Australia to Study Impact of Broadband: Issue Really is Cost, Timing

The Australian government will conduct an independent cost-benefit analysis of the National Broadband Network and a review of the regulations relating to broadband, as new questions about the cost of the fiber-to-home network has come into question. 

The more-abstract study of economic benefits of faster broadband is almost beside the point. It is not likely any truly-useful predictions can be made about the economic impact of various speeds and network architectures.

The more-important conclusions are likely going to be the projected cost of fiber-to-home versus fiber-to-neighborhood network architectures, speed to market and projected growth of consumer demand for higher speeds that would justify spending more, immediately, on one access method versus the other. 

The Australian National Broadband Network has been unable to meet its planned construction targets, and the government now questions the cost, as well. 

The change to a less fiber-intensive network is said to represent a final cost of A$20.4 billion (US$18.4 billion), well below the A$38 billion ($33.8 billion) originally stimated for the fiber to home plan, and far less than the $94 billion critics now say the former network would cost.

Some critics estimate that the Australian National Broadband Network (NBN) will cost A$94 billion dollars, not the A$44 billion its supporters have claimed. At least in part, that is because

of delays of several types and overly-optimistic assumptions.

The original business plan assumes wholesale revenue will start at $22 per month and then climb to $62 by 2020 or 2021 when the NBN is finished. That is growth of nine percent a year beyond inflation. 

Other major ISPs might say average prices for Internet access do not climb more than nine percent a year.

So critics say revenue projections are wildly overestimated.

What study of the benefits of broadband access has ever found anything but "it is a good thing?" The choice in this case is between faster networks and slower networks, not so much between the "fastest network" and a "fast network."

The problem is that the Internet is an ecosystem. So upgrading access speeds on one end of a connection delivers only so much benefit, if the rest of the ecosystem is not upgraded for those speeds, at the same time. And, of course, that never happens. Change comes incrementally.

Still, some would argue it is better to "waste" bandwidth and capital by moving immediately to fiber-to-home architectures. Others would say the immediate benefits, for consumers, businesses and the economy, would not be so much greater for fiber to home that the extra time and capital should be invested.

What probably will happen is that a mix of technologies will be used, as originally was planned. Satellite will continue to be used in rural areas. Fiber to home will continue to be used where it is feasible. But a greater percentage of locations might use fiber to the neighborhood.

It never was envisioned that fiber to home would be the architecture for all areas.