The federal government proposed this week to implement an internet tax on certain types of high speed services that would compete against the National Broadband Network (NBN). The proposed tax in its current form would cost over $7 per month per service and would apply to people using certain types of NBN comparable services. Whilst the proposed tax exempts a range of different broadband options there is still a push to include high speed mobile networks like 5G mobile broadband in the scope of the tax. The government is considering this to subsidise the costs of providing the NBN to rural and regional areas which are not commercially viable. The government sees the establishment of competing services as a threat to the NBN in two ways. The first is that the loss of customers to alternate networks increases the overall cost per user for the NBN. The second is that these alternate networks are in only profitable areas and these providers currently don’t have to offset it against the costs of providing high speed internet to unprofitable areas. This allows them to have a price advantage over the NBN. By imposing this tax the government hopes to level the playing field for the NBN and raise about $40 million for the NBN to offset the costs to providing internet to regional Australia.
However, internet access is already quite expensive in Australia compared to other countries and ISPs are finding it difficult to affordably provide access to the NBN in a profitable manner because of structural problems and high access charges. Not only that but the costs are so high for consumers that the take-up of the higher speeds on the NBN has been slow and many plans involve low data limits that further reduce the advantage of being on a high-speed network. After all what is the point of having 1Gbps speeds if you hit your monthly data cap in a day?
But it isn’t just the cost to households. The costs and the speeds have impacted upon business and many tech companies for example have been moving overseas to take advantage of lower costs to compete in an international market. Imposing costs on providers who are rolling out NBN alternatives makes them less profitable and reduces the areas where there is a business case to undertake the rollout. This further increases the burden on the NBN to roll out infrastructure. Comparatively, the current system at least allows the NBN to direct potential customers to these NBN comparable networks and get people connected on faster services much sooner. In addition, businesses are not only going to have to wait longer to access high speed internet but slugging them with extra costs will only further push them in an already expensive country to look offshore for solutions taking with them jobs and talent as we already see in the drain from the tech start up sector.
If the government is committed to providing internet to regional areas with a price cap, then it should consider alternatives like finding savings in the budget elsewhere to directly fund the additional costs of the fixed wireless and satellite services. Alternatively, it should consider providing tax incentives to those regional markets to make them more viable and affordable for providers and customers instead of making the rest of the network more expensive and less competitive. Our government needs to recognise that in the digital century, we do have to compete in a global market and remaining an attractive place to invest and operate by being competitive is how we grow our economy and increase the benefits for all Australians.
Alex Cullen is an intern at The Australian Taxpayers' Alliance