The Federal Government’s new $43 billion National Broadband Network promises to deliver Australians far more than fast movie downloads, writes telecommunications analyst Paul Budde.
The government’s plan sees us skipping the halfway house of so called ‘fibre to the node’, which would have seen street cabinets being installed around the country. The government will now bring the fibre network straight to people’s homes.
This is the most ambitious infrastructure ever undertaken in Australia and will be the most ambitious Fibre to the Home (FttH) network anywhere undertaken in the world.
The Australian Government is one of the few governments who, in a holistic way, understand the importance of broadband across the various sectors. This network is not just for high-speed internet and entertainment but, more importantly, for healthcare, education, smart grids, etc.
The $43 billion also clearly indicates that the investment will go well beyond internet and broadband and that the government understands the need to use it for the digital economy. This will set Australia up as potentially one of the international leaders here. This government understands the trans-sector approach that is needed to stimulate the digital economy. The nature of the investment further highlights that this is an open network and the infrastructure will be made available on a wholesale level. This makes it possible to deliver that infrastructure on a utilities’ basis which, of course, is going to make access to the network very affordable to the end users.
While the concepts are right – high quality broadband and an open access infrastructure – at the same time, such a massive project requires planning and design that is going to take time. The government had foreshadowed two quick wins:
- The first project will start in Tasmania perhaps even within the next few weeks.
- The government has indicated it will also immediately start work on the backbone network. This has been discussed for many years and indeed work can start on this rather quickly.
But the big work will require replacing the copper cables that are going into people’s homes by fibre. Examples from around the world have indicated that it is very difficult to build a business plan around this, just based on internet access – you simply will not be able to generate enough revenue from such services to warrant such an investment.
The government is taking the sting out of this by basically guaranteeing the investment money for the project and also indicating the use of the infrastructure for other sectors (healthcare, etc). What this means is that, for example, healthcare can independently provide e-health services to all Australians over the network, without these people needing to have a paid subscription. Media companies could do the same if for example they want to finance their applications through advertising. So there won’t be a gatekeeper involved who clips the ticket of everything that is happening over the network.
The accompanying regulatory documentation doesn’t give Telstra any room to manoeuvre. The company can, of course, participate, but based on the rules of the government and not based on the monopolistic structure of its current vertical integrated service offerings. Most current players in the industry have already indicated that they have no problems with this concept, so there is a good chance that some, if not all, of the players, involved in the tender become partners in the National Broadband Corporation.
Open network = innovation and affordability
The open network approach makes it possible to offer the basic infrastructure on a utility basis to content and service providers, and this paves the way for the development of the digital economy. In this way the FttH investment will deliver an economic multiplier effect that will benefit the healthcare, education, energy and environment sectors as well as the digital media and internet providers.
These content and service organisations can now independently develop their own products and services without being controlled by a gateway-keeping and ticket-clipping, vertically-integrated telco.
The structurally separated model of the FttH plan also allows the National Broadband Corporation to work very efficiently. Using infrastructure construction companies is the most effective way to build a network. This allows Telstra, Optus and the other telcos to concentrate on developing the intelligent structure on top of that, and this will deliver innovative new applications and services in the most cost-effective way, securing an affordable service for everyone.
As we see with the Tasmanian State Government, the project allows regional organisations to add their own local and regional touch to it and it supports local competition and local development, while at the same time fitting into the overall national picture.
What’s next for Telstra?
Telstra now has another choice to make. It can continue its obstructive behaviour and launch new court cases or (let us hope!) it can look at the business opportunities that are now available to it. It can work with the new Corporation and establish working relationships, based on the new rules set by the government.
What the new plans are doing is providing a bigger cake – not just another telephone or internet network, but an infrastructure that will attract a large number of new services.
Once the network is deployed, healthcare alone could account for 25 percent of its capacity. Equally, given the right business circumstances, services related to education and energy/environment could take up another 25 percent. Over time the traditional telecoms and internet services will only account for perhaps 25 percent of the NBN.
Not that these latter services have shrunk in volume or revenue – this simply demonstrates the volume of additional growth that will be unleashed on this open network infrastructure.
While Telstra’s NEXT G network is certainly impressive and its cable network upgrade will also help it to move forward, it will be no match for this new state-of-the-art FttH.
FttH and wireless
There may be many steps along the way but the FttH is the final destination. Once fully deployed, the FttH infrastructure will deliver 100Mb/s and who knows what else? We can only guess what might be possible in five or ten years’ time.
And wireless broadband will be weaved into all of this, partly to make sure that people don’t have to wait five or ten years before a fully-deployed FttH network is available to them, and partly because this technology is also evolving rapidly and, in less densely populated areas, it will be able to deliver a service equal to FttH.
Paul Budde is managing director of Paul Budde Communication (trading as BuddeComm), a global independent telecommunications research and consultancy company, which includes 45 national and international researchers in 15 countries. Budde.com.au has 2,000 research reports covering 170 countries, 400 companies and 200 technologies and applications. The company operates what is believed to be the largest telecommunications research service on the Internet and has over 3,000 customers in 80 different countries.
Unfortunately this ‘opinion piece’ is a shameful bit of Labor party propaganda dressed up as independent. It clearly is a positioning tool to secure a slice for this consultant of the $43b bankruptcy order this project has put on Australia.
This theory that in isolation this project will have categorical economic and social benefits is misleading and a Simpleton’s view of some of the most macro-economic issues this Country has ever faced.
It is more over the writings of someone who knows how to spend money and not make money. What is the ROI? The planned sell down after 5 years will return what to the investment of working families?
As a WEB2.0 entrepreneur the idea of a few extra businesses/consumers in regional areas achieving FREE ADSL2+ does not excite my top or bottom line. In the B2B space there will be minimal upside in business and productivity from carrier speeds increasing from 20Mbps to 100Mbps. The problem is more of a local infrastructure or security issue at the client end.
It may win votes but it will do little for start-ups and WEB2.0 companies and more for votes and Telstra profits.
Anthill – this is a sell out to the spin. Get in the real world.
Sincerely
Iema Pauled
Paul’s views are widely broadcast in Australia and beyond. He also thinks, writes and talks about the telecommunications sector when it’s nowhere to be seen on the front pages of the mainstream press (most of the time).
However this is executed, we should be building a 21st Century telecommunications platform that in years to come will be used in all sorts of productive ways that we can’t even begin to imagine now. To talk about ROI in five years is myopic. Let’s see where we are in a decade without it.
I am torn by this announcement.
On one hand, I disagree with Iema Pauled and think the vision of this proposal is fantastic. I never expected to see an Australian government give broadband the focus it deserves as critical infrastructure. The decision to invest in FTTH, with an open network, is something I am very excited about.
On the other hand, I am deeply concerned about the internet censorship policy that they seem determined to push through. Laughable ‘live trials’, secret censorship lists and utterly flawed policy.
As far as I am aware, they haven’t linked the proposals, but why do I get the feeling that the good will come with some bad?
Paul, I agree 5 years after completion (which is 13 from now) is myopic but this period is the time frame announced by the Government for assessing the commercial viability of selling down the project – an assessment of ROI.
Your grandstanding on “it will be used in all sorts of productive ways that we can’t even begin to imagine now” is the epitome of the problem.
“Viva la Australis”
Live the dream while someone else pays for it.
Is that the same approach you would take to business? Let’s just build it and will think up all sorts of ways to use it later!
Have you done the maths yet on the total cost of investment per Australian?
That is to say, as a Shareholder, have you established the quantum of your investment in this project?
Iema, we dont have to wait for the ideas on how to use it… they are already here… in fact i have FREQUENTLY spoken to others who (like myself) thought of uses for this 10-15 years ago, because even in the early stages we could see the vision of where all this was heading… but we were called “crazy”.
…the problem is NOT in spending this money…
…the problem is in getting the business community to support the innovators who come up with the concepts with which this kind of brilliant infrastructure can be used, before we decide to leave Australia to pursue greener pastures overseas.
Trev, I agree and my company makes money today from the net and our users would like faster broadband. In fact most of them would like a Ferrari while we’re at it. I can’t afford my sales team to be make this level of investment and neither can this country.
Let’s not make it emotive but factual – its simple maths, i.e. science. Innovators need to create product to fulfill the visions – you can’t yet make something appear out of thin air. Can’t afford to build it – not figuratively because you’re right how can we not afford to do it?
BUT, with forecasts of $200b already in the red how could the Board (Cabinet) or the shareholders (us) approve such an investment in blue sky R & D? Come on, the fact that you would leave Australia is surely more for the fact that our pissy market of 21M will never be enough for a web business – nor does it need to be.
You want to go overseas to get more market, to get more funding to make more money – agreed. So why be fooled by the brochure here and think that a $43b budget for a project of this type will be the final figure, will deliver on time and produce the ROI you’d expect?
What’s the track record on any Govt (left or right) project managing such a thing and bringing it in remotely near budget or program?
you have missed the point of what i am trying to say.
i am NOT saying i want to go overseas to get a BIGGER market or MORE money…
i am saying i want to go overseas to get ANYTHING AT ALL…
because my experience of the venture capital & private equity industry & government grants system in Australia is this >> in order to get a grant (or any other money from anyone), you must first prove that you neither need the money, nor the help of the people offering it… and the moment you can prove that, they will help… but if you ACTUALLY need the money, they dont want to know you…
they leap to the conclusion (it seems) that if you actually had something of any value to offer, then you wouldnt be struggling to find the cash… its COMPLETELY ridiculous, and incomprehensible, and i have had enough of it.
my opinion (and yes i admit this is my opinion), is that you are using the same logic used by the people who denied Australia the opportunnity to be at the HEAD of the ENTIRE WORLD MULTITRILLION DOLLAR COMPUTER INDUSTRY when the CSIRO decided to pretty much abandon computers in favour of a project to seed rainfall from clouds (which mind you, i dont remember them actually achieving do you?)… AND the same attitude that lost Australia its ability to be one of the leading nations in the incredibly profitable space industry… AND the attitude that stopped Australia having its own (rather than foreign owned) car industry… not to mention all the things we could have been able to do had we had the money that we would have made if those things had gone ahead in the first bloody place… and need i go on?
It doesnt matter how “pissy” 21M people may seem to you, because that is NOT the market place we are dealing with… its GLOBAL… and having this kind of infrastructure means that people can more easily develop stuff which can then GO GLOBAL… anyone who thinks that this is just about letting people download movies faster is NOT seeing the bigger picture.
…what you SHOULD be getting excited about (as an investor) is the chance to put your money into the brilliant projects that I and many others like me have been developing for a long time now… but instead, you seem more concerned about being right.
Seriously, change your thinking.
Hey Trevor – less Eminem style bro.
I agree being right is a goal for me – being wrong, not so much.
Your predisposition to VCs and Angels etc is perhaps more about the fact that your ideas aren’t sound commercial ventures but more cool pieces of technology. The distain in your verbage is familiar, I am sure I met you at a mixer in the Valley in 2002 after ‘the boat left the harbour’ on tech start-ups.
I love that you are a dreamer – this vision is crucial. But investors don’t buy dreams they make money and in a small market the standard deviation between success and failure is much greater. More risk, less exist opportunity, less balls – just market factors.
BTW – I am a founder not an investor.
how do you manage to make so many assumptions in the one comment?
you dont even know me nor my ideas nor my history nor my expertise nor anything whatsoever… and yet you are so confident to suggest that i dont have the details but just a vision??? wtf do you think i have been doing for 10-15 years? where did you get your conclusive proof that my projects are not commercially viable? …and i quote you: ” …more about the FACT that your ideas aren’t sound… ”
what fact is this?
what evidence led you to this conclusion?
the irony here is that in your goal to be so right, you make yourself wrong. if you were more comfortable with being wrong, you might actually learn something, and then be right more often.
Keep up that clear logic Trev, it will only take you another 10-15 years
the use of the phrase “is perhaps more about the fact” is really quite generic and common and doesn’t seek to debase your ideas. It just simply means maybe a look from the other side, the buyer’s side, might explain why (and if this is the case) the investors have not jumped on board as you’d like.
Tearing the balls out of the Australian investment community on a public website is probably a less effective approach, but I have no facts to back that up.
I have been wrong many many times, that’s how you learn. But I got to tell ya, I prefer winning.
generic? …you state that something is a FACT which is not a fact, and even if it was you would have no way to know that it was a fact & have still provided no evidence of HOW you identified it to be a fact…
the sarcasm on my logic is incredible coming from you
hey Trev, notice how this thread ends with it being focused about you?
Chaps, we’re closing this one down. Suggest you settle it with an arm wrestle. Or a beer. Or both.
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