NBN to the city last and to be more expensive

[medusala]

Their word is hardly any more credible than that of the people you suggest are only in favour of the NBN because they are rent seekers.

Not suggesting it is. Merely that people will argue out of self interest. Those without a dog in the fight tend to be rather critical re the economics.

So in your economic philosophy, what is more wasteful - 40 billion dollars on something that achieves more than we currently need, or 6 billion dollars on something that achieves absolutely nothing?

I am sure Treasury or the PC could model this if they were asked.

The coalition plan may be rubbish, I have no comment on their technological solution. My argument is that the government should interfere where there is market failure ie outside of the cities and then to a minimum standard ie nowhere near 100mbps.

I find it hard to believe Melbourne and Sydney cant get sorted without the NBN doing it.

 

[ReservoirDog]

Not suggesting it is. Merely that people will argue out of self interest. Those without a dog in the fight tend to be rather critical re the economics.



I am sure Treasury or the PC could model this if they were asked.

The coalition plan may be rubbish, I have no comment on their technological solution. My argument is that the government should interfere where there is market failure ie outside of the cities and then to a minimum standard ie nowhere near 100mbps.

I find it hard to believe Melbourne and Sydney cant get sorted without the NBN doing it.

The issue is it is basically a duopoly with no incentive for either telco to invest in faster broadband. This needs to be broken especially in the commercially non viable rural and regional areas.

 

[midorigreenwood]

Hey, any financially minded folk know anything about this Robert Gottliebsen bloke who writes for the Business Spectator (run by Alan Kohler of the ABC)?

he sounds alittle loopy

anyways....

http://www.businessspectator.com.au...akeshott-abbott-pd20100831-8TSBL?OpenDocument

on August 31st he wrote about the Australian Leadership Retreat on Hayman Island where apparently he claims sources close to the NBN revealed that the 11 billion dollar Telstra deal meant that the urban build of the NBN will be much more profitable and able to ensure a return of 10-15 percent which meant that they would be easily able to gather private sector funding.

according to him, sources close to the nbn claim that

the city section of the project could have been funded 'in principle' four times over.

In other words, the plan is to gain private sector money separately for the city build.

This leaves subsiding regional australia to the tune of 10-12 billion dollars out of the government's pockets along with private funding rather than footing the entire 43 billion dollar bill for the entire network.

He calls this the "Hayman solution" to broadband in Australia and claims that Abbott ignored it and thus lost the election.

Now to broadband. While the NBN represents a $43 billion outlay for Australia, even the rural-based independents would have trouble supporting it. It was too much money. What changed the game was first the deal with Telstra which transformed the economics, and second the so-called 'Hayman solution', whereby fibre to the home in the cities and major rural centres would be funded separately via the private sector because it offered a return of between 10 and 15 per cent.

That left in the vicinity of $10 to $12 billion to cover rural Australia which would be funded partly by the private sector and partly by a subsidy following the precedent of power, rail and the like, which is not economic to rural areas but is supplied as public policy.

http://www.businessspectator.com.au...defeated-Abbott-pd20100908-93TA3?OpenDocument

He writes today that this is what the NBN officials told the Independents in the briefing to make them change their mind

On Sunday August 29 National Broadband Network officials raced out of Hayman for Canberra. They met with the three independents on the Monday to explain the Hayman solution. I wrote my email to the independents which was published in Business Spectator on Tuesday August 31 (Time for rural broadband reason, August 31). I did not know the NBN officials had flown to meet then independents after Hayman until it was revealed last weekend by the Fairfax Press.
When I wrote my Tuesday comment it was still possible for Abbott to win and the note to the independents was also aimed to alert the Coalition, who were not at Hayman, that the broadband game had changed and they needed to revise their policy.

But Abbott did not grasp the significance of what had happened at Hayman.

I don't really know what to think :/

 

[medusala]

Hey, any financially minded folk know anything about this Robert Gottliebsen bloke who writes for the Business Spectator (run by Alan Kohler of the ABC)?

Used to get it but not anymore. They were originally keen on the idea then went right off it. Used to get lots of coverage.

For them to change their minds I assume the government must have absolutely screwed Telstra because previously most were saying the private sector wouldnt touch it with a barge pole. Analysts IIRC were mildy positive about it ie the Telstra deal (Morgs probably has a detailed view on this)

Cash flows from the city rollout will now be extended a few years in to the future, that is not a positive for returns.

This was only recently reported

http://www.bloomberg.com/news/2010-...make-profit-for-30-years-australian-says.html

Australia’s NBN Co., which is building a A$43 billion national broadband network, won’t make the government a financial return for 30 years, Chief Executive Officer Mike Quigley told a Senate committee hearing, the Australian newspaper said. The company hasn’t begun thinking about ways of attracting private-sector financing, Quigley told the committee, according to the Australian.

...............

However, MG does this not raise a large question? If such returns are indeed available then why is there any need for the government to be involved at all?

 

[Pessimistic]

If you look at history of the industrial revolution, much of it was financed privately, but infrastructure (at the time railways, dams, canals) were all seeded by acts of parliament.

Government has a function in all this.

This is a scare campaign as city people (and more importantly buisinesses) in the city will still have lots of choice NBN or all the private offerings.

Regional needs a huge boost because before long we need to attract population there

 

[TheBloods]

A lot of development is government initiated - computers, internet, jet engines, etc. Private sector cannot be relied upon to develop and progress by itself - it doesn't suit short-term profit thinking and in a market where new ideas are open to everyone there is little incentive to be first with the money needed.

 

[midorigreenwood]

However, MG does this not raise a large question? If such returns are indeed available then why is there any need for the government to be involved at all?

not a fair comparison. The taxpayer already paid for the ducts, pits and exchange space that Telstra now owns.

It is estimated that 90% of the cost of fibre optics deployment is in civil works.

The last telco that tried to build a fixed line network to compete was Optus with HFC. Telstra saw it as a move to encroach in its space and deliberately followed them street by street in turn installing overhead cables. Along with the NIMBYs complaining, it made it economically unviable for both parties and nearly sending Optus bankrupt.

Telstra didn't care..... according to the Australian, they make 50% margins from their copper infrastructure. It was a defense strategy to protect their incumbency in fixed line telephony.

Only the government is able to batter them into submission (although the bruhaha with the mining tax vastly improved telstra's bargaining position hence 11 billion dollar bribe) by threatening to withhold wireless spectrum which they need in the future as the copper infrastructure becomes obsolete.

 

[TheBloods]

The Economist - Sep

[In America, the] vitriolic net-neutrality debate is a reflection of the lack of competition in broadband access.

Doesn't sound like 'pure competition' is working so well.

 

[medusala]

not a fair comparison. The taxpayer already paid for the ducts, pits and exchange space that Telstra now owns.

And the taxpayer flogged off Telstra.

Only the government is able to batter them into submission (although the bruhaha with the mining tax vastly improved telstra's bargaining position hence 11 billion dollar bribe) by threatening to withhold wireless spectrum which they need in the future as the copper infrastructure becomes obsolete

That was my point re above. If Telstra got such a brilliant deal then I am not sure why the NBN is now more rather than less viable with respect to private financing.

What happens now to broadband in metro areas? Does Telstra just sit on its hands?

 

[midorigreenwood]

And the taxpayer flogged off Telstra.

yeah, but the Howard government chose to maximise their short term returns by flogging off telstra as a vertically integrated entity. They thought that access regulations would be enough to keep their market dominance in check but in practice the ACCC doesn't have enough teeth to act quickly.

Michael Malone, managing director, iiNet

Nobody denies Telstra's right to compete in the market, on a fair basis. We're more than happy to meet and beat Telstra on customer service, product innovation and cost management.

But where there is no wholesale competition, Telstra is using its ownership of the network to give its own retail arm an unfair advantage.

Right now, Telstra is selling a retail ADSL2+ broadband service for $49.95, as you can see headlined right here.

But Telstra charges more than $49.95 just for the port!

The port access is not the whole broadband service, it's just one component of it, and Telstra is charging more for that component than their retail arm sells the whole product for.

IInet complains to the regulators and two years later Telstra gets slapped on the wrist...... but in that time they have already tied up many customers to 12-24 months contracts.

How can you expect the market to work if other telcos are forced to compete with a giant which has had its infrastructure paid for by the taxpayer and doesn't want to play fair?

That was my point re above. If Telstra got such a brilliant deal then I am not sure why the NBN is now more rather than less viable with respect to private financing.

I have no idea whether Business Speculator are talking out of their arse..... but why can't it be a win win situation?

Telstra gets to flog off a dying infrastructure which is costly to maintain and gets paid to transfer its customers over. They also get to decommision roughly 5000 telephone exchanges as the NBN consolidates the network to 200 or so Points of Interconnect. Real estate developers will be licking their lips.

NBN on the other hand, doesn't have to worry about Telstra competing in the fixed line wholesale market and undercutting their prices. Capital costs are reduced because they are using existing infrastructure rather that digging new trenches.

What happens now to broadband in metro areas? Does Telstra just sit on its hands?

DSL market is still strong and stable despite the uptake of wireless services. As long as you're lucky enough not be be stuck behind a RIM and reasonably close to the telephone exchange, Metro areas will be fine untill the NBN comes a knocking.

Telstra will just continue being Telstra. Bullying competitors and aggressively signing up new customers to long term contracts in wait of the NBN handout.

 

[1jasonoz]

No. The market will provide in cities and it will do so cheaper and quicker.

Stutchbury added to a long list of people putting the boot in.

http://www.theaustralian.com.au/bus...rd-not-taxpayers/story-e6frg9p6-1225914991675

Most of the IT world backs spending $43bn of other people's money on a super-duper fibre network. But a collection of telco suppliers, including AAPT's Paul Broad, two week ago issued an alternative broadband plan, based on next generation 4G mobile technology, that rejected the NBN model of "infrastructure monopolies with retail competition". The Alliance for Affordable Broadband argues that a mix of technologies and market-based provision could include 4G coverage for 98 per cent of Australians at up to 100 megabits per second and even higher-speed fibre broadband for schools and hospitals. It would cost perhaps $3bn.

The AAB plan is not the best plan to source as an alternative to the NBN is it?

http://www.businessspectator.com.au...frastru-pd20100906-92587?OpenDocument&src=rot

 

[1jasonoz]

That is not always unusual. Costello wrote a piece on this recently re the mining tax. Some Lib policies in the past have come from the NFF and the ALP from the ACTU. Treasury then models policies once they have been selected. The PC rather than Treasury has also advised on numerous policies. Garnaut another example (though IIRC he had Treasury assistance).

Someone the other day wrote that for Treasury to not do modelling re this would be staggeringly incomepetant. ie implied that they must have done.

IIRC Howard/Costello did modelling re WorkChoices and refused to release it and were given a hard time over it. Perhaps the ALP learned a lesson re this.

That is not always unusual.

So you now accept that Government makes decisions like the Ralph 50% CGT changes without first doing a Cost benefit analysis?

Treasury then models policies once they have been selected.

Treasury like they did with the recommendations and costing included in the Ralph report, then include the costs to the budget in the forward estimates like the ALP have done with the $18.3 billion over the next 4 years for the NBN.

Someone the other day wrote that for Treasury to not do modelling re this would be staggeringly incomepetant. ie implied that they must have done.

As it should be with most government policies like the 50% CGT changes which are now costing the budget about $10 billion per year in revenue.

IIRC Howard/Costello did modelling re WorkChoices and refused to release it and were given a hard time over it. Perhaps the ALP learned a lesson re this

No Howard good a hard time over the Workchoices modeling because when he finally made it public, it consisted of 2 pages of assumptions equal to a 1st year uni assignment.

Its also interesting that Henry Ergas has come out and attacked the continued subsidies for the bush, re them failing to comply with cost benefit analysis.