In order to fulfil its 2007 election promise concerning the provision of fast broadband to almost all Australians, the Federal Government has decided to abandon the relatively modest $4.7bn partnership with private industry in favour of veritable budget monster – the recently announced $43bn ‘fibre-to-the-home’ (FTTH) network.

While this programme has been compared favourably to the nation building Snowy Hydro Scheme of the 1950s, in my view it runs the risk of becoming an obscenely expensive white elephant, the cost of which will be borne by taxpayers for generations.

Most of us would agree that fast and reliable broadband is a good thing. With it we communicate cheaply over long distances, access news and information from around the world, entertain ourselves and so on. We know this because most of us already possess broadband in our homes and workplaces via a variety of existing technologies – ADSL, cable and wireless, to name but a few. Yet anyone who’s travelled to countries like Japan, South Korea and the USA also knows that Australia’s broadband is nowhere near the fastest in the world. And it is this argument the Federal Government uses to justify spending unprecedented sums of public money on the proposed FTTH network.

What the proponents of fast broadband forget about Australia is that unlike the other countries mentioned above, it has relatively few people spread out over enormous (in some cases) distances. Indeed it is for this reason that the Government’s earlier aim of building a broadband network of at least 12mbps to 98% of the population has now been cut back to an admittedly faster network, but now reaching just 90% of Australians. Lack of population density makes network costs higher than average, a fact well known to Australia Post executives who must charge the same for a letter delivered within the Melbourne metropolitan area as one destined for the remote Northwest WA.

Wide open spaces aside, another argument against the FTTH proposal is that the earlier and more modest $4.7bn fibre-to-the-node (FTTN) project was abandoned because of a lack of funding available to the private sector participants. The fact the non-government sector couldn’t raise approximately $5bn for their half of the FTTN tender makes a mockery of the Government’s assertion that half the $43bn cost of FTTH will come from the same cash strapped private companies.

Finally, those in favour of the wonders that will flow from a $43bn FTTH network need to remember that right now, the entire worth of Telstra is just $47bn. So instead of attempting to build something that will compete against the once publicly owned incumbent, a financially wiser course of action would be for the Telstra 1, 2 and 3 share sales to be reversed via a Government backed takeover – at a time when equity markets remain weak and asset prices are therefore cheap.