My answer in a nutshell is that both side of politics have agreed that fixed broadband is a natural monopoly, when it is demonstrably not true for most Australians.

Sure there is lots of political theatre and debate over which broadband technology is best for Australia and whether the government should invest in more fibre now (the progressives' position) or delay fibre investment as long as possible (the conservative's position). However, both sides of politics have settled into a view that a monopoly fixed broadband network is the way to go for all Australians.

No competition

If there is to be any competition in our fixed broadband market, there is agreement it should only be at the retail level where service providers compete mainly on price while accessing the same underlying national monopoly network.

This has created a distorted product and service model and lead to huge distortions in the market. Retailers are driven to cut costs and buy less bandwidth from NBN so they can compete on price and blame NBN for the bad performance.

NBN is responding like a true monopoly and just telling the retailers to buy more and pass the price on to their customers.

In Australia, with the long history of Telstra dominating the older copper and HFC networks, this national monopoly thinking is pervasive and hard to shift.

The present conservative government has bought into this monopoly thinking rather than split NBN into competing FTTx, HFC, Fixed Wireless and Satellite operating entities as was recommended by its own expert panel in 2014.


The government is now suffering the pain of owning the monopoly and the unsatisfactory customer experience that comes with it.

Attempts to blame the previous government that set up the structure of NBN are difficult to accept since the vast majority of the funding and rollout of the NBN will be under its predominantly HFC and FTTN model.

Further investment will no doubt be required to move to a deeper fibre model in the 2020s.

No natural monopoly

This is all the more the case since the current government has increased regulation to dissuade alternative private fixed broadband investment, in order to protect NBN's financial position and strengthen its monopoly, rather than let competition drive NBN Co to improve its performance.

The fact that companies like TPG are willing to invest in fixed broadband to compete with NBN highlights the fallacy of the national natural monopoly argument. But given the high regulatory hurdles being put in place on fixed broadband by politicians, Australian telcos are turning to 4G and soon 5G wireless alternatives to find ways to beat the monopoly.

This clearly highlights that in most urban areas fixed broadband is not a natural monopoly like the old telephone network used to be.

Technology has created new options for broadband deployment, wired and wireless, that will quickly break down any monopoly in many areas if the market is left to do its work.


Geographic excuse

The excuse everyone turns to for this national monopoly arrangement is Australia's geographic challenge. No private enterprise will provide services to the Australian outback because of the huge costs and low revenues.

Of course this true, but it is also true of Canada, the United States, many parts of Europe, as well as even Hong Kong where fibre deployment has not yet reached 100 per cent of households.

Subsidies are needed to make this happen – but nowhere else is this solved by hiding the necessary cross-subsidies in a national monopoly company like happens now in Australia with NBN and previously with Telstra.

Most Australians are blissfully unaware that they are paying substantially higher prices for their fixed broadband in cities in order to subsidise their outback cousins. When asked many may accept this but at the moment it is a dirty secret that the politicians would rather keep quiet about.

In most other markets these subsidies are provided direct from the government budget or other industry levies. Given the importance of telecommunications for national competitiveness, these subsidies should not rest totally on the city-based consumers. After all this is how most other subsidised infrastructure, like roads are funded.

With the right subsidy structures and incentives private enterprise can deliver broadband infrastructure more efficiently to remote areas than relying on a politicised national monopoly try and be all things to all comers.

This sorry state of affairs looks set to continue for some time. Australia's competition regulator has recently released a draft report that seems to back the status quo with some tweaks to NBN Co's pricing and forcing retailers to be more transparent with their representations to end customers.


Without a massive restructuring of the market and a substantial write-down of the government's (and taxpayers') investment in NBN Co, it is hard to see things changing for the better in Australia.

So I expect this question will keep coming up at future events I attend unless some politicians (hopefully in a bipartisan way) make some big calls to totally rethink Australia's fixed broadband market.

As they say – you broke it, you fix it!

Gary McLaren is currently Chief Technology Officer at Hong Kong Broadband Network. Previously he was the Chief Technology Officer of NBN Co from 2009 to 2014.