Australia is often criticised for the speed (or lack thereof) at which broadband has been introduced. The Australian Competition and Consumer Commission’s release in June described growth as “flat” and said Australia ranked 19th among OECD nations in terms of the number of broadband users per 100 inhabitants.
However, the growth figures are not as gloomy as it may seem at first glance. In fact, over the last 12 months broadband connections in Australia have more than doubled, and they are growing at compound rate of about 16.5 per cent a quarter.
The ACCC report shows that, at the end of March 2003, there were 423,600 broadband services connected across Australia, up from 199,800 at the same time last year, and there is no doubt there is potential for much more growth yet.
After all, only 5 per cent of Australian homes currently have broadband connections compared with 19 per cent in the US and 13 per cent in France.
However, there are indications that the figures for the June quarter will show even greater growth as a result of increased competition and falling prices.
But that is still not good enough for ACCC chairman, Alan Fels, who has been turning up the pressure on Telstra to relinquish its monopoly in the ADSL (asymmetric digital subscriber line) and ULL (unbundled local loop) markets.
“Broadband markets in Australia will need to develop much more quickly if Australia is to retain, let alone improve, its comparative international position,” Fels said.
Increasing competition has forced wholesale prices down by as much as 50 per cent over the past two years with analyst companies such as the Meta Group predicting up to a further 50 per cent drop in 2003/2004.
Meta Group analyst, Bjarne Munch, said the market would gain momentum through 2003 with many new resellers such as OzEmail, Primus and Flow Communications and facility-based carriers like Request, XYZed and Nextep, exerting further pressure on retail pricing.
Munch said continued price declines warranted businesses from limiting contract periods from one to two years because market competition would lead to discounts in the range of 30 to 50 per cent and significant operational savings.
While Telstra was losing share in all markets and prices continued to fall, the corporation was likely to remain dominant for the foreseeable future.
On June 4, Telstra announced it had 340,000 broadband customers, up from 313,000 just a month earlier, and was well on track to make its target of one million by the end of 2005. Of the existing clients, 100,000 were wholesales ADSL (asymmetric digital subscriber line) customers.
Telstra BigPond chief, Justin Milne, said Australia’s broadband rollout was tracking well and Telstra’s rate of customer take up was higher in the first few years of rollout than the US, the UK and Canada.
Telstra’s ADSL rollout started in August 2000 and the service was now available to about seven million premises throughout Australia or up to 75 per cent of the population.
Since the rollout began Telstra has slashed the initial installation cost from more than $300 to just $29 including modem ($129 with $100 cash back).
As a result, in March alone BigPond signed up a record 23,000 new broadband customers.
Despite offering data downloads at as little as one-tenth the speed of cable, ADSL accounts for three-quarters of the market because it uses existing copper wire telephone infrastructure.
Cable can only be accessed where optical fibre infrastructure is available either through pay TV companies Foxtel or Optus or through independent broadband providers.
As a result, cable customers are mainly confined to major metropolitan areas. Despite that, both Telstra (Foxtel) and Optus claim to have at least 100,000 cable customers each. However, it is DSL where the biggest opportunities lay because of its coverage and ease of installation. While home users are mainly concerned about Internet and email access, the business sector wants virtual private network infrastructure and is looking at other benefits of broadband such as the ability to cut telecommunications costs using Voice over IP.
A recent survey by IDC of more than 200 Australian companies showed interest in VoIP was steadily increasing. The survey found that more than half of Australian companies expected to increase their spending on both broadband and IP services this year and satisfaction with the quality of both rose.
Senior Research Analyst IDC Telecommunications Research, Landry Fevre, said there was an increasing level of satisfaction with broadband services and that’s a strong sign of a maturing market.
He said VoIP and IP VPN were the biggest opportunities for service providers to add value to corporate and public services beyond broadband access.
The survey, which is conducted annually, showed DSL current deployment had almost doubled to 49.5 per cent of the survey respondents in 2003.
The highest adoption was coming from the small business segment.
But, Fevre warned that “given the opportunity for disillusionment”, carriers and integrators had to carefully manage customer expectations for risk and the reward an integrated communications strategy could provide.
“IDC suggests service providers and integrators must be geared with pragmatic tools such as best practice procedures, case studies, ROI, TCO and network assessment tools to measure companies’ VoIP readiness,” he said. “A lot of education and partnering will need to be done by service providers and enterprises in order to maximise their full return on this paradigm shift. As voice-based services are mission critical to companies, broadband and IP services providers need to position their offerings accordingly.”
Despite the move to use broadband for voice services Telstra remains the dominant business broadband provider and the corporation said it was now supplying wholesale DSL services to 180 Internet service providers around Australia.
Pacific Internet (PI) was one of them and managing director of the national ISP, Dennis Muscat, said that while broadband channel opportunities were growing, there was little sign of Telstra’s monopoly over the DSL market dissipating.
“Telstra Wholesale has over 1000 exchanges enabled for DSL,” Muscat said. “If you’re looking to be a reseller of DSL, the next best option is Nextep and Optus’ XYZ, which each have about 100 enabled exchanges.
“Because Pacific Internet is a national Internet service provider we must select an infrastructure partner that gives us the most comprehensive coverage. So we don’t have any choice but to select Telstra Wholesale. Not only is it a complete infrastructure provider but it has the depth of resources, skills, and complementary connectivity solutions that we require,” says Muscat.
“No-one else can offer what they do and in some ways you’re their prisoner if you want to be a serious player in this market. What we can do though, is choose complementary partners such as NEC’s Nextep, Optus’ XYZ or Request Broadband who have their own unique services.”
Muscat said that Pacific Internet currently had 7500 DSL customers and based on recently published figures that indicate an over all DSL market of 227,000 subscribers as of June, the company had a 3.3 per cent market share, while Telstra had 53 per cent.
He said PI has spent the past two years focusing on its channel partner program and now has 284 channel partners that contributed 32 per cent of all business broadband connections and 20 per cent of new revenue.
“The important thing when you have channel partners is to make sure you don’t get bogged down in administrative tasks in servicing them, so we have a fully automated extranet for that gives them access to sales tools, technical support, assists in the DSL service qualification process and provides a live commission report,” Muscat said.
Pacific Internet is in turn a channel partner of ADSL equipment provider Netgear. Under an agreement announced in April, PI will initially promote Netgear’s DG814 integrated DSL modem to the small-to-medium enterprise market.
This type of relationship has become commonplace in the broadband market and opens up opportunities for resellers on both sides of the fence (services and products).
While network/systems integrators, ISPs, ASPs and content service providers are delivering an ever-growing range of broadband services to business, the growing use of broadband OEMs rushing to produce products that can take advantage of the service and new opportunities are opening for their resellers.
Netgear’s national account manager and ISP specialist, Mark Churchill, said migration to broadband was inevitable, but there were still cost and security concerns, and a lack of knowledge of how it worked and integrated with existing infrastructure. This created opportunities to provide effective and easy-to-use solutions.
Competitor NetComm also has several significant supplier agreements with leading ISPs such as iPrimus, Netspace, Froggy and iHug which all now offer customers Netcomm modems and routing equipment.
Netcomm’s technical product head, Andrew Tricket, said small businesses were starting to realise that for relatively little outlay and virtually no hassle they could create reliable and secure networks using their broadband connection — Cable or DSL — and share (wirelessly or wired) devices such as printers, scanners, computers laptops and all of their information as though they had a bonafide Ethernet network set up.
While much of the focus of the broadband roll-out has been on business, home users will always make up the bulk of subscribers and online gaming is emerging as one of the home market drivers.
Later this year both Microsoft and Sony Computer Entertainment will launch broadband gaming services for their video games consoles and that will add to the growing data traffic caused by the increasing popularity of online PC games .
Several ISPs including the big four and expanding second-tier operators such as Internode are already geared up for online gaming including most of the major providers.
Internode uses its sister company, Agile’s national services network, which CEO Simon Hackett said was an ideal platform for the carriage of online gaming traffic for PC, Xbox Live!, PlayStation2 and other gaming services. There can be little doubt the broadband bandwagon is on the roll. It is now a case of identifying the opportunities it offers and grabbing them with both hands.