Creative destruction and the NBN

One of my many concerns about Australia’s National Broadband Network (NBN) was the toll it would take on future innovation and competition. A legislated monopoly, entrepreneurs would be forbidden from competing with it, eliminating potential consumer benefits before they can even be discovered. Fortunately for Australians, I was wrong:

Lightening Broadband is connecting homes and businesses using microwave links capable of delivering both 100 Mbps download and upload speeds. That’s better than the comparable NBN Tier 100, which offers 90 Mbps download and 30 Mbps upload speeds.”

Another telco start-up, DGtek is offering its customers a full fibre alternative service … [it] uses Gigabit Passive Optical Networks (GPON) and runs it directly into tightly packed homes with the dense population of inner Melbourne. As a sweetener, DGtek offers free internet service to government organisations – such as schools and hospitals – in areas they service.”

iiNet in Canberra has launched its Very-high-bit-rate Digital Subscriber Line (VDSL2) as its own superfast network. According to iiNet, it is made up of fibre and copper and provides a faster connection than ADSL and most NBN plans.”

Then there’s the competition from an area I did forecast, namely 5G wireless broadband:

Optus and Telstra are both launching 5G services in 2019. This represents a quantum leap in wireless technology that could win away millions of current and potential NBN customers.”

The total accounting cost of the NBN is already over $50 billion. With competition on all fronts preventing it from monopoly pricing, and its mandate of cross-subsidisation (e.g., rural households) driving up costs, that figure will only grow.

At this stage - nearly 10 years after its inception - there’s an almost certain chance that the taxpayer will see a negative return on its NBN investment.

As the situation worsens, something will give; that’s just how politics works, and the NBN is a political beast. The easy (and wrong) option would be to regulate or tax the NBN’s competition away. The more difficult (and better) option would be to remove the NBN’s legislated fixed-line monopoly altogether and sell it off, owning the loss and salvaging whatever we can from the carcass.


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