Brian Dalzell, Economics Section
Broadband
Broadband connectivity can be facilitated via copper lines
(utilising digital subscriber line or DSL technology), cable,
fibre-optic cable, and a range of wireless technologies which
include, but are not limited to, satellite, mobile, wireless local
area networks, and wireless fidelity. Broadband is often referred
to as high-speed broadband or high-speed Internet because it
usually involves a high rate of data transmission. The term
broadband is not strictly defined however. The OECD indicates that
broadband refers to Internet connectivity which provides access
with download speeds of at least 0.256 Megabits per second (Mbps).
By contrast, the International Telecommunications Union (ITU)
states that the term broadband does not refer to either a certain
speed or a specific service. Rather, broadband combines connection
capacity (bandwidth) and speed. Despite this, the ITU has produced
a recommendation that broadband be considered connectivity with a
transmission capacity faster than 1.5Mbps.
Broadband is less developed in Australia than in other developed
countries as demonstrated across the range of OECD’s
available broadband measures. For instance, in terms of broadband
subscriber numbers at December 2009, Australia ranked 17th out of
31 OECD countries, with 24.3 subscribers per 100 inhabitants. The
availability of broadband in Australia is not yet widespread and it
does not offer the level of quality and speeds available in other
developed markets, while simultaneously subject to high prices and
data caps. This is largely due to the historical context of
Australia’s telecommunications sector.
Historical context
Prior to 1991, the Australian telecommunications sector broadly
comprised a fixed-line monopoly provider. The
Telecommunications Act 1991 allowed for limited network
competition in fixed-line and wireless phone services. This was
facilitated via the selection of Optus Communications as a second
general telecommunications carrier to compete against the
government-owned Telstra, in both fixed-line and digital wireless
services. Vodafone (which merged with Hutchinson to form VHA in
2009) was later licensed to provide digital wireless services in
competition against both Telstra and Optus. General
telecommunications competition following the Telecommunications
Act 1997 led to entry by a large number of resellers of
internet, fixed-line telephone and mobile telephone services. While
these resellers have invested in particular network elements, no
new significant network infrastructure providers have emerged since
1997.
The incremental reforms since 1991 have resulted in a triopoly
network structure that remains highly concentrated. Telstra
continues to dominate fixed-line network ownership and control of
the wireless telecommunications sector is shared by Telstra, Optus
and VHA. While there is more competition in fixed-line broadband
services (Telstra and Optus have a total share of retail fixed-line
broadband services of 58.4 per cent and 16.4 per cent, for
2007–08 respectively), most competitors provide DSL services
that depend on Telstra’s public switched telephone network
(PSTN) in order to access end users. Put simply, almost every
Australian retail customer relies on Telstra’s PSTN as an
input for their fixed-line telephone and internet services.
The Australian Competition and Consumer Commission recently
indicated that this concentrated market structure has resulted in
muted competition and that the core competitive impediment is the
concentrated ownership of the network infrastructure. In
particular, the reforms since 1991 have resulted in highly
concentrated ownership of network infrastructure in a sector that
is subject to high barriers to entry and is heavily dependent on
regulatory mechanisms to promote and maintain competitive outcomes.
This market structure continues to result in relatively high
prices, data caps, and annual consumer complaint levels that grow
on a yearly basis.
Telecommunications, growth and productivity
While Australia lags international peers in terms of broadband
development and telecommunications prices, the incremental reforms
to date (which moved the sector away from a Government owned
fixed-line monopoly structure) have been a significant factor in
the demand for, and development of, Australian telecommunications.
The growth of telecommunications services more broadly has been
explained by a number of factors such as advancements in
telecommunications technology, market liberalisation, and
privatisation. Advancement in telecommunications technology is one
of the driving forces of reduced communication costs, as well as
globalisation and growth of the world’s economy.
Technological innovations in telecommunications have been driven by
increased competition levels stemming from telecommunications
sector reform.
In relation to sectoral reform, the economic literature confirms
that privatisation and liberalisation (competition in local
services) have improved economic growth, and increased the
productivity and efficiency performance of a country’s
telecommunications, relative to those countries which have not
undertaken such reforms.
Future broadband policy considerations
With a view to maximising outcomes, policy makers may wish to
take into account the evidence-based research in relation to the
following areas: government provision of public and non-public
goods and positive net social return; externalities and government
intervention in telecommunications markets; government owned
fixed-line monopolies; government business entities, competitive
neutrality and the crowding out of private investment; social
equity, universal service obligations and cross subsidisation;
structural separation, access regimes and investment incentives;
and the benefits of increased infrastructure based competition in
the Australian telecommunications sector.
Library publications and key documents
I Martin, ‘The promised land: costs and
benefits of the NBN vision’, Telecommunications Journal
of Australia, vol. 60, no. 2, 2010, http://publications.epress.monash.edu/doi/pdf/10.2104/tja10030
JS Gans and SP King, ‘’Big
Bang’ telecommunications reform’, The Australian
Economic Review, vol. 43, no. 2, 2010, pp. 179-180,
http://onlinelibrary.wiley.com/doi/10.1111/j.1467-8462.2010.00591.x/pdf
Organisation for Economic Development and
Co-operation (OECD), Broadband growth and policies in OECD
countries, OECD, 2008,
http://www.broadbandcommission.org/resources/BB%20GROWTH%20IN%20OECD.pdf
P Lam and A Shiu, ‘Economic growth,
telecommunications development and productivity growth of the
telecommunications sector: evidence around the world’,
Telecommunications Policy, vol. 34, no. 4, 2010,
http://www.sciencedirect.com/science?_ob=MImg&_imagekey=B6VCC-4YBMTGJ-1-1&_cdi=5951&_user=4962121&_pii=S0308596109001311&_origin=search&_coverDate=05%2F31%2F2010&_sk=999659995&view=c&wchp=dGLbVlb-zSkzS&md5=d69c5156308fed14cf1ba09d16b7decb&ie=/sdarticle.pdf