A while ago Paul Montgomery, whom I didn’t know, tweeted that he had wanted to set up a blog of the radical centre. His tweet was about his crestfallen discovery that we beat him to it. Anyway, my handle @nichlasgruen was in this tweet so I saw it and suggested that Paul submit a guest post – which he did. It’s below.
One of the blog series nominated in the comments of the Best Blog Posts of 2010 competition, run by Club Troppo and On Line Opinion, is the series on the National Broadband Network by Joshua Gans at his Core Economics blog. Paul Frijters’ nomination went like so:
1. The series of blogs (eg. here, here, here, and here) by Joshua Gans on the National Broadband Network. He writes about his area of expertise, i.e. monopolies and government regulation, it’s a big national issue, and he mostly gets it right (I think).
“Right” is a matter of opinion, especially to those who would prefer an analysis to go beyond mere economic issues, as I would. The left in general has been fully behind the NBN from the start, with the policy being released by a card carrying member of the ALP Right in Steven Conroy in the name of microeconomic reform, but also fulfilling a lot of leftist ideals for government intervention to construct public institutions. The ALP Left seemed quite happy for the Right of its own party to take up the cudgel of the “vision thing”, while the mostly inner-city Greens could only applaud the extension of a key part of their own lifestyle to the masses, and the regional Independents put their provincialism ahead of their principles to swallow the Government’s promises of early roll-outs to the bush. Thus most of the inquiry into the NBN as a policy issue has come from the right, for better or worse.
As the major policy item in a federal election this year which was otherwise bereft of serious discussion, the Coalition did not do a very good job of prosecuting their anti-NBN case in the eyes of the electorate, if the pre-election opinion polls and the post-election exit polls on the issue were anything to go by. The Coalition itself was not the best antagonist to argue against the NBN, as Malcolm Turnbull is its only parliamentarian qualified to speak on the technicalities and his performance was weighed down by his obvious political baggage. The Australian, a newspaper that prides itself on the power and influence of its frequent campaigns, could not mount a sustained attack on the NBN despite having many of the finest IT journalists in the country in its ranks. The media has let the public and/or the conservative side of politics down by not scrutinising the NBN enough, allowing some very rubbery figures to go by mostly unchallenged.
There are some elements of Gans’ analysis with which I fully agree. No, the NBN itself will probably not make a profit – or if it will, it will require such draconian anti-competitive measures to ensure it hits take-up targets so as to even alarm its cheerleaders on the left. The low take-up in Tasmania, if extrapolated to the rest of the country, can not justify the investment prima facie. Additionally, because so much of the investment is private sector and the government has already committed unofficially to give investors a better rate than long-term bonds, all of the losses will be eaten by the public, disproportionately to their capital contribution.
Yes, there is a good chance that the NBN will pay for itself in the wider scheme of things, which is the only real justification for making the NBN a public project. This is the Tiger Woods argument. Just as the Victorian government paid a $3 million fee to Woods’ appearances at the Masters golf tournament for the past two years, which produced an estimated $20 million the first time around, similarly, the federal government may be throwing away money on the NBN itself, but it will come back in the form of extra tax revenue from all the economic activity that the NBN will engender. Those sums could even add up without considering the so-called “social return”. That’s all very well, but it’s not the argument that we have been having in the national media, as they are still stuck on black or red ink for NBN Co. As has been pointed out before many times, this gamble is based on some airy-fairy projections, but then again so was the Coalition’s policy. It was not a great choice for voters to have to make, but they seemed to like the blue sky of the Government’s rhetoric rather than trusting broadband to be delivered wirelessly over the sky itself.
If we did have the “real” argument, it might actually do some good. I think the NBN as a project is not enough on its own. Building it and hoping that new local IT industries will pop up overnight like remora on a whale shark is rather poor policy. There needs to be a concurrent effort on encouraging these new industries with tax breaks for investment and support for education and nurturing of young Australian talent at secondary and tertiary levels. Computer science education in this country has been a basket case since the beginning. You’re almost better off teaching yourself and not wasting your time at university if you want to be an agile entrepreneur.
There has been some talk during and after the election about these ethereal new industries that will somehow conspire to deliver a return, financial and/or social, for the massive investment being made in the NBN. However, neither side has made any specific policy to actually make this happen. Why is that? Is it because the dollar values of the network itself are so humongous that it is anathema for politicians to even think about adding on extra investment in human capital on top of the cash ploughed into the ground? Is it thought to be enough effort on the supply side to just build the network, so that any further sweat of the brow should be spent on building demand?
I am surprised that the likes of Conroy and Gillard have not latched onto the media-friendly aspects of supporting an industry policy to underpin the project, if only at a superficial level. Even if the ALP was going to be highly cynical and only pay lip service to the ideal, it seems like low-hanging fruit to me to start talking even now about how the NBN-delivered future will be full of promise for new industries built on its back, like it was a million-polygonal pixellated merino. Perhaps leading up to the next federal election, the protagonists of the NBN will conduct a series of whistle stops for cutting ribbons of new innovation centres, shaking hands with the likes of serial tech midwife Mick Liubinskas or angel investor Tony Faure while announcing support for early-stage technology startups, and delivering keynote speeches exhorting the yoof of today to become the captains of tomorrow’s industries. The ALP has shown little sign to date that it is going to follow this path, despite the NBN being by far its most popular policy of the 2010 campaign.
While Gans worries about the immediate issue of subversion of the Trade Practices Act in setting up the NBN, I am more concerned about the lack of competition after the network is built in the secondary and tertiary industries that the project will require to be successful. Is delivery of the crucial IT applications like e-health, B2B and government services going to be left to the giant foreign-owned companies like IBM, Deloitte and HP? Given its history, Telstra’s ambition must surely be to create itself new monopolies in the NBN app market, but what would the Government’s response to that be? Instead of these vital questions, we’re still left debating copper versus fibre and watching the same old COAG infighting.
The major economic booms in Australia have been built on the efforts of the average worker: it was cockies riding on sheep’s backs, it was every man and his dog in the gold rush, and currently anyone can get a job working in the mines. I’m not sure I agree with Gans’ conclusion that the NBN is a subsidy for the rich, as he’s talking about a different set of rich than I am, but if the NBN is going to usher forth a new future where we transition smoothly from the minerals boom to a longer and more sustainable future based on being the clever country, then the Government has to do more than merely rolling out the cables to ensure it happens. It must support the plastic and glass with some human investment as well.
Paul Montgomery is a former IT journalist and a former ISP executive, and is currently founder and editor of FanFooty, a Web site about Australian rules fantasy football.