Low on speed, high on cost – July 18, 2007

It’s official: Australia has one of the slowest broadband speeds in the developed world.

The OECD’s most recent survey – Oct 2006 – ranked Australia lower than Turkey and Greece, and barely higher than the Slovak Republic for Internet access speeds. But perhaps more insulting to Aussie wallets is that its telephone services are also among the most expensive.

To be fair, broadband services have evolved since the OECD survey: Many Australian ISPs have have rolled out ADSL2 and ADSL2+ in urban centres. This has brought the theoretical maximum speed from Telstra and many of its competitors up to 24 megabits per second (downlink). But in reality, the average user never sees anything close to 24 Mbps. As an example, my usable download speed is ~3.5 Mbps.

Sure, much higher speeds are available in certain countries (think Japan and South Korea, where fiber-to-the-home is deployed quite economically). But I don’t think the post-October broadband experience in Australia is much different from those of most developed markets in North America or Europe.

Let’s set speed aside for a moment. The OECD report also covered the costs of telecom services, and found that Aussie bills for phone and internet costs are the highest third in the world. A fixed-line phone for a home business costs $950 a year, whereas the same service is available for $300 in the US. That’s an incredible difference! My residential bill for Internet is $69 a month ($828 per year) … and because DSL service over a dry loop isn’t offered, Optus tacks on another $29 $(348) for the landline. Argh!

2007 is expected to be an election year in Australia, so you can be sure the politicians have had something to say about the OECD review: Labour party telecom spokesman Stephen Conroy said, “Small businesses are being held back from developing, exporting and innovating because of the high costs they face in Australia.” A representative of federal communications minister Helen Coonan added that Australia’s vast distances and low population density created “challenges.” I agree that such conditions may be challenging, but 93% of Aussies live in urban areas – that’s the third highest percentage in the OECD!!

Happily for me, competition is prevalent in Australia’s capital cities and urban/suburban markets, so network performance is decent and the cost is lower than it might be otherwise. But choice of service provider is not so hot in the bush, assuming service is available at all. Hopefully the Howard government’s recent selection of OPEL (a joint venture formed by Optus and Elders) to establish wireless broadband services in rural areas will get going quickly. [ I have a beef with OPEL’s rumoured choice of WiMAX 802.16d wireless technology, but we’ll save that rant for another day! ]

The Australian economy is doing well — very well. The Aussie dollar is quite strong against its US counterpart, sitting around 87-88 cents, and national unemployment is quite low. Tuesday’s newspaper reported that used car prices could fall by 20% because of the hot market for new vehicles.

Could all this mean there is currently too much money to spend on cars, telephone and internet services — and that no one cares about crazy telecom prices?