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Tesla - the Google of the electricity industry 24 Jun 2016

One of the issues that I often spoke about during my time as a former director of the Global Smart Grid Federation  was that the electricity industry would have to go through a similar transformation process to the one the telecoms industry went through 20+ years ago upon the arrival of the internet. I warned that there was no doubt that eventually a Google-like company would step in and disrupt the electricity industry like Google and others did in the telecoms industry.

It is now 10 years later and we still haven’t seen decisive action from many of the electricity companies. It is extremely difficult for these incumbent players to actually make the transition without clear government direction, and, as a very senior electricity executive once said to me, it will be nearly impossible for the industry to do this on its own without strong government leadership. He argued that without strong action the electricity distribution companies might be relegated to simple pipe operators, and that in those circumstances there was little hope for the traditional incumbent players.

I think that we can now see the Google of the electricity industry appearing on the horizon in the form of Tesla.

Tesla is certainly not an unknown company in the industry in relation to electric vehicles and battery storage systems, but recent acquisitions are making it clear that the company is aiming for nothing less than an end-to-end power supply, storage and distribution supplier, totally based on renewable energy. As a new, innovative and cash-rich company it can, like Google, Facebook and others, expand these systems globally. So rather than disruption operating on a country-by-country basis, the change would be led by a global company. Obviously an electricity utility is rather different from an internet utility; and in relation to infrastructure it is far more complex. Of course national systems will have to be developed, but nevertheless a global concept has now been placed on the table. As with the internet companies, starting new systems from scratch is far easier and cheaper than upgrading the old big-iron grid and its systems.

We have seen that these internet companies have been able to reduce the traditional costs by up to 80% and they have wiped (or are in the process of wiping) total sectors. This process will no doubt be replicated in the energy industry.

Obviously there are many more issues attached to this. Electricity is an absolutely essential utility for our society and economy and within this transformation the big grid will remain an important element for many decades to come.

How this will all develop remains an uncertainty and it will be messy, but one thing is certain – things won’t be the same once Tesla starts rolling out its own end-to-end power systems around the world. Obviously it won’t happen overnight. It will take decades to accomplish. Furthermore, there is nothing stopping local utilities from partnering with Tesla and, by so doing, becoming part of the solution.

It is now approaching two minutes to midnight for the utilities to decide if and where they want to play in this new industry, and this will be a tough decision for them. Sitting on the fence and waiting for the government to show some form is leadership is no longer an option. Obviously if there are no clear government policies relating to where the country as a nation wants to go, those organisations will find it even more difficult to make the right decisions. In Australia current government policies are actually working against such a transformation process and this will make it an uphill battle for the organisations involved to plan their future.

Hopefully the move from Tesla will be a wake-up call for all involved to finally start making some serious decisions about the future of the electricity industry in each individual country.

Paul Budde

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The NBN in mid-2016 24 Jun 2016

In our city office we now have a fibre-to-the-basement (FttB) connection, delivering a service of very close to 100Mb/s – while in the Bucketty office in the Hunter Valley we have the 25Mb/s satellite-based Sky Muster service.

At the moment we use Sky Muster in the house and leave the office on our ADSL service, which, to be honest, has served us very well for more than a decade. We need to fully understand the satellite’s latency issue before we can consider the satellite service (which is obviously faster) for office applications such as our VPN and cloud applications.

So most certainly progress has been made with the NBN. After years of delays because of changes to the plans and the various associated troubles the NBN company now seems to be on top of the rollout and is rapidly delivering its FttN service across the country. And, yes, they can be congratulated for that.

As it now stands FttH will connect 26% of premises by 2020, while a further 44% will be served by FttN, and the remaining 30% will receive services via existing HFC networks. Using this approach, the government anticipated that 91% of premises connected to fixed-line infrastructure would receive 50Mb/s by 2020.

We remain disappointed with the government (rather than the NBN company) as they have abandoned the original plan of bringing FttH to 93% of the population. According to our analyses that would have future-proofed the digital infrastructure the country will eventually need. At a future date the current FttN and HFC networks will need to upgraded to a full fibre network (at least one that delivers a fibre connection to the doorstep from where it can be connected through a so-called distribution point (Fttdp) under the pavement into the home, basically delivering a similar service to the one we get in our Sydney office (FttB).

This upgrade is based, not simply on the speeds delivered over such networks, but more importantly on the costs of maintaining the old networks. This is already reaching a point where, in most cases, the FttH has become the preferred option among telcos around the world. We have often used the steam train analogy here. At the height of its success it could run at 220km per hour – very fast, even for today’s train services – yet maintaining these trains was simply no longer economically viable.

The NBN company is on record as having a positive view on the Fttdp, but the politics are not yet in place to allow this to happen on a larger scale. The Labor party has indicated it will deliver an extra 2 million fibre connections (FttH and FttDP) if it is elected. FttDP is further discussed in the analysis below.

There are also issues in relation to the HFC network. Developments in the USA in particular are starting to indicate that it is cheaper to upgrade to FttH than to upgrade the old HFC systems. This will also be discussed below.

While the NBN company is successfully rolling out its services – on track to connect over 3.1 million premises by September 2016 – they do encounter the predictable problems inherent in trying to upgrade an old network based on an old technology. The Central Coast of NSW is hit particularly hard, with ongoing problems due to a range of issues, including backhaul. Massive disruptions in both telephony and broadband are frustrating hundreds of people in this area. But problems of this type will eventually be resolved.

More importantly, once this all behind them the users will still be left with a second-rate network. While the government is claiming that today the majority of people are happy with a 25Mb/s service, the issue is not today, but over the next 3,5-10 years and beyond. I am sure the government is not making a $56 billion investment simply to satisfy today’s demand – one would hope that such an investment is based on a long-term plan.

Tellingly, the government doesn’t feature the NBN in policies such as smart cities and innovation. Any other government in the world would have linked the network to its policies in relation to high-speed broadband. If one talks about innovation this will, in one way or another, always involve ICT-based developments and there will be few start-ups and digital entrepreneurs that will be able to develop such businesses based on a second- rate network.

Furthermore, the business model of the NBN company is also starting to look shaky. It is no longer the premium infrastructure and it will find it difficult to differentiate itself from other developments – such as the FttB and FttH greenfield services from its competitors – as well as from further developments in mobile broadband based on improvements in 4G LTE and the upcoming 5G infrastructure. This means lower revenues for the NBN company. The question has already been asked as to whether it will ever be able to recoup its investments in the case of it being privatised, as is planned at the end of its journey. It will also be difficult to find the funds necessary to upgrade from FttN to FttH.

When the original FttH plan was launched we supported a regulatory ban on cherry-picking; however, with the abandonment of the premier infrastructure plan, the cherry-picking rule should be abandoned also, especially as private telecom companies are increasingly indicating that they see a market for the rollout of FttH, without going through the costly intermediate step of putting nodes in the middle of the network. These are becoming roadblocks towards a more modern infrastructure development. Under current regulation such projects are not allowed and as such are hampering innovation.

What do all these delays and second-rate plans mean? When Australia began the discussion on its broadband future back in 2005 a key reason to warrant national attention and national investment was that Australia had dropped to around the 25th position on the international level that measured national broadband services. Suburban, regional and rural broadband in particular was very poor. Telstra had a stranglehold on the market and there was little indication that this situation would change any time soon without government intervention.

When the NBN was launched in 2009 one of the goals was to get the country into the top ten of the international ladder. Now, in 2016, we have dropped to the 45th position. With the rest of the world now moving clearly towards FttH Australia is set to linger on at the bottom of the international ladder for many years to come. Yes, the situation will most certainly improve, but there is no chance of the country ending up in the top ten in the near future.

Does this matter? We would say yes, as internationally high-speed broadband is seen as an important economic development. It is essential in order to increase productivity, to become more competitive and to develop new high-value jobs. Given the digital disruption that is taking place because of technological changes, we need to make sure that Australian society and its economy are ready and able to transform into one that facilitates the new sharing and networking economy models.

After the mining boom it is clear that Australia needs to diversify and that our very poor level of productivity needs to be improved. And the digital economy is key in that. If we want to be competitive in our Asian and globalised markets we need to lift our digital profile among our trading partners, and the NBN is a major factor in that. We shouldn’t stop at the already out-of-date multi-mix technologies – these should be extended as soon as possible to a fully-blown FttH network, in line with what other developed nations are building.

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Analysis of the global telecoms industry in 2016 23 Jun 2016

The telecoms industry represents one of the most dynamic sectors in the world. Only 25 years ago 90% of all activities took place via telephone calls over fixed telephone lines. Now, within the broader ICT industry, telecoms is underpinning all of the new developments in relation to the digital, sharing and interconnected economies. It facilitates new social and economic developments in all sectors such as e-health, e-education, e-business, smart grids, smart cities, e-government, and so on.

Furthermore it is a key factor in improving people’s lifestyle, delivering a whole range of social benefits. And this is not just the case in the developed world, where the smart phone is now omnipotent. One only has to look at the effect mobile phones have on the lives and the livelihood of many of the people in Africa, Asia and South America. It is just mindboggling, even with simple applications such as SMS.

The impact on the business and professional markets is that ICT is increasingly becoming a critical business element in their day-to-day operations, and it is clear that many sectors and individual organisations will have to transform themselves if they wish to remain competitive and to participate in the rapidly changing business models in which ICT is becoming a critical business tool.

Close to 70% of the global population now has access to telecoms services through mobile phones, the internet and social media. This shows that the developments are very much grassroots-driven – in other words, this is demand- rather than supply-driven.

The importance of broadband

It is clear that the incumbent telecommunication providers have great difficulty keeping up with the demand in telecoms services. Some US$200 billion is spent every year to fix problems in their networks, and this is on top of their normal maintenance activities.

The new digital services that people and businesses expect require infrastructure that has high capacity, low latency, high levels of reliability, is secure, protects privacy and so on; and only fibre networks can deliver this. We already see that this year for the first time there is, percentage-wise, more fibre in the global telecoms infrastructure than copper, and this will slowly but steadily increase over the next 5 to 10 years. This also applies to mobile networks – in the end mobile networks are fibre networks with only a last mile wireless component.

Governments have begun to understand the critical need for high-quality broadband networks for their social and economic development, and they are developing policies that are aimed at improving the quality of their national infrastructure. I was the co-initiator of the UN Broadband Commission for Digital Development and globally there are now 140+ countries that have national broadband plans in place. Of course, implementing these plans is not easy, but good progress is made every year.

As a telecoms advisor to the UN, as well as to national governments, I have had personal experience with the development of broadband policies in the USA, UK, Ireland, Netherlands, Australia, New Zealand and Qatar, and it is very rewarding to see that several of these countries are among the world leaders in these developments.

The digital, sharing and interconnected economy

Developments, strongly facilitated by developments in the ICT industry, are leading to massive economic transformation processes. We see that whole industry sectors and traditional business models have been replaced by new ones. The key reason for these transformations is that in some instances up to 80% of the costs of those traditional business models can be removed.

These processes are relentless and are going to force other sectors to transform as well. Developments linked to this include cloud computing, data centres, data analytics (big data), machine-to-machine (M2M), the internet-of-things (IoT) and blockchain.

The latter, especially, will have an enormous effect on the financial market, and it is going to take out significant costs – in this case in transaction processes. How this will all pan out is still uncertain but the fact that nearly all banks are looking seriously into this is a clear indication that it will potentially have an enormous effect on their businesses.

By removing the complexity from these systems others can now far more easily participate, and the question comes up as to whether these banks will still need to be the middle men in many of these processes. In the digital, sharing and interconnected economy other arrangements for transactions can also be developed, and bitcoin (as a subset of blockchain) is one such option. Its success has so far been limited mainly to criminal activities and the so-called dark internet, but this doesn’t mean that our inventive minds will not come up with better, more law-abiding applications in the near future.

Mobile payments are revolutionising the financial world in developing countries. In these countries most people don’t have a credit card – often don’t even have a bank account – and so entirely new financial systems are being developed through their mobile phones, linked to mobile payment systems, where the banks are no longer necessarily the leading parties.

In the communities-based sharing economy we see, in some cases, money disappearing altogether – people exchanging services in-kind – and, in other situations, the sharing economy facilitates extending voluntary services within the various communities. This will no doubt lead to other social innovations being developed.

Looking at all of the above the future of telecoms is very bright indeed, as people will want to access more and more services through telecommunications. This will drive the already massive investments that are taking place worldwide in infrastructure, devices and services:  ICT investments are estimated at around US$3.5 trillion every single year.

Paul Budde

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The government’s $50 million competitive smart city and smart suburb program 22 Jun 2016

When the government launched its Smart City Policy a few months ago, we gave it the thumbs up. Subsequently the government has now allocated $50 million for smart city and smart suburb initiatives from local councils, and I believe that this again will be an important initiative to help Australian cities benefit from the social and economic benefits that smart cities have to offer.

But, as some of the critics of the plan have indicated, it is essential that this policy be implemented in a strategic way, with the citizens at its core. Furthermore, in the past most smart city initiatives ended up in a situation that we called ‘death by pilot’ – the projects were not upscalable and not replicable because they were not developed within a strategic master plan.

The $50 million currently allocated does need to be spent in a strategic way. This is now much more achievable, as over the last few years various initiatives from local councils, industry and the R&D community have provided us with the right ideas and tools to enable us to maximise the benefits that can be obtained from this national policy and the grants linked to it.

In our analyses and reports over the last few years I have regularly focussed on smart city developments. My involvement in this market goes back to 2001, when I had a meeting with 75 councils from around Australia, entitled The Broadbanding of Local Councils. Obviously since that time the focus has broadened and smart cities now include:

  • circular economy (waste, water, energy, smart buildings, etc)
  • the digital economy (interconnected, sharing, digital)
  • mobility (transport)
  • healthcare (e-health)
  • future capacity building (new jobs, education, R&D, innovation, start-ups, new tax revenue)
  • smart buildings and precincts

I have also been actively involved in many of these developments overseas: Barcelona, Amsterdam, Milan, Tokyo, Kuala Lumpur; and also with the international GSC3 Alliance, with whom we will be organising an international conference in Sydney in November. This will allow us to bring best international practices to Australia, to benchmark ourselves with the best in the world, and to work with other international cities to establish KPIs and other smart city measurements.

Next to connectivity, energy is a key element of any smart city, so we also looked at smart cities within Smart Grid Australia. Another initiative I took, with the assistance of Telstra’s CEO Andy Penn, was to look at an industry-collaborative platform of the national and international business leaders in smart cities – such as telcos, utilities and ICT companies – who can assist local councils in building the right business and investment models and procurement systems that are better-suited for multifunctional smart city projects.

Our approach with this industry collaborative is rather different from other commercial offerings, in that we specifically place the community outcomes above those of the individual companies involved. In this way we can deliver the best outcome for each council. In the end a smart city is all about its people. It will be the people that will make the city smart. Smart cities need to be led by what its people expect from them. Organisations involved in this approach have all committed to this.

They are also committed to working with local councils to facilitate a locally-based industry platform that is open to local businesses who wish to participate in these projects.  The collaborative has made a commitment to mentor and foster local start-ups, entrepreneurs and local suppliers for the longer-term. The aim is to create long-term new economic income through local businesses, which in turn will create local innovations and local start-ups.

And now, in my role as part-time executive director of the Australian Smart Community Association (ASCA), I can see that we also are in an excellent position to work with the 40+ local council members of this organisation on the concept of creating smart councils – based on integrating the bureaucratic systems into a holistic entity that is able to develop multifunctional (rather than silo-based) smart city projects.

Smart councils need to be led from the top, with the mayor and the councillors being the key persons to engage with the citizens. After all, it is for people that these smart cities are built. The CEO/GM need to manage the internal transformational process that will lead to the formation of a smart council.

Without a smart council, you cannot have a smart city. As mentioned, we have seen many projects fail over the last decade (death by pilot) because a smart city master plan was not in place.

Smart Grid Australia also had 12 research organisations involved in the alliance and I am in the process of bringing them into this smart city collaborative as well.

Altogether this will give Australia all the elements needed to develop socially and economically viable smart cities. These include first of all the local citizens, then the local councils, large corporations, local businesses and local start-ups and entrepreneurs, as well as the R&D community.

It is no wonder that when the federal government launched their Smart City Policy they were very pleased with the progress that we had already made, very much along the lines of the collaborative model that they presented in their policy document.

Part of their policy is a $50 million competitive smart city and smart suburb program for local councils, and, with the group assembled around it, ASCA is in a prime position to maximise the outcome of the government’s initiative. And we are keen to work with the government to make this happen.

We would like to see the government use the concept of live city labs – real-life projects that can function as demonstration models for other cities, councils, industry, community groups and so on. Different collaborative models can be built around one or more of the different smart city elements listed above.

Industry can participate in these models on a collaborative basis; and at the same time different groups can test different models with the aim of the best solution winning. At that stage these projects become upscalable and replicable.

Another key element within this government initiative should include a focus on the development of national standards for interoperability, operating systems and data hubs. By using these live city labs, we avoid the issue of each city trying to invent its own wheel.

The labs will also assist the local start-ups, and in addition it will be the platform for schools to give their students a glimpse of what sort of new jobs and skills will be needed for the future development of the city.

In all, very exciting times ahead for those involved in the development of smart cities.

Paul Budde

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Fiji’s telecoms sector is a leader in the Pacific region 22 Jun 2016

Fiji is a leader in the Pacific region in terms of development of its ICT sector and investment in telecoms infrastructure. However Fiji is periodically affected by tropical cyclones which can devastate the country’s infrastructure. Cyclone Winston hit the country in early 2016 and wrought considerable damage which destroyed homes, schools, buildings, power lines, telecoms infrastructure, agriculture and so forth. In the wake of the cyclone there was around $200 million worth of damage done to crops which caused food shortages and prices to escalate.

Up to 80% of the population lost power. This affected a large number of landlines as they largely share poles. Vodafone Fiji also reported damage to a large number of cell sites. Fortunately some of the mobile base stations across Fiji had back-up power generators and these networks became crucial for providing telecom services to relief workers and the myriad teams of people organising the clean-up and recovery work.

Looking forward from the cyclone, Fiji has been urged to take the opportunity to rebuild the country in a manner more suitable to a cyclone-prone region and to consider building shared infrastructure. Telecoms companies in particular were highlighted by Fiji’s Attorney General as one sector that could consider shared infrastructure as the islands are so small to service. In addition, he suggested that more underground cabling could be installed as these are protected from dangerous winds.

Generally, Fiji is one of the telecoms leaders in the Pacific region, along with Papua New Guinea. Similar to many developing nations, it is heavily reliant on mobile technologies rather than fixed lines. The percentage of unique mobile subscribers in Fiji sits at around 69%. Vodafone Fiji Limited (VFL) and Digicel Fiji are the major mobile operators and the only MVNO is Australian company, Inkk Mobile which operates on VFL’s network.

Efforts have been made to reduce mobile services pricing in recent years and in 2016 regulatory changes introduced by The Commerce Commission saw a reduction in mobile rates for interconnection services and Off-Net retail prices. This will result in the price of mobile calls across the networks declining by around 45%.

Tourism is one Fiji’s most important industries and there is strong demand for better communications - especially from isolated islands with resorts. This may be resolved over the next few years as the mobile operators heavily invest in 4G networks. The GSMA has forecast that by 2020 Fiji will have more 4G connections than 3G and will account for 38% of the Pacific regions overall 4G market share.

For detailed information, table of contents and pricing see: Fiji - Telecoms, Mobile and Broadband



Progress ahead for Lebanon’s fixed and mobile broadband markets 21 Jun 2016

Lebanon’s mobile infrastructure has been primarily focused on 2G and 3G networks in recent years. However this is set to change with The Ministry of Telecommunications (MoT) launching a “2020 Telecom Vision” initiative in mid 2015. While only around 16% of Lebanon has 4G mobile coverage, both Touch and Alfa are planning to upgrade and expand their 4G networks during 2016. Touch has commissioned Huawei and Nokia for the work, while Alfa has also contracted Nokia along with Ericsson.

Improvements in mobile infrastructure will hopefully overshadow stalled development of the tendering of Lebanon’s mobile network management contracts. The government announced in mid 2015 that a tender process would be held for obtaining the contracts and a final decision would be announced in the following September. However various delays and issues regarding tender applications means that in 2016 decisions regarding the ongoing management of the mobile networks has not been made. In the interim, Kuwait’s Zain Group continues to manage Touch Lebanon and Egypt’s Orascom continues to manage Alfa.

The 2020 Telecom Vision project by the MoT will also see improvements in fibre-optic infrastructure with plans for the entire country to be covered by 2020. Lebanon’s subscriber base for fixed broadband services is growing and in 2016 there are well over half a million subscribers to both DSL and, more recently, Fibre-to-the-Curb (FttC) networks.

Improvements to broadband infrastructure will also boost the already flourishing digital economy in Lebanon. Lebanon has a well developed start-up culture that has attracted international interest and recognition. The digital media sector in Lebanon is also growing strongly, with Lebanon citizens large users of Facebook. However there is some evidence that social media users in Lebanon, as well as the Middle East, are beginning to turn away from services like Facebook and Twitter and transition to mobile messaging applications Whatsapp and Snapchat instead. This is largely due to citizens concerns regarding security and privacy and a general feeling that their online use is being monitored by companies and government alike.

Overall, the ICT sector has grown significantly in Lebanon. With the government supporting and financing the 2020 Telecom Vision project we should see some great progress over the next few years. Infrastructure improvements will not only assist Lebanon in terms of communication delivery, but also grow its mobile data usage, along with its promising start-up culture. The pressure placed upon Lebanon by the influx of refugees may also be assisted by ICT improvements and digital technologies.

For detailed information, table of contents and pricing see: Lebanon - Telecoms, Mobile and Broadband



Digital technologies assist refugees in the Middle East 20 Jun 2016

Lebanon is just one country in the Middle East which is coping with an influx of refugees, primarily from Syria. Around 1 million Syrian refugees now reside in Lebanon and aid agencies are helping countries like Lebanon manage the impact on the host country. In 2015 the United Nations estimated there were well over 4.2 million displaced Syrians and most of these have turned to the countries of Turkey, Lebanon, Jordan, Iraq and Egypt.

Interestingly it is the use of digital technologies which is helping to manage some of the logistical side of the issue. According to an article in Computer Weekly, refugees are now digitally registered upon reaching a country and their Syrian ID cards are scanned by barcode. In order to verify the identity of a person the UN is using Iris Scanning - with around 1.6 million people already verified this way.

In order to deliver aid, such as essential food and personal items, there is an increasing use of smart card vouchers allowing the refugee the opportunity to purchase required goods themselves. Lebanon is one of the key countries to use this method to provide aid and financial assistance. Jordan has also begun offering Iris Scanning instead of smart cards at Point of Sale (PoS) to allow a refugee to withdraw cash from banks or purchase goods from supermarkets.

Data collection and analysis is imperative to managing such a large amount of displaced persons spread across multiple geographies, and the numerous aid agencies involved in the effort are using mobile technology for data collection. The World Health Organization is also exploring the idea of developing personal health records for refugees on mobile devices that the person can take with them.

Mobile and online technology offers a displaced person the ability to communicate with family members and keep in touch with news and information. These are just some of many examples which demonstrate how digital technologies have become a very important tool for refugees to obtain assistance in time of need.

Kylie Wansink

Senior Analyst – Global and Middle East Markets

For related information, see separate report: Lebanon - Telecoms, Mobile and Broadband



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