2009 Australia - Broadband Market - Overview and Statistics

The report reveals the proposal from the government to invest $43 billion in a national Fibre to the Home broadband network is a clear indication that they believe broadband infrastructure is a collective good. With its trans-sector multiplier effect it delivers massive social and economic benefits. The second major component of the proposals relates to reform of the regulatory regime for the telecommunications industry. These reforms aim to improve competition, strengthen consumer safeguards and reduce bureaucratic overheads imposed by the state industry regulator. Crucially the reform may include measures to address Telstra’s vertical and horizontal integration, such as functional separation or limitations to the cross-ownership of fixed-line and cable networks and media assets

A trans-sector approach is required to guide us through the development of the NBN. It is critical to look across a variety of industry sectors to create synergy. There are significant opportunities to utilise new telecoms networks for e-health, e-education and smart grids.

With respect to broadband infrastructure, Australia desperately needs to foster open networks to support competition. The unbundling of the local loop and the installation of DSL equipment by third parties within Telstra’s exchanges has resulted in a significant increase in competition. The development of a wholesale-only national fibre optic network based on open access principles is likely to secure these gains. However in order to satisfy demand for bandwidth core network backbones need to increase in capacity, perhaps as much as a hundred fold from their current capability. In fact some industry commentators contend that with increased state investment in the backbone potentially there would be little need to invest in the fibre optic network from the telephone exchange to the premises. This component would look after itself in a normal commercial fashion, mostly without the need for any subsidies.

Network operators currently utilise the copper access network to provide DSL based broadband services and the HFC cable network to provide similar products. While the government plans for a wholesale based national broadband network may change fundamental aspects of the telecoms industry in Australia, the copper and HFC based network will continue to co-exist alongside the fibre based networks for the foreseeable future.

Though there are roughly 200 ISPs in Australia and the retail broadband market in Australia is dominated by a small number of firms. Telstra provides nearly 45% of services and has roughly four times as many retail subscribers as the second largest player Optus with around 11% of the market. iiNet and TPG and Primus are other major players and each has around a 5% share. The remaining 30% of the market is shared between around 180 small and medium sized providers. Consolidation in the retail ISP market has occurred with a number of mergers in the last two years. The most notable of these deals was between iiNet and Westnet and between TPG, Soul and Chariot Internet.

Of critical importance to ISP’s is whether to further invest in DSLAM infrastructure as the fibre optic based national broadband network is built. Further investment will enable ISP’s to directly connect subscribers to their network rather than relying on purchasing wholesale services. However in the longer term the national broadband network may render this investment obsolete as subscribers are migrated to the fibre network.

There are two HFC network operators in Australia, Telstra and Optus, both serving customers in the large major metropolitan centres. By early 2009, we estimate that there were 830,000 cable broadband subscribers, a penetration rate of around 15% of the total broadband market in Australia. Telstra has indicated it will seek to expand the number of services it provides over its HFC network to compete with fibre-based services provided on a wholesale basis by a NBN operator. Telstra plans to launch very high-speed Internet services in Melbourne by the end of 2009. However, if the price of fibre-based services provided by the NBN operator is attractive to Telstra relative to the cost of servicing subscribers through an upgraded HFC network, then we may see Telstra abandon a strategy to upgrade the HFC in other major centres.

With respect to municipality broadband, councils and communities are beginning to understand the social and economic benefits that broadband can bring to their communities. It is therefore of critical importance that cities are taking charge of the development of their knowledge-based environments. A proactive local government is a vital element in the development of broadband, to the point where it can begin to deliver community benefits in terms of education, healthcare, community services and job creation.

The statistical sections of this report provide broadband statistics relating to the number of subscribers and market shares of major providers as well as additional data relating to DSL, cable and other broadband technologies. Of particular note is that the wireless broadband market is currently booming and this trend is expected to continue into 2010.

In 2008 fixed broadband access among Internet household in Australia stood at around 67%, trailing the leading broadband nations, such as Denmark, Netherlands and Switzerland, which are approaching 100%. New Zealand lags further behind though both countries are like to close the gap due to reform of their respective telecommunications industries. At the beginning of 2009 only 26% of broadband connections provided peak download speeds of 8Mb/s or more, up slightly from 20% at the end of 2007. Australia lags its peers with respect to slower broadband connections too. In early 2009 around 51% of broadband connections deliver speeds of 1.5Mb/s or more, up from 35% at the end of 2007.

The business market has been quick to embrace broadband – by 2009 the vast majority of the business sector had made the transition. Further growth is expected moving into 2010 despite difficult economic conditions in Australia. As business users gradually move to faster broadband access via ADSL2+ and, when it’s built, services from the fibre based national broadband network, businesses are increasingly embracing new broadband applications.

In 2008 business broadband usage increased by 143% from just over six million gigabytes downloaded in December 2007 to over fifteen million gigabytes downloaded in December 2008. Over the same period household usage grew by only 24% to 66 million gigabytes.

However business users have been earlier adopters of several broadband media services and in 2009, despite difficult economic conditions, household users may increasingly take up similar services, most notably, IPTV. However pricing of broadband media services is critical for household users. As such the emergence of an economically attractive revenue model based on advertising or other forms is critical.

Data in this report is the latest available at the time of preparation and may not be for the current year.

The following notes provide some background to our scenario forecasting methodology:

·         This report includes what we term scenario forecasts. By describing long-range scenarios we identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band.

·         The projections shown in the tables in this report are based on our own historical information, as well as on telecommunication sector statistics from official and non-official, national and international sources. We assume a possible deviation of 15-20% around this data.

·         All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities.