Australia passed the one million broadband connections mark in July, thanks largely to a price war that has seen residential rates plummet in recent months. The number of connections jumped about 50 per cent in the first half of the year as consumers and small businesses rushed to take advantage of the lower rates.
However, despite the surge in broadband interest, Australia still lags behind many other developed countries. In many cases, costs are still high and the speed of the services are so slow that it wouldn't be considered broadband elsewhere.
In a recent report into Australian Broadband Market Services and Equipment, IDC found most Australian broadband subscribers have an access download speed of 256 or 512Kbps, which it said significantly limited the delivery of content and hindered potential initiatives for high-content value proposition such as TV over VDSL (TVoVDSL) and VoIP services.
IDC analyst, Landry Fevre, said some overseas markets enjoyed attractive triple play bundles consisting of voice, broadband and TV services over the same network.
"For example, France's second largest broadband service provider, Iliad, offers free national phone calls, 2Mpbs ADSL and 100+ TV channels for about the third of the price for what you would get in Australia," Fevre said. "There is still a long way to go for Australian consumers to get a decent deal."
IDC telecommunications analyst, Susana Vidal said broadband and IP service providers had to concentrate on key areas to capitalise on the opportunities presented by business users. They needed to offer competitive pricing while maintaining high quality of service and network, up-sell IP services; provide innovative IP services targeted at different vertical markets; educate companies not only on the cost saving advantages of these technologies but on the potential productivity gains; present case studies to prospect customers that could demonstrate productivity increases and cost savings; and also educate them about the benefits of business grade DSL technologies such as SHDSL/SDSL, Very-high-bit-rate Digital Subscriber Line (VDSL), and other DSL.
KPMG director, Malcolm Alder, said high bandwidth broadband had enormous potential macro-economic benefits and could be measured in billions of dollars and whole percentage points of GDP growth.
"In an era when almost half of Australia's GDP comes from knowledge-based industries, broadband is becoming as important as rail and roads in terms of national infrastructure," Alder said. "For the household, it is increasingly being referred to as the fourth utility after water, electricity and gas and it would seem only a matter of time before broadband is a central part of most people's lives.
"The recent rapid growth in broadband take-up in Australia has mainly been a result of significant price falls, but looking further ahead, other factors such as increasing bandwidth, permanent accessibility including mobility, and expanding quality and quantity of content and new applications, will become increasingly important to sustaining broadband growth."
The July Pacific Internet Broadband Barometer showed that 52 per cent of Internet enabled small businesses now ha d broadband connections, yet almost 40 per cent of them uses a residential account for their business - a statistic that was, perhaps, not surprising considering the majority of Australia's 682,000 small business had less than five employees. But Pacific Internet expects the use of residential broadband products to decline in the mid- to long-term, as small businesses increasingly adopt broadband applications that require the security and reliability assurances associated with business grade products.
The report indicates there are opportunities to supply valued-added broadband products such as managed security services - something Pacific Internet has now announced it intends to do.
There also other areas that show promise including videoconferencing and Voice over IP. While current use remains low, according to the report, adoption of these technologies by small businesses is beginning to grow.
In July, 16 per cent of businesses indicated they currently used videoconferencing (up from 12 per cent in January 2004), and a further 21 per cent indicated that they intend to do so in the future (up from 12 per cent). While only 8 per cent of broadband small businesses indicated that they currently use VoIP, 25 per cent intended to do so in the future.
Pacific Internet managing director, Dennis Muscat said, the report shows a market still in the early stages of evolution.
"Small businesses are certain that broadband represents a highly effective value proposition, yet they're making decisions based on cost and still using the technology for simple gains," he said.
The Australian broadband market was still developing and the cheap residential plans had been a great entry point for small businesses, particularly small office home office businesses, up to four employees, that are similar to residential users, Muscat said.
"But while small businesses are still using residential plans, they're not positioned on a platform that's suitable for more advanced applications like Voice over Internet Protocol (VoIP) and videoconferencing," he said.
"As the small business market advances, we predict there'll be a shift to business plans that offer faster speeds, higher grades of service and are more robust.
"This will lead to an increase in the adoption of affordable broadband applications that were traditionally restricted to the big end of town because of high price points."
Two of the country's largest hosting companies - Adelaide-based Hostworks and Brisbane-based WebCentral - are already seeing moves towards value-added services over broadband.
Hostworks offers a 'desktops on demand' service, which it acquired with last year's $2.55m purchase of Dimension Data Central, a Sydney-based business that offered hosted applications for small to medium companies.
Using Citrix software and a broadband link, companies are renting software from Hostworks online rather than buying applications to cut complexity and cost from their IT infrastructure.
Hostworks managing director, Marty Gauvin, said the widespread availability and affordability of broadband communications was starting to change the way businesses acquired technology.
"Broadband means that software applications are becoming more of a service than a standalone product, especially for companies that lack in-house IT support," he said. "Instead of having to buy, deploy and maintain complex IT applications, companies are choosing to purchase their desktop software on demand, backed by guaranteed service levels."
Hostworks is seeking business partners to aggregate customer demand for its desktop on demand service.
Meanwhile, in-coming WebCentral CEO, Andrew Spicer, said reliable and affordable broadband was a critical enabler for making online business tools available to small business.
Managed applications such as Managed Exchange and Managed SharePoint products gave small businesses access to what have traditionally been big business technologies at affordable monthly prices.
These type of managed applications were suitable for smaller companies with ADSL that would usually not be able to justify the expense of a full in-house installation, but could afford a monthly fee for a fully managed service where hardware, software, back-ups and maintenance was included in the price.
He said resellers who traditionally sold full solutions such as Microsoft Exchange and SharePoint could capitalise on the adoption of ADSL broadband to generate recurring revenue streams from the SME market by reselling WebCentral managed applications.
Managing director of Netspace, Stuart Marburg, said ISPs that wanted to provide managed services should partner with a managed service provider and concentrate on the core business of connectivity and running a high performing network.
He said Netspace would head down the managed service path and was currently exploring partner opportunities.
In July, Nexon Asia-Pacific launched private IP solutions for small-to-medium enterprises (SMEs) and small-medium corporates offering customers a virtual local area network (LAN), leveraging its premium grade broadband IP network.
Nexon director, Barry Assaf, said a private VLAN represented a superior technology option compared to a
VPN because of the inherent limitations of the Internet on network availability, guaranteed connection and network throughput.
"A private VLAN provides a dedicated circuit for each customer within the managed network," he said.
They and their many options had emerged as a major business-to-business communication solution, Assaf said.
"Being a scalable solution means customers can start small and scale up as their access needs and number of users increase," he said.
Australia has been behind the eight-ball in the uptake of broadband and it is going to take a lot of effort for it to catch up. However, as it does, new openings will offer ripe pickings for those who are ready.