Should the Australian Government Own NBN Co - Case Study Example

Should the Australian Government own NBN Co Student’s Surname Institutional Affiliation Should the Australian Government own NBN Co The National Broadband Network (NBN Co) is an exclusively held Commonwealth Government Business Enterprise (GBE) established in 2009 to design, develop, and manage Australia’s National Broadband Network. The company was established with connecting all Australian households with high-speed broadband internet with 93% being connected to fiber to the home network (FTTH) and 7% being connected to broadband satellite and wireless networks (Given, 2010). Nonetheless, NBN Co is a fixed wholesaler and is not allowed to retail the broadband network meaning it’s exclusively a wholesaler in the broadband market. The Australian Government should own NBN Co because they are undertaking the role of a wholesaler meaning that they do not control the market entirely and based on a national infrastructure model it will offer long-term solutions in the ever-changing technology sector. Being the most costly public infrastructure project in Australian history, NBN should entirely be owned by the government. This is because it has been developed through a model that involves public representatives meaning that it will offer greater value to consumers as a public project. Moreover, the telecommunications industry has witnessed increased changes in Australian history. The government dominated the telecommunications industry in the 20th century. However, as technology advanced and demand for internet and broadband increased, the government allowed for private investors. Nonetheless, the entry of private sector players has led to increased monopoly and lack of competition in telecommunications market. Moreover, current private players have not managed to meet the demand for high-speed broadband to all Australians. The current largest national broadband infrastructure was owned by Telstra before NBN acquired the infrastructure. Even with such an infrastructure, the demand for internet has not yet been met. The main justification as to why the Australian Government should own NBN is based on ability to develop value in the long term. Unlike private companies, the government owned enterprise GBE uses public money to increase service quality and delivery for its citizens. In return, the main aim of NBN is to enhance the social returns or welfare of Australian in relation to telecommunications for both citizens and government services. According to Williams (2010), the effect on economic development of investment in telecommunications infrastructure seems to be comparatively strong. To enable the Australian population to enjoy telecommunication services and technology, a telecommunications network is needed. Unlike government owned business, private businesses have shareholders who expect the company to make profits in their transactions. This means that if NBN is privatized it would remove the wholesale-only policy because it may not be the effective strategy to make profits and meets shareholder objectives. According to Venture Consulting (2011), NBN is operating under objectives from the government that would never be pursued by privately-owned businesses. Moreover, current private telecommunication players lack the vision and resources to expand and improve Australia broadband network. According to Gans & King (2010, p. 181), Australia is ranked 16th in terms of broadband investment, speed, and penetration by the OECD. BBB continue to argue that this low ranking can be attributed to monopoly by Telstra in broadband service provision with about an 80% market share. Therefore, the government is well placed to own and control NBN Co based on the availability of resources and the overall objective of enhancing broadband access nationwide. Based on the initial plan of NBN, the company expects to generate cash flows from revenues collected through wholesale of FTTH that will be uniformly charged country-wide. These predictions do not have a precise cost-benefit analysis, but the latter illustrates higher gains in the long-term. Moreover, the company had already expected to start slowly in terms of deployment and revenue generation. By last year, the company had spent $7.3 billion and connected 260,000 residents (Hutchinson & Ramli, 2013). Although the company fell short of its initial target to connect about 300,000 homes, the company is still a milestone ahead (Hutchinson & Ramli, 2013). This is because those 260,000 homes are connected to next generation high speed broadband. Moreover, this has enhanced the public sector service delivery in the education, health, social, and transport sectors with high speed connectivity. Currently, NBN has completed constructions of fiber passing about 1.2 million premises and already have over 500,000 active connections (Adhikari, 2015). Additionally, NBN developed their roll-out plan that is expected to ensure that 100% of Australian households are connected to broadband (Adhikari, 2015). Moreover, the already clear evidence has seen that existing players in the broadband market are still transitioning their customers in areas that have already been connected. In the near future, the company will be able to cover more and more households, businesses, and government agencies. This will enable a new accomplishment of a single broadband infrastructure that will increase the country’s broadband penetration, speed, and investment. The current achievement by NBN as a government-owned business in just about 4 years outweighs what could be achieved if it was a private-sector project. Although the current plan has not exactly gone as planned, it is still in course and well justified. NBN as a government owned enterprise has already attracted increased criticism. Venture Consulting (2011, p. 24), states that “There is no escaping the fact that we are returning to a model of a wholly government owned carrier that is unlisted and therefore has no corporate disclosure obligations, but which will have major economic implications for the government of the day.” The economic implications of the government are in terms of ability to pay debt as well as meet their financial obligations. NBN had initially predicted increased revenue losses based on its roll-out capacity (Gerrand, 2012). This has been sighted by most critics as the number one failure of the company. Nonetheless, it is still too early to evaluate the performance of the company without a comprehensive analysis. NBN has been accused of increased mismanagement, which is a key weakness for government owned enterprises. The company has been alleged to increase its staff, increased disunity in teams, and increased mismanagement (Hutchinson & Ramli, 2013). This is a common feature even in private owned businesses, but this does not offer any justification for the whole project. As it stands, NBN has not been caught on the wrong or been proved to illustrate massive mismanagement. Additionally, NBN may not be obligated to corporate disclosures, but it has to report to its shareholders who are ministers (Li, 2012). Despite the presence of political influence, the ability the telecommunications minister to oversight is effective in ensuring that issues of mismanagement or abuse of office do not occur. Moreover, NBN is also controlled partly by the coalition government meaning that oversight is no issue. Overall, NBN is not unlike the historic government owned enterprises based on its sole purpose as well as structure. It offers increased room for success especially in the long-term when it is government-owned than when it is privately-owned. Another major point to make is that NBN offers a different approach to its project based on the wholesale-only policy unlike other countries that develop government-owned networks such as the U.S. According to Furh (2012), the U.S 2008 project to develop government-owned networks has failed increasingly by killing competition and creating counterintuitive situations for broadband solutions. Countries such as Korea have invested billions in upgrading to next generation networks through government funding as part of national broadband improvements. The same case applies to NBN since it aims at developing a national infrastructure rather a nationally controlled network owned by the government. This even opens up competition to many businesses by creating new opportunities while reducing the power of dominant players in the market. The national broadband network is developed in a manner that it meets the capacity of leading technologies already available. Although the technology integration perspective is still unclear, there is no doubt on the capacity behind NBN’s ambitious project. Numerous telecommunication services can effectively be integrated into the network including FTA, pay TV, streaming of high definition video, VoIP, and mobile technologies (Gerrand, 2012). The potential to which such a network can offer are massive, but only a government-owned company can access the permission, resources, and capability to develop such a network. In conclusion, NBN should entirely be owned by the government. This is because it has been developed through a model that involves public representatives meaning that it will offer greater value to consumers as a public project. NBN has no shareholder or corporate obligations, thus its project will result in sustainable development of the communications industry. As a government enterprise, the company should seek profits, but enhancing the social well-being of Australians through high quality, fast, and affordable telecommunication networks. References Adhikari, S., (2015). NBN Co rolls out ambitious construction roadmap. Retrieved from http://www.businessspectator.com.au/news/2015/10/16/technology/nbn-co-rolls-out-ambitious-construction-roadmap Eisenach, J., (2014). Australia’s failed experiment in government-owned broadband. Retrieved from https://www.aei.org/publication/australias-failed-experiment-in-government-owned-broadband/print/ Furh, J.P., (2012). The Hidden Problems with Government-Owned Networks. Retrieved from https://www.coalitionfortheneweconomy.org/wp-content/uploads/2012/01/1-6-12-Coalition-for-a-New-Economy-White-Paper.pdf Gans, J. S., & King, S. P. (2010). ‘Big Bang’ Telecommunications Reform. Australian Economic Review, 43(2), 179-186. Gerrand, P. (2012). Implications of national broadband for Australia contrasting the current government and opposition broadband policies. AQ - Australian Quarterly, 83(1), 20. Given, J. (2010). Take your partners: Public private interplay in Australian and New Zealand plans for next generation broadband. Telecommunications Policy, 34(Public-private interplay in next generation communications), 540-549. Hutchinson, J. & Ramli, D., (2013). What went wrong with the NBN. Retrieved from http://www.afr.com/technology/what-went-wrong-with-the-nbn-20130920-j0dng Li, G. (2012). The return of public investment in telecommunications: Assessing the early challenges of the national broadband network policy in Australia. Computer Law And Security Review: The International Journal Of Technology And Practice, 28220-230. Venture Consulting, 2011. The impact of the Australian National Broadband Network on the Communications Sector A forensic view. Retrieved from http://www.ventureconsulting.com/assets/NBN-A-forensic-view2.pdf Williams, R. (2010). Telecommunications and Economic Activity. Australian Economic Review, 43(2), 176-178. Read More