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Australia’s National Broadband Network Problem

October 20, 2014

350px-Flag_of_AustraliaIn blog posts earlier this year, the Coalition for the New Economy discussed Australia’s experience with its government-owned broadband network (GON). A recent story at Tech Policy Daily had more on the system, called the National Broadband Network (NBN). This new piece discusses how GONs like NBN impede competition.

One problem with national GONs like NBN,author Bronwyn Howell says, is that is they can set prices on a country-wide, rather than regional basis, so prices don’t reflect the actual cost of providing service. Private companies can’t do this (without going bankrupt) so the pricing scheme is a clear subsidy to the GON.

The Australian networks also gets a lot of other help.

For example, a recent report on NBN by an independent panel of experts recommended removing provisions that put restrictions on NBN’s competitors because they dampen competition. According to Howell, the report also “recommends breaking up the NBN into separate entities based on different network components (e.g. satellite, transit, and fixed wireless) and divesting them wherever possible, as well as radically revising the regulatory environment by transferring oversight from the Australian Consumer and Competition Commission (ACCC) to a new ‘networks regulator.’”

Howell reminds her readers that, in the 1980s, countries all over the world reformed rules regarding state-owned telecommunications firms in order to eliminate government monopolies that “were not in line with the long-term interests of consumers.”

It’s time to do so again, she says.

Unfortunately so far it appears the Australian government will ignore these recommendations. Indeed, Howell reports the government has said it won’t review the restrictions put on private-sector fixed line competitors because that effort would “take time and inevitably involve uncertainty.”

Howell’s response? She says, “Citing uncertainty as a justification is insufficient. The very nature of competition is to undermine the cozy predictability of uncontested monopoly provision.”

Howell began her Tech Policy Daily column by saying, “It is a truth universally acknowledged that a telco in possession of market power will seek to use its position to foreclose competition. This is true regardless of whether the telco is privately or publicly owned.”

Australia’s example shows she’s right.