It’s been anything but smooth sailing for Australia’s National Broadband Network (NBN) but like the great ocean liners of years gone by, the A$43 billion behemoth keeps steaming forward through all weathers. It has managed to survive vigorous opposition from existing network operators and political attempts to steer it off course and was almost sunk by a recent election where it played a pivotal role in garnering the support of independents that floated the government through.

Now it is attracting the attention of external parties, no less than the Organization for Economic Co-Operation and Development (OECD) which felt obliged to comment on Australia’s attempt to navigate towards the equivalent of the communications space age. It started by praising the government’s efforts stating that the project holds the promise of delivering potentially large benefits. Good infrastructure facilitates trade, bolsters market integration and competition, fosters the dissemination of ideas and innovations and enhances access to resources and public services. These benefits are particularly important for Australia because of its size, the geographical dispersion of its population and production centres, and its remoteness from other markets.

But that’s where the praise ended. The report went on to highlight many concerns including part of the plan to shut down the existing copper network and the country’s main cable network. While establishing a monopoly in this way would protect the viability of the government’s investment, it may not be optimal for cost efficiency and innovation. It went on to say that empirical studies have stressed the value of competition between technological platforms for the dissemination of broadband service.

Nevertheless, Australia has an important infrastructure deficit. This is in part due to underinvestment in the 1980s and 1990s, while the rebound in capital spending at the beginning of the 2000s has been insufficient to deal with capacity shortages exacerbated by the strong demand generated by the mining boom, expected population growth, technological progress and environmental concerns.

To ease these shortages, the authorities have put bolstering infrastructure to the top of their economic policy agenda. This entails greater government expenditure in this area, but also structural reforms to optimize public and private investment choices and the use of existing facilities with better regulation.

For consumers anything would have to better than the existing market dynamics. Australian operators appear hellbent on maintaining some of the highest priced broadband connections in the Asia region citing low population and high infrastructure costs as the reason for the high prices. The common platform and wholesale price structure promised by the NBN will certainly push competition, lower prices and provide a better range of retail services, but for how long.

If the age old monopoly model follows we should see ’boutique’ networks rolling out in due course targeting specific market sectors or regions, most likely wireless, last mile connections. That will surely including the usual howling that regulators are protecting the incumbent NBN. It will interesting to see how long the ship keeps afloat and avoids the breakers yard.