National Broadband Network

Lots of nonsense continues to be written and said about the Australian government tender process for the National Broadband Network (NBN) and the supposed merits of excluding Telstra from the bidding process, allegedly having submitted a non-conforming bid.

Be that as it may, let the government exclude Telstra and instead fund a separate, capital-city only network to be built by one of the other bidders. At the same time, allow Telstra to build their own national network, presumably coast-to-coast including major regional areas.

For all its problems, the current network coverage of Telstra is far superior to any of its competitors outside of the capital cities. It is impossible for anyone to build a network with broadband access to 98% of the population without subsidies. Either cross-subsidies inside the network provider, where city dwellers pay more to subsidise our country cousins, or government subsidies to maintain equalisation of prices.

The idea has been raised by several commentators, the socialist commentariat in particular, that Telstra should be prevented from building a competitive network to compete with whom ever is the winner of the current bid. Notwithstanding the fact that such a ludicrous, anti-competitive suggestion could be made on the grounds of consumer benefit is the silliness of begrudging the success of the shareholders who own the mostly-privatised entity.

Does this behaviour evince some kind of juvenile spite towards the management and shareholders of Telstra? The current management team is, by definition, subject to change. The shareholders, on the other hand, see the value of their investment further diminished (not to mention the diminution in value of shares held by the Future Fund, the largest shareholder in Telstra) by government intervention in what should be a free market for communications services.

Let the new network providers charge their fair price, presumably undercutting Telstra in areas of high population since their "national network" will be limited to those areas where they (or anyone else) can deploy at low cost and still earn a high marginal return on their investment. It is to be expected that Telstra will meet this price point in some centres, providing strong competition, and will also offer the benefits of a truly-integrated national network for premium customers, including business and government.

Completely putting aside what applications(*) and economic benefits,(**) if any, will flow from the 100+ megabit per second bandwidth that will be usable for homes and small businesses to connect to the Internet, let them build their NBNs and allow the market to decide which way customers will run.

It is another story altogether to consider how much the national capability in telecommunications has been diminished by the relegation of Australia's Telecom, a formidable research and development organisation, to just another utility company known as Telstra.

The growth of directory and media services does not make up for the national loss of innovation and competency in the telecommunications space formerly held by Telstra Research Laboratories, now only partially filled by exceptional organisations like WATRI.

(*) Yes, I know about eHealth application and I am aware of the nebulous future expectations to be delivered by the digital economy. Please define for me what you expect to to be the majority of uses.
(**) Please explain how an increase in network bandwidth improves productivity by: 1) increasing production per person; 2) improving return on capital or investment; or 3) by minimising input costs per unit production.