The NBN wants to be free

There’s been a lot of discussion on what Austalia’s national broadband network (NBN) will cost when it’s finally delivered to consumers. How much will we need to stump up to take part in today’s knowledge economy? Most cost recovery models have ISPs charging monthly fees of over $200, which is a lot more than the $50 per month most of us are used to paying. Who’s gonna pay that? A lot of folk have been pointing out the folly of forcing through a broadband network that few of us can afford, let alone be bothered to pay for.

Is this missing the point though? What if the government’s intention is to make the NBN free (or close enough to as to make no difference)? Much like most other public infrastructure such as roads. There’s precedents for this, from the New Deal though the recent government report on supporting innovation and the fact that the government is sitting on a large pile of money that they intend to spend.

The global financial crunch has had a dramatic impact on everyone’s lives, though Australia has been in the lucky position of avoiding the worst of the down turn. Australia is even the first large, rich country to raise interest rates on the back of the world recovery. Discussion has now turned to the nature of this recovery: will it be V or W shaped? Most of the smart money (including the RBA’s) seems to be settling on W shaped, with the potential for unemployment to rise in the short to mid term. The war chest the government accumulated to fight recession is still quite full, and the government has stated that it plans to stick to the large stimulus plan announced earlier in the year.

Recessions often to bring governments to think about major infrastructure projects. The U.S. went down this route mid century, with Congress having a few attempts at chartering a “National System of Interstate Highways” before Eisenhower made it a reality. I haven’t seen a figure for the investment required, but I expect it to be scary. The impact, though, was profound on the U.S. in general, and the economy in particular. Through the years, various estimates have been made of the contribution of the interstate highway system to the economy, generally finding that the interstate highway system has more than paid for itself in improved commercial productivity, with each dollar of investment in highways producing an annual reduction in product costs of 23.4 cents. It is estimated that the interstate highway system is now producing approximately $14 billion. All this from something you can use for free.

Fast forward to the future, and we can find an interesting report, Powering Ideas, recently published by the Australian government, outlining how what Australia might do to support innovation domestically. The report is quite long but at its nub, it points to a strategy of funding the infrastructure required by innovators it make it easy (and cheap) for them to innovate. This doesn’t mean that the government is getting out of the grant business, but it is an admission that the government doesn’t have a great track record of picking winners in this space. Cheap (if not free) infrastructure helps those grant dollars go further, while at the same time helping every innovator in Australia who wasn’t lucky enough to receive a grant.

Put the two of these together and it makes you wonder: what if they Australian government makes the the NBN free? Back in the 30’s the U.S. economy was driven by interstate commerce. Reducing the cost of trucking goods across the country (reducing the transaction costs) helped drive the economy forward. Today, in Australia, knowledge and collaboration are the back bone of the commerce. Reducing the cost of sharing information and collaborating has the potential to have a similar impact .

Like free and efficient roads, very cheap broadband access would help the entrepreneurs and innovators thrive. This would provide Australian’s with powerful platform to build businesses in a today’s knowledge economy. We could capitalise on the current trend for software-as-a-service (SaaS) startups replacing business process outsources (BPO), replacing a human labour driven solution is a software driven solution, servicing the world’s needs from our home base Research driven startups would have cheap and efficient access to the massive data sets which drive modern research, having the world at their fingertips.

You would probably still need to pay for the last mile, connecting your abode to the NBN backbone, but this is similar to the current energy delivery commitment from the government: they get the power lines to the property boundary, and then you pay someone to connect it into the house. Local ISPs could provide (or organises) the connection service, along with sorting out the home network and providing support. The NBN would also probably need to expand to include the link overseas, complimenting (or replacing) the network of links funded and managed by the existing telcos and ISPs.

And finally: where do the major Australian telcos fit in this? Interesting question. One probably better left to them to answer.

Posted under: Business-Technology, Innovation

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