How much should we prop up the remote regions?

Australia has a long history of propping up the economies of the remote regions. You get tax breaks for living in remote areas, telecommunications providers are forced to provide phone services and we subsidise connecting them to the Internet. Australians have an emotional connection to the bush, despite the fact that most of us don't live there and a large proportion have never even been anywhere particularly remote.

I've been thinking about this recently after the new government's tender for a Fibre To The Node network stipulates that 98 percent of the population should have 12 megabit broadband. 12 megs is a pretty fat pipe, and you've got to wonder why they set the bar there -- was it based on any cost/benefit analysis or did they just pluck a number from the air? And where does 98% come from? What kind of density are those last few percent spread over?

What I've been considering is how much it makes economic sense to prop up all these places, and does it distort rational market incentives? For example, Australia has enormous farms in quite marginal land. Perhaps the best outcome would be to not farm these areas, given their fragility and the marginality of the business?

As another example, I once visited a family friend's enormous farm in South-West Queensland. Very dry, dusty land with a couple of sheep per square kilometre. The farmer had a main house on one side of the property and another small house on the other side of the property that was used only a couple of weeks a year. At the time, Telecom was forced to supply phone service to these remote areas at a maximum cost of $5,000 for installation. The microwave links to provision these services would have cost quite a few orders of magnitude more to supply. Because of this perverse incentive, the farmer had a phone installed at the little-used house, where previously they'd kept in contact with the main house via HF radio. So the taxpayer bore the cost of installing all this, when in reality it wasn't particularly needed.

The same idea comes in with this broadband subsidy. Now I'm sure every farmer out there would love to have metro-equivalent broadband, the ability to watch YouTube and the like. But do they really need it? I'm struggling to think of any business-essential application that would require the bandwidth and low-latency of broadband.

Telemetry from sensors would use very minimal bandwidth, and isn't all that latency-prone, so would be much more cost-effectively carried by other means. Access to weather reports and commodity prices isn't exactly high-bandwidth stuff: a 56k modem would do fine. Even having webcams strewn around a property so the farmer can keep an eye on things when away isn't going to use enormous bandwidth.

So what pressing issue requires a subsidy for this? It seems rather extravagent. The political sums don't add up either. These regions are almost all National voters, and would never elect Labor (despite the agrarian socialist Nats having more in common with the ALP than the reactionary, conservative Libs).

I've long argued that we should stop subsidising farming anything like as lavishly as we do. Farmers are business people like all others, so why do they qualify for such extravagent treatment, apart from some weird sentimentality?