Broadband flimflam

Kevin Rudd, Australia's FTTH-mad prime minister

Two items of news from the broadband sector caught my attention this week. The first – and, unsurprisingly, the most widely reported – was the announcement by Australia’s government of a plan to spend a budget-busting A$43bn on the construction of a near-nationwide fibre-to-the home (FTTH) network over the next eight years. The second – missed by some leading newswires – was the detail that 550,000 homes are now served by FTTH networks in France, and yet just 170,000 have taken up the service.

The question that links the two is obvious: what is the point of spending so much on a high-speed network if few people will pay for a high-speed service? Whether the funding comes from the private sector, as in France, or mainly from the public purse, as planned in Australia, observers have every right to question the economic and commercial logic of such investments.

France’s operators could argue that it’s early days for FTTH, and caution against jumping to gloomy conclusions based on take-up so far. But these subscriber figures are pretty worrying. At least one of France’s operators is trying to attract customers to FTTH by offering it at the same price as DSL, a copper-based broadband technology. But France Telecom – which has made the greatest progress in FTTH rollout – is charging more. The early indication is that many customers are not prepared to pay.

For some, this is missing the point. Fibre is a lot more resilient than copper, they say, and will be able to support services in the future we can’t even imagine today. It will also be much cheaper to operate and maintain than older infrastructure. But Australia’s government is justifying its FTTH plan on the basis that it will be an important stimulus to the economy, just as the railways of Britain were back in the nineteenth century.

It’s this latter point I find really troubling. While so much investment gets channelled into the FTTH infrastructure that customers seem unwilling to pay for, there is little sign of the economy-boosting services that FTTH will support. In fact, there is nothing to stop services that sound important, like e-medicine and e-education, from being delivered using DSL, and yet they have not received anything like as much government attention as FTTH. No doubt, ecommerce has taken off in heavily penetrated broadband markets like the UK and Germany. But what type of ecommerce could FTTH support that DSL can’t?

As for teleworking, that, too, can be done by most people quite satisfactorily using DSL. The barriers that have prevented it from becoming more widespread are cultural – not technological.

Indeed, strip away all flimflam from FTTH, and about all it can do that existing infrastructure can’t is provide a multi-channel high-definition TV service – something that is available to lots of customers already over various forms of broadcasting technology.

No doubt, the nineteenth-century railway builders also had their detractors. But their supporters must have been able to rely on much bolder arguments. After all, the railways were providing a transport system where none had existed beforehand. All FTTH seems to be doing is adding an expensive layer of polish to the track.