Christopher Niesche: Australia slipping behind on internet speed

In places like Cameroon where deliveries take days and fast internet is a pipedream, economic development moves at a snail's pace. Photo / AFP
In places like Cameroon where deliveries take days and fast internet is a pipedream, economic development moves at a snail's pace. Photo / AFP

In Cameroon, the roads leading out of the commercial capital and main port city of Douala are unpaved and potholed; wrecked cars litter the road and motorists are stopped at dozens of police checkpoints.

A journey of just a few hundred kilometres can take several days.

It is one of the many factors that have held back economic development in Cameroon and other parts of Africa.

Roads and rail were the economic enablers of the 20th century, allowing goods and workers to move around quickly and cheaply.

When deliveries take days instead of hours and when what should be a short trip to a job or an interview becomes a major undertaking, a lot of people spend a lot of time sitting around twiddling their thumbs and the economy atrophies.

As we move increasingly towards a knowledge-based economy, the economic enabler of the 21st century is fast internet.

On this measure Australia is slipping further and further behind.

Australia's global rank for internet speed has fallen from 30th in 2013 to 56th at the start of 2016, according to research house Akamai's latest State of the Internet Report. (New Zealand, by the way, is 49th.)

This is measured by average peak connection speed, which the company says is more representative of internet connection capacity.

Adding to the problem is that fast broadband in Australia is a lot more expensive than in other parts of the world.

The reason is Australia's government-owned National Broadband Network.

This initiative was supposed to bring us superfast affordable broadband that would help power innovation and economic growth in Australia.

But it didn't turn out that way.

Construction of the NBN has been beset by delays and political fighting. The original plan was to connect the fibre network to just about every home and business in the country, creating a superfast, high capacity network that would future-proof broadband in Australia for many years to come.

But to save on costs, many homes and businesses will be connected to the network via the old copper telephone wires, which will considerably slow down speeds.

This compromise hasn't saved any money, with the cost of the NBN blowing out to an estimated A$43 billion.

This is why high speed broadband is so expensive in Australia - the government has to recoup the construction costs of the network.

NBN Co does not sell broadband to the public or businesses. Instead, it acts as a wholesale network, selling its services to internet services providers who on-sell it to the public.

And the high prices NBN Co is charging them are passed on to consumers. A basic NBN plan costs around A$39 a month, but this could rise to as much to A$150 a month, according to some industry estimates.

The higher the speed and the more data a user downloads, the more NBN Co charges an ISP. It means that ultrafast, unlimited broadband will be beyond the reach of many consumers and potentially businesses.

The high broadband prices are putting the squeeze on internet service providers, with one of Australia's largest internet services providers TPG warning last week that the high NBN charges would slash its future earnings.

Some A$2.7 billion was wiped from its market capitalisation in two days, and A$736 million of that wiped from the personal holding of the company's billionaire founder David Teoh.

What all of this means is, as the world transitions to a digital economy, Australia risks being left behind, unable to fully participate in global growth and commerce.

Local buyers see power opportunity

We wrote a few weeks ago about how the government had blocked Chinese Government-owned China State Grid Corp and privately-held Hong Kong company Cheung Kong Infrastructure from buying the Ausgrid electricity network that delivers power and communications services to around 1.6 million homes and businesses around NSW.

The latest development in the story is an Australian bidder has come forward, now it no longer has to compete with the huge money on offer from the Chinese government.

Two of Australia's biggest industry superannuation fund investors have offered more than A$10 billion for a controlling 50.4 per cent stake in NSW's most valuable poles and wires company.

Both funds certainly have a lot of cash to invest.

AustralianSuper is a A$100 billion industry superannuation fund and IFM Investors is owned by 29 smaller union-backed funds and oversees A$72 billion.

Ausgrid is a regulated asset - that is, the prices it charges its customers are set by regulators.

This means its profits won't ever surge but they are also very predictable and assured for many years into the future, making it an attractive asset for a superannuation investor.

With the new bid, it looks as if Australian retirees will be able to benefit from the steady income stream the electricity network can provide.

- NZ Herald

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