Population distribution and telecommunication costs

This paper examines the impact of population distribution on the costs of providing local telephone service. The study was undertaken to examine the extent to which price differences in international comparisons of telecommunications costs can be attributed to differences in the distribution of population, therefore providing insights into the importance of other factors such as industry and regulatory performance. The key points in the paper are: „h 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. „h 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. „h Depending on assumptions about the cost of providing each line, average line costs in low-density areas of Australia of less than about 2 lines per square kilometre were found to be between 6 and 10 times the average cost per line in the rest of Australia. „h Similarly, low density areas are 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.