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 (s goog) 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 (s vz) 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?
This article also appeared on BusinessWeek.com