Why Australia’s internet is so slow?

In this recent YouTube clip the Australian’s Business Editor, Chris Kohler, puts forward three reasons why Australia’s internet performance has dropped to 57th in the world behind even Kazakhstan (see Akamai’s Q3 2016 State of the Internet report).

The reasons can be summarised as follows :

  1. Australia is a big country with lots of remote and isolated communities.
  2. Australia has reasonable infrastructure already unlike others that are starting from scratch.
  3. Australia’s internet companies are on an investment strike waiting for the NBN.

These three reasons are no more than convenient myths.

The core reason is vested interests are protecting their long held dominant positions and government policy that has entrenched these positions rather than promoting competition to promote investment in new technologies.

New technologies have driven huge change in telecommunications infrastructure around the world. In Australia we have embraced mobile technologies through infrastructure competition between mobile carriers.  The result is Australia is one of the best served nations in the world for mobile broadband. For fixed broadband it has been a sad, sad story of vested interests conspiring with government to protect their positions.

My blog has plenty of articles outlining these issues.

But let’s take each of these “reasons” stated by Chris Kohler and expose them for what they are – convenient myths.

Myth 1 – Australia is a big country with lots of remote and isolated communities

There is no doubt Australia has a big land mass and lots of remote towns and farms. When compared to Singapore and Hong Kong it understandable this will be taken as a reason why broadband is better in these “city states”.

However, Australia is also one of the most urbanised countries in the world. According to Wikipedia, Australia ranks 23 of 203 countries with 89.4% of the population living in urban areas. This compares to the United States ranked 41st (with 82.4% of population) and the United Kingdom (with 79.6%). Despite these higher rates of urbanisation the United States (global ranking of 20) and United Kingdom (global ranking of 28) have far better internet speeds.

But the best comparison is Canada with extensive social, economic and geographic similarities to Australia. On the urbanisation rankings Canada sits at number 43 with 80.7% of the population in urban centres (so significantly less urbanised than Australia) with a global internet speed ranking of 30 (significantly higher than Australia).

In fact Canadians experience average peak downloads speeds of 62Mbps compared to Australians who get only 46.9Mbps on average.

Furthermore, 52% of Canadians achieve better than 10Mbps average download speeds while only 28% of Australians reach this level of broadband service.

In short geography is not a compelling driver for Australia’s broadband experience. In fact being one of the more urbanised countries means Australia should in fact find it easier than many other countries to achieve better fixed broadband rates.

Australia’s mobile networks operate with the same geographic constraints but as stated earlier Australia has some of the best mobile broadband performance in the world.

Myth 2- Australia has reasonable infrastructure already unlike others that are starting from scratch.

This myth seems to be in the excuses list to overcome the embarrassment that some developing countries are achieving better internet performance results than Australia.

Countries such as Romania, Kazakhstan, Latvia and Slovenia are seen as countries that have “leap-frogged” older investments in copper telephone networks.

However, this myth does explain how this is an advantage. The cost of building new fibre cabling networks in countries without existing infrastructure is likely to be higher. New duct routes, poles and central office sites have to be built from scratch rather than repurposed.

The advantage may be that these countries have more incentives to improve their infrastructure to “catchup” to more developed countries. But this not a reason for Australia’s worsening internet performance rather an exposition of Australia’s lack of urgency when it comes to maintaining its international digital competitiveness.

This myth highlights more clearly than the others that Australia’s vested interests are not motivated by Australia’s international rankings but rather maintaining their current dominant positions in Australia’s telco landscape.

Myth 3 – Australia’s internet companies are on an investment strike waiting for the NBN.

This myth actually has some truth in it. Australia’s telcos are not investing in fixed broadband infrastructure.

But this is because the Australian government is actively discouraging investment. The previous Labour government put in place legislation that would force builders of new fibre networks aimed at competing with the NBN to offer their services on strict regulated wholesale-only terms.

After the change to the Coalition government in 2013, in response to the competitive “threat” from TPG Telecom, the government extended these mandatory provisions to all existing broadband networks (except those being sold to the NBN) and has flagged a new levy to be paid by all competitors to NBN Co for high speed broadband services.

In reality there are significant amounts of private investment that are ready to deploy more fibre based broadband to Australians – but the government is actively regulating and taxing to protect NBN Co from competition to presumably maximise its value under any future privatisation.

So there is indeed an investment strike – but it is because the government is regulating any investment to be non-commercial not because the NBN will meet all future consumer demands.

Summary

So there you have it – the myths about Australia’s growing broadband deficit will continue to be espoused by the vested interests while Australia falls further and further behind the rest of the world.

The NBN investment, in VDSL and DOCSIS technologies, will improve the situation. But after the rollout of this investment in 2020, Australia will have effectively caught up with what the majority of the developed world had achieved in 2010.

We will still be 10 years behind and wondering how we are going to fund the next tranche of investment so this does not blow out to 20 or 30 years over the next few decades.

 

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