Australia - Concern that the NBN may repeat mistakes made with the privatisation of Telstra

[smh] Bitter experience shows that private monopolies gouge their customers.

WHITE elephant or monumental achievement? A few experts have been buzzing this week with confident predictions of how the federal government's plan to spend $36 billion on a national broadband network will turn out. Some know it's a stinker; others are equally convinced it's a winner.

What on earth are we to make of this? Two sharply opposed camps of expert opinion, each apparently certain of the other's delusion.
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The answer is to beware of them all, because nobody - including the Gillard government and the company it has set up to build the broadband network - really knows for sure how the NBN is going to turn out, particularly as an investment for taxpayers.

The only thing we can be sure of at this time is the promised physical performance of the network.

By the mediocre standards of today's broadband - with its reliance on the old Telstra copper wire network - this new thing will be a corker, among the best in the world. More speed and capacity than you can poke a USB stick at.

But predictions about the NBN's financial viability - and, by extension, whether it is a prudent investment of a colossal, unprecedented sum of public money - are highly speculative.

Big unknowns surround the network. How many Australians will be prepared to cough up a lot more money every month for faster broadband speeds? Will new, or even existing wireless technologies pull the rug from underneath public demand for the NBN?

Be in no doubt: Communications Minister Stephen Conroy is taking an educated punt on the future, and splashing billions of our taxes to back it. Publicly he expresses confidence. Privately he should be worried.

The business plan released this week by NBN Co forecast a 7.04 per cent rate of return on investment. That's ridiculously precise for this stage in proceedings, years out from the completion of the network.

Moreover, there isn't a respectable private business in Australia that would go for an investment offering such a paltry return. Only taxpayers' money could be invested so ''courageously'', as Sir Humphrey Appleby would say.

Should we, as taxpayers, live in fear of the financial failure of the NBN? Perversely, perhaps not. If alternative predictions of a prosperous future for the network turn out to be correct, this virtually assures another, potentially more gruesome prospect: that the government will seek to cash in on the success and sell it into private hands.

As it stands, the government has left open the question of NBN's ownership, thanks partly to the Greens, who have secured a deal for a parliamentary vote before any decision to privatise the network.

But the mere fact that private ownership of the NBN is on the table is a cause for concern. Parliament has only recently passed legislation to separate Telstra's wholesale and retail arms - in effect, partially correcting the monumental error of its initial transformation from a public monopoly into a private one. Why would we do this again?

The Howard government's privatisation of Telstra will go down as one of its crowning disgraces. With three separate public share offerings, it achieved what should have been impossible: the simultaneous fleecing of millions of mum-and-dad investors (who were fooled into buying shares at inflated prices) and the gouging of millions of phone and internet customers by a private monopoly.

When Telstra's fixed-line network is eventually retired, it is envisaged that the NBN will essentially be a replacement natural monopolist, albeit as a purely wholesale supplier to the various competing retail telcos.

If it remains publicly owned, the NBN will doubtless tend to exhibit some of the sins expected of a vast government monopoly, such as inefficiency and waste. The only significant check on these failings will be the government of the day and, ultimately, the voters. It is far from a perfect option.

The alternative is potentially worse. A private NBN, being profit-driven, may well be a more efficient and lean operation than a public one. The problem is that, in the absence of competitors, the private operator - no matter how strictly regulated - will also be strongly motivated to take undue commercial advantage of its position, leaving customers to pick up the tab.

Telstra's record in this regard speaks for itself. For years it earned excessive profits by abusing its monopoly power and overcharging for fixed-line phone services, while also gouging loyal customers on mobile and internet services. It was only the arrival of new technology and aggressive alternative providers in the mobile market that finally stripped Telstra of some of its power, and forced it to accept lower prices.

The dominant pragmatic wing of the Labor Party long ago embraced the view that government ownership of business enterprises was, by and large, neither necessary nor desirable. And previous governments were right to sell off businesses such as Qantas and Commonwealth Bank, which operate in relatively competitive markets.

But the monopoly NBN will be a very different animal and, like Telstra, difficult to tame if it is sold into private hands. It has taken 13 years to partially undo the Telstra debacle. Let's not create another.

Telstra sell-off was a mess. Let's hope we've learnt for the NBN