It seems that the Labor Party recognises that there are some pieces of technical infrastructure that require an element of Government funding to bring into existence, but that once implemented there will be ongoing benefit for the nation.
The essence of their internet broadband announcement is as follows:
“Federal Labor will revolutionise Australia’s internet infrastructure by creating a new National Broadband Network.
It will connect 98 per cent of Australians to high speed broadband internet services – at speeds over 40 times faster than most current speeds.
With the rollout of a new ‘Fibre To The Node’ (FTTN) network, Federal Labor will increase speed to a minimum of 12 megabits per second – so fast that household entertainment, business communication and family services will happen in real time.
The remaining two per cent of Australians in regional and rural Australia not covered by the FTTN network will have improved broadband services.
New services and benefits of the network – particularly in rural and regional areas – include:
• Slashed telephone bills for small business;
• Enhanced business services such as teleconferencing, video conferencing and virtual private networks;
• Enhanced capacity for services like e-education and e-health; and
• High definition, multi-channel and inter-active TV services.
It is estimated that the new National Broadband Network will deliver national economic benefits including:
• Up to $30 billion in additional economic activity every year;
• Making Australian small businesses more competitive;
• Creating new markets for businesses and new jobs for Australians; and
• Extending media diversity.
A Rudd Labor Government will:
• Partner with the private sector to deliver the national broadband network over five years;
• Undertake a competitive assessment of proposals from the private sector to build the network;
• Ensure competition in the sector through an open access network that provides equivalence of access charges and scope for access seekers to differentiate their product offerings;
• Put in place regulatory reforms to ensure certainty for investment; and
• Make a public equity investment of up to $4.7 billion.
This commitment will be financed from existing government investment in communications, including the $2 billion Communications Fund and through the Future Fund’s 17 per cent share in Telstra, which will earn dividends and be sold down to a normal market level after November 2008.”
It seems to me this is just the first step. No point in having train lines (i.e. the broadband network) if you don’t have trains (e.g. e-health) to take advantage of it!
Given that there is a clear business case for increased spending in the Health IT domain – with net benefits estimated at up to $A5.0 Billion per annum or more (based on studies undertaken in the US, UK and Canada) what could be a better use of a little more of the Future Fund than to kick start e-health with an investment designed to deliver a real return once implemented?
A sensible approach would to be develop a National E-Health Strategy, Business Case and Implementation Plan as a first step and to then establish an highly accountable implementation organisation – maybe modelled on the UK or Canadian models or a mixture of the two – with a focus on making sure the lessons learnt from both are properly absorbed. (While I plan a separate article on this area in the future the need for local involvement, ownership and choice in the context or appropriate standardisation and central direction setting now seem obvious for any national initiative.)
The Future Fund has as its objective a return of 7.5% + inflation over the long term I understand. It would seem this return could be achieved with expert project management and the deployment of Health IT is a way that is known to have beneficial impacts (i.e. use of advanced clinical workstations, in depth automation of investigative services and supply chains, improved secure messaging and the use of systems wherever possible with advanced clinical decision support). Measurement and well as realization of the return on investment I recognise will be a considerable challenge but should not be impossible. There is no doubt the econometric tools exist to undertake such work exist.
The main issue that will almost certainly emerge will be how the benefits achieved will be cashed out for return to the Future Fund – given the tendency of the Health Sector to aim to expand services when efficiencies are obtained rather than take the cash benefit.
I believe the scale of the return on investment in this sector is likely to mean that both some service expansion as well as cashing out of benefits will be possible – to everyone’s pleasure.
Health IT is an ideal candidate for a major planned capital investment and will both make a profit and do good things for the users of, and workers in, the Health Sector.
Let’s give it very careful thought.
David.
Let's not give it careful thought because it's a stupid idea. Ten years ago ISDN was the broadband option of choice - of course it was rapidly superseded in the short term by DSL and in the long term by Optical Fibre. If the Labor party had been in power ten years ago and spent billions of dollars on ISDN it would have bought a white elephant. Broadband in the cities is PROFITABLE for private companies without government support - all plundering the Future Fund would do is hand a truckload of public servant's superannation funds (which is what the Future Fund is meant to be) to the telcos for no return. As far as regional broadband goes there is already a scheme available (I forget the acronym) to subsidise internet access. Giving the recipients money and letting them find the best deal is the best way to get cheap broadband out to the country.
ReplyDeleteI disagree with surturz and think the idea has significant merit.
ReplyDeleteIf someone had invested in ISDN ten years ago, Australia would have benefited enormously. The growth of the Internet has shown the economic and social value of ubiquitous communications. Such an investment would have helped Australia (which was still being called the "clever country" back then - remember that?) to take full advantage of the economic opportunities that have ensued.
The failure to invest in our intellectual capital and related infrastructure (including all forms of education as well as telecommunications) has been a distinctive characteristic of our current leadership.
I remember investing in T1 on the premise that Telstra had a unique opportunity to build on the vast existing investment in "last mile" copper by rolling out ISDN and the then new-to-Australia DSL technology. I was bitterly disappointed when the management of Telstra decided to invest large sums of money overseas in enterprises that were not core Telstra business. Remember PCCW? If that money had been invested in Australia's infrastructure - either DSL or ISDN, I don't think it matters much - I'm sure we would have seen a better result.
Can people still really believe that private enterprise is the only way to provide telecommunications infrastructure in Australia? Apparently the corpse of economic rationalism is still twitching, although the brain is dead.
surturz obviously has not tried to purchase a DSL connection in many of the outer suburbs of our major cities. If he had, guess what he would be offered? ISDN!! He is apparently misinformed on the issues.
I own a property 70 km from Hobart. There is a fibre optic cable running up the highway about 200m from my door, owned by Telstra. This cable is largely unused. It was presumably installed by Telstra because it was the most cost effective way for them to provide telecommunications services to the area and beyond to the hydro power stations upriver.
There is no DSL service in the region (there are many ISDN and some satellite users) I have an entrepreneurial bent, so investigated the possibility of establishing an ISP by renting some space in the Telstra exchange to install DSL equipment, and purchasing a small part of the available bandwidth on the largely dark fibre optic cable to connect the DSL hub to an ISP in Hobart.
There I hit a brick wall. The cost of that "backhaul" service is approximately $1000 per month per megabit of bandwidth, making my idea economically unviable. My other option would be to install my own fibre to the nearest available non Telstra node (in Hobart) at enormous cost. This fibre would also be largely dark (given current demand and the price for volume of internet traffic.)
Can anyone tell me how this makes economic sense? Telstra has an opportunity to pay for some of the cost of maintaining their infrastructure by selling some unused bandwidth, but fails to charge a realistic price apparently because they see more benefit in maintaining their effective monopoly, and are afraid of what VOIP and other modern technologies (that is, competition) will do to their revenue stream. The upshot is that people in the region end up without a broadband service - even with the HiBIS (now called Broadband Connect) scheme.
I am glad that Australia has managed to avoid applying the same logic (ie private enterprise is more efficient at everything) in the healthcare sector. The leader in that field is the United States, and they have a healthcare system that is the envy of all millionaires, and millions of people without healthcare cover at all.
The fact that private insurers in the US spend 20-25% of their income on administration compared to 2% for the US Government's Medicare system makes a clear case for continued public involvement in infrastructure and services. The real question is: Should this be achieved through regulation alone or by a combination of regulation and public ownership? I would argue that public ownership has a role to play and is in fact closer in philosophy to the economic rationalists' fading dreams of unregulated and unfettered markets.
The point is not that we may have been better off if there had been investment in ISDN, the point is that investment in Fibre optic would have been better - i.e. trying to pick winners with billions of taxpayer dollars is stupid.
ReplyDeleteI can understand Jon's take on the issue, but it is obviously skewed by his existence 70km from Hobart. The point is that City broadband is PROFITABLE and that Labor's plan will only hand over large chunks of money to a handful of Telcos (maybe just Telstra) for no benefit. I'm all for sensible subsidies of country broadband, but why subsidise the city?
Also, Jon defeats his own argument by describing the $1000/month "brick wall". This is evidence that more competition is needed - for an ex-govt monolith like Telstra, it is too difficult to look after a few dozen people in a remote area, but if Telstra's monopoly was broken, smaller companies might be able to fill niche markets.
If Labor's plan to fund broadband infrastructure from the Future Fund gets legs, you can bet there will be only one supplier, probably Telstra, exacerbating Jon's "brick wall" problem. A Labor government is not going to want to deal with even three ISPs, let alone hundreds.
The solution to regional broadband is to give the regional users more money to shop around with, not just funneling money to a particular telco.
surturz still misses the point. He appears to agree with and understand that in areas of fast changing technology, large scale infrastructure rollout is a high risk, high cost activity. Duplicating infrastructure does not make sense from a macroeconomic point of view, even in the cities. It may be PROFITABLE in the cities now, but it would be MORE PROFITABLE if infrastructure were to be shared rationally. From a (non economic rationalist) point of view, it doesn't matter who builds it, we (as a society) still have to pay for the infrastructure. Suggesting that my example just shows that we need more competition and the best way to achieve this is to duplicate an underused fibre thus doubling the infrastructure establishment and maintenance costs is ridiculous.
ReplyDeleteSometimes competition does not work, especially in areas that tend to be natural monopolies such as infrastructure. Competition between companies to win a contract to maintain the infrastructure in a certain area for a certain time makes much more sense (this is what happens with roads.) Competition between companies offering me added value services on top of a shared infrastructure makes much more sense (think of competing courier companies.)
Ten years ago, a fibre rollout was far more expensive (and high risk) than it is today, and it clearly didn't make economic sense then. It did make sense for some high traffic links and was used in those circumstances.
Meanwhile, the country did not have the benefit of ISDN infrastructure (supported by fibre links where it was cost effective) to support economic and social development (as opposed to PROFITABLE activities such as digging irreplaceable stuff out of the ground and selling it.)
This is not about picking winners. When you are dealing with large scale infrastructure, you can't afford to live on the "bleeding edge" of technology, so it is ridiculous to argue that we should have rolled out fibre to the home ten years ago.
New technologies will continue to emerge, and we will need to continue to invest in upgrading the infrastructure using proven technologies. New infrastructure should be rolled out progressively starting with areas of highest demand. I do not believe that people living outside major population centres should have the same level of service as people who do. I do argue that a more cooperative approach to providing telecommunications infrastructure would provide a better level of service to all Australians.
In the healthcare area, it is clear that certain infrastructure is required to support effective use of ICT. The clearest example of this is identity management. Does it make sense to have competing identity management services? I think not. Does it make sense to have competing (standardised) decision support systems that make use of identity management services? Absolutely!
I do understand your argument I just don't agree with it. It certainly does matter who builds it because they can take more or less resources to do so. Monopolies are notoriously wasteful with resources.
ReplyDelete"Doubling the infrastructure" is no different from government building ISDN networks one year and Optical Fibre the next - we are talking about technologies that change rapidly, and will be rebuilt over and over again.
I'll make the further point that there is no evidence that more broadband penetration would be adequately used by the public hospitals. I know of at least one major Sydney area health service that does not provide web access (except for smh and their intranet site) to its users by default. This same AHS basically doesn't allow external companies to access its networks either. So you could increase broadband speed 100 times, but that AHS would not benefit at all because of their IT security policies.
And the real argument against this lunacy is that there has been no discussion of how public servants' superannuation will be funded if the Future Fund is depleted. "Increased taxes from increased productivity growth" is a nonsense argument because paying superannuation out of tax is simply a Ponzi scheme - unsustainable unless our population grows without restraint (and you could argue on environmental terms that even with unrestrained population growth it would still be unsustainable).
I forgot to cover the 'central identity management' issue. While in an academic sense I agree with that one, I believe it is highly unlikely that a single identity authority will ever be a practical outcome. Firstly, it is politically unpalatable (c.f. Hawke Labor's "Australia Card")
ReplyDeleteSecondly, there are many organisations want to be able to register people into their computer systems without being forced to synchronise with a central authority - anyone that still has paper files or films for example doesn't want to be forced to re-label and re-file patient records for a patient they saw ten years ago and have not seen again.
Thirdly, as computer systems get more interconnected, concurrency will be an issue, and there is too much trust required of users to easily allow these concurrency issues to be resolved at the user level - that's why multiple registrations have been, and always will be a problem (is Mrs Jane Smith the same person as Miss Jane Jones from ten years ago? I don't know, so I'll book them as a new patient to be sure).