Hey guys correct me if I am overstepping the "journalist" rules here but we have a really interesting letter going in CommsDay tomorrow from Ian Martin at RBS.<br><br>He is talking NBN here and says some new things I haven't heard before.<br>
<br>Key pars: <br><br><b>"</b><meta http-equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Publisher.Document"><meta name="Generator" content="Microsoft Publisher 12"><link rel="File-List" href="file:///C:%5CDOCUME%7E1%5CUser%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C03%5Cclip_filelist.xml"><style>
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</style><b><span style="" lang="en-AU">We may move to a market structure with 3 or 4 or more carriers of sufficient scale to build and operate their own network connections to 200 POIs. If so, this will be a very different market structure to that at present where only Telstra has its own infrastructure backhaul to all 5,000 exchanges and all 1,200 or so that matter economically. Indeed of the 350 or so that have contested DSLAMs no-one but Telstra has their own infrastructure backhaul to all of these. </span><span style="" lang="en-AU"><span style=""></span>However, if we do get this industry structure where 3 or 4 carriers have sufficient scale to have their own extensive core networks then margins have to go up not down, as it’s the margin that pays for the return on network investment. Those prices and margins are not directly a matter of how NBN sets its prices (maybe the Government will keep subsidising NBN's own costs indefinitely); instead they are a requirement to cover costs of the carriers' own core network and systems. Is this the right industry structure? 3 or 4 more established carriers may be better for sustainable competition and so improve allocative efficiency, but it may well push up industry cost structure compared with the current structure and so be negative for productive efficiency. So is it the right industry structure? No-one knows; no-one has examined it. (I think a marginal benefit to competition for a big increase in cost and price.)"</span></b>
<p class="MsoNormal" style=""><b><span style="" lang="en-AU"> </span></b></p>
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</style><b><span style="" lang="en-AU"><span style=""></span>For 90 years until 1990, productive efficiency was so important that the Government wouldn't let any other players into the market; so we had a structure that retarded allocative efficiency (service volumes, service range price options). Here we are 20 years later and competition and its allocative efficiency benefits are now seen as so important that the Government is prepared to retard productive efficiency through a high cost NBN, separation, forced migration and an artificial market structure to enhance its preferred form of competition.</span></b><span style="" lang="en-AU"><b><span style=""></span> That’s not a recipe for lower costs and prices except as introductory ‘sweeteners’. After that the NBN Implementation model calls for real prices increases. That is the main effect of NBN in my view, loss of productive efficiency for a small gain in allocative efficiency mean higher prices, that's after 20 years of real price decreases in fixed network services."<br>
</b><br>Anyway an "economist's" view of the NBN.... treat it for what it's worth.... </span>
<p class="MsoNormal" style=""><span style="" lang="en-AU"> </span></p>