prawn_86
Mod: Call me Dendrobranchiata
- Joined
- 23 May 2007
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- 7
The conspiracy theorist cynic in me wonders if the gov has decided to go ahead with it so they can implement filtering at the base infrastructure level....
Normally im the last to defend any politician but I think some people here will dislike every gov decison, no matter what it is.
I think at least this decison is nation building and has actaul value. The least they can do is try and figure out if it will work and if not at least they tried (obviously it wont be as efficient as private industry, but thats something you have to put up with).
With some members here its damned if they do, damned if they dont...
The conspiracy theorist cynic in me wonders if the gov has decided to go ahead with it so they can implement filtering at the base infrastructure level....
the conspiracy theorist in me, wonders what doubts they have over the future, or suitability of satellites.....?
Satellites are of no use for true broadband. You are better on ADSL.
i wonder what sort of improvement in satellite tech 5 billion would make? add a few billion more (chicken feed eh..?) for the actual improved satellites, and it would be a quicker, easier exercise....and you could sell the tech...
PS. I do support high speed broadband, It would do wonders. My problem is that we have no idea if this proposal will make a profit. Without a profit, it would be hard to find a private partner, also, whats to say that there are willing buyers of these bonds, and who is going to purchase the wholesale network and for what price in a few years time.
Waste of money digging holes and filling them back up again but its what they did in the depression to keep people busy.
Technology will make this obsolete by they time they get it in the ground. Much more efficient to build a good wireless network to tack onto the exisiting poles in the ground. The wireless technology will improve over time and it is much easier and faster to drive around to all the poles and replace the equipment on them than dig up all the holes again.
It seems as though the Australian government has adopted a new theme song:
"Anything you can't do, we can't do better..."
It's the only reason we can come up with for the decision to build a publicly funded broadband network, providing fibre optic cable to 90% of Australian homes.
The original plan was for the government to stump up just under $5 billion, which would have funded about half of the projected cost. In that case though, the fibre was only going to stretch to the box at the end of the street.
Now, for just an extra $16 billion, you'll get fibre optic cabling right into your home.
What more could you ask for. The total cost is estimated to be somewhere around $43 billion. But how often to public sector projects come in under budget? In less than two years the estimated cost has increased four-fold - and they haven't even started building it yet.
Worse than that, the taxpayer won't get a return on the investment for at least 50 years - probably longer, but I'll get to that shortly...
In fact, our guess is that over the eight-year timeframe for this project you - the taxpayer - won't get much change from $100 billion. Where did we get that number from? Thin air. We made it up. But as a guess it's probably got as much value as the official estimates that tell us it will 'only' cost $43 billion.
It's often claimed that when the private sector can't provide something it is up to the government to step in and take over. We don't agree. The government claims that none of the proposals it received from the private sector were up to scratch and so it's going to build the thing itself.
Clearly, if there was a dollar to be made out of this the private sector would be in there building the network already.
And we also question just how keen the private sector will be to get into a long-term deal with any government at the moment. And that's partly of the government's own making.
The reason capitalism works so well is the ability of the buyer and seller to come to an agreement on price that is beneficial to both parties. If the seller is charging too much then it will deter buyers.
So can we really expect a government controlled entity to provide a service that is competitively priced so it is worthwhile for the company to operate while still offering good value to the customer? You only have to look at the public transport networks to see that it is not possible.
The only companies that will make any money out of the deal are those in the construction and telecommunications industry that will build it. The company or companies left to operate the network will have no choice but to run it either at a loss or at best on a very thin margin.
In terms of constructing the network, there will be plenty of takers. But actually running the network will be a different story.
So anyway, let's take a look at the numbers. To start with, as a taxpayer are you happy with being forced to contribute at least $1,000 towards getting super fast broadband? Because that's your taxpayer funded contribution.
And it's providing the exposure remains at $21 billion.
As nice as it may be to get internet access at 100Mbits per second, is there really a commercial demand for it? And what will the cost to the user be for the service?
We assume that under the original $10 billion costing, the service providers had established a pricing matrix that would make them a profit, and keep it attractive for consumers to buy. Now that the costs of the service will be four times greater, what impact will this have on the pricing?
Will it cost the consumer four times as much per month? Probably not. But it will add to the cost for the consumer.
Telstra have around a 50% market share for broadband, so we'll focus on their numbers. According to Telstra's 2008 annual review, it had an excellent year for its Bigpond Broadband service. Revenue increased by 49%. That's impressive by anyone's standards. Hats off to Sol and the team for that effort.
However, that still only took total broadband revenue to $1.8 billion.
An equally significant number is the ARPU - that means Average Revenue Per User. That stands at $53.02. We don't know what Telstra's profit is on the broadband segment, but Telstra's overall profit margin is around 15%.
So, at the moment, consumers of the Telstra Bigpond Broadband product are willing to pay - on average - $53.02 for current available internet speeds. And don't forget that the Telstra service is among the most expensive broadband services on the market.
So, for the sake of round numbers, let's assume that consumers across all broadband providers are currently prepared to pay $50 per month for internet access.
What will consumers be prepared to pay for a service offering speeds up to "100 times faster" than current services? We can guarantee they won't be prepared to pay 100 times the cost. In fact, our guess is any company will struggle to get the consumer to pay an extra $10 per month.
So if we assume there are about eight million households in Australia, each willing to pay $60 per month, that's total annual revenue of $5.7 billion. And if we use Telstra's 15% profit margin, the venture could expect to make profits of around $855 million per year.
At that rate, the project would need to bring in this level of revenue for fifty years before it paid back the costs of construction. And that's assuming the costs stay at $43 billion.
Even if users are happy to pay $100 per month that's still thirty years before the cost is paid back.
The upshot is. How is this going to make any money and is it a worthwhile use of taxpayer money? And to make things worse, the portion being funded by the taxpayer isn't going to come from cuts in the budget, it's going to come from increased debt.
Notice how easy it is for governments to go further into debt once they've crossed the threshold. Maybe the Future Fund will tip in a few billion as well
Yes, we are definitely falling behind in terms of broadband connectively compared to the rest of the world. But like I said before, it's simply not fair to compare Australia (vast land, too little population) with others with better infrastructure.
National broadband can be rolled out more cheaply using the existing network.
KEVIN Rudd is a political genius, but can the nation afford him as Prime Minister? Instead of announcing that Senator Stephen Conroy and whoever advises him on communications policy are duds who should be sacked, he has set off a $43 billion hare designed to last long enough to carry his Government through the next election.
If we can take Rudd seriously, this will be the biggest public-private partnership in the world, which will, if required, be fully financed by the Government and then sold back to the private sector after it is completed in eight years. So we have moved from a failed policy involving expenditure of $15 billion to $20 billion to bring optic fibre to the end of the street in favour of a more ambitious policy designed to bring fibre to the home through a wholesale only network for $43 billion.
If the high-speed broadband is run out as part of the normal development of the network, beginning with the institutional and business customers who can benefit immediately, and the copper loops are gradually replaced with with fibre as they rot, the urgent high-speed network could be provided sooner.
This is better than persevering with Rudd's hare-brained scheme, and the rest of the network could be upgraded out of retained earnings and a moderate increase in telephone charges.
More importantly, there would be no "crowding out" of more urgent infrastructure investment such as saving the Murray-Darling Basin and its ability to produce 40 per cent of Australia's fruit and vegetables.
In Rome, the emperors offered the mob "bread and circuses". Our little emperor reckons he can get away with circuses alone.
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