NBN: Congestion, Telecommuting and Productivity

Last week, I took a virtual slide rule to the potential REVENUE earnings of the forthcoming National Broadband Network (NBN), and came up with some rather surprising numbers. I didn’t even need convincing, but the numbers even surprised me and I’ve been working in the industry for 15 years.

Obviously I was unable to factor in costs – (as I doubt NBN Co themselves understand the cost model completely yet, so I have NO hope) – but any company with such potential for revenue earnings – whether they be public or government enterprises – should be able to deliver value against those earnings. The numbers are potentially VERY big, and NBN Co is certainly not run by any old bozos.

These are people who have built and operated large, successful telecommunications companies in the past.

Another NBN “win” is the potential benefits the network will be able to bring to the rest of the economy. Detractors say it is all “hairy fairy”, and replete with “ifs” and “buts”, but the mere existence of the NBN will bring massive flow on effects to the rest of the economy.

Take a look at this report from the Bureau of Infrastructure, Transport and Regional Economics (BTRE), as part of the federal Department of Infrastructure and Transport, in respect to the costs to the Australian economy in terms lost productivity and potential GDP, simply because people are stuck in traffic staring at someone else’s number plate. That is, congestion on our roads during our daily commute.

“BTRE base case projections have these social costs of congestion rising strongly, to an estimated $20.4 billion by 2020. The city specific levels rise from $3.5 billion (2005) to $7.8 billion (2020) for Sydney, $3.0 billion to $6.1 billion for Melbourne, $1.2 billion to $3.0 billion for Brisbane, $0.9 billion to $2.1 billion for Perth, $0.6 billion to $1.1 billion for Adelaide, $0.11 billion to $0.2 billion for Canberra, about $50 million to $70 million for Hobart, and $18 million to $35 million for Darwin.”

By 2020 – (about the time the network is likely to be completed) – the annual cost to the Australian economy simply because people are stuck on the roads getting to and from work, is projected to be $20.4 billion dollars.

Every year.

If the very existence of the NBN provides the stimulus to entice even only 10% of workers to telecommute – that is, work from home using the bandwidth the NBN will provide to make doing so particularly viable – that is reducing that congestion by 10%, and therefore saving the Australian economy $2 billion EVERY SINGLE YEAR once the network is completed.

Against a build cost of up to $43 billion dollars, with large potential revenues, and potential savings in the order of billions of dollars just by reducing congestion on the roads by even small amounts, that’s a compelling outcome.

There are potentially savings of similar magnitude right across the Australian economy – this has been only one single example. To me – yet again – the NBN still continues to stack up against the numbers.

  • Anonymous

    I ‘work’ fromm home already,internet banking,etc.Saves on Petrol in car.

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  • You can’t just factor in the cost of lost productivity due to the commuter being stuck in traffic! What about the cost to the economy when the employee starts working from home, eg. if the employee usually works in the CBD, working in a traditional office, and the job turns into telecommuting, they now no longer generate business in that CBD community in all sorts of areas: commercial realestate; commercial cleaning; commercial fixtures, fittings; furniture; commercial supplies; utilities; parking, vehicle fuel & expenses, or public transport; lunch bar and coffee shop products; clothing / office attire; etc. etc. What cost to the CBD businesses supplying these products if they lose 10% of their market? Someone’s job probably!

    • I absolutely take your point, but you have to look at the benefits a little more holistically.

      Firstly, “telecommuting” does not necessarily mean “working from home”. There are already moves by many government and councils to establish “activity districts”. Moving people’s place of work away from the CBDs and into suburban and regional/rural areas.

      Instead of having to build new freeways (expensive) or upgrade existing ones (expensive) to funnel more and more people into the centre of our cities, people are encouraged to work closer to their homes, further taking the burden off our overcrowded road and public transport infrastructures.

      The suppliers to these CBD businesses aren’t going to lost 10% of their market. That same 10% of their market may simply be in a different part of the city.

      Yes, this will effect the economies of CBDs, but those economies will shift into these other areas. The “lunch bar and coffee shop products” need to go where the people are, and if the people move, as will they.

      The Harbour Tunnel in Sydney was built to alleviate congestion on the Sydney Harbour Bridge. Twenty years later, bridge traffic has returned to almost the same numbers as before the tunnel was opened, and the tunnel is carrying even more cars into the Sydney CBD. The actual number of cars (congestion) arriving in the Sydney CBD has increased, all because $1 billion was spent building a tunnel to get it there just a little quicker. Not a very sensible application of $1 billion dollars, is it?

      Governments spend billions of dollars developing infrastructure to jam more and more people into the centre of the cities, and this is unsustainable.

      The better solution is to promote a macro-economic change that takes the massive pressures off of the CBDs and gets people working closer to their homes. The NBN will be critical to this, because decent telecommunications infrastructue – (which we do not have today) – is the foundation stone for getting that right.

      People would be doing it now if the communications technology could deliver it.

      Getting people off the roads delivers a massive boost to environmental pressures, just through the related reduction in carbon emissions alone.

      Work closer to home, and you get more time at home with your family and friends, which improves general health and well-being, taking pressure off health services.

      This is not just about the NBN – it is about changing the way the whole economy functions – and the NBN is an important piece of the puzzle.

  • Anonymous

    The Centrelink office near my house in Belgrave (on Mt Dandenong, outer east Melbourne) mainly contains staff who work ‘in’ the national office in Canberra. They sit in Belgrave, but work for the Canberra office. They keep the Belgrave cafes and shops going during the week, instead of overloading the Tuggeranong offices and putting even more pressure on the overpriced Canberra housing market.

    Looks like a win for everyone to me.

  • Anonymous

    Working from home isn’t going to magically happen because of the NBN. I can do my job from home right now but my employer (a major technology company) has mandated a policy that everyone must work in the office, ironically at the same time it is a job requirement I have high speed broadband at home.

    The NBN won’t change this situation, the only change will be I may have 100Mbit instead of ~20Mbit. Even in countries that do have FTTH/FTTP this policy prevails.

    The NBN is not a cure all or magic pill. It is just getting the various levels of Internet access in Australia on an even footing, which is long overdue.

    • You are right that many companies have a policy of having everyone work in the office. The NBN is also not a “cure all” as you put it, but it will be one of the cornerstone economic reforms that starts a shift away from such a restrictive policy.

      If we stop the ludicrous spending on freeways to get more and more people into the same amount of space in the cities, there are obvious productivity benefits, and the spending on NEW road infrastructure can be minimised, reducing carbon emissions.

      Imagine that – reducing carbon emissions by spending less money!

      The NBN is not the cure all in and of itself – it is a shift that will drive other areas of the economy in different and more prosperous directions.

      You have 20Mbps? Awesome…you’re lucky, because the average Australian broadband connection is still less than 1.5Mbps. My copper phone and therefore ADSL internet drops out if it rains heavily, because of the poor infrastructure – and I am in a major city!

      • Anonymous

        As mentioned the broadband speed/infrastructure is not the limiter here, and that is not the reasoning for the policy. This policy exists for various reasons, none are due to lack of technology. As pointed out this is a global company and the policy is the same in Japan which from memory has the fastest broadband. Also remember everyone has different job needs, some people prefer working in an office and find it more productive or value the face to face interactions, some people simply cannot do their job remotely. So the NBN won’t change this stance.

        I agree spending lots of money on freeways to get everyone into one place is not worthwhile, but there are other solutions and businesses are already starting to realize that and slowly moving outside the city. However spending money on transport infrastructure (road/rail) is beneficial for other reasons than getting everyone into one spot for work.

        With speeds, yes 20Mbit is great, but using it is another matter, those speeds are only useful for large multi-thread downloads, none of which are work related. I think you’re point about stability is much more valid, reliability and acceptable speed are the big sell points of NBN. But these are only minor points in considering work from home and quite often corporate infrastructure is the limit here. I certainly don’t get 20Mbit over VPN to work and dropouts occur more frequently on the various VPN methods I’ve used than either ADSL or Cable

        Just because home Internet is more reliable and faster doesn’t mean that all the other reasons for road infrastructure and working in an office (or on the road) disappear. It may encourage more workplaces to be flexible with employees eg 1-2 days wfh per week, but if it’s not an option now I wouldn’t expect the NBN to change it (the latter is an option for me now if I have a reason).

        • The key difference is upload speeds.If you’re on ADSL (any flavour) you’re limited to 1Mbps. On HFC cable, the most you’re getting in Australia is 2Mbps. 20Mbps down is fine for 1 or 2 people, doing not a lot – however, if you are working at home with 20Mbps down, you are not getting LAN speeds. Modern corporate LANs are 1000Mbps – you lose a lot more time downloading a huge file from the office to work on at home at 20Mbps than you do at 1000Mbps.If a file takes 5 minutes to arrive at 20Mbps, and it takes 1 minute to arrive at 100Mbps, that is a big difference. Add up all those 4 minute chunks over the course of a year, and that’s a lot of lost productivity.

          If you’re saving the file back to the corporate LAN at 1Mbps, it takes 20 times longer – or 100 minutes. That’s 100 minutes that someone else waiting for the file at the other end has to wait for your computer to finish saving it, before they can access it.

          • Anonymous

            I think you’ve missed the larger point. Technology is not the barrier here … my employer is fine with the existing broadband for doing work, as am I, but they want me in the office with my team as they believe that is far more beneficial to them in the long run and will ultimately save on costs. That being the case the NBN will not change this situation, if I got NBN tomorrow I’d still be going into the office.

            The speed and ease of access to the Internet via the NBN will be great, but saying you can work from home because you have this access means you conveniently forget what people do for a living, why they use a computer at work, how they interact with others and the ability for both the company and the individual being able to support that arrangement (non-technology aspects like workplace safety)

            Internet access and speed is just one of the many items to cross off the list for working from home.

          • I never said you “can’t work from home right now”…it will become more feasible for more people, for the technical reasons I’ve outlined.The technology might not be a barrier for you and what your company does, but it is for many.Some companies will always insist that all workers work in the office – and that’s fair enough – but that doesn’t mean that model is for everyone. It is old thinking, it is expensive thinking. Office space is a premium expense, and if it can be minimised by having everyone work at home for a couple of days a week, and then share “hot desks” in the office the other three days, the economy becomes more productive.I know exactly what you’re saying, but just because something has always been done a certain way, doesn’t mean it has to always be that way.More and more, companies will find efficiencies that change the model – and the NBN will generate many of those new efficiencies.For you – you get 20Mbps – you are in a massive minority.

          • Anonymous

            actually 5 years ago doing as you described was much more common place where I am, only recently was it changed, in fact we’ve had the hotdesk concept for a long time (90s I think). So where I am we have “been there done that”, and it’s possible the new way does work better (time will tell).

            I think working from home 1-2 day a week is good for all involved, but there is value in having people work together in an office that is lost if working from home constantly, I think that is just the social nature of human beings.

            Is NBN the catalyst to changing more corporates to doing what was done in the 90s by a few ? maybe, time will tell

            20Mbit may be a minorty (5% probably), but I think 1.5Mbit is too, I think you’ll find of the population with broadband Internet the average is closer to 8Mbit, that is the number I’ve seen tossed around lately.

            btw, don’t get me wrong, I think the access of the NBN is 90%+ of australia at 100Mbit is fantastic and I can’t wait to use a cloud-based backup reliably, and I think it will present new business opportunities to Australians. I just take a conservative view on the level of change it might bring, for example the advent of the telephone didn’t end face to face meetings and today you still can’t get blood test results over the phone from a doctor.

            anyway I’ll leave it at this, time will ultimately tell

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