Australian Nation’s aspirational need to access, identify, future technological opportunities.

    NBN, Renewable Energy Industries but two opportunities now gone begging!

    Can one call Government a Luddite or, must the term be restricted to responsible, individual Ministers??

  • 5
    Posted Friday, 29 August 2014 at 7:41 pm | Permalink

    Every day, in my job working for a start up about to turn over A$1 million per month after only 2 years of being in operation, I have video calls with at least 3 people around Australia, 3 video calls to India, and 1 video call to San Francisco.

    There are 4 people in a role similar to me, all who have similar calls, all around the same time.

    Then there are the sales team who are always on the phone (which is connected to the net and not landline). Our media editor uploading videos to youtube, our designers calling Eastern Europe, and our web developer on calls to Indonesia.

    As well as our boss playing music through spotify.

    80% of the time, we are going “What? Sorry, I didn’t get that, can you repeat that please?”

    It’s an abomination that we are working with ADSL 2+ speeds. It’s an abomination we’ve waited over 3 months to get fibre installed AND we’re still waiting for it. It’s an abomination that a company with nearly $10 Million a year turnover whose bosses voted Liberal are treated with such contempt.

  • 6
    Shaniq'ua Shardonn'ay
    Posted Friday, 29 August 2014 at 9:20 pm | Permalink

    @FunkyJ - maybe you should block spotify, youtube etc to everyone who doesn’t need it - i.e. Management, maybe then they’ll think twice before they vote next time..

  • 7
    Shaniq'ua Shardonn'ay
    Posted Friday, 29 August 2014 at 9:32 pm | Permalink

    I’m pretty lucky that I have good ADSL2 (via copper) in my inner city flat but I just have to look out the window at the coax wired to the building and down the street (which is mostly used only by the possums to get around) to see the lost opportunity we had in the 90’s when the foxtel network was put in.
    My neighbors stand outside to talk on the mobile (Telstra btw, Optus is even worse) while it goes unused because it is not cost effective for people to pay for the foxtel monopoly they don’t want just to get a high speed connection.
    When the hell will Economists learn that it is not good idea to privatize infrastructure. It’s a failed model.

  • 8
    paul holland
    Posted Friday, 29 August 2014 at 10:48 pm | Permalink

    The connection with Australian users of Skype seems to be very slow when connecting from Japan. This is despite the fact that I want to have my daughter and other of my customers access the excellent internet educational programs which are coming out of Australia. If the speeds are to slow then the users will have to switch to alternative sources and the possibility of other countries.

    Abbot and co must expect us to pray to god that what Australia has will keep us up to date for awhile. I hope that a lot of people stop praying and do something to get the country into a new millenium. This report is not worth the paper it was written on. Industry groups should be shouting that was is on offer as we stand is an insult to our integrity.

    Across the straits Korea is in another league and reaping the benefits.

  • 9
    michael r james
    Posted Friday, 29 August 2014 at 10:55 pm | Permalink

    #3 Dogs breakfast at 5:27 pm
    “Not sure whether the authors of this report were dolts, neanderthals, Luddites, or just deliberately obtuse.”

    It’s actually worse. Far worse. Hit your own-head-against-the-brick-wall worse.

    Sure there are a few Luddites and maybe a few who actually believe in the faked-up free-market bullsh!t. But a considerable majority of the LNP are only doing this for one reason. Because Abbott opposed it in opposition. He opposed it just to oppose it. He himself actually has no ideological inclination on the issue at all. He simply doesn’t care. (He might be a bit of a Luddite; probably gets his secretary to print out his emails. But on the issue of a fast efficient internet for the nation, he really doesn’t give it a moments thought. He could care less, which is to say, he couldn’t care less.)

    Then there are those who have to support this ridiculous policy of destruction, against their better judgements, all the while knowing that Abbott didn’t give it a moments thought when he demanded the party oppose it in opposition nor another moment’s thought when pursuing the destruction of Labor’s NBN when in power. In fact his main thought on the issue (or perhaps Peta’s) was how cleverly it wedged Turnbull, forcing him to sell a policy against his better judgement. (It was a win-win; if Turnbull refused Abbott would be free of a future threat, verifying what the party thinks, that Turnbull is not a team player; if he failed to devise and sell the alternative, ditto. Even if Turnbull “succeeded” the party knows how he hates both the party for making him do it, and himself for acceding to the perfidy.)

    Turnbull’s soul is shrivelling every day this goes on. As it should.

    One day in the future he will unlock that attic room (maybe a virtual one! on Instagram! lo-rez of course so downloading is not a challenge) and look squarely at the portrait that slowly turned so ugly he kept it covered all these years, then he himself will finally manifest the ugly horrorshow in his own aged visage. Too late he’ll realize there wasn’t much point in being so clever most of his life, when at the time it really mattered — for the nation not just his self-interest — it came to this.

  • 10
    michael r james
    Posted Friday, 29 August 2014 at 10:56 pm | Permalink

    #3 Dogs breakfast at 5:27 pm
    “Not sure whether the authors of this report were dolts, neanderthals, Luddites, or just deliberately obtuse.”

    It’s actually worse. Far worse. Hit your own-head-against-the-brick-wall worse.

    Sure there are a few Luddites and maybe a few who actually believe in the faked-up free-market fantasy nonsense. But a considerable majority of the LNP are only doing this for one reason. Because Abbott opposed it in opposition. He opposed it just to oppose it. He himself actually has no ideological inclination on the issue at all. He simply doesn’t care. (He might be a bit of a Luddite; probably gets his secretary to print out his emails. But on the issue of a fast efficient internet for the nation, he really doesn’t give it a moments thought. He could care less, which is to say, he couldn’t care less.)

    Then there are those who have to support this ridiculous policy of destruction, against their better judgements, all the while knowing that Abbott didn’t give it a moments thought when he demanded the party oppose it in opposition nor another moment’s thought when pursuing the destruction of Labor’s NBN when in power. In fact his main thought on the issue (or perhaps Peta’s) was how cleverly it wedged Turnbull, forcing him to sell a policy against his better judgement. (It was a win-win; if Turnbull refused Abbott would be free of a future threat, verifying what the party thinks, that Turnbull is not a team player; if he failed to devise and sell the alternative, ditto. Even if Turnbull “succeeded” the party knows how he hates both the party for making him do it, and himself for acceding to the perfidy.)

    Turnbull’s soul is shrivelling every day this goes on. As it should.

    One day in the future he will unlock that attic room (maybe a virtual one! on Instagram! lo-rez of course so downloading is not a challenge) and look squarely at the portrait that slowly turned so ugly he kept it covered all these years, then he himself will finally manifest the ugly horrorshow in his own aged visage. Too late he’ll realize there wasn’t much point in being so clever most of his life, when at the time it really mattered — for the nation not just his self-interest — it came to this.

  • 11
    Mick Handcock
    Posted Saturday, 30 August 2014 at 6:56 am | Permalink

    Regarding the NBN cost benefit analysis “It proved that a slower, less effective NBN will cost less. Thanks Sherlock.” That simple gem was from Tony Bourke, in his weekly 5 x 5 from fed parliament this week.

  • 12
    Chris Wilson
    Posted Saturday, 30 August 2014 at 7:40 am | Permalink

    It’s just not credible modelling. Excluded is the cost of maintaining the copper from the cabinets to the home, a huge (i.e. ongoing multi-billion dollar cost).

    Also excluded from the FTTN is the cost of the in-house equipment (e.g. ADSL modems and installation)while it is included in the FTTP model.

    Worse, the conversion from FTTN to FTTP, which will be required about 5 minutes after the FTTN is implemented, is also excluded.

    So they may be Luddites, but they have also deliberately skewed the model to get the answer they want.

    The analytical capabilities of the Main Stream Media are once again shown to be pathetic.

  • 13
    Peter Hannigan
    Posted Saturday, 30 August 2014 at 12:43 pm | Permalink

    High speed internet? Who needs it. It is just like that ridiculous idea that people will ever want to buy or use desk top personal computers. Oh …wait …

  • 14
    David Hand
    Posted Saturday, 30 August 2014 at 6:48 pm | Permalink

    Nothing in the article about the unrelenting shift to wireless. No comments about it at all.

    Instead, we are in geek land about fixed line speeds.

    Until you can get your heads around the future of broadband in a wireless world, you’re just a bunch of lefties campaigning for your failed grandiose public spending albatross.

  • 15
    magoo
    Posted Sunday, 31 August 2014 at 5:45 pm | Permalink

    @Hand, before you take the spin on wireless being the future maybe educate yourself on why that’s impossible.

    http://nbnmyths.wordpress.com/why-not-wireless/

    Until you get your head around the scientific method and how that applies to determining whats viable, your just a right wing follower who doesn’t need facts to make decisions.

  • 16
    mikeb
    Posted Sunday, 31 August 2014 at 6:38 pm | Permalink

    Oh no not the “future is wireless” argument again. Of course everyone will use wireless BUT it will be running off the backbone of a fixed line NBN. What is so hard to understand about that? Do you think that the rest of the world has been hoodwinked by “lefties campaigning”? Maybe it’s just as simple as letting the experts who actually know how these things work get on with their jobs. I’m sure if they need your advice David Hand then they’ll ask for it.

  • 17
    ChristosHellas
    Posted Sunday, 31 August 2014 at 7:44 pm | Permalink

    Premises with ALPs ‘Last Mile’ direct fibre NBN connections (FTTP) - will be worth more than - Premises with LNPs ‘Mile Away’ 3rd rate copper connections to NBN street cabinets (FTTN).

    We are already seeing buyers & renters with small/home businesses or student kids, requesting FTTP & rejecting premises only with FTTN.

    At least under ALP, 93% premises values would have been treated equally with FTTP. Under LNP only a ‘privileged’ 18% will now have FTTP & better premises value than the ‘unfortunate’ 75% - actually has a whiff of ‘communism’ - gobsmacking stuff.

  • 18
    David Hand
    Posted Sunday, 31 August 2014 at 7:46 pm | Permalink

    Yes Mike,
    But when people are wireless, the fixed line NBN will no longer need to be physically connected to every home. Maybe, say, a local node somewhere? Save all that expensive undemanded redundancy for those with specific demands for fixed line such as commercial, educational, geeks and the Conroy memorial fan club?

  • 19
    ChristosHellas
    Posted Sunday, 31 August 2014 at 8:11 pm | Permalink

    No David Hand,

    Wireless is only the low capability ‘leaner’ technology to connect premises. Fibre cable is the high capability ‘lifter’ technology to connect premises. Every telco & service provider will tell you so - just ask any of them.

    Just imagine the response from premises buyers/renters when you tell them ‘umm, its got a wireless connection to the mile-away street cabinet’ compared to ‘yep, its got a direct fibre NBN connection’. Which premise would you pay a bit more to make sure you get?

  • 20
    David Hand
    Posted Monday, 1 September 2014 at 12:34 am | Permalink

    Yeah well, Christos,
    I await with interest evidence of property values in Fitzroy rising faster than say, Prahran or Toorak. Handy that - living in a marginal electorate.

    What I read is that NBN take up in Fitzroy is disappointingly low because of the number of renters who prefer to have no fixed phone line at all but stick to mobile.

    They seem happy to accept the slower speeds that wireless has at the moment. The Coalition NBN will improve wireless speeds of course by adding fibre to the nodes. Yeah yeah, not as fast as the Conroy Cult rightly says FTTP will be but they don’t care.

  • 21
    ChristosHellas
    Posted Monday, 1 September 2014 at 10:22 am | Permalink

    Actually David Hand,

    Free Choice. Open Access. Wide Competition. FTTP allows people to freely choose through open access of all competitive services. They can then make the best informed & best value decision. Strangling choice, limiting access & restricting competition to 75% of premises with FTTN, while a ‘privileged’ 18% have the choice of open access to all competitive services - is just wrong. It’s definitely not free-market. Wonder which premise you would pay a bit more to make sure you get?

  • 22
    tinman_au
    Posted Monday, 1 September 2014 at 1:11 pm | Permalink

    You have a source for that data on Fitzroy David? I’d be interested to take a look.

  • 23
    David Hand
    Posted Monday, 1 September 2014 at 5:44 pm | Permalink

    Tinman-
    “What reporting of the Brunswick NBN survey didn’t tell you”

    commsday.com/commsday-australasia/comment-what-reporting-of-the-brunswick-nbn-survey-didnt-tell-you#sthash.Dos4BaYR.dpuf

    Published 5 April 2013.

  • 24
    David Hand
    Posted Monday, 1 September 2014 at 5:45 pm | Permalink

    Sorry 5 March 2013

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