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SWOT: The broadband debate

SWOT: The broadband debate

Gartner analyst Andrew Chetham likes to characterise the broadband equation like this: increased competition among broadband providers brings down prices and increases the subscriber base. The pool of increased users opens up new markets to content providers. Other end users get a whiff of the potential benefits of broadband connections, join up and increase the demand for services. This increase in demand attracts new service providers, which in turn increases competition and brings down prices. And so on and so forth.

Regional neighbours, such as Korea, have seen an explosion in the number of high broadband subscribers. _Why not Australia? And why do we _continually hear the warnings that by lagging behind the rest of the world, we are doomed to suffer the economic consequences of second-rate technological infrastructure?

What must we do to catch up? Where do we start? Is it the technology, the price, the applications or simply reaching critical mass? Is it the chicken or the egg? The industry poses some opinions.

The price we pay

Justin Milne, CEO of ISP and online content provider OzEmail Internet is one of many online content providers urging a change to the pricing of broadband in Australia. "Polls of our consumers indicate that the demand for broadband is extremely high, and this is backed up by studies from other Australian researchers," he says. "However there is a greatly reduced demand for consumer broadband when the price is set artificially high."

Milne is confident that, given access at an appropriate price, consumers of all levels would embrace broadband technology, simply because it can enhance the consumers' experience with the Internet. "The possibilities are endless, once people have access to high-bandwidth connections. [Look at] the possibilities in terms of online and distance education, commercial transactions, online services; they will all take off," he says.

But Milne is critical of Telstra's handling of broadband access, and claims the rollout is being artificially delayed by inflated prices. "From Telstra's perspective, the slower DSL is taken up, the better. DSL has two bad characteristics from Telstra's perspective: one, it costs money to implement, and two, it allows competitors into the precious local loop," says Milne.

It ain't easy

Recent flare-ups over broadband pricing in Australia have seen Telstra widely evangelising last year's split of its wholesale and retail branches and its ensuing "commitment" to the wholesale provision of broadband services in Australia.

Telstra Wholesale managing director Rosemary Howard admits the wholesale/retail split has been a difficult process, especially in terms of the development of structures within Telstra, but believes it has set the foundations for a significant improvement in wholesale access to the all-important copper cable. "It was not easy," she says, "because we had to put up a wall within the company, to ensure absolute confidentiality for our wholesale clients."

Along with the internal split, Telstra set about designing the specific wholesale broadband products. It came up with two alternatives: access to wholesale ADSL choice, copper wires and exchange infrastructure; or access to the Unconditioned Local Loop (ULL), which offers broadband service providers access to the copper wires as long as they provide the infrastructure at the exchange.

Telstra Wholesale has come under fire for playing favourites with Telstra Retail, but Howard insists that much of this criticism stems from industry confusion regarding Telstra's wholesale and retail pricing. "There has been some confusion about our pricing," she says. "However, we now have a strict division between our retail and wholesale divisions, as well as specific products and pricing structures associated with each."

Then what about the slow progression of broadband availability in Australia? Howard falls back on the chicken and egg scenario. "We are really looking to the industry to provide and promote services which will drive broadband demand," she says when asked if there were any inhibitors to the uptake of broadband in Australia. "We are the wholesaler, we are working on providing high-quality wholesale broadband products."

Telstra is not the only one casting longing glances in the direction of the online providers. Gartner's Chetham has been watching the broadband market throughout the Asia-Pacific, and isn't impressed with what he has seen. "There just aren't any apps that are really going," he says. "A lot of people are talking about broadcasting - television and radio stations - but there is nothing new that will provide a real impetus for broadband growth in Australia."

What Chetham and other industry pundits are waiting for is a classic "e-mail" of broadband services - a service that will really drive demand for significantly faster, more reliable Internet connectivity. But in truth, most _pundits openly admit not knowing what kinds of services will be facilitated by broadband.

"The technology is going to develop in all sorts of directions that we can only imagine at this stage," says Chetham. "There are traditional markets that will always be there such as gaming and broadcasting, but no-one wants a computer just to replace a TV."

Here and now

Nevertheless, while some wait for online services to hatch, others are simply astounded by how quickly the scene is maturing.

Neil Verrall, sales and marketing director at corporate telco PowerTel, believes numerous technologies are already available and waiting for broadband to become available. "DSL is going to take off as soon as it is widely available at the right price," says Verrall. "We are already seeing technologies such as VoIP (Voice over Internet Protocol) begin to heat up again, _and the potential for growth in the voice and data network market is astounding."

Others in the industry haven't had the time to ponder the technology market as they run to keep up with growth in demand. John Ellershaw, CTO of value-added broadband distributor Quadtel is enjoying riding out the wave of broadband demand. "Sales are just beginning; we are looking at a jump from 10,000 to 70,000 customers before the end of this year," he says. "We are going to look back soon and talk about the high-bandwidth revolution."

The statistics so far tend to back his view. Early adopters of high-broadband Internet access now number in the tens of thousands. And in fact, connections to broadband services nearly doubled last year from 61,980 users to 121,856. In addition, access revenues from broadband services are growing steadily, and expected to hit $200 million by the end of next year.

Ellershaw scorns the notion that a lack of online services is stifling broadband penetration in Australia. "Businesses will always find something to do with higher speed connections; there is so much to be gained from the extra productivity. When the prices are right, we are going to see an explosion of business," he says.

Ellershaw also echoes Telstra's Howard in pointing out that the complexity of the infrastructure associated with ADSL had proved harder to implement than was initially envisaged. "It is not all that easy to implement because of the complexity of creating an entirely new infrastructure. It just isn't as easy as people expected, and it didn't get going as fast as some people would have liked, but it is really beginning to take off."

An artificial hand brake

Stephen Wilkes, managing director of Optus-owned broadband wholesaler XYZed, remains sceptical regarding the inference that a lack of online services has stifled growth in Australian broadband. While he believes broadband pricing is edging ever closer to a price point where SMEs could become a significant market, he still believes the market is being slowed by artificially inflated prices.

"We are not that far away from an explosion of broadband subscribers," says Wilkes. "As soon as wholesale customers can get access to the local loop at a price that makes it possible to on-sell effectively into the SME, we are going to see an explosion."

Like OzEmail's Milne, he believes pricing is the one fundamental hump which needs to be overcome in order for the broadband demand to take off. "Pricing changes depending on the area, but it costs me, on average, $60 to lease the copper running from the exchange to our customers' premises," Wilkes says.

"The amount I want to be paying is $20. I can then start to compete fairly; I can start to sell products into the SME market; and we will see the broadband subscriber base grow significantly.


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