Occasionally a report comes along which should give people a whole new way of looking at a public policy debate. A new report on universal high-speed broadband (UHSB) via fibre-to-the-premises (FTTP), titled “Superfast: Is It Really Worth a Subsidy?”, does just that. Written by development economist Charles Kenny and his brother Robert Kenny, a British telecommunications consultant, it makes five points which are too frequently overlooked.
First, the macro-level studies which seek to show that UHSB via FTTP* will bring enormous economic benefits are mostly really ropey. This has been true for a decade and is getting worse. People who understand telecoms mostly don’t know how to do rigorous cost-benefit studies, or (like McKinsey & Co) don’t care.
Second, the micro-level specific benefits claimed for UHSB via FTTP in areas such as education, health and power management are mostly overstated.
Thirdly, many of the supposed benefits of UHSB via FTTP – macro- or micro-level – should be realised with the broadband we already have. It’s amazing how often the debate overlooks this. The report makes particular play of the way in which estimates of the bandwidth needs of electricity “smart grids” have been recklessly overstated. The same is true in other areas, including health. To make the case for UHSB via FTTP, proponents need to show what it can do that currently available broadband cannot.
Fourthly, UHSB over FTTP is frequently claimed as the solution to our toughest problems, the intractable ones with complex social roots. For example, it is supposed to transform health care, while health IT experts battle away vainly to get the industry to digitise its existing workflows (a project that really does look like it would have big payoffs). It is supposed educate our kids and cut our power consumption. At this point, UHSB over FTTP starts to look a little like a developed-world cargo-cult.
Fifthly – and perhaps most importantly – we should be able to see high-speed broadband (HSB) via FTTP at work today. The world has had HSB via FTTP for the better part of a decade in places like Seoul and Tokyo. And Australia, like most other developed countries, has had HSB via FTTP for many years too – not everywhere, but certainly between CBDs, many inner-city areas, and the universities. The notion that we can only imagine the future is only a half-truth. As William Gibson wrote long ago: “the future is here; it is just unevenly distributed”. So the incremental benefits of extra bandwidth for technologies like videoconferencing should be showing up in communications between different parts of Seoul and Tokyo, and between the Australian capital-city offices of major businesses and professional services firms. They are hard to find – harder, indeed, than I expected ten years ago. This is somewhat surprising, but also instructive. (The Kenny brothers make too much of South Korea’s recent slow growth; the more telling observation is the surprising paucity of new uses for South Korea’s shiny new broadband infrastructure.)
People – especially people poorly-grounded in the history of technology – can be easily misled into thinking that if the improvements of the previous generation of technology were good, then the next generation must be just as desirable. In fact, as the Kenny brothers point out, improvement in technology does not necessarily keep on delivering pay-offs in every successive generation; think of the Concorde, once seen as the logical successor to the turboprop and the subsonic jetliner.
The evidence in the Kenny brothers’ report and elsewhere suggests that the widespread adoption of the Internet in the late 1990s was the first-order communications revolution, and always-on middleband and slowish broadband was a second-order revolution. Both occurred incrementally in a short period of time, without great government command or subsidy; the Internet is well-suited to incremental improvement. UHSB via FTTP is a third-order issue.
I admire Stephen Conroy for his energy, his patriotism, and his courage. But his “national high-speed broadband plan” was conceived largely for the political purpose of aligning the Labor brand with “the future’, and costs far too much for what it delivers. It does not survive close scrutiny. That is why the government has been fighting to keep it away from the Productivity Commission, and why it should go there.
* Sorry, but I can’t think of a better way of putting it than UHSB via FTTP. “National broadband network” is a misleading name; we already have one, in the same sense that in 1996 we had a “national Internet network”. The question is whether we should pay more and restrict competition in order to deliver today’s gold-standard service to everyone.
Update: I had missed Ken Parish’s recent post and the ensuing discussion, which is one of the more detailed and well-informed you’ll find on the merits of the NBN.
Note that the Kenny brothers explicitly say that in many places there will be a commercial case for fibre right now, and that eventually everyone may need it. Their argument is that the case for government to subsidise or control universal HSB via FTTP is grossly overstated.