It was only a matter of time before a politician facing an election cottoned on to the international “free” wireless broadband fetish. And so NSW Premier Morris Iemma has the distinction of introducing telecom’s latest fad to these shores. Almost certainly he won’t be the last.

Free muniwireless, as the Americans call it, brings with it some fairly provocative implications. The first one is the presumption of market failure, that broadband is something that should be given for free as a social service.

The second is that, if I have read Iemma’s proposal correctly, there will be very little government subsidy for it, other than the provision of real estate and perhaps, some paid custom. The suggestion is that a private player should bear the risk and find alternative sources of income to actual basic access charges.

If one looks around the world at the fast growing operating and potential examples of the muniwireless model, we see that there are only limited options for cost recovery on a “free” network. One is to charge a fee for “premium” service: in other words, the free service is capped at a certain speed and usage limit. Another is to gain revenues from that wonderful magic pudding: advertising. Google in Mountain View, CA and Microsoft in Portland, OR are already experimenting with variations on this model – enabling the location-detecting attributes of the network to enhance the value of the user to the advertiser.

But one thing is clear – there is no proven sustainable business model for a completely or even partially advertising-supported broadband network. So Iemma’s plan is a big step into the unknown. Of course, Iemma’s plan is much less ambitious than Queensland Premier Peter Beattie’s plan to fibre up Brisbane.

But last time I looked, there was no suggestion that the Brisbane network would be given away for free, although there’s nothing to stop them from hanging free WiFi off the fibre tails. And the similar broadband announcement in Western Australia yesterday—pledging a 10 Mbps network for the entire state—is at least backed by the pledge of $1 billion of government business over ten years and the promise of “equal access” for third-party carriers.

Indeed, I wonder if Iemma’s advisers have paused to consider the “externalities” of their plan. For those who happen to be in range of the free wireless service, there will be a strong incentive to cancel existing broadband subscriptions, perhaps as a trade-off for inferior service and functionality. And the plan certainly makes it harder for the likes of Unwired, Commander and Telstra to sell their wireless broadband wares to business users – especially given that early evidence suggests free networks, unsurprisingly, quickly gain double digit market shares.

Ultimately, as Telstra’s Rod Bruem remarked yesterday in reaction, “nothing comes for free in this world so we will be interested to see how this will be paid for”.

Peter Fray

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