The broadband non-crisis

By David Walker (Google profile)

(Author's note to readers: To judge from correspondence, many readers of this article jump to the conclusion that I must have a narrowband connection and an irrational affection for Australia's dominant telecommunications provider, Telstra. In fact, I pay Telstra $A87.95 a month for 3 gigabytes per month of connectivity, and I wish my business could obtain cable-based Internet as well. I also wish it were cheaper. To clarify: broadband is undeniably useful to certain users. That's not the issue. The issue is how public policy should be changed.)

What is the great challenge facing the Australian Internet right now? To judge from recent pronouncements by the highest authorities, the challenge is to promote the use of broadband Internet connections, now enjoyed by probably less than 500,000 of Australia's 10 million online citizens.

A suddenly concerned Australian Prime Minister, John Howard, is setting up a joint government-industry broadband advisory group. His telecommunications minister, Richard Alston, has discovered after six years in the job that Telstra has an unhealthy domination of broadband infrastructure. The states and the Federal Opposition are pressing the issue. The head of Computer Associates, Sanjay Kumar, reckons the Federal Government should offer tax dollars to bribe people into broadband. Silicon Graphics chairman and chief executive Bob Bishop wants direct government broadband funding. Bill Gates is still saying, as he did two years ago, that Australian broadband is overpriced. And the politically savvy Telstra, which delivers more broadband than anyone else in Australia, has produced a $50 million "broadband stimulus package" to show it's worried too.

But hold on. Broadband is available to perhaps six million people in Australia, in packages as cheap as $55 a month. Most Australians aren't buying yet. And so what? Australia has lots of healthy, pleasant, widely-available goods and services that people don't buy. Take mangoes - full of vitamins, tasty, found at most good fruit stores. Less than ten per cent of Australians will eat a mango this week. But there is no National Mango Crisis, and none will be declared anytime soon. So why is there a National Broadband Crisis? No-one seems able to say clearly.

Maybe consumers are simply ill-informed about broadband's benefits? Perhaps, but it's certainly not obvious. Broadband Internet has a couple of advantages over dial-up: it's always on, and it's faster. But the providers have been busily selling those benefits. And some of the other alleged benefits are less compelling: small, jerky, unreliable streaming video is less small, jerky and unreliable on broadband, and file downloading happens faster - or would, if Napster-type services weren't forever being shut down. Given that Australia's ISPs and its local telephone network provide pretty much state-of-the-art dial-up Internet service at half the price of broadband, connecting customers via untimed local calls, you'd have to reckon many Australians are making a rational judgment when they ignore the broadband option. (Many of the factors driving Australia's broadband take-up rate are summaried in a wonderfully clear and well-reasoned ITU paper called "Broadband: The Case Of Australia", published in May 2001 by John Houghton of Victoria University's Centre for Strategic Economic Studies and Peter Morris of Telesis Communications.)

Perhaps the system has been rigged to keep broadband prices unreasonably high? Certainly Australia's politicians, regulators and commentators made mistakes in the early- and mid-1990s as they went about creating the nation's current broadband environment. But similar mistakes were made elsewhere in the telecommunications system, arguably with much worse effects - and no-one has declared a National Phone Crisis yet. And despite Bill Gates' claims, Telstra and Optus broadband appears to cost much the same as typical US broadband service.

The nearest thing we have to an identifiable problem is the oft-quoted statistic that Australia ranks a lowly 16th on the OECD league table of broadband take-up. But you don't get a cash prize for being number one on this league table. Heck, you don't even get a trophy that the nation can put on its collective mantelpiece. We're way down the OECD mango-eating tables too, but John Howard has so far successfully avoided having to address the issue.

In short, the Broadband Crisis looks suspiciously like a manufactured product.

Manufactured by whom? Suspects abound. Back in the late 1990s, any analyst could tell you that consumer broadband would be booming by 2002. The resulting overcapacity on trunk routes has brought broadband blues to many nations, including the US and Britain as well as Australia. So lobbyists everywhere have busied themselves convincing governments and oppositions that broadband should be subsidised, promoted and otherwise helped. Meanwhile, a number of software companies - notably Microsoft - want to stimulate slack sales with a new generation of broadband-fuelled software products. Singing the broadband blues is a global growth industry.

And just about everyone in the world has room to obsess about their standing in the broadband race. Number one on the OECD's broadband league table is South Korea, with proportionately more than twice as much broadband as any other nation on Earth. The reason is a Korean government policy of throwing broadband both regulatory force and huge sums of money - more than $15 billion so far, with another $30 billion to come by 2005. (A shortage of alternative channels for gambling and pornography seems to have helped too.)

Good luck to the South Koreans, but Australians should be able to find better ways to spend $45 billion. You could spend it on lowering the cost of basic connectivity (via ISDN, ADSL, POTS, ATP, whatever). Or you could spend it teaching local Internet professionals to deliver cost-effective business solutions (an issue raised recently by Commonwealth Bank chief David Murray). Or you could spend it ensuring the public education system delivers the quality of knowledge workers we will need over the next 50 years.

But please don't worry about broadband. We're number 16 on the OECD list, wedged comfortably between Switzerland and Norway. It'd be nice to be higher, but it isn't a big problem. Relax. Go eat a mango instead.