National Broadband Network There Is Essay

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Development of the infrastructure is slow, as politicians have difficulty making decisions and moving forward efficiently. Wired broadband is at the heart of the plan, yet most of the world is already moving towards a largely wireless platform for broadband, and consumer technology is supporting this (smartphones, tablet computers). NBN Co. is proposing itself as a wholesaler. However, the current proposal would put NBN in a monopoly position. Monopolies have little incentive to make investments in innovation, and have excessive pricing power. Government would need to ensure that pricing was not abusive, creating inefficiency. Without government intervention in the wholesale market, NBN would be able to charge monopoly rents for its broadband, to the detriment of service providers and consumers -- everybody would pay more for broadband than they would if they were in a competitive market. In addition, if having a modern telecommunications infrastructure is the social goal of this project, undertaking a project wherein innovation would be stifled is not going to achieve that.

The creation of a monopoly in broadband will reduce innovation and increase prices. This is a natural impact of monopoly conditions, as there is no competition to drive innovation or to bring down prices. There will be competition on the retail side, but NBN will have superior bargaining power. This will mean that resellers will have high fixed costs, reducing the impact of competition on delivering lower prices to consumers.

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This market inefficiency will also serve to reduce the demand for broadband. Despite the monopoly in the industry, some consumers will simply choose to do without. The government is only providing the infrastructure with this program, not forcing consumers to purchase. Thus, the government may fail to meet its stated objective of delivering broadband to all Australians, by virtue of the fact that it is creating conditions that will encourage larger numbers of Australians to forgo broadband.

From an economic perspective, therefore, there is little case to be made in favor of NBN. If the project is economically viable, the existing companies in the market will develop the infrastructure. Certainly, for the vast majority of Australians who live in densely-populated urban regions, broadband will come if it hasn't already. The remainder of Australians in rural areas may not be served, but the cost of $36 billion is very high to service a few hundred thousand people, regardless of their level of interest. In addition, government intervention in the broadband market will result in monopoly conditions, therefore higher prices and reduced innovation. As a result of this, fewer people will adopt broadband than they would under monopolistic competition or even oligopoly conditions.

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