Do the OECD stats support the NBN?

Communications Minister Stephen Conroy has seized on figures released by the Organisation for Economic Co-operation and Development that benchmark global broadband pricing, stating that they show broadband prices are still too high in Australia.

The statistics on pricing, dated September 2010, compare the range of prices that consumers pay for broadband in OECD countries at different speeds.

This is how Australia performed:

• For connections slower than 2.5Mbps, Australia ranked 3rd most expensive behind Mexico and Chile;
• For connections between 2.5Mbps and 15Mbps, Australia ranked 3rd least expensive, just behind Greece and Austria;
• For connections between 15Mbps and 30Mbps, Australia ranked 14th most expensive of 33;
• For connections over 45Mbps, Australia ranked 12th most expensive out of 33; and
• For connections between 30Mbps and 45Mbps, Australia was not included in the statistics.

Conroy said in a statement that the latest statistics highlighted the critical need for the National Broadband Network (NBN) roll-out to "open up a genuine choice of services and drive competitive prices for consumers".

"The government expects retail prices for high speed broadband services offered on the NBN will be both affordable and very competitive for all Australians no matter where they live," he said.

"If Australia wants to remain competitive in our region as the world moves to a 21st century digital economy, then we need to act now. The NBN is about investing in the future and the Gillard Government is getting on with delivering it."

However, in a blog post this afternoon, Shadow Communications Minister Malcolm Turnbull pointed to Australian Bureau of Statistics (ABS) data that said that most Australian customers do not use high speed broadband, instead opting for speeds between 1.5 and 24Mbps — most of which falls into the lower price range. He said that those on speeds of less than 2.5Mbps should be moved onto higher connections as soon as possible but said that the NBN is not the fastest way to do this, with construction on the project not due for completion until 2020.

He said that government-owned monopolies such as the NBN will not do anything to facilitate competitive prices for broadband.

"In fact, the main reason the government has legislated against Telstra and Optus using their [hybrid-fibre coaxial] networks to compete against the NBN and other operators from 'cherry-picking' NBN customers is because it fears that facilities-based competition will deliver lower prices in the city, undermining the NBN Co's ability to charge higher prices," he said.

Indeed, the NBN may have just the opposite effect on broadband prices, Turnbull warned.

"Most concerning, however, is that the NBN will reverse a long-term trend of very rapidly falling prices," he said. "OECD statistics show that between 2005 and 2008, DSL prices in Australia fell by 45 per cent (because competitors had been kept out of Telstra's exchanges for so long, you could argue that prices were artificially high in 2005 — but nonetheless, the figures reveal what happens when competition is introduced)."

Turnbull argued that it wasn't a lack of access to high-speed internet technology that prevented many Australians from getting online but simply the ability to afford a connection to the internet.

"For all of Senator Conroy's rhetoric about eliminating the tyranny of distance, the biggest barrier to Australians taking up broadband is its cost," Turnbull said. "ABS figures show that there is a disparity in access to broadband between households in major cities and households in remote areas — 75 per cent compared to 62 per cent (the national average is 72 per cent)."

"But the disparity is much greater when household income is taken into account: 94 per cent of households earning more than $120,000 a year have access to the internet at home compared to only 43 per cent of households earning less than $40,000 have access to the internet."