Singapore, New Zealand, and Australia are building national fiber-optic networks that will provide high-capacity connectivity to all residences and workplaces. All three national projects separate network facilities from retail service providers. Government investment, government ownership, and government control, to various degrees and in various institutional forms, will be a major aspect of the facilities layer. Commercial competition among private retail firms seems to be the central concept for end-user service provision.
Plans for government involvement in broadband networks might benefit from more thinking about retail services and end-user services. Some points for thought:
- Some health, education, and energy-consumption management services might be provided universally, at no direct cost, over the national network. In order to do so, everyone must have some type of end-user service. Organizing access to universal end-user network services would increase the value of national networks.
- The Singapore proposal specifies a residential/non-residential pricing distinction that goes all the way down to the network layer. Non-residential prices are about 3.5 times higher than residential prices (see slide 29, Overview of Next Gen NBN Wholesale Prices). Favoring residential customers over business customers is a historically prevalent pricing structure for telephone service. That pricing structure shifts network costs into common costs for businesses. It can be understood as a non-transparent value-added tax. Such a tax is advantageous for incumbent politicians. More generally, politicians often are concerned about particular retail prices. Policy analysis should recognize this reality in thinking about government involvement in networks and retail services.
- Advertising and marketing services can be quite expensive for competing, commercial firms. In 1997, U.S. long-distance telephony competitors spent about $5.4 billion on advertising and promotional expenses. That was much more than the capital cost for building major national fiber-optic networks. Government provision of relatively simple, well-understood, universally valued services generates much less advertising and promotional expenses than commercial retail competition. On the other hand, government provision of services has its own costs and risks. Thinking about the characteristics of specific end-user services can help to inform analysis of trade-offs between government service provision and commercial service provision.
- Government service provision can be an important tool for restructuring the communications industry. In the communications industry around the world today, plain-old telephone service (POTS) still generates a huge amount of revenue. National networks could be understood as a national commitment to eliminating this revenue. On the other hand, users are used to paying large monthly bills for telephone service, but not for email service or web search service. Recognizing user payment habits and their implications for business structure and service innovation is an important component of understanding the implicit regulatory effect of national networks.
- Traditional print (newspapers, magazines, books) and broadcasting (radio, television) businesses are under enormous strains. High-speed national networks are likely to increase the speed of transition to new media organizations. The democratic potential of new media organization is enormous, but the path to realizing publicly valuable media change is likely to be quite difficult. New national networks can foster much better direct communications among community organizations and their constituents. These important end-user services should be explicitly recognized within national network projects.
- Providing some retail services may be crucial to making national networks economically viable. Tim Nulty, who has world-leading expertise in the matter, argues strongly that retail service provision is essential to making municipal fiber-optic networks economically viable. The same may be true for national fiber-optic networks.
Government overviews, with links to additional government documents —
Singapore: Next Generation National Broadband Network (Next Gen NBN)
New Zealand: Broadband in New Zealand
Australia: National Broadband Network