With the debate about the National Broadband Network well underway, some of the dismissals of why a population would need higher broadband speeds (or as Kevin Rudd so quaintly called it at the Tasmanian Community Cabinet meeting, “Bandspeed”) – often bounce around somewhere between the ridiculous and the incredulous. It’s not only the economic and social value of bringing higher speeds to market at a decent price point that gets the sceptical treatment by those essentially not across the policy brief, but also scepticism aimed at the rhetoric the government has been deploying over the NBN that it is has the importance and consequences of a key essential service akin to roads, power and water, and should be treated as thus.
Of particular interest to this point is the idea that I’ve heard floated around on broadband subsidies for low income households being a possibility further down the track, and how that would fit into the wider policy mix that seems to be falling under the broad banner of the Education Revolution.
Yesterday the ABS released an interesting set of data on sporting, cultural and technological activity undertaken by 5 to 14 year olds over the past 12 months, broken down into a number of demographic cross-tabs.
Within this ABS release is some pretty interesting data on internet use by kids that’s worth looking at and keeping in one’s thought orbit when it comes to some of the issues surrounding the NBN.
First up, the basics – the proportion of 5-14 year olds that accessed the internet in the last 12 months, and broken down by urban geography.
Figures 1 & 2.
The big jump in net access for kids comes between the ages of 9 and 11. Also interesting is that total net access for the 5-14 year cohort starts falling off the further away you get from a capital city.
On the question of where it is that kids access the internet from, the results show some interesting trends across age.
Figure 3
While home based access grows slightly as kids get older, it is primarily the jump in access at school and “Other Places” in the 9-11 year cohort which appears to be one of the reasons for the jump in overall net access for that age group.
Also worth noting is how these overall access changes align with the change in the number of hours the internet gets used each week.
Figure 4
They’re the broad basic stats, but where it gets particularly interesting – especially in terms of the NBN debate – is where the ABS broke some of these stats down further using family type and parent’s employment as cross-tabs.
Figure 5
As generic household employment reduces, so does children’s internet access, with smaller numbers of kids accessing the internet in the past 12 months in those households of either family type where parents were not employed. Some of this is likely to be caused by the affordability of net access at the home, but there’s also a likely to be a big suite of other socio-economic issues involved as well – and it would probably be impossible to pull one apart from the other.
But the prism that this data is worth looking through comes in the next chart – internet use among 5-14 year olds by activity type:
Figure 6 (click to expand)
In the past 12 months, a higher proportion of children accessed the internet for educational purposes than any other, by a significantly large margin – something those banging on about the internet being for porn and music piracy might like to sit on and spin for a while.
When we look at the big jump that occurs in total net access in the 9-11 year age cohort, and how that corresponds to the big jump in access at school – we also see the same jump in using the net for educational activities among that cohort.
Figure 7
Net use for educational activities, which are most likely driven by use at school, is becoming ubiquitous – by the age of 11 – which is worth thinking about in terms of the likely counter factual of the NBN. If that isn’t built, high speed broadband will still exist in Australia – but it will be more expensive per Mbit and where higher speeds will be limited to a much smaller geographical area.
I wonder what impact if any would be had on ultimate educational outcomes if schools had access to next generation internet applications based only on their geography and capacity to pay for high speeds rather than a more universal availability that would occur with the NBN?
How important is high speed access at home likely to be in terms of education outcomes? Taking into account what we already know via the data contained in Figure 5 – could we use employment as a proxy for income, and if so, is there a case for some form of government subsidisation for home access for low income families?
If there is, I’d be interested in your thoughts on whether or how the benefits accrued would be larger than the costs?
28 Comments
Being a parent, getting kids to do homework – in a reasonable amount of time, can be an effort.
If the net is slow, or unavailable, then it takes that much longer.
What might take 30mins could take an hour.
Also if there is only 1 computer at home then they will need to take turns.
If the net slow then this might take several hours every night – in short it won’t get done.
I’d be interested to know how many computers the average household has, and what percentage have internet access.
There are two of us in our household, and we have three computers hooked up to each other and the internet, two desktops and a laptop, and we need all of them. One older desktop is hooked up to the scanner, and it doesn’t get used much except for scanning or when one of the main two spits the dummy, which happened recently when we got a blackout which temporarily disabled the on/off switch on the laptop.
The type of broadband Kev is talking about would be overkill for us – but it would be great, because it would probably reduce the cost of the ISDN speed we have now and which is satisfactory, we pay about $70 per month.
But I’ve read a number of times that once you go to a higher speed service, you never want to go back.
All well an good, except that the NBN is looking to cost over $100 a month, assuming an optimistic take-up rate. With some of the really good smaller operators (like Exetel) you can get ADSL2 with ~10Gig/Month download quotas with dirt cheap (couple of bucks a Gig) excess download fees for around $50 and month.
I’m sure I’d seriously consider paying $100 a month for the kind of speeds being proposed for the NBN, but I don’t see that this is going to make the net any more available to families that can’t afford to connect at the moment. I agree completely with the arguement that making the net more accessible for all is a good thing, but I don’t see that the NBN addresses this at all, which is what this post seems to assume.
Possum, what you are seeing is a market where Telstra dictates the spread of retail prices. It targets its own retail plans at a price compatible with the incomes of the top half of income earners. It then sets its wholesale charges in such a way to put a floor under the retail prices of other retailers.
The bottom line is that about a third of households have either dialup (and believe me, no one chooses dialup) or have nothing, opting usually to keep their landline. Indeed, Telstra has created a framework where most consumers have no choice but to have a Telstra landline in order to have an Internet connection (yes, there are “naked” plans, but these are only physically available to a minority and because of the underlying cost structure, these plans are again well out of the reach of the poorer third of households.)
The actual stats are here:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/8146.0
and there’s lots of numerical data on the same site
Add to that the apparent plateauing of internet uptake and what you see is a market approaching saturation amongst those who can afford the current prices. Underlying all of this is the stranglehold Telstra has on wholesale charges and the cost of backhaul data. It does have competition on some routes but these charges are still far in excess (multiple times) the cost of similar services in other countries. On top of that the cost of international data has been a matter of “whatever the market will bear” rather than anything remotely resembling “cost plus”.
What the NBN is, is an opportunity to cash in the advances in technology which have brought the real cost of data transport down to cents, or fractions of a cent per GByte. That’s what most people don’t realise, is that the actual cost of trucking bits, is a lot less (by orders of magnitude) than we pay for in this country.
The other bottleneck that the NBN is there to break, is the customer access network, or more familiar terms, the last mile. This is costly, but the capital cost has to be seen in terms of a useful lifetime of 50 years or so.
In short, we’ve been ripped off, and the NBN is an opportunity to see how badly we have been ripped off.
As for education being a key benefit of high speed broadband, the key is not the web but future applications that allow young children to interact with tutors, and become a part of virtual classrooms. Where schools are less timetabled and aimed more at the specific needs and talents of children because where distance barriers are broken, children can then interact with more specialised teachers. And more importantly, the NBN is a boon to the most remote users.
Curious that you only mention eduction, because the cost-benefit of the NBN goes well beyond education. First and foremost its a distance-breaker. It encourages more diverse social contact (factor that one into future political views and voting behaviour
) . It encourages more diverse business networking, where for instance those with ideas and inventions can quickly video conference with those interested in resourcing them. It has obvious and huge benefits in E-health and more importantly in the prevention of illness in the first place. Not to mention the potential efficiencies in the provision of basic services, government and so on. The NBN has the potential to save billions in avoided physical transport. It has the potential to encourage all kinds of new applications in machine to machine communications. And I could go on all night.. The point is that the one thing that will make the NBN most cost effective is the one thing we haven’t yet imagined.
As they said when we rolled out the electricity grid “who needs to spend all that money if the only thing its going to do is power light bulbs – gas is perfectly ok”.
As for Bogdanovist @ 4. Those estimates have little credibility. The fact is that the NBN at the very least, has to more or less match the current market for DSL but do so whilst adding more speed and more data. That’s the starting point. That’s why the main game is not whose model you believe but instead its about how cheaply you can dig holes and nail things to poles. That’s Quigley’s job. Let him work on it and see what he comes up with.
If you think about it, the original $43Bn estimate for the NBN was a figure coughed up by the bureaucrats in the DBCDE. They were asked “what’s the most this thing could cost”, and they came up with a figure that essentially amounts to $5000 per household. Now, given most of the cost of actually building the network is the civil engineering (digging holes) that figure looks absurd. It does not cost $3000 to dig a trench across a suburban lawn (typical use case) and fill it in again. Let alone to do the same thing pole to pole which is the most probable outcome.
Compare this to prices overseas that started out at $4000 per house passed a few years ago and are now trending down to more like $1500 and that’s for the entire kit.
More realistic estimates put the cost of $28Bn. I personally feel even that is conservative, but even so, the models based on this figure estimate a necessary average monthly revenue per connected user (yes they do take into account realistic take up rates) at around the $45 mark. And remember, that’s average. What the NBN actually has to do is like any other company and create differentiated products that are above and below this cost.
The bottom line is it is not unreasonable for the NBN to provide a product that is the equivalent of a phone line and wholesale it at next to nothing, allowing retailers to provide a phone service at around the $10-$15 mark. (Say bye bye to Telstra’s core cash cow and the profitability of its copper network). As well, I anticipate a bargain basement phone and internet access service (say at 12Mbps) which might retail at $35 per month. Cheap enough that those that currently can only afford a phone, can have internet as well. Remember of course that the “shareholder” also understands like I do that in order for the NBN to achieve its social goals it has to bring on board low income earners, and also, this end of the market is important to the NBN’s overall take up rate. As with airlines, its the cheap seats sold however cheaply, that actually make the difference between break even and profitable.
The NBN is then free to market premium services for up to and over $100 per month, thus keeping a profitable average. The thing is, it has the ability to maintain a wide spread of speeds and quality of service (and thus differentiated product) compared to what is now available on DSL – and at a time when most of the market will be maxing out the capability of their copper loop.
There’s been a lot of BS spouted over the NBN, and as an internet oldie (I used to use the net back in 1989) I’ve seen it all. You’ll be surprised how much unmet demand there is in the system – held back by what amounts to the profiteering of a company that always saw the growth of the Internet in Australia as a threat to its core cash cow – landline phone rental.
Bring it on
Oh btw Possum, I couldn’t help but laugh at the fact, that the boon to the smut users of the country (forget abut the Web, we’re talking 3D virtual reality immersive smut), will actually help cross subsidise virtual classrooms for poor children
A lot of posters here don’t seem to understand how the NBN will work. It isn’t going to be a retail service, with subscribers. It will be a wholesale service (like Telstra is today). ISP companies will pay a fee for use of the NBN infrastructure. So you still might be with Exetel paying whatever, but Exetel will be paying a fee to the NBN company to use the network, rather than paying a fee to Telstra as it does today. Good news is that it should enhance competition of the internet services companies (as there is no conflict of interest between a wholesaler also being a retailer). Bad news is that Telstra (or anyone else) has no incentive to build a competing infrastruture (not with so many billion in Government funds being given to the NBN)
Thank you for all that cud chewer.
Fantastic post Cud Chewer!
Terrific post Cud Chewer!
What a cracker of a post cud chewer. Well done!
You’ve summed it up beautifully and pointed to the way of the future.
It will be a huge breakthrough when that “backhaul dam” finally bursts.
Scott @ 7:
Bad news is that Telstra (or anyone else) has no incentive to build a competing infrastruture (not with so many billion in Government funds being given to the NBN)
How is that bad news? Is it bad that Macquarie Bank (or anyone else) has no incentive to build a competing road infrastructure for local roads? National ownership of national infrastructure is a perfectly acceptable model, if there’s a level playing field for those utilising the infrastructure. The NBN should broadly achieve this, which is more than can be said of Telstra’s tenure as owners of the copper. Given their conflict of interest, and the lack of sane regulation, that’s not very surprising. As others have said: bring it on.
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My own kids are 3, 5, and 7 and all use the internet. The youngest uses it for Thomas the Tank Engine videos and games. The five-year-old uses it for learning to count through games and quizzes, and the seven-year-old uses it as an encyclopaedia.
Beyond that, our local school has interactive whiteboards that can be used to implement virtual classrooms, amongst other things. Except that they can’t, because we’re rural, and Telstra, despite having put ADSL in our local exchange, won’t turn it on because of their tantrum-ridden negotiations with the ACCC.
The thing about the universality promised with the NBN is that it enables cool things like virtual classes for specialist subjects, and collaboration with kids from different backgrounds. If not everyone has the technology, that sort of stuff just can’t make it into a curriculum.
ADSL2, that should be – we do at least have ADSL1
Wow, talk about boosterism.
The main, defendable criticism of the NBN is that it hasn’t been subject to a proper cost-benefit analysis.
Of course, a la Cud Chewer, one can dream up a whole lot of enormous benefits that will flow from the NBN, but until all of these benefits are weighed and valued rigorously against the likely costs, I will remain very cautious.
I particularly like Cud Chewer’s point “If you think about it, the original $43Bn estimate for the NBN was a figure coughed up by the bureaucrats in the DBCDE. They were asked “what’s the most this thing could cost”, and they came up with a figure that essentially amounts to $5000 per household. Now, given most of the cost of actually building the network is the civil engineering (digging holes) that figure looks absurd. It does not cost $3000 to dig a trench across a suburban lawn (typical use case) and fill it in again. Let alone to do the same thing pole to pole which is the most probable outcome.”
If it is true that the bureaucrats were asked to come up with the highest figure it could possibly cost, and so the estimate is biased upwards, that would have to be a new first in government infrastructure planning, which is of course much better known for its cost underestimates than its large underspends.
As for the data released by the ABS, not sure how helpful it really is. A few points. First, what do you think the likelihood is that internet use is being accurately reported here for 5-14 year olds. A considerable amount of internet use by young teenagers is likely to be unsupervised and it makes sense to me that in a survey setting that all members of the family are likely to have an interest in over-reporting educational use. Second, we know nothing about the value-add of the educational use that does take place. Without knowing exactly how the net is being used by students for educational purposes and how it is complementing or substituting other educational activities, it is impossible to evaluate social benefits flowing from its use. Third, do we know from the survey how much time is allocated on average to each activity? I imagine even from the graphs shown here that the total time spent on non-educational activities is considerably higher than the time spent on educational activities.
To answer the question posed at the end of the blog, to evaluate the worth of a subsidy, one would have to weigh the cost of the subsidy against the benefits. The benefits will be extremely difficult to assess as you would need to estimate not only the likely marginal social benefit flowing from additional use of the internet (how much better will educational outcomes be for that group of students? What proportion of those benefits are private as opposed to social?), but also measure the benefits that flow from high speed broadband as opposed to lower speed broadband. If the analysis were to be thorough, one would have to also weigh the benefits of the subsidy against other potential uses of that subsidy. If the government has a budget constraint, are there other potential uses of the money that go toward the subsidy that would benefit the educational outcomes of the poor more than greater access to the high speed internet?
So, my conclusion is that the NBN may be beneficial in its current form and it may not, but until more rigorous cost-benefit analysis is done, we can’t really have a got idea whether the government investment will be worthwhile. As for evaluating the educational benefits and the utility of a subsidy, we are even further away from being able to do that properly.
Thus far, the NBN is to evidence based policy what the Howard government was to compassionate treatment of refugees.
We can never accurately asses the end dollar benefit of a dollar spent on education, so should we just give up investing in it?
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Another aspect that is overlooked is that high-speed internet makes it far easier, through means such as ubiquitous videoconferencing, and access to large sets of data from anywhere, for people to work from wherever they like without burning carbon, and clogging roads, or overfilling trains, to get to their office. It allows people who trade in intellectual property to seamlessly become exporters of their IP, or to work in multiple regions within Australia without getting on a plane every second day. If we’re serious about carbon reduction, then investing in infrastructure that reduces our reliance on transport seems as good a place as any to start, and if you look at it on those terms if we could use it to knock off even 10% of work-related travel, then even $43b looks like the bargain of the century. Try funding a 10% expansion of the nation’s road, rail, and air infrastructure for that amount.
Ahh…no JP – I didn’t say that we can’t evaluate it, I said that no attempt has been made to evaluate it in the current context by the government. There are all sorts of detailed studies of the returns to education, and the social component of those returns, but little (or none) in Australia that looks specifically at the social returns to government investment on internet infrastructure that will alter the way educational services can be delivered. And just as importantly, how different broadband speeds are related to those returns.
This can be done, or at least attempted. It just hasn’t yet. Presumably because the goverment isn’t particularly interested in an independent answer to these questions.
Your last sentwo sentences reveal how little you have thought about carbon reduction or cost-benefit analysis.
How likely is it that the NBN will knock 10% off work related travel? I’d guess that was an enormous over-estimate of the impact of the NBN. Further, to work out whether it was a worthwhile investment from a climate change perspective, you would need to calculate the cost per tonne of CO2e abated. You can’t just simply say “$43 billion is the bargain of the century” without doing some proper analysis of your assumptions.
I’d suggest that a 10% reduction in work related travel is probably conservative, at least in the medium term. Any number of studies on telework will tell you that the main restriction on actual hours of telework is from the need to socialise and interact with colleagues. The current telework experience is isolating. This is why most people who have the option only do so on a part time basis.
The big difference with high speed broadband in particular, is in in bringing the office to where you are with HD video.
As for the potential greenhouse gas savings, here is just one source that attempts to so some modelling.
http://careers.telstra.com/getdoc/e3de4091-1b38-407c-9377-8757f4e3394f/GENERAL-517569-Telstra-Telework-Summary.aspx
Labour Outsider: If households and businesses spend pretty much what they do now on internet access for access to the NBN, then you already have a decent return on investment. Once you consider the return multipliers for education, export facilitation and international competitiveness, transport demand mitigation, carbon reduction, then really the wonder is that people like you would rather spend years and millions more on viability studies, instead of building something that will clearly have a positive return on investment as quickly as possible.
Seriously: we’re talking $1500-$5000 a household for something that most households will pay at least $600-$1000p.a. ($50-80/month for internet + phone access seems pretty conservative given that most pay more now) for. For business the numbers are equally compelling. It’s already viable on that basis alone, and all the other benefits are just cream.
People who argue that we need to quantify the cream in minute detail before we proceed have missed the wood for the trees, for mine.
One of the great benefits of Howard’s cock-up of the Telstra sale is that Australians are conditioned to pay far more than they need to for telecommunications. Building a system with orders of magnitude more capacity, but the same per-user cost, is easier in Australia than anywhere else on the planet.
Firstly, thanks cud chewer for your posts and the conversation you’ve got going. Likewise Possum, another terrific post.
Labor Outsider, let’s assume that the status quo will only ever lead to poorer coverage for areas outside the capital cities (there’s no broadband cable in Newcastle for example), and speeds that are limited by the last leg in the case of cable, and intrinsically in the case of ADSL (of whatever version).
In other words the monopoly, the 800lb gorilla of Telstra is a huge impediment to ‘equal’ access, whether we are measuring that in ‘income’ terms, or geographical ones.
I’d like to think that access to the internet, (and not s*cking it up through straw, by the way), is the equivalent of any public utility because the benefits of EVERYONE having it, far outweigh the benefits of letting a monopoly squeeze the juice from the low hanging fruit, whilst letting those on the upper branches rot on the vine.
God, it sounds like socialism! Smells like socialism! Must be good! LOL
Slice it and dice it how you will, but the 21st Century will quickly separate those who do and those who don’t have access to the internet.
Argue for costings, by all means, but don’t judge it as if we’re discussing the bottom line of Telstra!
Telstra be damned! The bastard child of King Rattus deserves to die.
Did anyone see the race on Hungry Beast between Telstra ADSL, a car and a carrier pigeon to transfer a 300M movie (Duck Soup) over 135km in NSW. Needless to say, the pigeon won.
Yes, the pigeon’s win was Sol’s legacy Diogenes. They made a good point with humour, but not so funny if you actually had ADSL that awful. Also not so funny the many millions the Bandito made off with either!
Yep and all that.
It is costing me in excess of $650.00 in airfares and accommodation this week to fly to Brisbane to deliver a twenty minute powerpoit.
To say i would rather be able to do it while sitting here is a slight understatement.Bring it on.
When the new Palace de Politique was built in Canberra, much was made of the state-of-the-art teleconferencing facilities and the video suite.
Wonder if this has ever been used given the Fly Away Kevvy, Fly Away All habits of the Hawke/Keating/Howard/Rudd governments?
“I’d suggest that a 10% reduction in work related travel is probably conservative, at least in the medium term. Any number of studies on telework will tell you that the main restriction on actual hours of telework is from the need to socialise and interact with colleagues.”
I spent some time going over the videoconferencing research about four years ago for a desktop collaboration project and I couldn’t find any evidence at all to support claims about travel reductions. I recall one paper (from researchers at Sun I think) that made the point videoconferencing and collaboration software could *increase* the need for travel, as people would more quickly get to the point that a face-to-face meetings was required.
There also wasn’t any evidence to support claims that *video* was important for effective remote collaboration. That was looked at specifically in a couple of studies and there was no significant change on any measure (Meeting length, cross-talk, subjective satisfaction etc) when video was introduced to the suite of tools available.
d
Could that be more the “junket effect”? The phenomenon where conferences and meetings are just an excuse for a trip and a bit of duty free shopping?
I think there’s a huge difference between videoconferencing for meetings and video and data links for work.
As cud chewer noted, a barrier to telework is social isolation. Face to face contact is not missed so much in meetings, as it is around the watercooler. Rich social networking, including video, will do as much, or more, to promote people’s willingness to work from home as better meeting tools will.
For those for whom written communication with the outside world is sufficient (I’m one) we already have the tools to reduce the need to travel to work in ADSL. In our family we’ve reduced work travel time by 75% over the last decade. It was 100% at one point, but my wife took up some part-time work that is currently necessarily face-to-face, but which could be done mostly from home with the NBN. The 25% of travel that remains is no longer done using Sydney’s overstretched road and rail infrastructure, but on regional roads with plenty of spare capacity. We also work a few hours each week in Ireland, a country neither of us has ever set foot in, and my wife is considering whether she has time to consider a part-time work offer in the US, that would also not require her to leave home.
But I take the point about the appeal of junkets – we’re off to Vietnam next year, ostensibly to hear lectures by a famous-in-his-field US educator, even though my wife watches videos of his lectures on a regular basis at home. That said, we chose this training course because we’d been planning to visit Vietnam anyway.