NBN vs. the world: The American experience

A similar geographic challenge but different market structure made the National Broadband Network (NBN) approach unworkable for the U.S., say Australian and American policy makers.

Australia and the U.S. watched each other as they designed plans to deploy broadband throughout their populations, policymakers from each nation told Computerworld Australia. While the nations share some geographic similarities, different market structures and regulatory histories required different approaches.

With the NBN, Australia is paying to bring broadband to every home, selling the service through wholesale agreements with ISPs. But the U.S. National Broadband Plan proposes using a subsidy system to spur private investment.

NBN Co looks “both nationally and internationally at the trends that are going to affect broadband take up,” NBN Co general manager revenue, Stephen Myers told Computerworld Australia. “We want to make sure we’re developing the network … in the context of what all of the developments that are occurring are, and making sure we continue to benchmark the developments that are occurring in the more advanced markets back into what can potentially happen in the Australian experience.”

NBN vs the world: The Korean experience

When writing the U.S. National Broadband Plan in 2010, the Federal Communications Commission (FCC) “looked at a lot of other countries but at Australia in particular because it was both timely and had geographic issues similar to the United States,” the plan’s lead architect, Blair Levin, said.

The Australian Perspective

“The American market came from quite a different structure from the Australian market,” said NBN Co’s Myers. And the regulatory environment in the U.S. is “very much hands off,” relying instead on industry competition to spur broadband, he said.

In the U.S., “you have a very wide deployment of cable,” Myers said. Big cable operators compete directly and aggressively with telcos on broadband and other telecom services, he said. That alternative platform “really has kept the telcos honest” and driven broadband deployment.

In contrast, Australia has Telstra controlling the cable and copper infrastructure, with no other company providing a competitive check, Myers said. “The government has stepped in to bring a uniform platform to the marketplace as an alternative and restructure the industry so that we’ll get a uniform, ubiquitous deployment of infrastructure.” The government determined it could not meet that goal through negotiation with Telstra, he said.

The U.S. and Australia face a similar geographic challenge in that both nations have large rural areas that are difficult to serve broadband, Myers said. But the U.S.’s vastly bigger population provides scale reducing the cost of connecting more expensive areas, he said. The American government has focused intervention in the market where there is no service available, with the FCC working to redirect its existing telephone-focused subsidies into broadband, he said.

The U.S. market structure has caused a problem of its own, Myers said. “It’s actually resulting in very much a patchwork network across the states.” Different companies deploy different technologies from each other, and even within their own footprint offer different speeds in different areas, he said. “There’s no consistency across the marketplace.”

“Verizon has rolled out an extensive fibre-to-the-home network in the US,” but hasn’t seen much take up, said Rod Tucker, a professor at the University of Melbourne. “This is because the Verizon fibre network runs alongside competing HFC and ADSL networks. The lesson that Australia can learn from this is that facilities-based competition can be inefficient.”

Over the page: The American Perspective

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The American Perspective

The NBN would not work in the U.S, said Levin, the former FCC broadband advisor who is now a fellow at the Aspen Institute.

The U.S. has two broadband-capable wires to about 90 percent of homes, Levin said. Australia serves less than a quarter of its population with cable modems, according to 2008 OECD data. “The two-wire strategy for the U.S. had driven upgrades through the private market that Australia was not seeing and so there was less of a need to change strategies.”

“Further, the Australia approach in the US would have been much more expensive as it would have required buying out both cable and telco providers,” he said.

“Government financed broadband networks made available on a wholesale basis to private sector telecom providers and to other governmental entities are highly appropriate in one unique circumstance and that is where the private sector fails to make the necessary broadband investments to serve a community or a larger region,” said former Democratic U.S. Rep. Rick Boucher. Boucher helped write the law that ordered the National Broadband Plan.

In addition to two wires at most homes, the U.S. has four national wireless networks and fixed wireless providers providing service to rural areas, said USTelecom vice president Patrick Brogan. USTelecom is the largest American telco association and counts ATT and Verizon as members. “Building a national network on top of those existing infrastructures would be wasteful and could strand a great deal of private investment.”

The U.S.’s much larger population would make the cost to serve everyone prohibitive, Brogan said. Australia has estimated the NBN costing $47 billion to serve 22 million Australians. “Imagine the cost to serve 310 million Americans – though not necessarily a linear extrapolation, the cost would be huge,” he said.

“In rural areas of low population density where deployment costs are great because of distance and return on investment will be low because of the limited number of subscribers, government financing for broadband deployment is highly appropriate,” said Boucher, who is now a partner at the Sidley Austin lawfirm. “I can imagine that Australia with most of the country being rural and lightly populated presents an ideal opportunity for the application of this principle.”

“The basic challenges are the same,” Levin said. “How do you get networks everywhere, how do you get everyone on, how do you have a competition framework that drives consumer welfare, how do you use the ecosystem better to drive economic growth and social policy goals, and how do you drive continuing innovation and potentially, technological leadership.”

“The technologies that create the opportunities are largely the same as they involve international development and standards,” he added. “The key inputs are the same—fibre and spectrum—and the government policies that create access to those inputs are similar, such as rights of way policies, access policies, spectrum auction policies.”

“But the history, market structure, and regulatory structure are different enough that again, while the American Plan is useful in some ways, I would be the first to say that as to Australia, our plan was not like, say, the 10 Commandments but more like, as Captain Barbossa said in Pirates of the Caribbean, “more like what you’d call guidelines than actual rules.”

This story is part of a series on how other countries have dealt with their own broadband networks and what Australia could learn from their experiences. Read about the Korean experience here.

Follow Adam Bender on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU

Copyright © 2012 IDG Communications, Inc.

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