Australia has a broadband vision – do we?

I spent Christmas and New Year visiting friends in Australia and I took the opportunity to catch up on what was happening with their National Broadband Network (NBN) Co.

In March 2009 I was representing Ofcom at the Commsday Conference in Sydney speaking on standardised Wholesale Ethernet Access when the Labor Government announced that, rather than continue increasingly frustrating negotiations with an aggressively incumbent Telstra, they were going to build the fibre network they believed Australia needed, themselves.
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There was near universal agreement that this was a bold and visionary stroke, but there were also concerns over the price tag of around $AU 40 Billion, and the technology choices made – Fibre-to-the-Home (FTTH) plus fixed wireless and satellite. And both the principle and the practise – should the state be building a network and even if it should, could it do so in time and to budget?

And would anyone use it if they did?

Over Christmas and New Year I met with Stephen Conroy, Minister for Communications, Malcolm Turnbull, Shadow Minister for Communications, as well as the CEO and CCO of NBN Co and other stakeholders to see where they were in providing answers to these questions.

Well, they have just completed their target of having construction commenced or completed in areas covering 758,000 premises before the end of 2012. They are on track to achieve their end of June 2013 target of 286,000 premises passed. After a ramp up over the next eighteen months they expect to level out at approximately 6000 premises passed per day until 2021.

The network is Gigabit Passive Optical Network (GPON) FTTH to 90% of the country with the rest guaranteed 12 Mbits through fixed wireless (not mobile) and satellite. Controversially NBN Co is also paying Telstra and Optus to decommission their hybrid fibre-coaxial (HFC) networks and migrate those customers to the NBN. These HFC networks cover about 20% of the population – the richest, densest, easiest to get to 20%. NBN Co argue they need those customers to make the overall economics of what is a natural monopoly work.

NBN Co will be a purely wholesale play, no retail, and only offering a ‘simple’ layer 2 ethernet service which, not by coincidence, looks something like the standard wholesale access that I was promoting when I worked for Ofcom. This Active Line Access has been formally standardised by NICC – although BT still do not support it.

Australia has a unique network topology, 85% living within 50km of the coast and density is good for networks costs. However, 76% of Australian homes are detached houses as opposed to only 22.5% in England, making for lots of long local loops.

Each home will have a box like today’s Virgin Media or Sky boxes, to enable the delivery of a wide range of Ethernet based services from home movies to telemedicine. Importantly though, each of these set-top boxes will have four Ethernet ports, so the customer doesn’t have to be ‘captured’ by one provider for all services.

At $Au40 Billion it is costing about £2000 per home. In the UK, by contrast, we are spending approximately £2 Billion of public money to deliver FTTC to the ‘final third’ that is around eight million homes. So that’s £250 per home, one eighth what the Australians are spending.

But it is not a fair comparison – firstly there is just the sheer size of Australia – roughly 32 times the landmass of that of the UK. This size has a direct impact on the costs of rolling out Broadband infrastructure in Australia, with the costs to deliver the last 30% far greater to that of the first 70%.

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OPINION: National Broadband Network rollout proving to be a costly failure

IN April 2009, the Rudd-Gillard government announced its plans to build the National Broadband Network.

The fibre-optic network is supposed to pass 12.2 million premises around Australia by 2021.

More than three years later, as at June 30, 2012, it had passed just 38,914 – less than one third of 1 per cent towards the finish line.

Yet NBN Co’s corporate plan, issued in December 2010, promised to pass 317,000 premises by June 30, 2012. Another comparison: in 1994, Telstra announced it would build a national hybrid fibre coax network. By June 1997, three years on, the network passed 2.1 million homes.

NBN is doing equally badly on the number of services being delivered. There were 3867 fibre services in operation as at June 30, 2012; the corporate plan promised 137,000.

More recent disclosures at estimates hearings in October show little improvement. One component of the fibre rollout, brownfields, had risen from 29,000 in June to 32,295 and fibre services in operation were at 6400.

Broadband Minister Stephen Conroy and NBN Co have tried every trick in the book to disguise the poor performance. They abandoned the original corporate plan and issued a new one in August this year. The goal of 317,000 premises passed by June this year was changed to 39,000.

The goals for later years also dropped sharply. Originally the network was to pass 1.27 million premises by June 30 next year; that has fallen to 341,000.

Next, they made comparisons as difficult as possible. The original corporate plan gave target numbers for five different categories of premises: three types of fibre, wireless and satellite. The new plan, and the 2011-12 annual report released recently, now gives numbers for two types of fibre and a merged number for wireless and satellite.

Third, they tried to shift attention away from hard numbers by introducing a new statistic: premises where there is construction commenced or completed. NBN Co’s March 2012 media release promised that by 2015 “construction of the fibre optic component of the network will be under way or completed in areas containing 3.5 million premises”.

This statistic – which is not used by private sector telecommunications companies such as Telstra and Optus – is meaningless. They count a home as having construction commenced from the moment a contract instruction is issued to the contractor.

But several further steps are required, including the Telstra commencement notice and the final contract instruction. On average, it will be 12 months before the work is completed. A fourth trick is to quote total subscriber numbers across fibre, wireless and satellite.

At the October estimates hearing, NBN Co said it had 24,000 customers. But of these, 17,000 were on satellite – and more than half of them were customers of an existing government program, dating back to Howard government days, to subsidise satellite broadband in rural and remote areas.

The rollout is chewing up taxpayers’ money at an alarming rate. By June 30 this year, $2.832 billion of taxpayers’ money had been put into NBN as equity; of that more than $900 million had vapourised in three years of accumulated losses. (In 2011-12 alone, NBN Co lost $520m.)

Total equity contributions – entirely taxpayer funded – are projected to reach $30.4bn by 2021. This is almost $3bn more than the Rudd-Gillard government had previously disclosed.

NBN Co is splashing around money with abandon. It pays extremely generous salaries. Average remuneration cost per head was $172,000 in 2011-12, more than 50 per cent higher than the comparable figure at Telstra.

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iiNet claims “first place in fibre”

ISP iiNet says it has connected more than 10,000 customers to fibre to the Home (FTTH) broadband across Australia, surpassing the total number of FTTH customers connected to the NBN.

iiNet’s Chief Executive Officer Michael Malone says that more than 8,000 iiNet Group customers are connected to high-speed FTTH broadband via iiNet’s TransACT and Internode networks and wholesale services, and that a further 2,700 are connected through the NBN.

iiNet calls itself “the leading challenger in Australia’s communications industry” and which is the second largest DSL ISP (after Telstra). Malone, one of the industry’s more tireless self-promoters, said iiNet’s recent acquisitions and growth have positioned the company to be the leader in FTTH broadband in Australia.

“We’re all about upgrading the lives of our customers and giving them access to innovative products backed up by our award-winning customer service. When it comes to FTTH, we’re using every opportunity to connect as many Australians as we can to the best internet around,” he said.

“The number of residential customers connected by the iiNet Group also surpasses the number of Australian homes connected to Fibre by any other provider. As well as delivering super-fast broadband to more people than are connected to FTTH through the NBN, we’re now the largest provider of FTTH services in the country.”

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Telstra Signals Game On

Telstra (TLS) has raised the competition heat in the telecommunications sector with its purchase of Adelaide-based ISP Adam Internet, for an undisclosed sum. While only a small acquisition for the giant of the sector, it will make players in the middle tier of the broadband marketplace sit up and take notice, according to brokers. Most see it, with Telstra’s stated aim to run Adam as a separate entity, as a bid to challenge Optus ((SGT)), iiNet ((IIN)) and TPG Telecom ((TPM)). For RBS it is Telstra’s “Jetstar moment”, referring to Qantas’ ((QAN)) well-founded decision to run a budget airline, Jetstar, along side its premium service. For Deutsche, it reaffirms its view that organic growth in this area is difficult. Credit Suisse sees Adam as Telstra’s ‘challenger’ brand and believes it is a significant change for Telstra and the industry.

The acquisition price was not disclosed but speculation puts it at $50-60 million for around 80-100,000 subscribers. Therefore, the acquisition for Credit Suisse, on an 80,000 subscriber basis, implies an acquisition price of 10-12 times FY12 earnings and $550-$660 per subscriber. Credit Suisse believes the deal won’t provoke concerns at the Australian Competition and Consumer Commission, given Adam only has around 1.5% market share. RBS also notes, nationally, it would not be a material reduction in competition. However, Adam could have up to 20-25% of Adelaide subscribers and that may concern the ACCC.

Adam is seen operating as Telstra’s low cost online channel but benefiting from the infrastructure and balance sheet of Telstra. Credit Suisse says it is a sound strategic move by Telstra, giving it a lower-cost channel to minimise retail market share loss as the NBN rolls out over time. Nevertheless, there is risk, as Adam needs to gain presence outside its home market and not get bogged down by its big brother’s bureaucracy. The broker expects Adam to be positioned as a mid-tier operator going head to head with iiNet and Optus, rather than challenging the lower cost providers TPG and Dodo. The reason for this, Credit Suisse maintains, is that Telstra still has the number one retail broadband business (46% market share) and it would have a lot to lose by leading broadband prices down with the Adam brand. Optus and iiNet hold 18% and 15%, respectively, of the national broadband market share. However, in the metro broadband market, the broker estimates Optus and iiNet collectively hold 45%-50% market share. This, therefore, represents a significant opportunity for Telstra to challenge.

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Telstra’s Adam buy will boost competition, say Hackett & Malone

Telstra’s controversial move to acquire South Australian ISP Adam Internet would actually increase competition in the state, iiNet chief executive Michael Malone and Internode founder Simon Hackett said yesterday, despite concerns from Adam Internet customers about the deal.

Telstra’s dominant position in Australia’s broadband market, owing to its historical nature as a vertically integrated telecommunications monopoly, has largely prevented it over the past decade from acquiring smaller players in the sector. However, yesterday the telco announced plans to acquire one of the few smaller players left in the Australian market, South Australia’s Adam Internet. The move will effectively consolidate the state’s broadband market into just three players; Telstra, iiNet (which also owns Internode, which had a strong base in the state) and Optus, which has a strong national presence. It’s not clear to what extent Australia’s fourth major player, TPG, has a presence in the state.

However, according to Malone and Hackett, the move shouldn’t be blocked by authorities such as the Australian Competition & Consumer Commission, which does have the power to query the transaction on competition grounds. “I don’t believe it should be blocked. To the contrary, I think this will be great for competition in South Australia,” Malone said in response to an emailed query. And Hackett added: “We wouldn’t seek to block the transaction (even if we were asked, and I don’t especially expect that we will be).”

Hackett said Adam, with its estimated 90,000 broadband customers, didn’t add a great deal of size to “the Telstra empire” in the larger scheme of things (Telstra is estimated to have about 2.6 million ADSL broadband customers). “But I do believe it’ll polarise competition in SA in a good way, because now there is new and clear point of difference between the traditional rivals in South Australia: Internode and Adam,” the Internode founder, who now sits on iiNet’s board, added.

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All Systems Go – Telstra finalises NBN Agreement

Telstra, the NBN Co and the Commonwealth Government have today announced a finalised definitive agreement for Telstra’s inclusion into the National Broadband Network project and the structural separation of the company.

After a three year process of convoluted talks, negotiations and revised plans that were recently accepted by the Australian Competition and Consumer Commission (ACCC), Telstra CEO David Thodey stated that the company was very pleased (and most likely relieved) for the positive outcome for their customers, employees and shareholders.

The agreement is expected to provide Telstra with approximately $11 billion in post-tax net over an extended period.

Read more about the media release announcement at Telstra’s Media Centre – Telstra finalises $11 billion NBN agreements

Stephen Conroy’s Public Lie On Internet Filter

Factual inaccuracy, fabrication, deceit, falsification or simply an outright lie. Whichever way you look at it, Stephen Conroy has told a blatant lie to the public in relation to the Internet Content Filtering project. is reporting that Communications Minister Stephen Conroy today told a lie by saying that Telstra and Optus had adhered to the government’s request by deploying a mandatory filtering process, when in fact, they had only implemented a significantly dumbed down voluntary version.

There have been no reports of any Australian Internet Service Provider using the government’s Internet content filtering system as suggested by Mr Conroy. Unless we’re all missing something here, it looks like the good minister either has become confused in a momentary lapse of reason or is just downright telling a lie.

Read more at – Conroy misleads public on Internet filter


ACCC approves Telstra structural separation plan

The ACCC have officially announced their approval of Telstra’s structural separation plans by today accepting their revised undertakings.

Prior to this announcment, the competition watchdog originally knocked back Telstra’s first submission by suggesting the Telco had not done enough to ensure they were going to play fair in both wholesale and retail operations after they were structurally separated.

More specifically, the ACCC were concerned with Telstra’s commercial interests involving wholesale ADSL contracts with competitors, and promoting wireless services that would compete against the NBN.

Today’s ACCC announcement now alleviates all these concerns and opens the way to a finalised Telstra-NBN Co agreement and has essentially signalled a major shift of structural reform within the Telecommunications industry and will thus strengthen competition as a result.

ACCC Press Release – ACCC accepts Telstra’s structural separation undertaking

Telstra to offer wholesale 3G services

Telstra has seemingly decided that it should make available it’s 3G products and services to smaller Telecommunications providers to resell in order to assist with its ailing wholesale services.


Download speeds for wholesale customers on Telstra’s 3G services will range up to a maximum 3Mbps, while those on Telstra’s own Next G mobile network can achieve download speeds of anywhere up to 20Mbps. So there’s the catch. The vast difference in speeds is possibly due to the fact that Telstra need to be careful that they don’t cannibalise their own product.


The likes of Optus and Vodafone have also provided similar wholesale services to Telco’s such as Dodo, Virgin, iiNet and Internode for some time now, so this move by Telstra may not only seen as a potential tactic to counteract competition and bolster sales, moreover one that also aligns with Telstra’s transition to offering superior 4G services.


Read more at – Telcos to resell Telstra 3G services

Telstra wireless green light for NBN

The ACCC have thwarted previous plans by the NBN Co to force Telstra’s hand for a non-compete clause that would stop the Telco marketing it’s wireless broadband plans as a substitute for NBN fibre.


It’s believed that Telstra will pledge not to mislead or deceive consumers in anyway that their wireless broadband services will be an effective substitute for the National Broadband Network and attempt to migrate their customers across to their own Telstra Next G wireless Network.


“We were very concerned about that because we believe there should be no prohibition on Wireless competition to the NBN.”
– ACCC chairman Rod Sims


Read more at NBN loses Telstra wireless battle


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