National broadband network schemes are plagued by political uncertainties and unrealistic business models, raising the issue of how much government intervention is needed for universal broadband, said panelists Wednesday.
Speakers at a fixed-broadband panel session at the CommunicAsia summit were particularly critical of Australia’s NBN project. Kip Meek, chairman, of UK-based Broadband Stakeholder Group, described the plan as “extraordinary” and a scheme that “departs from the principles of good regulation in telecoms. I worry about it.”
The project, estimated to cost as much as A$43 billion ($31b), involves the establishment of a state-owned carrier, NBN Co. The government and Telstra have been unable to agree on the terms of Telstra’s participation.
Richard Pascoe, partner at Gilbert + Tobin, put it more strongly. “I think we’re in danger of taking collective leave of our senses,” he said, remarking on the amount of money being spent on NBN projects in Australia, New Zealand and Malaysia. “How on earth will these networks make any money?”
Pascoe cited the debate over network neutrality as an example of how difficult it will be for national broadband networks to see a return on investment.
“It’s simply not feasible to treat all packets equally because the applications that will drive uptake of these multibillion-dollar networks will require QoS to be of any value. But who will pay for it?” he said.
“The consumers will pay for data plans but not content. The aggregators, content providers and search engines say it’s up to the network providers to pay. And network providers won’t innovate if there’s no reward for providing capacity.”
Thomas Jones, partner with Corrs Chambers Westgarth, remarked that government-driven NBN rollouts “need transparency, investment certainty and retail and wholesale competition” to succeed.
Jones added that the NBN Co plan is still plagued by political uncertainties, from NBN-related legislation languishing in parliament to the prospect of the opposition party dissolving the company if it wins the pending national election.
Meek of BSG pointed out that national broadband plans in general tend to vary widely in terms of mandating coverage and speeds, which also affects projections on take-up rates.
“There’s no systematic way of determining just how much government intervention is needed to enable ubiquitous broadband and balance the tradeoffs between coverage, speed and take-up,” he said.
A model from BSG that assesses the incremental benefits of broadband investment indicates that most markets are not likely to roll out fiber-level broadband beyond 20% penetration without government intervention, but that the UK broadband plan – which has set its universal broadband goals at a modest 2Mbps minimum – will yield a much higher rate of return than if it were to require FTTH to the majority of homes.
“So there is a strong case for government intervention to achieve standard broadband coverage on a nationwide basis, but not for superfast broadband,” Meek said. “Getting a return on FTTH requires heroic assumptions about the externalities involved with such rollouts.”
Meek added that Singapore’s NBN scheme was an exceptional case. “It can deploy full coverage and superfast speeds relatively cheaply because of its geography and scale, so balancing tradeoffs is less of an issue. Australia hasn’t made those tradeoffs either, but I think that’s a mistake.”