[LINK] Fears over fee hikes in Labor’s ambitious broadband plans

[Richard Chirgwin]

Hmmm. I'm not an economist, and therefore not familiar with the 
relativistic behaviour of money (ie, the size of the dollar depends on 
the observer's point of view). However ...

With 4 million households (ie, 50% penetration rate), each billion of 
revenue over five years needs $50 per household, per year - just over 
$4.15 per month. If the required income to pay for the network is $10 
billion, then it's just over $41.50 per month per household.

Around $85 - $83 to be precise - per household returns revenue of $20 
billion over five years at 50% user penetration.

Let's take the highest estimate of total build cost, $20 billion (from 
Pipe Networks). Roughly five billion of that is subsidy, leaving $15 
billion. So at the highest estimate, $85 per month represents a margin 
of 33% (excluding cost of capital).

So to my ears, the industry's $85 per month estimate sounds somewhat 
like rent-seeking-in-advance.

RC

David Boxall wrote:
> <http://www.itnews.com.au/News/78946,fears-over-fee-hikes-in-labors-ambitious-broadband-plans.aspx>
>
> ..."Federal Government’s ambitious broadband plans could potentially 
> drive up consumer prices for broadband services"...
> ..."speculation regarding wholesale prices upward of $75 a month for 
> Labor’s planned network, will result in significantly higher retail 
> prices across all service offerings"...
> ..."this could be as high as $85-$90 per month and broadband services 
> will not be economically viable for 60 percent of the Australian 
> population"...
> ..."In order for the broadband network to be accessible to markets like 
> health and education, the service has to be based as a utility. There 
> will be lower monetary returns than a service provider would want, if it 
> was using the service to a profit"...
>
>