New, stricter regulations are required for the advance of Australian broadband, while the government should withdraw its support for nationwide infrastructure run by incumbent carriers, claims a report released Thursday by the Committee for Economic Development of Australia (CEDA).
The report, titled "The Local Broadband Imperative", suggests that the telecommunications industry has been misguided in its approach to future broadband technologies, and is depending too heavily on a "big national solution" that can only be achieved through existing carriers.
Rather than being a nationwide problem, as is currently believed by the industry, broadband issues tend to vary by area, and can thus be more effectively addressed by small, local networks that could be managed by local councils, the report states.
"When it comes down to it, broadband and Internet access has a lot in common for an area as would local public goods such as garbage services and parks," said report author Joshua Gans, Professor of Management at Melbourne Business School. "If people think it's valuable, people are going to be very happy if it's in their area; it's going to bid up house prices in that area and it's going to earn more rates for local councils."
With current pricing of Telstra-owned infrastructure, however, entering the broadband market can be difficult for start-ups. And besides the issue of connecting local networks to Telstra exchanges, start-ups also face the issue of getting space in conduit to lay local networking cables or fibre.
"We don't have a market that would allow people to be entrepreneurial about exploiting whatever value they think might be there," Gans said. "It seems to me that what we need is to [allow] the competitors to be free of Telstra, and allow them to do the investment.
While Gans recommends that the government should encourage competition through stricter regulations on Telstra's wholesale pricing, the company argues that allowing other carriers to piggyback on its infrastructure is not only destructive to Telstra business, but also does not provide enough incentive for other carriers to invest in their own networks.
"There will be no solution to the broadband impasse in Australia while the current regulations remain in place," said Telstra spokesman Rod Bruem. "If Telstra could get an adequate return on the infrastructure, you'd see other competitors investing in infrastructure of their own, [but] there is no way competitors will be interested in building new infrastructure while regulations are so destructive."
Meanwhile, Gans argues that incumbent telecommunications carriers, including Telstra and Optus, may not be sufficiently motivated to make big broadband investments due to conflicting interests between their current phone service offerings and the possibility of low-cost alternatives, such as VoIP, that high-speed broadband will provide.
"I would just say that [from] a casual observation of their incentives, [it] looks like they [telecommunications carriers] have no real reason to speed it up," he said. "They're in a competing business - the last thing these guys are going to want is to allow a service to come in that is essentially almost zero price, because it's going to be competing with their existing lines of business."
"To hand responsibility for investment in broadband to people who have direct conflicts of interest doesn't seem like the way to go," he said.
Australia's broadband impasse has left the country lagging behind the rest of the world, with more than half of all broadband users still capped at download speeds of 512 kbps or less. While being a laggard comes with the advantages of lower costs and less risk, hanging on to old technology could be costing the country business and educational opportunities, the report warns.