I've been thinking about this. Whilst much of the discussion about the NBN has centred around the technology, costs, timing and politics, I think an essential question has been largely overlooked.
Do we need (as opposed to want) the NBN?
Because it would not be palatable to answer this question with the answer that it would enable people to download their pornography faster or play more "World of Warcraft" or live a "Second Life" (I'm too busy with this life to have time for a second one), the answer given is usually:
"Without the NBN, Australian business will be at a competitive disadvantage with the rest of the world"But, thinking about it, does that statement really stand up to critical scrutiny?
Let's look at it.
I have personally owned and been intimately involved with a number of businesses over the years. Not one of them suffered or is suffering through the lack of an NBN. There are a small number of businesses that probably would benefit (maybe even need) a super fast broadband. One that I can think of is our thriving cartoon industry - they work in conjunction with US studios and need to transfer large volumes of graphic data between Australia and the US on a regular basis. However, they already have super fast broadband. Because it is worth it to them they are quite happy to pay to have fibre optic connections right into their office. The NBN will make no difference to them.
Ah but I hear you saying (actually I hear the tap tap tap of you typing) "The world is changing. It's an online world and becoming more so day by day. In fact, just today, I heard that Jetstar, in recognition of this, are now allocating 25% of their advertising budget to online advertising. If Australian businesses cannot provide an online presence capable of serving millions of connections a day they will miss out on business. What about all those brave new ideas for online businesses like Facebook, Ebay and the ones that we haven't even thought about yet. Surely they need a high speed internet presence to be able to meet the demands of millions of customers around the world?"
Quite so. However, it simply doesn't work like that. Most companies with such huge reliance upon their online presence simply do not have network servers sitting in the corner of their offices connected to the Internet to meet those demands. What they actually do is rent server space in massive server farms either in Australia, the USA or wherever (often many locations). These server farms have massive bandwidth connections directly into the heart of the Internet. Need more processing power? Rent a bit more. Need more storage? Rent a bit more. Need more bandwidth? Rent a bit more. It makes both technical and commercial sense (that's why they do it that way).
Are there any International businesses that have refused to establish a presence in Australia because they cannot get fast enough Internet? Are there any Overseas companies that refuse to do business with Australian businesses because our Internet is not fast enough? No.
So, business does not need the NBN. Most businesses can operate quite satisfactorily on the currently available 20Mb/s ADSL speeds. For those that need more they can have multiple ADSL connections or if even that does not meet their needs, pay to have a fibre optic or cable connection directly to their business. I am told that there are 1 million premises in Melbourne alone that can have 100Mb/s (ie NBN speed) connections at a cost of around $300 per month. Currently around 200 have taken this up!
Australian business is not suffering and will not suffer because we don't have the NBN.
Now, I'm no luddite. I'm a retired computer geek and I love my Internet (even at the "modest" speed of 3Mb/s that I currently receive). I just think that, in these times, $43bn could be spent on first order needs, rather than something that is nice to have.
A much more modest program of upgrading our backhaul and providing a wider implementation of 20Mb/s ADSL2+ would provide an appreciable increase in Broadband speed for everyone and would not rule out a progression to FTTH at some later time. You may be surprised to discover that of the $43billion that is planned to be spent on NBN, the cost of upgrading the backhaul is only about $4bn. The rest is being spent on running fibre directly into homes. A much more modest program could actually widen the coverage of Broadband - rather than providing faster Broadband to those that already have fast Broadband as the NBN will do.
Over to you.
I agree.
ReplyDeleteForrest, that was beautifully put. Many years ago, one of my lecturers at university described an engineer as:
ReplyDelete"Someone who does for one dollar what any fool can do for two"
Why should we be spending an amount greater than the entire 'fiscal stimulus', when one tenth of that sum would achieve 90% of the target? There is still such a thing as 'Value for money', and, with the NBN, we are conspicuously not getting it.
Cheers,
Ciabatta
We didn't need Felcro, DVD's or photocopiers but our lives changed when they became an integral part of them. We didn't need to go to the moon either. Do we need QFT? TST has been "adequate" for a hundred years. Before computers could we envisage an electronic medical records system? We do need an electronic any to any medical records system and one already exists but can the political will be found to make the change? There are many other things that will be made possible of which we can't possibly envisage. This will inevitably increase traffic on the Information superhighway. It's similar to the problem of building a road. Do we wait until the supply constraints become too great and it is needed or do we build it thereby opening up greater possibilites? Your answer may depend on your understanding of the relation between the present and the future. Look for example at Korea, raised from a basket case in the '50's to what it is today. It buys our ore and sells it back to us as Hyundais and Samsungs and Supertankers. What we need is forwrd-looking vision. BTW, isn't it going to pay for itself in the long term?
ReplyDeleteI dont think it ever needs to pay for itself Kelpie, like roads it is a public infrastructure providing a service to users for generations to come.
ReplyDeleteAnd do Ma & Pa Kettle have to pay for it out of their hard earned? no, it is a budgetary deficit not a stock.
Infrastructure projects that generate significant social returns are anathema to neo libs, who are not able to calculate social returns in market terms.
Nationally the federal govt have committed $4.2B to roads for this year and the State govts would each have their own budget - NSW has allowed $4.4B - these figures attract little media comment. These sums are spent with little or no direct return - the benefits are experienced throughout the community.
G'day Kelpie,
ReplyDeleteDon't get me wrong, I'm not against progress. However, I'm not sure if your examples of Velcro, DVDs and photocopiers really compare well (particularly Velcro! :) ). The example of going to the moon is a good one though. In fact, in a previous life I used to do a speech in support of going to the moon. However, that was a different time.
I absolutely love my Internet. I am astounded every single day by the fact that I sit here on my veranda looking out on a most spectacular view, connected through my laptop to the entire world. I can listen to radio from anywhere in the world, communicate with people from anywhere in the world, access all the knowledge of the world, watch live video etc etc whilst sipping my first coffee of the day and listening to the birds waking up. The Internet is a truly wondrous thing.
As you say, having faster Internet may well lead to the development of applications that we have not yet thought of. At this stage, however, the evidence does not support that. There are oft quoted examples of other countries that already have access to Internet speeds similar to and even greater than those promised by the NBN - Japan, Singapore. As far as I have been able to establish, no stunning applications have resulted from those countries having faster Internet. The only application that I have seen reported in these countries is the access to ipTV (Television over the Internet). As it happens, you do not need 100Mb/s Internet to achieve that. Full HD TV uses about 5Mb/s. That means that a 20Mb/s Internet link could quite easily provide for two HD channels and still have plenty of room for general Internet access.
There are currently significant numbers of people in Australia who do not have any Broadband access at all. There are also many people (primarily rural) who have minimal Broadband speeds. Both of these situations could be addressed with a much smaller spend than $43bn. Unfortunately, the FTTH NBN will provide faster Internet to those who already have fast Internet and little or nothing to those that currently have no Broadband.
It's actually all about Back-haul (the connection from our exchanges into "the Internet"). With upgraded back-haul (a handful of $bn) and the use of node technology currently available, our current Internet could extend it's practical reach to nearly every Australian. Had the organic growth of the Internet been allowed to continue then we would now be well on the way to achieving that. As it is, the current investment in this has been stalled for the last three years because of the uncertainty of exactly the direction of where the Government is going with this.
As it stands, my 3Mb/s (and for a country person, I consider myself lucky) will now likely be all I will get for at least the next 8 years. Again, the cities (for obvious commercial reasons) will receive 100Mb/s Internet long before the Fibre is dragged up my road (if ever).
My vote is to spend a LOT less and extend the reach of adequate Internet. Doing that will not in any way preclude the roll out of Fibre at some future time.
We need to be honest. As I have previously said, the justification of "our businesses will be left behind without high speed Broadband" does not stand up to scrutiny. That leaves us with the reality that the NBN is providing high speed internet into homes to enable us to watch more videos. Nice but not essential. Bread and Circuses?
G'day Rog,
ReplyDeleteYou say:
"... it is a budgetary deficit not a stock."
Our Treasurer does not agree with you. According to the budget, this is not a "spend" but an "asset" purchase. Further, they project that it will generate enough returns (eventually) for them to sell it into private hands.
How we then deal with this newly generated privately owned monopoly (isn't that what is being blamed for our current situation?) is going to be interesting.
Also.
"Infrastructure projects that generate significant social returns are anathema to neo libs, who are not able to calculate social returns in market terms."
What are the "significant social returns" of the NBN?
I think to characterise those who question this project in that way (implied no social conscience) is slightly unjust. There are many social issues that I support with a much higher priority than the NBN. Furthermore, I say again that this NBN is not being justified by its promoters as "social infrastructure" - it is being promoted as a commercial necessity - and that justification is faulty.
(implied no social conscience)
ReplyDeleteI didnt say that forrest, what I said was that markets have no capacity to value social returns. Unfortunately price is a crude measure of value.
G'day Rog,
ReplyDeleteFair 'nuff.
I am not equating "price" to "social value". As you say, it is a difficult valuation to make. Not that the difficulty of doing so necessarily stops some from attempting the task. In our Tuberculosis research we are both familiar with the "scientific" attempts to attach a monetary value to lives.
We can, however, make value judgements about the comparisons between different social returns. As an example, I would consider a program that successfully improves the lives of the Aboriginal members of our society as providing a much greater social return than that provided by the NBN.
I am interested if anybody can actually provide me with what exactly are the social returns that will be provided by the NBN.
Further, I go back to my original point. The NBN has not been sold to us by it's promoters for any social return. I don't believe I have once heard them outline any such thing. The only real justification that I hear from them is (sorry to repeat myself again) "our businesses will be left behind if we do not build the NBN". As I have said, I believe that to be a faulty justification - and nobody has yet convinced me otherwise.
Given that the only given justification is faulty then perhaps you are right - we DO have to look for a social return. I just can't see what it is.
Forest, the OECD produced a report saying that FTTH would produce "potential spillovers in four key sectors of the economy: electricity, health, transportation and education."
ReplyDeleteIt is a comprehensive document and discusses costs, benefits and touches on potential future developments eg cloud computing.
Whoops, missing link
ReplyDeletehttp://www.olis.oecd.org/olis/2009doc.nsf/LinkTo/NT0000889E/$FILE/JT03275973.PDF
G'day Rog,
ReplyDeleteIt seems that now, in the fight for truth and justice, I am now challenged to take on the might of the OECD (while still wearing my underpants on the inside). Well, in my time I have been called many things (even a neo-liberal :) ) but I can never be accused of backing down from an intellectual battle.
As it happens, that OECD report doesn't provide much of an adversary. I haven't wasted my time reading all 70 pages of it but have read the summary, which I think I am entitled to believe outlines their main case. Frankly, I would have thought that the OECD would have been embarrassed that such an uninformed document has made it into the public domain. I would suggest that it was written by the OECD work experience kid but that would be an insult to work experience kids.
Before tearing their assertions apart, I might point out that I am enormously amused by the fact that they are, in fact, trying to attach a monetary value to the so called social benefits of a FTTH program. I can only assume that they are also "neo-libs" :)
Bear in mind that this document is being presented as the case for FTTH, not Broadband Internet. Exactly what we are discussing.
As you say, they offer four key "spillovers" (!) as their justification, electricity, health, transportation and education. I'll deal with them one by one.
ELECTRICITY.
" Data networks can serve as the foundation of new, smart electrical grids (advanced metering
infrastructure) by addressing an historical information gap between end-users and distributors. Enabling
communication via broadband can provide consumers a vision of their electricity consumption in real time
as well as the overall supply and demand situation, allowing them to adjust consumption based on price
signals. For the electricity provider, the smart grid allows operators to stabilise demand by monitoring and
influencing consumption in real time either through technical intervention or variable demand-based
pricing. Smart grids also promise to help manage electricity storage throughout the network which could
be used to steady demand patterns during times of peak demand."
As it happens, I was browsing in an electronics shop just yesterday and noted the availability of DIY electricity consumption meter for less than $100. These devices readily report (wirelessly to a panel anywhere in the house), current consumption, running consumption, electricity cost and even the amount of CO2 that the household is responsible for. To connect such devices, or any other variation of smart meter to some central database is a relatively trivial exercise and, most importantly, would require the merest trickle of data to and from the home. This volume of data would impose no burden whatsoever on a conventional Broadband Internet connection (In truth it would run happily on a dial-up connection). Without going into tedious detail, all of the data collection and distribution being foreshadowed involves truly trivial amounts of data. Perhaps the electricity provider might require a larger bandwidth at their control centre but that has nothing to do with the NBN.
(continued)
(continued)
ReplyDeleteHEALTH.
"Health systems are facing tremendous pressure to improve health quality, accessibility and outcomes,
and to do so in a cost-effective manner, particularly as the overall population ages. Broadband increases
the potential for more doctor-to-patient interaction between hospitals/doctors and end-users at home. Two
specific areas where broadband will likely have a significant impact in e-health are increasing the
efficiency of health monitoring and reducing the costs on the system via remote consultation and
intervention, particularly as the percentage of the population over age 65 rises significantly."
This is always a good one brought up by the NBN proponents. Think about it - what are we talking about? The ability of people (mostly those poor old 65+ people) to consult with their Doctor without leaving home. Well that's great. Let's assume that this is a goer. Let's further assume that we each have access to some form of health monitoring harness that can measure and report temperature, heartbeat, blood sugar, whatever. (I don't think that we will have cat scan machines in every home). Again, the amount of data that such a system would generate is truly trivial. On the manned moon missions something similar was used to monitor the health of the Astronauts - I can assure you that the link from the Apollo craft to Houston was a tiny, tiny fraction of that that we all have today from our conventional Broadband.
Of course maybe they are talking about specialist Doctors in large hospitals being able to review cat scans or X-rays in real time for patients in small rural Hospitals. Again, this has nothing at all to do with the NBN that is about providing fibre into individual homes. If it is needed then put fibre into every Hospital in Australia - if they need it then I'll vote for it. (I've actually been told that the bandwidth required for these applications is not huge anyway)
TRANSPORTATION.
"Transportation planners struggle to understand traffic flows because there are not sufficiently robust
means to collect traffic data, analyse and model it in real time and then pass the results along to all
concerned drivers and commuters, helping them alter their routes. Broadband networks and access to the
resources they provide form the foundation for collecting and distributing timely transportation
information. This information, provided to traffic control systems and delivered to commuters to aid in
route planning can help reduce traffic congestion, lower fuel consumption and help users avoid accidents."
At the risk of repeating myself, providing such data to "concerned drivers and commuters" is trivial. Not to mention that it is not very likely that we will be dragging fibre along behind our cars, buses and trains.
If the traffic controllers want real time video data of traffic flows they can (and do) have them now. It doesn't require FTTH.
(continued)
(continued)
ReplyDeleteEDUCATION.
"Broadband is having a significant impact on education and e-learning by improving access to digital
learning resources; encouraging communication among schools, teachers and pupils; promoting
professional education for teachers; and linking local, regional and national databases for administrative
purposes or supervision."
I'll knock over the last point first. "linking local, regional and national databases for ....". How many times do I have to say it? Trivial. besides, what does this have to do with providing Fibre into the Home.
What about remote education. Great - I'm all for it. Trouble is, the NBN won't roll out to remote locations anyway. It would be much better to provide these locations with a "standard" Broadband connection that they currently do not have - we all know that such a connection can quite easily sustain real-time video interaction.
School to school? Well, just like the hospitals - if they actually need massive bandwidth to implement a worthwhile program then I will vote to have Fibre run into every school in Australia.
So there you have it - the OECD report four "spillovers" revealed for the shallowness that they actually are.
I actually think that much of the confusion about all of this is the perception that the NBN "makes the Internet go faster". It doesn't. If anything, it is the provision of adequate backhaul (a relatively cheap exercise cf $43bn) that provides the ability for the Internet to "go faster". A good backhaul system would allow virtually everybody in Australia to receive adequate Internet speeds (that many do not get at the moment) and at the same time provide the ability for those Hospitals and Schools to have super fast fibre connections into that backhaul, if they truly need it. This has nothing whatsoever to do with providing FTTH.
(finished ... finally)
and ...
ReplyDeleteAnybody else have a view? Just jump in.
Don't leave it to Rog, the OECD and me to sort this out. :)