So why doesn’t the Abbott government (in argument that it would save tax payers money) to cut funding to ABC and let it sink or swim on it’s own.
In the 21st century people have access to a free and open web when no local station is available anyway.
It works for USA to not have a national news station (baring NPR/PBS which are mostly private these days anyway..), why can’t competition and free-markets work for Australia in mass media??
A couple of reasons. First of all, it's politically impossible. The ABC is an absolutely beloved institution in Australia. Making even tiny cuts to it is political suicide. Even people like myself who don't like it's news coverage, like a lot of what it does in terms of its coverage of the arts, and culture, of educational programs. My car radio is tuned to ABC Classical, and the radio in my bedroom is tuned to ABC's Radio National. Out of our free to air TV networks, I probably watch more ABC television than any of the other broadcast channels because it shows most of the dramas and comedies I want, and which the commercial stations often won't touch. Maybe if the ABC wasn't there, something commercial would form to replace it, but that isn't guaranteed and would take a long time anyway.
Secondly, there are some essential services that the ABC provides brilliantly. During natural disasters, especially bushfires, the ABC can keep people alive. Part of the reason the ABC developed is because we're such a large spread out country.
But the big problem is political - a government that shut down the ABC would be committing political suicide. As the bias gets more and more blatant and obvious, that might eventually change - but it hasn't changed yet.