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

Richard Chirgwin rchirgwin at ozemail.com.au
Tue Jun 24 07:29:25 AEST 2008

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.


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"...

More information about the Link mailing list