High Speed Broadband – Rudd Labor and the business of Nation-Building

The original article, by Tristan Ewins was originally published on leftfocus.blogspot.com on 7 Apr 09.)

Public policy sea-change

Rudd Labor has announced - on April 7th - a plan to finance and construct a massive 'fibre to the home' broadband network -- supplying service to 90% of Australian homes. This comprises a remarkable sea change in public policy.

According the Stephen Conroy, the project will: "directly support up to 25,000 local jobs every year, on average, over [its] 8 year life" www.minister.dbcde.gov.au/media/media_releases/2009/022

As reported on the SBS news website, the new company, formed by the government, "will spend more than $43 billion delivering high speed broadband to 90 per cent of homes and businesses [starting] from early 2010." (www.sbs.com.au/news/article/1014650/Mixed-reaction-to-broadband-announcement)

Meanwhile, the remaining households would be provided with Wireless and Satellite technology.

The plan in its entirety, however, would "set back the deliver of high-speed broadband to the entire country until about 2018." (www.news.com.au/heraldsun/story/0,21985,25301678-661,00.html)

Presumably the plan is for rollout to begin soon -- perhaps from 2010 -- but to take many years for completion. Here, time is of the essence. Australia could well become a world leader in new communications, information, and entertainment industries. Close scrutiny needs to be applied, therefore, in ensuring the swift deployment of the promised infrastructure.

Financing

Currently, the government plans to take a holding of at least 51 per cent in the company, including the issuing of bonds to the public 'Infrastructure Bonds'. (www.news.com.au/heraldsun/story/0,21985,25301678-661,00.html)

The 'slack' is supposed to be 'taken up' by the private sector -- but with financial crisis -- and shortage of liquidity, that may not be viable for some time.

For many years, now, Australian governments have eschewed the kind of nation-building_#main-fn1">1 infrastructure investments which are so vital to our country's future.

Now, however, Kevin Rudd has placed this announcement in the same league as the iconic 'Snowy Mountain hydro scheme'.

Again, the author emphasises: The investments we make now might provide for Australian information, communications and entertainment for decades into the future. So it is essential for the government to 'get it right'.

At the 'Left Focus' blog, this writer had argued in February for a public 'fibre fibre to the home' network. Importantly, such a substantial investment stands to deliver productivity gains, and drive real improvements to material living standards. (leftfocus.blogspot.com/2009/02/national-broadband-network-make-it_06.html)

New technology in this sector looks set to deliver a revolution in communications, information and entertainment.

As the author wrote in February, new technology could involve: "the fusing of digital television with Internet services and content."

While the new paradigm could be "interactive, participatory, open, and consumer driven." , "consumers [might] be able to shift seamlessly from 'pay for content' services, to free-to-air content."

Such content could be "sponsored through pinpoint advertising - adapted to consumer profiles, or where such information is unavailable, adapted to suit the content." ( leftfocus.blogspot.com/2009/02/national-broadband-network-make-it_06.html)

Another possible use for the new technology would be "video-telephony/video-conferencing." As John Quiggin has written at his blog:

"It can be done, just, with existing technology, but the possibilities would be radically transformed by the advent of near-universal fast broadband." (http://johnquiggin.com/">http://johnquiggin.com/">http://johnquiggin.com/)

Why not keep it public?

Many years past such investments would be considered a matter of 'nation-building', delivered as public monopoly. Today, however, Rudd Labor felt obliged to qualify its announcement by suggesting the new company would be privatised at some later date.

There are many reasons why the government needs to reconsider.

Firstly, given the centrality of new information and communications technology to everyday life, there is the spectre of 'information rich' and 'information poor' households'.

A company or authority -- remaining in public ownership -- could cross-subsidise provision of service for struggling households -- including those on low incomes and welfare.

However - even a part-private company would be divided in its loyalty to the public, and to shareholders. Assuming eventual full private ownership, there would be no-scope for cross subsidies. Furthermore -- profit margins would see more expensive service than if a public authority had run the network on a not-for--profit basis.

A 'Communications Levy' on business, the wealthy and high income earners (say 1%-2%) meanwhile, could cover the gains made by business as a consequence of emerging new markets, and technology-driven productivity. This could provide for the cost of debt servicing into the future.

Furthermore, should the new body -- under private ownership - hold a 90% stake in the national broadband market -- surely it would be easier -- and wiser -- to avoid the potential abuse this could involve. By this I again clearly infer a case for full public ownership.

And surely the Wireless network should be provided publicly too. Again -- an effective private monopoly here could result in the fleecing of rural customers who have no other choice.

Indeed: many customers will want 'the best of both worlds' -- and could benefit from 'package deals' that enable a natural public monopoly to take advantage of its economies of scale.

Finally -- a fully-public authority would be more compatible with 'national security concerns'.

Infrastructure as sensitive as a state-of-the-art communications network needs to be run by an authority committed to the privacy of Australian citizens. And there needs to be information security for Australian intelligence and defence interests.

Conclusion

In condemning the kind of 'extreme capitalism' that saw the collapse of finance markets worldwide, Kevin Rudd suggested a fundamental shift in outlook -- away from the neo-liberal paradigm.

Now, though, we are again being told to accept a privatisation agenda that few ordinary people really want -- and which doesn't really even make sense.

Surely governments of the Centre-Left today can be confident enough to reconsider the value of a 'democratic mixed economy'.

Natural public monopolies, here, ought be considered 'part of the picture' -- especially when they so directly provide for human need. Add to this the imperative of avoiding wasteful cost structure duplication on the one hand; or the dangers of monopoly on the other.

A public National Broadband Authority -- or government-owned company with a public service charter -- could provide for the real needs of Australian consumers and business.

As stated: such a body could provide cross-subsidies to those otherwise disadvantaged for lack of wealth. And it could provide cheap -- but high quality service -- being run on a not-for-profit basis.

And again: Debt-servicing costs could be provided for through a 'Communications Levy' upon high income earners and corporations.

John Quiggin has suggested the following scenario: presuming a "10 per cent return to cover capital costs and depreciation" the new company would need " revenue of around $4 billion a year, on top of operating costs, say $1 billion a year."

He continues:

" That would require 5 million households and small businesses to pay $1000 a year (about $80/month) each."

While Quiggin is unsure whether or not these conditions will be met, the author of this paper believes the possibilities will be broad.

Again: there is the possibility of "fusing of digital television with Internet services and content": A paradigm which is: "interactive, participatory, open, and consumer driven."

The Greens and other Senators on the cross-benches could have leverage here -- so focus upon these people is key. And as the next ALP National Conference approaches there will be many with whom the arguments made in this paper would find resonance.

The goal of a democratic mixed economy, here, should not be only the preserve of the ALP Left and Greens It should matter to all social democrats, and those who care about the public interest, and the rights of the poor.

If it's worth doing, it's worth doing the right way. Let's organise to make sure this time the government - and other core Parliamentary players - get it right.

Tristan Ewins

See also: "The case for re-nationalising Telstra" of 13 Jan 09 also by Tristan Ewins also published on Online Opinion, Forum discussions #comment-233680">"The broadband revolution" and #comment-233597">"Monday Message Board" on johnquiggin.com, "Other projects will pay for hare-brained scheme" by Kenneth Davidson in the Age of 9 Apr 09, citizensagainstsellingtelstra.com.

Footnotes

#main-fn1" id="main-fn1">1. #main-fn1-txt">↑ Editor's note: The term 'nation-building' is often also used by the growth lobby for building up population numbers. In this article it is used to describe building infrastructure on a national basis.