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Issue # 1409      6 May 2009


Broadband and the cycle of privatisation

It’s raining big budget government spending items at the moment. One of the recently announced ones was the “fibre-to-the-home” National Broadband Network (NBN) valued at $43 billion. The Commonwealth will have a 51 percent stake in the project that will deliver potential download speeds of up to 100 megabytes per second (Mbbps) to up to 90 percent of the Australian population – exceeding Rudd’s 2007 election undertaking by a long margin. It will generate 25,000 jobs a year over the eight years it will take to roll out.

The federal government would have us believe it is taking charge of a vital piece of new infrastructure and reasserting the role of government in ensuring that the growing communications needs of the community are met. But old habits forced on governments by corporate interests die very hard and it is clear that public enterprise is not making a comeback anytime soon.

Rudd’s Monthly magazine essay of just three months ago warned of the dangers of turning the vital interests of the community over to the profit hungry interests that gave us neo-liberalism or “extreme capitalism”, as the PM put it. With the broadband network, his government had a golden opportunity to keep this increasingly important asset out of the hands of the price-gouging monopolies largely responsible for the second rate system Australia endures at the moment. After a decade of neglect under the Howard government, Australia has a lowly average connection speed of 1.7 Mbps while Japan enjoys speeds of 61 Mbps, Korea has 45.6 Mbps, Finland has 21.7 Mbps, Sweden 18.2 Mbps and France 17.6 Mbps.

The challenge of providing first rate internet speeds in a country with such vast distances and low population densities is indeed great. The government should be commended for biting the bullet. It is good news that the patched-up “fibre-to-the-node” option was shelved. But the decision to make this “nation-building” project a “public-private partnership” is a major blow to the public interest. If the people of the world have learned anything over the past two decades it is that the private sector does not do a better job for the community by running its services for profit.

Heedless of these hard-learned lessons, Communications Minister Stephen Conroy will be spruiking the project to all sorts of private investors in the weeks and months to come. Superannuation and life insurance funds might be interested in the Aussie Infrastructure Bonds to be offered. Attractive tax arrangements will have to be worked out. And, of course, after 13 years the federal government will step aside and let private enterprise take over the network built up primarily through public investment carrying most of the risk.

This project has plenty of knockers. Opposition leader Malcolm Turnbull claims the system is so expensive it will never deliver a commercially attractive return. He says households now paying between $50 and $75 a month for a broadband would have to pay a prohibitive $200 a month for connection. On the other hand, Deutsche Bank analyst Sameer Chopra foresees charges of between $42 and $45 per month – only slightly higher than current charges and with potential to access many more services.

With so much public money up for grabs in the telecommunications industry it would be hard to find a disinterested “expert” but clearly something had to be done to fix the current system. Plenty of questions still surround the planned rollout. Will Telstra be onboard or compete with its copper network? Will it be obliged to split its wholesale and retail operations and sell its stake in Foxtel? Will the NBN buy out the bits and pieces of fibre-optic networking presently owned by the Optus, Telstra and Leighton Holdings’ Nextgen networks?

Whatever the case and unless the government can be forced to reconsider its public-private partnership idea, it appears the capitalist state will step into one of its traditional and very wasteful roles. It happened with waterways and railways and highways. The government establishes hugely expensive infrastructure and then sells it off to big business interests that control the political process. Private owners proceed to run these systems into the ground forcing the government to step in to restore them. After this it is privatised once more and the cycle goes on.

Enough really is enough! The Rudd government should fund this network and keep it in public control to ensure the cheapest and most reliable service for the Australian people. Too expensive? The submarine and warship contracts announced last week have blown that argument out of the water once and for all.

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