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Summary:

The government of Australia has committed $38.9 billion to build an open, fiber-to-the-home network that will serve 93 percent of its citizens, with those in rural areas guaranteed service of up to 12 Mbps. The U.S. can’t replicate that effort but it can learn from it.

The government of Australia has committed AUS$43 billion ($38.9 billion) to build out a national fiber-to-the-home network that will serve 93 percent of its citizens, with those in rural areas guaranteed satellite or wireless service of up to 12 Mbps. The government’s plans also include opening the network to commercial providers that might want to offer access as well as services through the pipe, creating a communications network that might resemble Google’s proposed fiber network, but on a much larger scale.

It’s not a cheap effort, and Australian ISPs have both derided and fought against the project, arguing that the network will compete against theirs and that the government has no business running a broadband network anyway. But as Nate Anderson at Ars Technica notes, the fiber-to-the-home network has been validated in an independent report issued by KPMG and McKinsey. Anderson breaks it down for people in an analysis that everyone in the U.S. who cares about broadband should read.

He notes that the two countries are different, with most of Australia’s population living at the perimeter of the continent, and points out that the effort will require 250,000 kilometers of fiber and 5,000 visits per day to customers’ homes over a period of eight years in order to get fiber to that 93 percent of residents. But the McKinsey and KPMG report ultimately estimates that the cost to the consumers will be the equivalent of $27-$32 a month for 20 Mbps voice and broadband access. I pay much more for much less.

The key will be the open network, which the McKinsey report says will create a “fundamentally different industry structure…This change will accelerate the evolution of the industry. At times this may be smooth; at other times it will be uneven. New business models and companies will emerge.”

Unfortunately, opening up existing networks wouldn’t work in the U.S. (some with ties to the current telecommunications industry argue the entire Australian model wouldn’t work), as the U.S. telephone and communications network has been built by private companies. Forcing ISPs to open their networks isn’t an option that will sit well with ISPs, their shareholders and even many in the government. However, the answer to the lack of competition isn’t data, as the National Broadband Plan proposes, nor is it wireless, which can never deliver the kinds of speeds a fiber-to-the-home connection can.

The answer to the lack of competition is…well, competition. We see it in places where Verizon has rolled out its fiber-to-the-home offering and the cable companies are forced to compete; we see in areas where municipalities have managed to deploy their own fiber networks; and perhaps we’ll see it in whatever lucky town gets Google’s experimental network. So while forcing open access here isn’t an option, and it’s unlikely that the feds will greenlight what could cost up to $350 billion for a fiber-to-the-home network, we only need to look to Australia to see how valuable they can be.

Related GigaOM Pro Content (sub req’d): Who Will Profit From Broadband Innovation?

Image courtesy of Flickr user Linh_rOm

This article also appeared on BusinessWeek.com

  1. I wouldn’t take Australia as an example too quickly. Discussions on the NBN have gone to and fro for many months. Don’t be too surprised if bureaucracy shuts this plan down. Currently speeds are fine, services are acceptable however “all you can eat” plans are almost non-existant. I am hoping with the NBN in place, Australian consumers will have the ability to purchase unlimited plans at an affordable place to fulfil the higher bandwidth demand for future applications and technologies such as IPTV and mobile internet.

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  2. The Australian NBN is not 100% there yet. If the present government loses the next election, then it is likely out the window, as the visionless opposition party is not supportive of the strategy. If they win, then the process will be 6 years down the road before they are likely to be kicked out and hence much more of a certainty.

    If it succeeds, then it will likely change the face of the Australian society. Ubiquitous and open high speed connectivity for service delivery to every Australian for something like the next 100 years or more.

    The good thing about this project is that Kevin Rudd (Prime minister) who has basically reneged on every election promise he made, put a complete bulldog of an individual called Stephen Conroy (The Communications Minister) in charge of the project, and he has reneged on nothing.

    To my way of thinking, this is the way the project must be thought of. Long term strategic thinking is a rarity in governments, who mostly don’t think past the next election. Sure 43 billion is a large number, but when you consider how long fibre to the home is likely to be used for, then the cost becomes much more reasonable to contemplate.

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  3. [...] However, that hasn’t stopped BT from some bad behavior on the network management side. Unlike Australia’s future fiber to the home network, BT’s network doesn’t have government [...]

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