Population Distribution and Telecommunication Costs

A staff research paper by Peter Cribbett on Population Distribution and Telecommunication Costs examines the impact of population distribution on the costs of providing local telephone service.

The study finds that the average cost of providing local telephone service is increased in Australia, because it has a relatively large proportion of its population (and hence lines) in areas with low population densities.

Depending on assumptions made about the cost of providing each line, average line costs in low-density areas of Australia of less than about two lines per square kilometre were found to be between six and ten times the average cost per line in the rest of Australia.

Similarly, low-density areas were estimated to account for some 25 per cent of the total cost of providing local telephone service, despite having only about 5 per cent of the total number of lines. This compares with a 10 per cent cost share for the equivalent low-density areas in Washington State and 5 per cent for those areas in California.

Previous benchmarking by the Commission indicated that Finland has lower prices than Australia. This new study suggests that this is not the result of cost advantages due to a more favourable population distribution.

This work is in support of the Commission's ongoing program of benchmarking the performance of Australia's economic infrastructure. It follows on from two international benchmarking studies of telecommunications prices.