2007 Australia - Converging Industries

Publication Overview

This report provides high-level overviews and strategic analyses of the developments in the converging markets, industries and technologies.

The subjects covered in the report include:-

• Transition to a Digital Industry
• Telco, ISP and IT Industries
• Internet Media Companies
• Triple Play Models
• Analyses of Media reforms
• Net Neutrality Analysis
• Home Media Centres
• Home Networking

Executive Summary

In 2006 BuddeComm’s best seller was our new report on digital media developments.

This year we have produced four reports on this topic, an indication of the enormous developments that are taking place in this market.

It is interesting to note that we are rapidly moving from ‘convergence’ to ‘digital media’. It was not so long ago that we began to talk seriously about converging markets, industries and technologies. However that time has passed and we are now talking about the results of convergence rather than the process.

The traditional companies involved are still struggling with the transition. They are being forced to deal with the Internet media companies, who simply skipped the convergence phase and jumped straight into the digital media market.

During the process of establishing themselves in this market these new companies were confronted by a hostile traditional industry that maintained the attitude – ‘you must accept our business models and conditions and we will give you some of the crumbs that fall off the table.’

The music industry was the first to find out that it could be bypassed, and now it is the film and video industry that is scrambling to come up with an answer. Rather than embracing the brave new world of digital media they responded in the same way as the music industry – with denial and law suits against the Internet companies. Their money would have been better spent creating their own models, instead of wasting time in court.

The converging industry needs to look at new business models that will increasingly be led by their customers. The ‘take-it-or-leave-it’ approach will no longer suffice. Subscription models need to be changed, and new models such as triple play must be developed further.

The government, also, has to deal with this convergence, and it will need to align its policies accordingly. Government is not well-known for leading change, so we are now facing a situation in which the digital media are developing much faster than the related policies.

Interesting developments are also taking place within the home environment. Here the convergence between the various consumer products has just started, and a major battle will take place over the next five years. Industries involved include: IT, telecoms, media, utilities and consumer electronics, as well as services industry such as networks, securities, etc.

Key Highlights:

• To a large degree convergence has been bypassed by the digital media that have arrived in the market, driven by the Internet media companies.
• Significant work still needs to be done by the traditional players to better position themselves as leaders in this market.
• The telcos need to quickly get their house in order and Telstra’s NGN program is a major factor in this. Also, that company’s rollout of FttN is crucial to their preparations for the digital age.
• The movement of services closer to the edge of the network is becoming possible by the extraordinary growth in the capability of chips and software, and by much higher bandwidth capacities. Not only will new networks consist of federations of connected software and storage ‘objects’ concentrated in completely new network locations; mobile ‘service in a box’ devices will also appear.
• The traditional media companies are slowly moving forward. They are using their traditional media such as TV, newspapers, magazine as a launching platform for a range of extra (niche market) multimedia services.
• The Internet media companies came out nowhere and are now leading the field. They include: Google, Yahoo, Skype, eBay, MySpace, Second Life, Flickr – and, locally, Sensis, ninemsn, Fairfax Digital, Legion and Destra.
• Net neutrality may not be a big issue in Australia at the moment, but under a monopolistic or duopolistic market structure, it could rear its ugly head.
• Government policies should be aimed at stimulating the development of applications, particularly in the social, healthcare, education and energy sectors.

This report provides high-level overviews and strategic analyses of the developments in the converging markets, industries and technologies. It gives further information on:

• Possible scenarios for the digital industry, where services move further to the edge and to more central server farms.
• New models that need to be deployed for the convergence between telecommunication, media and IT markets.
• The changes in the telecommunication and media markets that are being forced upon the industry by the new emerging Internet companies.
• The business model that will deliver these integrated products – known as the triple play model, in which voice, video and data applications are delivered over one single access subscription.
• The media reforms that have been discussed for over a decade; the watered-down version that was accepted in 2006 but has still not been implemented in 2007.
• The principle of network neutrality which allows Internet users to access any web content or applications they choose, without restriction or limitation.
• Media centres, which are at the heart of a digital home.
• Home networking is trailing residential broadband take-up rates by around five years, but they are slowly penetrating deeper into the market, utilising wireless and broadband power line technologies as well as the more traditional Ethernet.

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