2011 Australia - The National Broadband Network - September

Publication Overview

This annual report offers a wealth of information on the trends and developments taking place in the e-government, e-health and e-education sectors. The report analyses the issues surrounding the growth of such services and includes global and regional information. Comprehensive information on the exciting developments taking place on a regional level is also provided.

Subjects covered include:

  • NBN Co and infrastructure;
  • Trans-sector thinking, approach and projects;
  • Deployment strategies
  • Competition and regulations
  • E-government market overview, analysis and statistics;
  • E-health market overview, analysis and statistics;
  • E-education market overview, analysis and statistics;
  • NBN service market share estimates for 2015, 2020.

Researcher:- Paul Budde
Current publication date:- September 2011 (4th Edition)

Executive Summary

NBN - full steam ahead into 2012

With the legislation in place significant progress has been made during 2011 in preparation for the rollout of the NBN.

The last major part of the complex puzzle relates to the arrangements with Telstra. Since the change in management in 2009 that company has embraced the NBN and embarked on its own business transformation process. Significant new steps have been taken, which are already positioning the company at the forefront of the new business opportunities that will arise once the NBN is in place. Separately, it has negotiated good deals with the government in relation to its infrastructure assets and the handover of customers from its old networks to the NBN.

The company is keen to see the NBN make as much progress as possible before the next election, since it stands to win a great deal if the NBN can move forward, both financially and business-wise. While the opposition has threatened the wind the NBN back, it will encounter major obstacles in doing so. First of all, Australians have indicated, over two elections, that they like the NBN; and, second, after the Telstra deal is done it will be very hard to convince that company to buy out NBN Co and start investing in FttH infrastructure on its own, based on a structurally separated business model.

Infrastructure

The NBN is extending its reach from the five initial release sites to over 30 of them within the next 12 months. The fixed wireless network will start next year and will be mostly completed by 2014. This is a less contentious issue, as both political parties roughly agree on this approach. Interestingly, several regional communities outside the FttH footprint are negotiating with NBN Co to fund their own extensions to the NBN in order to get proper fibre access.

The two satellites that will cover the very remote parts of Australia will be launched in 2014 and will be operational the following year. This part of the plan also appears to have bipartisan support.

So the political battle will be concentrated on the cities. Here the opposition would prefer to extend the life of the old technologies (ADSL and HFC) and have private companies supplying the infrastructure.

The wireless versus fibre debate has subsided somewhat, but it still lingers on among some politicians and the media. The reality is that not one telecom expert will say that wireless can substitute fibre. It simply goes against the laws of physics; but some people continue to fuel this debate.

The report covers in detail the various infrastructure technologies, as well as all the activities around the first release sites.

Economic and social issues

It is now also becoming increasingly clear in political circles that the real value of the NBN is not telecoms but national infrastructure, and this will assist the country in addressing a range of other issues such as healthcare, education, energy and environment. All of these sectors are undergoing a process of transformation and more ICT developments are needed in that process. The linear silo-based approach that these sectors have followed for the past 50 years is no longer appropriate to address the challenges that the economy and society are facing.

The NBN can offer a trans-sector solution, whereby the same infrastructure can be used for e-health, smart grids, e-education and so on.

Any cost benefit analysis on the NBN should be based on the social and economic benefits. Once that principle is established – something that is now also recognised by the parliamentary commission on the NBN, as well as by the opposition – a much clearer, economically-viable business model can be established by NBN Co.

The success of NBN Co should not be measured by how much money it can make from telecoms services; it should be gauged by how that NBN infrastructure can deliver those trans-sector benefits. Once that principle becomes accepted as the foundation of the NBN Co business model the political debate can move away from the discussion about whether, based on its current limited telco business model, NBN Co can survive or not.

The report discusses the use of the trans-sector model as the basis for cost benefit analysis. It also provides an overview of NBN Co; analyses its options and directions and provides an overview of the contracts awarded and projects underway.

The industry

Australia is the first country in the world where the whole industry will adopt a new plan for the future. In the past this has been based on ad hoc decisions, with little room for long-term planning. Competition survived on the crumbs that fell from the Telstra table, and on regulatory relief that often took many years to arrive and was frequently too late to help a starving competitive environment. Uncertainty was a major obstacle. All decisions depended on Telstra and there was little hope for individual initiatives.

The single most important element of the NBN is that it will provide certainty about future direction. There will be problems, and the outcome will not be perfect, but for the first time individual companies are far more in charge of their own destiny.

Of course, these changes will not happen overnight and there will be a transitional period during which Telstra and its competitors will have to cooperate; and this will require give-and-take.

The government has published a far-reaching regulatory regime change that makes it clear there will be no return to the old days – a time when the incumbent was able to game the regime, creating endless delays and stifling competition. It is essential for the regulatory regime during the transitional period to be based on transparency and equality. There should be no repetition of the regulatory gaming policies of the past.

Telstra also announced its support for the NBN and its willingness to work with the government. As well as this the company has put its weight behind the trans-sector concept, which will be the avenue to generating new revenue. Negotiations were launched with the government to investigate how Telstra could best participate. These negotiations have been very complex and tough, and they are still going on. An initial agreement to negotiate further was signed in late 2009, followed by the signing of a final heads-of-agreement in mid-2011.

The report gives overviews of government policies, the regulatory developments in relation to the NBN and to the transitional period, and the negotiations with Telstra. In addition it analyses how this will affect the industry and the competitive, innovative environment of the future.

Market forecasts 2015, 2020

The Australian telecommunications market will change dramatically over the next ten years. Accelerated by government policies, these changes will be driven by a total overhaul of the industry.

This will also transform the industry and developments such as cloud computing and the Internet of Things (IoT) will be accelerated.

The NBN will become the predominant infrastructure, and as a utilities-based network it will also provide its services to other sectors, such as healthcare, education and business. With these sectors involved we will see the industry developing specific new business models around infrastructure, ICT and retail. IPTV and other media and entertainment applications will start to play a more important role as well.

Telcos will have to decide where they want to play. Infrastructure will largely move to NBN Co, its contractors (eg, Telstra) and a few backhaul providers. Companies also have the opportunity to become the ICT providers to those other sectors. The larger sectors in particular will create a sizeable demand for value-added infrastructure services. The first of such contracts signed in the healthcare industry offers glimpses of such a future.

The NBN is attracting other (non-telco) companies and many international companies have already set up shop in Australia, or are ramping up their organisations here in order to be able to profit from this enormous new test-bed for the new services of the future.

All of this will help the industry double its size to around $80 billion by 2020.

Paul Budde

September 2011

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

Table of Contents

  • 1. Introduction and Overview
    • 1.1 Why we started the NBN in the first place
    • 1.2 Why shouldn’t we build the NBN?
    • 1.3 NBN national infrastructure, not just telecomms
    • 1.4 General Overview of the plan
    • 1.5 Economic reforms
      • 1.5.1 Fundamental change to the economy
      • 1.5.2 People issues
      • 1.5.3 Business modelling - the key to success of the NBN
      • 1.5.4 Recommendations of the 2009 Implementation Study
    • 1.6 Socio-economic benefits
    • 1.7 Where is the user in all of this?
    • 1.8 Why wireless broadband is no alternative to FttH
    • 1.9 Will Australia cash in on international interest?
      • 1.9.1 Global broadband focus is on Australia
      • 1.9.2 Overseas companies are already moving in
      • 1.9.3 Australian businesses should ready themselves for export
      • 1.9.4 Australia’s diplomatic service and Austrade need to lift their game
  • 2. Policies and Regulations
    • 2.1 Legislation passed Parliament (analysis)
    • 2.2 National Broadband Network (NBN) Regulatory Framework
      • 2.2.1 Introduction
      • 2.2.2 Bills passed House of Reps
      • 2.2.3 Key elements of the Companies Bill
      • 2.2.4 Key elements of the Access Bill
      • 2.2.5 The key points of the NBN amendments
      • 2.2.6 Impact of the amendments
    • 2.3 Regulatory reforms for the transition period
      • 2.3.1 Introduction of regulatory instruments
      • 2.3.2 Regulatory instruments - analysis
      • 2.3.3 Final Access Determinations for fixed line telecommunications
      • 2.3.4 Layer 2 bitstream on non-NBN Co networks
    • 2.4 Budget funding for the National Broadband Network
      • 2.4.1 Administrative and regulatory support
      • 2.4.2 Funding planned until 2016
      • 2.4.3 Funding for The Department of Broadband, Communications and the Digital Economy (DBCDE)
      • 2.4.4 Funding for the ACCC and ACMA
    • 2.5 Telstra Structural Separation Undertaking
      • 2.5.1 Introduction and comment
      • 2.5.2 Telstra’s undertaking
      • 2.5.3 Migration Plan
      • 2.5.4 The Australian Competition and Consumer Commission (ACCC) involvement in the NBN
      • 2.5.5 Telecommunications Universal Services Management Agency
      • 2.5.6 Reform delusions
    • 2.6 Sale of NBN Co
    • 2.7 Special access for smart utility services
  • 3. NBN Co
    • 3.1 An infrastructure company
    • 3.2 The role of NBN Co
    • 3.3 Service Oriented Architecture (SOA)
    • 3.4 Governance and management of NBN Co
    • 3.5 NBN co business plan
      • 3.5.1 Key highlights
      • 3.5.2 Rollout plan
      • 3.5.3 Introduction and costings
      • 3.5.4 Pricing and market assumptions
      • 3.5.5 Product offerings
    • 3.6 Analysis
      • 3.6.1 Can NBN Co do the job?
      • 3.6.2 NBN Co’s position needs to be clarified
      • 3.6.3 Will NBN Co honour its promise of a trans-sector approach to its infrastructure?
  • 4. Infrastructure Plans and Contracts
    • 4.1 The network plan
      • 4.1.1 Overall design and architecture
      • 4.1.2 The backhaul network
      • 4.1.3 Points-of-interconnect (POI) architecture
    • 4.2 External analysis of the Australian Fibre-to-the-Home (FttH) architecture
    • 4.3 FttH in new developments
      • 4.3.1 Broadband - FttH Greenfield Market (separate Report)
    • 4.4 NBN co contracts
      • 4.4.1 Fibre-optic contracts
      • 4.4.2 Network Operations Centre for NBN
      • 4.4.3 Contractors for first-build sites
      • 4.4.4 Nokia Siemens Networks selected for DWDM
      • 4.4.5 Data Centres
      • 4.4.6 IBM selected as systems integrator
    • 4.5 Other developments
      • 4.5.1 Testing network design in first release sites
      • 4.5.2 Smart grids and the NBN
      • 4.5.3 The Optical Network Terminal (ONT)
      • 4.5.4 IPTV versus IPTV+RF
    • 4.6 Analysis of the NBN Co infrastructure situation
      • 4.6.1 Is it smart to build massive concrete poles before the NBN?
      • 4.6.2 NBN Co to provide fibre in greenfields
  • 5. Rollout Strategies
    • 5.1 Introduction
    • 5.2 Let the roll-out begin - March 2011
    • 5.3 NBN Co
    • 5.4 Analysis late 2010
      • 5.4.1 Community engagement
      • 5.4.2 Opt-in/Opt-out
      • 5.4.3 Inhouse networking
      • 5.4.4 What about existing FttH users?
      • 5.4.5 Regionalised rollouts
    • 5.5 Pricing Issues
      • 5.5.1 NBN pricing infrastructure not telco-based
      • 5.5.2 Good NBN price will lead to very high uptake
    • 5.6 NBN penetration forecasts
      • 5.6.1 First NBN Retail prices announced
    • 5.7 Telstra to trial copper-fibre transfer
    • 5.8 Wireless broadband for rapid deployment
      • 5.8.1 NBN Co buys spectrum from Austar
    • 5.9 Fibre-to-the-apartment
    • 5.10 Other quick-win areas
    • 5.11 Deployment requires intelligent approach towards measurement
    • 5.12 Massive increase in efficiency, productivity and customer satisfaction
    • 5.13 Privacy is paramount
  • 6. First Release Sites and Black Spots
    • 6.1 Introduction
      • 6.1.1 Tasmania starts first phase of NBN rollout
      • 6.1.2 Second release sites in Tasmania
      • 6.1.3 First sites of mainland NBN rollouts
      • 6.1.4 Second-release mainland sites
      • 6.1.5 RSPs announced for trial projects
      • 6.1.6 VHA to work in trial area with fixed-line broadband
    • 6.2 Early indications of pricing
    • 6.3 First fixed wireless rollouts
    • 6.4 Regional Backbone Blackspots Program (RBBP)
      • 6.4.1 Background information
      • 6.4.2 Progress report
      • 6.4.3 Adelaide blackspots receiving high-speed broadband
    • 6.5 interim regional and remote satellite services
    • 6.6 NBN initiatives NSW
  • 7. Telstra
    • 7.1 Clearing the way forward
    • 7.2 Telstra needs to show industry leadership
    • 7.3 The company fully supports the trans-sector concept
    • 7.4 Telstra and government agree on NBN future
      • 7.4.1 Heads-of-agreement (HoA)
      • 7.4.2 Analysis of the HoA
    • 7.5 Telstra Structural Separation Undertaking
      • 7.5.1 Introduction and comment
      • 7.5.2 Telstra’s undertaking
      • 7.5.3 Migration Plan
    • 7.6 Historic analysis
      • 7.6.1 Transforming the company
      • 7.6.2 BuddeComm and Telstra
  • 8. Industry in Transition
    • 8.1 Transition of the telecoms industry
    • 8.2 Telco-centric approach needs to be abandoned
    • 8.3 Opportunities during the NBN transition period
    • 8.4 NBN opportunities for the main players
      • 8.4.1 Telstra
      • 8.4.2 Optus
      • 8.4.3 AAPT/Telecom New Zealand (TNZ)
      • 8.4.4 Macquarie Telecom
      • 8.4.5 Primus Telecom
      • 8.4.6 Internode
      • 8.4.7 iiNet
      • 8.4.8 Amcom
      • 8.4.9 TransACT
      • 8.4.10 TPG
      • 8.4.11 M2
      • 8.4.12 AUSTAR
      • 8.4.13 Crown Castle Australia (CCA)
    • 8.5 The submarine cable conundrum
  • 9. Will Australian Companies Seize the NBN Opportunity
    • 9.1 Do investors understand the industry transformation?
    • 9.2 Telstra made the first move
    • 9.3 Other telcos and ISPs are also moving
    • 9.4 Mobile profitability under threat
    • 9.5 What will be the profitability opportunity for the fixed telcos?
    • 9.6 Consolidation will reduce the number of players
    • 9.7 Smaller ISPs disappearing
    • 9.8 New NBN opportunities in ICT
    • 9.9 Layer 3 is where mass market competition will take place
    • 9.10 Internet companies: global and more of the same
      • 9.10.1 Telecoms 2nd-tier Market Shares
  • 10. Market Forecasts 2015,2020
    • 10.1 industry Transformation
    • 10.2 Fixed Infrastructure market
    • 10.3 Wholesale Market
    • 10.4 The retail market
    • 10.5 Penetration Forecasts
      • 10.5.1 Roll out penetration
      • 10.5.2 Broadband access penetration
    • 10.6 The mobile market
    • 10.7 The digital economy - trans-sector market
      • 10.7.1 Forecasts – 2015; 2020
      • 10.7.2 The digital media market
      • 10.7.3 Business Market Survey
    • 10.8 Business models and Mergers and Acquisitions (M&A)
      • 10.8.1 Fixed market scenarios
      • 10.8.2 Mobile market scenarios
    • 10.9 Forecasting notes
  • 11. Glossary of Abbreviations
  • Table 1 – NBN budgeted and actual expenditure – 2008 - 2015
  • Table 2 – Deployment schedule
  • Table 3 – NBN pricing schedule for access virtual circuit
  • Table 4 – NBN* uptake scenario forecasts – 2015 – 2020 (household penetration)
  • Table 5 - Total payments to be made to Telstra
  • Table 6 - NBN deal valuation cash flows ($)
  • Table 7 – Selected second-tier telco revenues by service – 2003 - 2010
  • Table 8 – NBN take up rates first release sites
  • Table 9 - Broadband uptake* scenario forecasts 2015 - 2020 (household penetration)
  • Table 10 - Impacts of the NBN on industry output at 2020 (% change)
  • Chart 1 – Market share size of NBN trans-sector market – 2020
  • Chart 2 – NBN services revenue share estimates by market share – 2015
  • Chart 3 – NBN services revenue share estimates by market share – 2020
  • Exhibit 1 – Economic benefits of broadband – overview of surveys
  • Exhibit 2 – Action plan, 2011 - 2012
  • Exhibit 3 – The Regional Backbone Blackspots Program – overview of rollout and status – 2011

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Paul, May I congratulate you on a very successful and enjoyable afternoon with the Minister. In providing the roundtable discussions between government and industry, it highlighted the strong interest by stakeholders in Broadband and its implementation but it also presented us with other issues and opportunities that we need to address.

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