[LINK] Fwd: How expensive are Australian NBN services?

Tue Aug 16 11:58:53 AEST 2011

> -----Original Message-----
> From: link-bounces at mailman.anu.edu.au 
> [mailto:link-bounces at mailman.anu.edu.au] On Behalf Of 
> stephen at melbpc.org.au
> Sent: Tuesday, 16 August 2011 1:49 AM
> To: link at anu.edu.au
> Subject: [LINK] Fwd: How expensive are Australian NBN services?
> 
> 
> How expensive are Australian NBN services?
> (Depends on how you measure it)
> 
> By Richard Chirgwin.  (Article found via main page, Google News)
> 
> <http://www.theregister.co.uk/2011/08/15/nbn_service_prices>
> Posted in Telecoms, 15th August 2011 01:00 GMT
> 
> One of the things people like to toss into the broadband debate is to 
> grab a price that's cheaper than what Australia's National Broadband 
> Network seems to offer, and complain about it.
> 
> Usually, that involves grabbing a price in a currency other 
> than our own, 
> grabbing today's exchange rate, and converting the foreign price. And 
> there's always something wrong with this: it ignores factors 
> external to 
> the exchange rate.
> 
> To pick a nearby example: while we can easily convert 
> Australian dollars 
> to American - so long as our calculator runs faster than current 
> fluctuations in the exchange rate! - that conversion ignores the 
> different average wage (about $AU1,300 here, $US800 there). Twenty 
> dollars makes a bigger hole in the American than the 
> Australian pocket, 
> right now.
> 
> So I'm going to compare a few fibre broadband offerings in different 
> countries based on a more complex measure, that of "purchasing power 
> parity" (PPP). A table of broadband prices adjudged this way 
> is below...
> 
> (SNIP)
> 
> Australia is paying over the median price for a 100 Mbps broadband 
> service (recalling that to put us at the greatest possible 
> disadvantage, 
> I have picked a premium service provider). There are seven services 
> offered cheaper than Internode; only three are more expensive.
> 
> But is it really so bad? Here are a few points.
> 
> 1. All of the countries offering lower prices than Australia 
> for a 100 
> Mbps service are much smaller than Australia, with consequent 
> geographic 
> advantages.
> 
<Snip>

An interesting article. 

Conclusion: Correct Result, slightly incorrect workings.

Hungary with a population of 9 million and size almost comparable to
VIC, is a relatively poor country and it's inclusion at those speeds and
prices set off alarms as to the validity of the methodology.  (Cherry
picking differing tier providers based on cost alone [i.e.: without
regard to oncosts and coverage area - % of population -] results in a
skewed result).
i.e.: UPC, the carrier selected for Hungary is available in 7 out of 13
districts in Budapest. A City of only 2+ million. Hardly representative
of fibre delivered in Wilunga S.A. by comparison. (See [1] Below to see
what the rest of Hungary is paying).

The Berkman OECD Broadband PPP analysis is a good place to start for
accurate numbers and PPP costs. [2] Below.

To use PPP as an economic measure, requires context. i.e.: that includes
a comparison with the Annual Individual Income or GNI. For PPP to be
utilised as an accurate comparative tool, I believe that the annualised
(GNI) income versus the annualised cost of the service should be
presented as a cost percentage of table:

On that basis, South Korea is the cheapest. (GNI Source: Ref [3] below)

Slovak Rep  7.7%
Norway      5.4%
USA         3.7%
Australia   3.2%
Japan       3.2%
Slovenia    3.1%
Hungary     1.9%
Czech Rep   1.8%
Iceland     1.7%
Sweden      1.7%
South Korea 1.2%

With Australia the fourth most expensive of the sample basket.

If however we use Richard's other mentioned measure, land area and we
compare the pop density by the annual sum charged per sq mile, then in
fact Australia is the second cheapest of the basket.

      	Revenues per Mile2
Slovakia     $608,599.32 
Japan        $599,612.64 
Korea, South $563,525.76 
Slovenia     $185,718.48 
Czech Rep    $166,734.12 
USA          $141,069.60 
Hungary      $139,372.80 
Norway       $71,955.00 
Sweden       $26,559.72 
Australia    $6,430.20 
Iceland      $3,811.20 

So whilst there are many ways to calculate the value of the NBN and
seesawing journalists wearing red and blue jackets may attempt to
confuse and obfuscate, the reality is that on an annualised basis, the
NBN is extremely good value for money internationally. (Err, as in cheap
to the consumer...)

For comparative purposes, Iceland @ 136000 sq km of course is just a
little larger than VIC @ 100250 sq km.  

Then again, there are always two sides to the argument. What is built
has to be paid for... and if I was the NBN Co... I would think about
moving to Slovakia to obtain the ROI figures that the opposition demand.

Anyone wanting to understand the high costs of fibre rollout (inc.
Overseas capacity), in more detail is urged to review the Telstra
costing model to the ACCC in 2007 [4]

[1] http://www.t-home.hu/english/internet/residential
[2]
http://cyber.law.harvard.edu/pubrelease/broadband/files/Berkman-Broadban
d_Full_data_set.xls
[3] GNI, 2009 from http://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD
[4]
http://www.accc.gov.au/content/item.phtml?itemId=845943&nodeId=e3918999f
98b063bd85c00e75fae7628&fn=2007 transmission cost model.xls

/body