NBN - Opening up large new investment opportunities
The Australian government’s decision to launch a $43 billion national fibre-to-the-home broadband network is an unmistakable indication that broadband has been acknowledged as essential infrastructure. It fulfils a national purpose as its trans-sector multiplier effect delivers massive social and economic benefits in healthcare, education, energy and the environment.
A digital economy requires an open broadband infrastructure, and for that infrastructure to work it is essential that it be built by a national utility (in Australia, NBN Co). There are certainly questions concerning the business model and the investment plan; however widespread support exists for the visionary plan.
The most important ingredient in the success of the Australian National Broadband Network (NBN) will be the infrastructure company running the network, NBN Co. It has to make the critical architecture and design decisions that will form the basis of the new infrastructure for at least the next 25 years. It will be essential for the network to facilitate the vision laid down by the government, which includes multiple use of the network by other sectors such as healthcare, education, energy, etc.
At the same time the company will need to ensure that it remains an infrastructure company and does not become another telco.
This report also discusses issues around technologies such as network operation centres (NOC), the optical network terminal (ONT) and IPTV versus RF video.
From vision to implementation
After the vision comes the actual design and rollout of the network.
Australia was the first country to get the national purpose vision right. The USA soon followed and is now showing real leadership as well. The Netherlands and New Zealand are also on the right track. The European Union, OECD and United Nations have all given their support to this new concept. Economic and trans-sector innovations are now key items on the political agenda of many countries.
However, when it comes to deployment there is no silver bullet and each individual situation generates its own set of unique implementation models.
The report discusses a new approach, which applies across infrastructure projects and looks at the potential synergies between the building of roads, sewerage systems and water and gas pipe networks, as well as telecoms and electricity networks.
New social and economic policies and strategies need to be taken into account in the design and architecture of the infrastructure. Pragmatic solutions must be developed to maximise the use of existing infrastructure and other resources. Under-served areas need to receive priority and local communities and local government can play a key role in this. Wireless broadband will play a major role as well.
These early projects could also be an ideal testing ground for trans-sector applications, and this report explores these at a high strategic level.
Transition period and regulatory reforms
The NBN will certainly change the game. While there will be a transition period where some of the old activities will persist there will be an increasing move towards the new environment. The players will begin to realign themselves and, in preparation for the new world, many will start changing their business plans well before that time.
Nevertheless, while accepting the inevitability of a transitional stage, the government has produced a far-reaching regulatory regime change publication that leaves no doubt that the old days (when the incumbent was able to game-play the regime, creating endless delays and stifling competition) have gone forever. In the end the outcome of the new framework will be aligned with the goals of the NBN, and negotiations and discussions aimed at shaping this new environment are already taking place.
Australia will be the first country in the world in which the entire industry will adopt a new plan for the future. In the past strategies were based on ad hoc decisions and there was little room for long-term planning. The market survived on the crumbs that fell from the Telstra table, and on regulatory relief, which often took many years to eventuate and was often too late to help a starving competitive environment.
Industry transformation for Telstra and the other players
In the past uncertainty has been a major obstacle. All decisions depended on Telstra’s response.Those who developed their own independent plans quickly discovered that Telstra’s reach was long and deep. Examples of this are TransACT in Canberra and the Unwired service. Even larger companies like Optus and AAPT (Telecom New Zealand) struggled to set their own course.
The single most important element of the NBN is that it will provide certainty for the industry about future directions. There will be problems, and the outcome will not be perfect, but for the first time individual companies will be far more in charge of their own destiny.
Soon after the NBN was announced in April 2009 Telstra realised that change was inevitable. It reacted swiftly. A new management team was appointed, led by the new CEO, David Thodey. Telstra immediately declared its support for the NBN and its willingness to work with the government. The company also put its weight behind the trans-sector concept, which will be the conduit to new revenue. Negotiations have been tough but a Heads of Agreement was signed in June 2010 and support for the government’s regulatory reforms followed in October that year.
New revenue streams from new sectors
Initiatives are already being undertaken in the areas of smart grids, education and healthcare. Further action is expected to ensure that the business that will be generated from these sectors can be taken into account within the NBN business plan. This report provides an overview of the key sectors, plus a summary of the first trans-sector projects initiated by the government.
For more than a decade the traditional media has been on notice in respect of the changes they will be facing with developments in the digital media market.
So far they have failed to take decisive action – partly due to their fear of cannibalisation, and partly because their business models do not cater for swift business action. This has brought about a decline in their revenues, but, far more importantly, they have failed to seize a share of the new market, which is now dominated by newcomers such as Google, YouTube and Facebook.
The NBN is the next stage. Here again the media have largely been absent from this debate, but the NBN will create changes, with new revenue options. The traditional media players can take a leadership role, looking at the trans-sector opportunities the NBN has on offer – or they can simply copy their outdated models onto the NBN, perhaps by using the wholesale services of a telco. However, for the next decade, their attention will mainly be on Digital TV rather than on the NBN.
E-health may become an area in which key killer applications emerge – applications that utilise truly high-speed broadband networks. By 2020 this may perhaps account for as much as 25% of the NBN’s income.
All of this will assist the industry to double its size to around $80 billion by 2020.
The Australian government is leading the way in strategic trans-sector thinking, linking e-health developments to the NBN. Early diagnosis and after-treatment patient monitoring are two areas where significant synergies may be found, using applications provided to users at home.
As the financing of the Australian public health systems becomes increasingly costly an opportunity exists to lower these costs through more effective use of web services for healthcare consumers. With widely available and cost-effective high-speed broadband infrastructure e-health will be in a position to enable all customers to benefit from advances in medical technology and medical services.
Over the next five years the use of IT and telecommunications technology within educational environments will also increase dramatically, as high-speed fibre-based broadband becomes widely available in Australia. Simultaneously, the capability of Internet services in relation to e-education is set to increase enormously over the next decade as well. To a large extend this trend will be driven by schools, universities and their educational staff.
With its large landmass and relatively small population Australia is an ideal market for remote education services. As such Australia is home to many successful e-education service providers, as well as being a relatively important market for e-education services.
The Australian government already offers its citizens relatively sophisticated e-government services and, as with education, the establishment of a fibre-based broadband network may see the government improve and broaden the range of web services for which it is responsible.
Australia, therefore, is a fascinating and relatively advanced market for both e-education and e-government services. This report discusses related telecommunications infrastructure developments as well as trends and innovation related to the e-education and e-government services.
Many exciting developments will take place in 2011 in the area of smart grids. These developments will stimulate others to move on from demonstration projects and to progress from smart meter rollouts to smart grids.
Events that started in Australia in 2005 have grown into an international groundswell, with BuddeComm involved as a leading consultant with the governments in USA, UK, Netherlands, Australia and New Zealand, as well as with the United Nations (ITU/UNESCO).
The key to the concept is to release untapped social and economic benefits by using broadband as an affordable utility infrastructure to deliver a range of trans-sector services (healthcare, education, smart grids, etc). The industry has been working on the applications for over a decade but only with strong government leadership can these benefits be realised.
Broadband services uptake scenario forecasts of household penetration – 2015 - 2020
Broadband service charge p/m
(Source: BuddeComm estimates)
Note: This is different from the rollout uptake as the government is committed to 100% penetration
Data in this report is the latest available at the time of preparation and may not include the current year.