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Australia’s Government Network A Failure

August 5, 2016

350px-Flag_of_AustraliaIt seems like more and more U.S. cities and states are experimenting with government-owned internet networks (GONs). Some are building middle mile networks that other providers can connect to in order to provide service to consumers. Others are going all in—building and operating taxpayer-funded networks that sell service directly to consumers.

As the Coalition for the New Economy has documented on its website, many of these networks have failed, or are failing.

Thankfully, U.S. taxpayers haven’t seen a government broadband experiment on a national scale yet. But Australia has. And, according to the Technology Policy Institute (TPI), which last month released a study on Australia’s National Broadband Network (NBN), what’s resulted should be a cautionary tale for U.S. leaders at all levels of government.

According to TPI, NBN was ambitious. The wholesale network:

  • Is the largest public sector investment in broadband to replace existing copper infrastructure with fiber;
  • Was meant to improve quality and lower retail prices; and
  • Was meant to connect 93 percent of Australian households and businesses. (The plan was first to do this through a wholesale fiber-to-the-premises (FTTP)—that plan was later downgraded to fiber-to-the-node (FTTN) “as a result of escalating costs and political change”).

The Institute is blunt about whether NBN has achieved these results. It says, “Six years after its start the overall outcome has not been positive.” The TPI found that Since NBN implementation:

  • Coverage and adoption rates have slowed for fixed broadband;
  • Mobile broadband growth has remained relatively constant despite increased investment;
  • Australians continue to experience low speeds, higher prices relative to other countries and a slowing rate of price decrease for internet services; and
  • Fixed retail market concentration has not changed significantly and has only slightly increased in the mobile market.

The TPI concludes, “The Australian case reveals how state owned broadband might not be the best answer to meet full coverage and competition objectives” and argues “The NBN is an example of an intrusive policy subject to political pressures that has resulted in inefficiencies that distort consumer patterns and investment decisions without changing the competitive landscape.”