The national broadband network (NBN) has been a major issue in federal election campaigns for close to a decade.
And the 2019 version of the NBN bears little resemblance to the futuristic, egalitarian earlier editions.
Despite years of controversy, cost over-runs, and delays, the coalition government says our $50 billion national network is finally nearing completion.
But Labor’s Shadow Communications Minister Michelle Rowland has set out some different priorities should her party achieve government in the coming election. One of these is a “digital inclusion drive”, aimed at improving access to the internet for older Australians and low-income households.
In addition, Labor is making no immediate commitment to replacing copper connections with fibre.
Instead, if elected, it will fund service and reliability fixes for those on the copper NBN, and impose service guarantees for small businesses and consumers. It will examine what has happened to the economics of the network, looking at its cash flow, pricing, capital structure, and future options for network upgrades.
Labor’s policy will disappoint those hoping for a fast-tracked return to that party’s original (2009) vision of high-speed fibre for (almost) everyone. But its 2019 plan is an important acknowledgement that network infrastructure is only one part of the NBN story.
Affordability and digital inclusion
The Australian Digital Inclusion Index (ADII) provides data on the affordability of internet services for Australians since 2014. It shows that recent, modest improvements seen by some households have been matched by declines in affordability for a number of Australia’s more digitally excluded groups.
The results for low-income households, single parents, people outside the labour force, Indigenous Australians, and people with a disability remain poor.
The good news for Australian consumers is that the pricing of mobile services has improved, reflecting competitive pressures and the reduced cost of delivery as a consequence of investment by network owners.
But when we look at fixed broadband services — the kinds of connections used by most households — recent price increases by NBN have led to a decline in the number of low-cost plans on the market. This change post-dates the most recent ADII report (2018), and the effects are beginning to work their way into the market.
Communications costs matter
Communications services have a knock-on effect in many other areas of life and work.
Access to high-speed broadband can reduce the costs of using other services considerably. This makes critical activities like banking, seeking government information, looking for work, or studying much easier.
But when we speak of the cost savings linked with online services, we need also to bear in mind the flip-side of those savings: the much higher costs borne by those, often less well-off, citizens who must access services offline.
If an individual on a low income lacks electronic access to banking or government information, the cost of commuting to do these things in person can be prohibitive — and especially so for Australians living in remote or regional areas.
For children at school and adults in education or training, a lack of access to the internet means many will fall behind their peers, as access to educational materials and online content becomes a core part of the modern education experience. This has implications for Australia’s ability to take advantage of the next wave of digital transformation.
Australia’s digital divide is not going away
Expensive for everyone
The costs of inequitable internet access are directly felt by many families, but the broader costs are borne by society.
And so digital exclusion now has the potential to be a drag on Australia’s economic growth and productive potential for decades to come.
For individuals, conducting activities offline may be time-consuming and expensive. But that’s also true for the government. It’s estimated that even taking half of government services online would save around A$20 billion.
Aside from the costs of lower productivity, economic growth and tax receipts, inequitable access means that the material savings from automated services may never be realised.
Affordable access to broadband also supports the cost effective delivery of core government and other services – such as health – to regional and remote locations.
Although addressing inequitable access will involve costs in the short term, effective policy measures to improve affordability are likely to generate considerable national benefits.
Infographic: Budget 2019 at a glance
How to improve affordability
At this stage Labor is not saying what it might do to improve internet affordability for low-income households.
The idea of writing down the NBN has been widely discussed. It does, however, have serious implications: it will be very costly to taxpayers.
It will also limit the ability of the NBN to invest in future network upgrades and threaten the economics of uniform national pricing, the NBN’s key promise of equity for regional and remote Australia.
That could mean a return to the pre-NBN communications landscape, with regional and remote Australia relying on increasingly obsolete communications infrastructure while metropolitan Australia moves ahead.
A direct increase in cash payments is likely to improve living standards materially for those in poverty, but more money for low income households doesn’t necessarily mean that broadband will be within their reach.
The creation of a concession at a retail level would make the telecommunications companies responsible for selling products at a cheaper rate, which in an era of reduced margins appears unlikely to occur.
Also, a series of retail concessions can lead to consumer confusion, as the scope of each scheme and the discounts on offer vary wildly. We’ve seen these problems in the energy sector.
Another option is to create a wholesale concession, a measure that has been promoted by consumer advocates. This would involve the government paying NBN to put a wholesale product into the market that retailers could purchase and retail to low income households.
A nationally uniform concessional service would allow retailers to compete in offering affordable services to low-income households, boost NBN take-up and consequently its revenue and financial viability.
Focus on inclusion
While the introduction of a concessional arrangement would involve government picking up a part of the tab for service delivery, it offers sizeable benefits.
By ensuring NBN access for low-income households, the government avoids forgoing a large proportion of the savings that should accrued from the digital transformation of government services (and the benefits to be gained from improving services).
It would also prevent a lower take-up of NBN services and revenues. Without such an arrangement, questions will continue to be raised about the financial viability of NBN, its repayment of outstanding debt to government and whether there needs to be a write-down.
The take up of broadband has historically seen improvements in average household income, productivity, and the creation of new kinds of work and services.
In order to maximise the benefits of the current wave of digital change, we’ll need a broader public debate, that goes beyond the relative merits of fibre and 5G.
Policy will need to address the challenge of affordability, invest in digital literacy, and ensure that all Australians can access the services that they need.
While there are many improvements that can and should be made to our national network infrastructure, a focus on the larger problem of digital inclusion is both welcome, and overdue.