The tale of two countries

John Key

John Key relates a tale of how he phoned Kevin Rudd to boast that his Government was going to spend $1.5 billion on a fibre-to-the-home broadband network. "We'll be ahead of you Kevin," Key trumpeted.

Just a week later the Australian Prime Minister unveiled his plan for a A$43 billion fibre-optic network that would create tens of thousands of jobs, cover 90 per cent of Australians - while the rest had access to a mixture of wireless and satellite connections, and, remedy the "years of failed policy that had left Australia a broadband backwater".

"You've got to hand it to the Australians," was Key's rueful laugh. He may have embroidered the anecdote (slightly), but the underlying lesson is clear. New Zealand is going to have to significantly lift its sights - and the scale of investment - if it is to match the tempo with which Australia is pressing ahead with a piece of infrastructure that is vital to future economic success.

What the Rudd Government grasps in spades is the notion that the State needs to invest huge amounts of cash to future-proof the broadband pipe as a major utility. Both Governments want the private sector to co-invest in building new networks. Communications Minister Steven Joyce - who will soon outline the Government's response to a raft of submissions to his local broadband initiative - wants the private sector to (in total) match the $1.5 billion state investment.

The downside is it could end up with a fragmented approach that will give myriad local players a slice of the action but not deliver bangs for the buck.

Vested interests challenge the Government to be more clear about what outcomes it wants from its investment. Others - particularly offshore players - suggest it should simply bypass entrenched interests with their legacy investments and ensure super-fast broadband.

The real challenge is to shift the debate away from the line that New Zealand is poised to waste taxpayers' dollars on broadband that will mainly be used for downloading movies and so forth. Instead of succombing to such nonsense - and I am sure policy-makers won't, despite the massive political lobbying now under way - politicians and business people should focus on the fact that fibre-optic networks are no longer the simple preserve of telcos. If we wish to move to the "smart cities" platform, major investment is needed so the broadband pipe can underpin new transport networks and intelligent power usage.

The Australian Government plans to directly seek private sector investment in the company it will form to build the network. But it will retain a majority share, which it will sell-down five years after the network is built and operational.

The full-blooded, steam-ahead approach to investment is typical of the confidence with which successive Australian Governments at federal and state level have invested in infrastructures from transport through to energy and water. Australia's population is just five times that of New Zealand's. But it proposed investment is nearly 15 times that of the planned NZ spend.

The 3:1 ratio tells the story.