While the Australian broadband and wireless markets were singled out by many observers at the start of the year as areas to watch, the reality is that, so far, neither has been a big money-spinner for resellers. Security remains a concern for corporate customers considering wireless implementations, while confusion reigns among consumers, and to a lesser extent resellers, when it comes to speeds, interoperability and simply making wireless gear work effectively. The broadband market is still controlled tightly by ISPs and unbundling is still somewhere over the horizon.
According to market analysts at IDC, the proportion of total IT spend going into the home market is just over eight per cent in Australia – globally that figure is 15-20 per cent. Meanwhile, vendors insist broadband and wireless will drive each other to bigger and better things.
ARN caught up with three of the biggest players in the local market – D-Link, NetComm and Netgear – to wrap up 2003 and talk about their predictions for the coming year and beyond.
Q: With new standards coming through regularly, and others being worked on for next year and beyond, what levels of understanding and acceptance are you finding when it comes to wireless technology?
Managing director, NetComm, David Stewart (DS): “Wireless is still a mixed market. There are still lots of security concerns for business users and only a small proportion of the potential market has installed wireless.
“Cost has kept it out of the consumer market. People in both [business and consumer] areas are going with it but they are still only the early adopters.
“We will probably discontinue offering 802.11b products some time in the next year. I think there will still be a market for it but nobody will be able to make any money from it.
“Quite frankly, it [802.11b] is all most people need but they always want the biggest, best and fastest products and services – particularly in the Australian market.”
Managing director, Netgear Australia, Ian McLean (IM): “The speed of 802.11g and the fact that the technology is becoming more affordable all the time have seen our wireless sales become four times higher than they were at the beginning of the year.
“But there still aren’t many people making money from wireless because it has become very competitive very quickly.”
General manager, D-Link Australia, Domenic Torre (DT): “People want speed but the introduction of 802.11g didn’t cause a drop-off in 802.11b, which is still increasing today.
“Having said that, 802.11g has sky-rocketed and is catching up to 802.11b sales. It remains to be seen whether there will be room for both technologies.
“Security is still a concern for business users but I see a lot of drive with 802.11i in the third quarter of next year and those customers will consider wireless for non-critical applications.”
Q: What about the broadband market, how has that fared in the past 12 months?
IM: “Broadband is starting to happen but the channel is not making as much out of it as it could because it’s still controlled by the ISPs. Once we drive broadband into the home, other technologies will follow.”
DT: “Things are starting to heat up in the consumer space. The strength of the Aussie dollar and competition saw the price of DSL products drop by about 40 per cent earlier in the year – that is significant.”
DS: “While ADSL has been talked about for a couple of years, it’s now reached a lift-off stage with significant number going out of the door. We are selling many thousands [of ADSL modems] per month and DSL grew from seven per cent to 34 per cent of our business during the year.
“Broadband is the lynch pin or focal point and consumers are starting to sign up as they realise that you can’t use other bits and pieces of technology effectively without it. It’s a building block process.”
Q: When can we expect to see the unbundling of hardware and services in the broadband market and what will drive it?
DT: “It is still going to be 12-18 months before you see ISPs letting go of modems because the technology is still complex and they want control from a services point of view.
“Unbundling could be driven by customers that have signed up for contracts that run out soon. The market is becoming more mature and customers know exactly what they want.”
DS: “Unbundling will happen eventually, with financial departments within carriers proving to be the trigger. Someone within Telstra or Optus will decide the subsidisation of hardware has gone on long enough and kick it over to retail.
“It gets harder and harder for them [carriers] to recover their margins and it will benefit the channel when they stop subsidising the gear.”
IM: “At the moment, Telstra want to sell you a modem, a router, the whole kit and caboodle. But I am hopeful Telstra might unbundle next year and OzEmail has said it will start offering broadband start-up disks, which will give the channel an opportunity to sell hardware that goes with the service.”
Q: Where do you see the greatest opportunities for channel players looking to make a buck in broadband or wireless?
DS: “Expert advice and services are the way to go for the channel. If you look at the American market, retailers have taken on a bigger and bigger role – the mass merchants are supplying the hardware and a lot of traditional resellers have become consultants.
“People want to buy hardware as cheap as they can but this stuff is not easy to implement and the technical support calls we receive suggest people are getting bamboozled. Customers are buying things because they want the service but they don’t have the knowledge to set this stuff up – that’s where they [resellers] can really make some money.”
IM: “The wireless home is becoming more understood and offers dealers some good opportunities. The challenge for the channel is educating the market because the guys selling music systems or gaming consoles are just not computer literate.
“We have seen in the US a couple of years ago, and in Europe now, that broadband and wireless tend to take off at the same time.”
DT: “There are services that resellers could be offering to differentiate themselves from their competitors. We are training resellers on how to conduct site surveys but some dealers need to start reinventing themselves.
“Consumers want cheap product so you have to be prepared to earn low revenue from hardware and offer something extra to supplement that.”
Q: What are the problems facing resellers in these markets and how do you think they could be doing a better job?
IM: “The channel needs to spend some time figuring out how it [wireless] works and how it doesn’t. There are issues around interference that could mean a successful implementation in one building might not work in another.
“Resellers also need to communicate how things should work to end-users and make them aware that they might have to invest in better antennae or other solutions if they want to get to the next level.”
DS: “A lot of resellers are seriously in need of some education. We recently ran a whole series of seminars across the country with distributors and were pleased but surprised at how many dealers came along.
“A lot of these guys are good at building PCs and loading Windows XP but haven’t had a background in VPNs and firewalls. We will have an almost continuous roadshow next year.”
DT: “One thing resellers need to learn is that there’s no exact science for wireless. You can’t sell a product and tell the customer to go away and install it because it may not work.
“Large scale implementations need site surveys to make sure signals are strong enough and margins are getting tighter for everyone concerned as consumers get more demanding about the speeds and connectivity they require.”
Q: What excites you about 2004? What technologies will make a difference and why are they important?
DS: “We see broadband hitting the straps next year and there will be an opportunity for us to move into symmetric DSL (SHDSL).
“We also see VoIP starting to gather momentum. It’s been kicked about for years but I honestly believe the infrastructure is there now for customers to plug a VoIP phone in and have quality of service. You will see some of the ISPs using it as a marketing angle.”
DT: “It will be more of the same next year but with greater take-up, particularly in the broadband space. We are starting to see more competition against Telstra in ADSL and the carriers will jostle to get the technology out to the market.
“Unbundling will eventually see ISPs tying themselves to one vendor to make life less complicated but that is not happening yet – it will probably take another 18 months or two years.”
IM: “The arrival of 802.11i should help to ease security concerns for enterprise customers considering wireless. We are not looking to target Cisco at the core of the enterprise network but we do seem to be doing more business at the edge.
“Netgear has a turbo-based 802.11g product that can realistically hit speeds of up to 90Mbps and is only 20 per cent more expensive than a standard 802.11g (54Mbps) product. I expect that to do very well in 2004.”