[LINK] NBN to cost 24 times South Korea's faster network, says research body
rchirgwin at ozemail.com.au
Thu Feb 10 09:34:01 AEDT 2011
Me on the EIU report:
> The headlines say all you need to know, surely? As reported
> <http://www.smh.com.au/national/36bn-price-for-nbn-slammed-20110209-1an2x.html> 
> <http://www.theaustralian.com.au/national-affairs/taxpayers-lead-the-world-in-funding-labor-broadband-bill/story-fn59niix-1226003302845> 
> <http://www.telecomasia.net/content/korea-has-best-approach-broadband-eiu> 
> the place
> <http://www.businessspectator.com.au/bs.nsf/Article/Australia-lagging-world-in-broadband-plans-index-pd20110209-DW4FF?OpenDocument&src=hp1> ,
> Australia's NBN has been rated as too expensive and relying too much
> on government support, according to the Economist Intelligence Unit.
> Australia cherishes a characteristic called "cultural cringe". A full
> explanation would occupy a PhD thesis, but one symptom is this: if
> someone overseas says "you're hopeless", our media will respond "yes,
> we are!"
> Whether journalists tag the network's price at $36 billion, $43
> billion or $27.5 billion (the government's commitment), having the EIU
> slam the NBN is too tasty to resist.
> And because Australians love an appeal to authority -- we still sweat
> and fret over the deliberations of the same credit ratings agencies
> that gave junk mortgages the "AAA" stamp, thus sparking the GFC and
> beggaring local governments throughout the country -- the report,
> which rates government broadband initiatives around the world, is
> accepted as holy writ.
> Australia is rated poorly chiefly on the basis of the NBN's cost to
> government. According to the /Sydney Morning Herald's/ inaccurate
> headline, the network is "one tenth the speed" of South Korea's
> network "at 24 times the price".
> South Korea is currently implementing an upgrade to its network to 1
> Gbps speeds, whereas the NBN currently assumes a maximum end user plan
> speed of 100 Mbps (the network has already been tested at 1 Gbps).
> Unable to contact the EIU by telephone due to time-zones, /The
> Register/ put three questions to the organisation's Iain Morris by
> e-mail. We reproduce the questions and answers below.
> *El Reg:* Reports have stated that the EIU calculates the Australian
> government NBN commitment at 7.58% of total government revenues. If
> these reports are accurate, can you please outline the basis of this
> *Iain Morris:* The 7.58% figure is based on taking the public-sector
> commitment of the plan (A$27.1bn in Australia's case) as a percentage
> of annual government budget revenues for 2009 -- the last year for
> which actual data was available when the report was being produced.
> It's simply a benchmark that allows comparison between countries.
> There is another benchmark in the report showing total public-sector
> spending as a percentage of annual fixed-line retail revenues in 2009,
> which also makes Australia stand out for the size of its commitment.
> *El Reg:* Can you please identify which South Korean broadband
> programs are included in the analysis, and their value?
> *Iain Morris:* It includes both the initial fibre network and the
> current initiative (upgrade to 1Gbps). The current plan has US$1bn of
> public funds versus about US$26bn of private funds; the earlier plan
> also had similar splits between public- and private-sector funds.
> *El Reg:* As Senator Conroy pointed out (a calculation which I
> examined as an analyst in 2006) South Korea combines both high
> population density and small geography. Specifically, its 44 million
> (roughly) population resides in an area less than 1/8 that of New
> South Wales (population 7.24 million). How is such a disparity
> resolved in the EIU analysis?
> *Iain Morris:* The Australian government is quoting population density
> figures to defend itself, but, as its NBN implementation report points
> out, 90% of the population occupies just 0.2% of the land mass. In
> fact, overall pop density and land area are red herrings -- the cost
> is all in the last mile.
> I should also point out that South Korea's costs are similar in total
> (around US$30bn plus) but the private sector has covered more than 95%
> of the costs -- both in the past and in the next phase of the plan --
> hence the 24 x factor, which is in relation to public spending, not
> total spending.
> *7.58 percent of what, exactly?*
> The media's treatment of the EIU's "7.58% of government revenue"
> measure is simply wrong; any journalist citing that figure without
> context is either sloppy, or an economic illiterate.
> As Morris makes clear, the figure is only a benchmark. Long-term
> government commitments should not be compared to government revenue
> for a single year.
> Australia's government spend is meant to take place over eight years
> (at which point the government intends to sell the NBN). Australia's
> spend on an annualized basis will be less than 1 percent of total
> government revenues.
> The EIU benchmark is useful only as a comparative measure -- it offers
> no insight into the bottom-line budgetary impact of any country's
> broadband program.
> Australia vs. South Korea
> The EIU refers to "both the initial fibre network and the current
> initiative (upgrade to 1Gbps)" in accounting for South Korea's
> government network spend.
> This appears to overlook South Korea's very long history of government
> intervention in telecommunications (generally following a public /
> private model).
> That history stretches back more than fifteen years. To quote an
> <http://money.cnn.com/2006/06/08/technology/business2_futureboy0608/index.htm> 
> from 2006: "In 1995, the South Korean government made what must rank
> as one of the most shrewd and far-sighted investments in business
> history. It spent big on a nationwide high-capacity broadband network
> that any telecom operator could offer service on, and offered
> subsidies so that 45 million Koreans could buy cheap PCs".
> We do not know how much of that history - and how much South Korean
> government investment - has been included in the EIU's analysis.
> The question of geography
> Morris dismisses geographical considerations as "red herrings", noting
> that 90% of Australia's population occupies 2% of its land area.
> Let's instead look at population density solely in Australia's urban
> areas: roughly 18 million people in 152,000 square kilometers (2% of
> Australia's 7.6 million square kilometer total).
> Even Australia's urban density of 118 people per square kilometre
> pales against South Korea's total density -- urban and rural -- of 440
> people per square kilometre.
> On that basis, I do not consider geography to be a "red herring".
> Ignoring household size, a South Korean telco can expect any given
> service area to hold roughly four times as many people as a carrier
> can expect to find in urban Australia.
> Politics and telecommunications
> The Sydney Morning Herald described the EIU as "right leaning".
> The Unit criticizes not the total price tag of the NBN - as Morris
> noted, South Korea's upgrade cost is close to the Australian
> government's total NBN commitment.
> The EIU marks Australia down because that investment is coming from
> government. The EIU is clear that it believes the NBN should be a
> private sector project.
> This is not a neutral position: it follows a particular school of
> economic theory, and subscription to that theory is at least partly
> reflected in the left-right divide of Australian politics.
> Such a simplistic view (public bad, private good) also ignores whether
> carriers are willing to co-operate in public/private projects, whether
> a nation's industry structure encourages that co-operation, and
> whether a government holds sufficient authority to enforce co-operation.
> *What do you get for your billions?*
> The most revealing response from the EIU still relates to the total
> price tag.
> For a total budgeted cost (including private and public sector spend)
> of $43 billion, Australia will update its entire network from copper
> to fibre, for 97% of the population.
> For $US 27 billion (public plus private spend), South Korea expects to
> upgrade an existing fibre network to gigabit speeds -- excluding the
> initial build cost.
> Last year, when NBN Co announced that its network tests had reached
> gigabit speeds (an announcement unfortunately made in close proximity
> to a Federal election), the network's critics cited that speed as
> unnecessary, wasteful or even implausible
> <http://www.gizmodo.com.au/2010/08/abbott-thinks-1gbps-nbn-is-utterly-implausible/> .
> South Korea's private sector clearly believes those speeds justify a
> network upgrade that matches the total Australian government
> commitment to the NBN. That should, at least, put paid to the notion
> that "no network needs to go that fast."
On 10/02/11 9:14 AM, Craig Sanders wrote:
> On Wed, Feb 09, 2011 at 04:31:00PM +1100, Bernard Robertson-Dunn wrote:
>> NBN to cost 24 times South Korea's faster network, says research body
>> UPDATED James Massola
>> From: The Australian
>> February 09, 2011 2:46PM
>> 111 comments
>> THE National Broadband Network will cost taxpayers 24 times as much
>> as South Korea's
> wow, that's cheap. only 24 times the cost for 76 times the land area
> (and 0.005% of the population density).
> a shining example of public sector efficiency, shows what's possible
> without the inherent inefficiency of profit.
>> but deliver just one tenth the speed, according to one of
> i thought the NBN had already announced that due to equipment upgrades,
> speeds would be up to 1gbit rather than 100Mbps?
>> It also loses points due to limited private-sector involvement, high
>> government intervention and the exclusion of state and municipal
>> authorities from the plan.
> Waaaaa! Not enough snouts at the trough! *Our* snouts not at the trough!!!
More information about the Link