Overselling Fibre – UK Report Dispelling Productivity Myths of High Speed Broadband

29th Nov 2010. Decried by the Labor Government and upheld as important by the Liberal opposition, this US report adds to the debate about inadequate data and policy being developed to support a  cost benefit analysis of the Australian National Broadband Network.

Click here to download the report

Paul Budde’s commentary is an excellent summary:
“The report is correct in that there is no business case for building national high-speed broadband simply to replace telephony, entertainment and internet. And if you are going to build it with other social and economic benefits in mind and you do not develop good policies to make that happen, again there would be no business case.
The NBN in Australia is placed within the context of social and economic reforms and that is exactly where it needs to be positioned. It is a facilitator and catalyst for transformation and this is widely acknowledged by the UN, OECD, World Bank, USA Government, European Union and many others. It would be hard to argue that they are all on the wrong track. However, to achieve those reforms a range of wide-ranging policies in relation to all those sectors needs to be developed and implemented.
Only with such a comprehensive approach will those benefits be realised.”

Report Summary

Governments around the world are investing multiple billions to support the roll-out of fiber to enable high speed broadband. These subsidies are based on the premise that fiber to the home (FTTH) brings substantial externalities. It is argued that FTTH will support economic growth and is key to national competitiveness; that it will benefit education, healthcare, transportation and the electricity industry; and that it will be the TV platform of the future.

In this paper we argue that the evidence to support these views is surprisingly weak, and that there are several errors that are made repeatedly when making the case for FTTH. In particular:

– The evidence that basic broadband contributed to economic growth is decidedly mixed, and some of the studies reporting greater benefits have significant flaws

– Time and again, data that basic broadband brings certain benefits is used to justify investment in fiber – but the investment in fiber must be based on the incremental benefits of higher speed, since (in the developed world) there is already near universal basic broadband

– This error is compounded since other high speed broadband infrastructures (such as cable, and in time wireless) are often simply ignored when making the case for fiber

– Fibre is credited with bringing benefits that would in fact require major systems and social change in other parts of the economy, such as a widespread shift to home working, or remote medical care. In practice, these changes may never happen, and even if they do they will have significant additional cost beyond simply rolling out fibre

– Frequently business or government applications, such as remote medical imaging, are used to make the case for FTTH. But these applications require fiber to certain major buildings, not to entire residential neighborhoods (and these buildings often have high speed connections already)

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