Paul Budde: This week on the BuddeBlog

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This week on the BuddeBlog (free) ….
Paul writes about the…Fibre and digital media – the European topics
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BuddeBlog - Fibre and digital media – the European topics
Value-added ISPs are starting to arrive
Will Hutch do the trick
Finland slowly ditching dial-up Internet
How to spend New Zealand’s Yellow Pages money
Can we stop the broadband train crash?
Broadband action time for local councils
Digital Media Policy Vacancies
Discounted Reports this Week – normally US$40 – this week US$5
New Caledonia - Telecoms Market Overview & Statistics
Optus - Company Overview and Operating Statistics
In Focus - Global - Digital Media - Advertising Overview, Statistics & Forecasts
Hot Topic - Digital Media and Convergence

Fibre and digital media – the European topics
This week’s blog has links to free reports that are our contribution to the discussion on the topics of broadband infrastructure and digital media. We hope this will lead to a successful implementation of broadband infrastructure, not only in Australia and New Zealand but also in a wider international context.

A sequel to the event has been planned. A virtual conference will take place between digital media experts in the Netherlands and Australia – courtesy of Cisco, who will make available their recently opened telepresence centres in Amsterdam and Sydney. Those of you interested in both the Netherlands and in Australia, please have a good look at the Netherlands - Digital Media Developments report.

The BuddeBlog includes links to these free reports:
• Netherlands – Fibre-to-the-home Developments
• Netherlands - Digital Media Developments
• Europe - Travelogue European Trip March 2007

I hope you enjoy all of this information and that it will assist you in making the right policy and business decisions in the exciting world of fibre networks and digital media.

Paul Budde

Value-added ISPs are starting to arrive

I think it took 10, maybe 15, years to get my message across – that telcos and ISPs had to move into the value-added services market.

I began this missionary work in the 1980s when videotext, the predecessor to the Internet, was launched in Australia. But things got more serious when I became one of the inaugural directors of SPAN, since incorporated into the Communications Alliance.

It was (and is) my argument that access and basic services are commodity products that will always be under pressure, and very vulnerable to the whims of the network provider. On several occasions Telstra has changed the rules, with the stroke of a pen, sending many telcos and ISPs to the wall as a result.

I revived my crusade a few years ago, promoting new business models such as triple play, that is, incorporating a range of voice, data and video services in one access package. Admittedly a hiccup occurred when some of the players thought that throwing in TV as the video service would do the trick. This has caused some problems for the early players in this market – notably, in Australia, Reeltime. But that is all part of a long learning curve within the industry.

We are at last starting to see the first value-added packages entering the fixed market. True, since the late 1990s the mobile operators have been trying to get a foothold in this market, but so far their business models have not proved particularly successful.

Perth-based ISP iiNet announced a video-on-demand agreement with Fairfax Digital and Singapore''s Anytime group. The deals will see iiNet acting as the exclusive ISP promotional and billing partner for a new VoD service, featuring content from Anytime. The deals also include additional promotion for iiNet through the Fairfax Digital network.

At the same time Hutchison''s X-Series mobile Internet service also unveiled its new alliance with iiNet. If an X-series customer signs up their home broadband connection with iiNet they will receive a credit of $100 to their home broadband account and another $50 if a phone or VOIP is added at the time of sign-up.

Will Hutch do the trick

Great news from Hutchison, breaking the decades-long stranglehold that the mobile industry has had on developments in mobile data and mobile content.

Under the name X-series the company has launched a range of mobile Internet pricing packages, handsets and applications that are very attractive indeed. And the prices are close to those that have made broadband so successful in the fixed market.

Under the new plan 3’s mobile phones can be used as modems and thus also provide Internet access to PCs and laptops. There is no longer a walled garden and users can even use Skype to make calls via the much cheaper data facilities on the network. This single initiative suggests to me that Hutchison is going to position itself as a wireless broadband provider rather than a mobile comms operator. Their future is in data not in voice, and by establishing an early lead in this market, as they did with 3G, they have once again taken the lead in the mobile industry.

It may take several years for the others to catch up as, to date they have not indicated a readiness to undermine their lucrative voice business.

While there has been an immediately reaction from Optus and Vodafone with press releases on their activities I don’t immediately expect a price war. This also didn’t happen when Hutchison launched the country’s first unlimited call package – one could argue that some still haven’t caught up on that one.

Again, it will give Hutchison an opportunity to establish itself in the most lucrative part of the market – the people who already spend significant money on their monthly access to wireless broadband services, either via their phone, or on their laptops when travelling through hotels and airports.

As indicated, I recently studied a Telstra package (Next G with JJAM) but the cost of using such a service is higher than what I currently spend on mobile and hotel broadband. Hutchison is certainly opening up this market.

While Next G coverage might be more extensive than that of Hutchison, most heavy data users live in the cities, and that will give Telstra a good run for its money.

On the mobile side I see the X-series as being mainly used for cheap mobile calls, and also for email access (and perhaps a few other applications). Internet access via the mobile phone is a penalty which users which will avoid at all costs, but the potential to use the phone as a modem in connection with the laptop is very powerful indeed.

So this will make good voice quality very important. The mobile phone is already at a disadvantage, as it is often used in noisy environments. A poor quality VoIP service would simply not be acceptable to the users, despite its cheap price.

Paul Budde

See also:
Australia Mobile Communications
Hutchison

Finland slowly ditching dial-up Internet

Finland has traditionally been an early adopter of new technologies. Internet use is among the highest in Europe, while home PC usage is above 50%. Internet growth has been driven by access prices far below the European Union average, while the annual average price reduction of the major broadband operators has been about 30%-40% since 2005. Since 2004 the focus has been on migrating dial-up customers to broadband plans, while the increased speed of broadband - 8Mb/s has become the standard - has made it increasingly popular among consumers.

In 2005 the Ministry of Transport and Communications in Finland refined its national broadband strategy, shifting the emphasis to the quality and speed of connections, the creation of content and the development of wireless connections. The strategy envisaged that 90% of all Internet subscriptions would broadband by the end of 2007. As early as 2005 dial-up plans represented only 36% of Internet connections for Sonera, Finland’s leading ISP. Sonera has now decided to drop dial-up Internet altogether, given that demand has become all but non existent. Indeed, the company has effectively stopped selling dial-up since January this year. All current dial-up customers will have their connections cut off in September 2007, while an unlimited usage broadband package including 2Mb/s download for €30 a month is offered as a standard replacement.

This move is a logical progression, from a business point of view, and it is appropriate that it should have occurred first in one of the most advanced broadband markets in the world. Inevitably other markets will follow as broadband penetration reaches a tip-over point. In the cut-throat world of the competitive European broadband market, ISPs need to acquire subscribers in order to gain more subscribers, since the economies of scale will allow them to reduce prices for customers. Terminating dial-up offers may lose some customers in the short term, but will enable the operator to concentrate more fully on the network upgrades necessary to meet future consumer use.

See also:
Finland - Broadband Market - Overview, Statistics & Forecasts;
Finland - Key Statistics, Telecom Market & Regulatory Overviews;
Europe - Broadband Market - Overview & Statistics.

How to spend New Zealand’s Yellow Pages money

Telecom has confirmed that it has reached an agreement to sell its Yellow Pages Group subsidiary to a private equity consortium consisting of CCMP Capital and Teachers Private Capital, the private investment arm of the Ontario Teachers Pension Plan for NZ$2.24 billion. It is Telecom’s expectation that the transaction will be completed by the end of April.

I have been advocating for some time that Telecom should spend the majority of this money on its current infrastructure plans.

It has become clear to me that by selling off its Yellow Pages, and by pursuing other strategies, for example outsourcing other digital media activities to Yahoo7! in Australia, that the company has made the decision to focus on its core business , ie its role as a national infrastructure provider. This view is re-enforced by its purchase of PowerTel in Australia, which is a telco provider with a similar type of business model.

After more than a decade of underinvestment in the national network, Telecom will need a large investment to bring its local access network up to scratch. The ongoing problems with the performance of its broadband network also clearly indicate that lots of work needs to be done here.

In 2006 Telecom also indicated that it would speed up its Next Generation Network (NGN) upgrade and complete this by 2008 rather than the earlier planned date of 2012. The government’s decision to split Telecom has also forced the company to become far more serious regarding its infrastructure, and the current developments of Telecom are clearly indicating to me that the company is putting its house in order. There is still the mobile network mess that needs to be addressed and it will be interesting to see what its grand plan here will be.

My analysis of the private equity acquisition of the Yellow Pages is that these companies understand that Yellow Pages is a slowly dying business, and that growth goes to online services and no longer to the printed media. However, it is amazing how long people are prepared to pay for the expensive Yellow Pages ads, and this is set to continue for years to come. Many companies are in an automatic mode and simply renewing their advertisements without questioning the value. But of course there are still lots of people who will use the Yellow Pages for many years to come. What this means is that you can save considerable cost in this business by accepting that it is a dying business and that you don’t really have to invest too much in marketing and promotion. So while the revenues might not go up much, the costs can come down, so the profitability could even increase. Furthermore this business remains an interesting tool for other companies who do want to use these directories as a stepping stone to the bigger and better things in digital media.

Paul Budde

Can we stop the broadband train crash?

Infrastructure is often treated like a game of football. The outcome depends on who has the ball, the performance of the players, the financial situation of the club, the referee, the rules etc.

And so the game is nearly always unpredictable.

One could argue that infrastructure is too important to fool around with, but, unfortunately, that is exactly what does happen a lot of the time. Seldom is infrastructure implemented according to the vision of the designers – political football often results in half-baked plans, shortcuts or staged implementations.

Have you ever seen ….
•a freeway that is not constantly ‘under construction’, worked on, changed or upgraded?
•a bridge that hasn’t been upgraded or supplemented with another bridge or a tunnel?
•a railway system that is not constantly undergoing structural maintenance?

Does this mean that the designers got it all wrong at the start? I don’t think so. When I look at the
archives of the original designs of infrastructure projects I often marvel at the foresight of the designers. Most of the time they were definitely on the right track.

The reality, however, is that such infrastructure plans generally only get going after some serious congestion problems arise. They may have been under discussion for decades before the problems started to occur, but it often takes a disaster to speed things up.

At that point it suddenly becomes urgent and, with great haste, the project gets underway – often putting aside the grand plans that were originally conceived and using instead an expediency model – perhaps not a total shortcut, but certainly nothing approaching the original design.

This then results in ongoing changes, expansion and restructure.

Will the new Australian broadband network be any different? I don’t think so. I and many others can come up with grand visions and talk about infrastructure that:
•can relieve heath care costs;
•decreases pressure on the building of new retirement villages;
•includes facilities for smart meters that saves energy; and so on,

….but the reality will be that some political decision, some opportunistic business development, or perhaps even a disaster will drive the project in a particular direction.

For instance:
•a Telstra-led monopoly;
•a subsidy-driven network alternative;
•a competitive opportunity seen by a media mogul;

Of course, I am worried by hastily-made decisions from the current Minister, aimed more at political gain than at the national interest, and about the fact that the Labor initiatives remain very vague about the essential regulatory changes that need to be made. This all leaves the door wide open for hastily made compromises, pork-barrelling and opportunistic behaviour.

The more questions people ask the better. Let’s have a lot more discussion about wasteful, unwanted shortcuts to what should be a once-in-a-lifetime opportunity to get it right in our industry. We all need to be vigilant about this, put pressure on the politicians and hold them responsible for their decisions.

Paul Budde

See also: Australia Broadband

Broadband action time for local councils

Within the Wholesale Industry Group we have stressed the importance of the involvement of local government in the developments of broadband networks. Around the world hundreds of local councils do play an active role in the broadbanding of their local communities. This article is a further contribution to that discussion.

Broadband has now bipartisan support and - quite rightly - has been elevated to a degree of priority in the national political agenda. This issue however requires action by all three tiers of Australian government to ensure an orderly and comprehensive roll-out of a national high-speed broadband network with access-for-all. The physical, financial and technical/ user-interface aspects of ''access'' requires an intergovernmental strategy targeting development and building standards, access points and training of all members of the community in the use of broadband delivered or enhanced services. This may be as simple as familiarising elderly people, being supported at home by say a video-nursing scheme, in the use of a three-button television with set-top box. This gives them regular video conversations with home-nursing and home-care services- as well as providing them with the usual TV entertainment and information.

Most analysts agree that a national high-speed fibre network will happen and so it is now apt to address other aspects of such a strategy.

There is a legitimate role for government here both in terms of managing a historic monopoly which no longer serves the public interest as well as in ensuring a competitive economy through provision of appropriate utilities for the globalised economic environment in which we now operate.

At the local government level there are three issues to be addressed:-
the last mile technologies ie. how to get high-speed services from the node (ie telephone exchange or street cabinet) to the home/ business etc..
the provision and enhancement of local government services over broadband and its implications and possibilities eg. video-phones, power point ''how-to'' guidelines.
ensuring access-for-all eg. interface tools/ training for those with physical, social, hearing, visual or other impairment - as both uploaders and downloaders ie. local government employees and customers.

Already representations have been made to the Australian Building Codes Board Review 2006 asking that broadband conduits or other provision be made a mandatory utility in the BCA.
There are obvious building and environmental applications:-
•in smart-metering and providing consumers with graphic feedback on their household (or even personal) consumption of water and utilities and generation of wastes ie. their environmental footprint, in real-time as well as data on their cumulative bill.
•in monitoring building performance eg. heat gain/ loss and lighting levels optimised for natural and artificial light levels.
•in delivering voice, data, billing, advisory and care services into buildings and even to designated rooms.

However, at this stage we are not aware of any amendment of the BCA having been made in this direction.

The Local Government and Shires Associations ( LGSA) has recently also become active in this field and perhaps they could establish a broadly-based task group to link local government practitioners with these networks and technologies.

This is not the realm of the computer geek but rather the domain of realists and pragmatists who observe what is afoot in the EU and North America and in Japan, Singapore and Korea. These countries have a coordinated governmental response to the opportunities of the digital economy and technologies. They are nations with whom Australia has to compete or collaborate- if not in technology then in the content and business conducted over those technologies.

It is notable how Australia excels in many of the broadband ''content'' areas:-

Film, music, television, the graphic and performing arts as well as business management, tourism, hospitality, food and wine, personal development and sports.

Australia has been hindered in all these areas by its ''tyranny of distance'' from other (Anglophone) markets.

Increasingly the country’s diverse cultural mix offers the business outsourcing and export advantages which English proficiency gave to India over the last 20 years.

Australia’s competitiveness in these areas will require rapid broadband interaction with many countries underpinned by a comprehensive broadband network to the premises and the technical skills to use, manage and maintain it.

In the absence of a pro-active role those ''last-miles'' of copper wire will remain the weakest link.

The LGSA should consider taking a leadership role in a coordinated national response to the challenges and opportunities of the Knowledge Economy. In this way broadband infrastructure (conduits, fibre-optic cabling and other platforms) will quickly become recognised as being just another essential pipe along streets and into buildings/ places along with the water, electricity, gas and sewer that underpinned the Industrial Age.

Digital Media Policy Vacancies

I have been asked to check if I know of any people interested in executive functions in digital media policies. Let me know if you are interested and I can send you further details.
Paul

Discounted Reports this Week – normally US$40 – this week US$5
New Caledonia - Telecoms Market Overview & Statistics
(This report will remain at US$5 until the 09/04/07)
French speaking New Caledonia is equipped with a modern telephone system provided by government-owned OPT New Caledonia, the sole provider of domestic telecommunications services including a GSM mobile network. Traditional Internet access is widely available. Broadband ADSL is procurable in an increasing number of areas. Mobile telephony has become the favoured means of communication, with users exceeding the number of fixed-line connections by more than 2:1. In December 2003 the first 3G live call conducted in the Pacific Islands was made on OPT’s UMTS trial network. In October 2006 it was announced that a new submarine cable would be built by Alcatel and owned by OPT New Caledonia, linking New Caledonia with Australia. It is being billed as the first regional, as opposed to trans-oceanic cable to use wave division multiplexing.

Optus - Company Overview and Operating Statistics
(This report will remain at US$5 until the 09/04/07)
Optus provides a range of communications services including mobile, national and long-distance services, local and international telephony, business network services, Internet and satellite services and subscription TV. This report provides an overview of the main divisions within Optus including: Consumer and Multimedia, Mobile, Business and Wholesale. A major re-alignment of the company’s operating structure had been completed by 2006. A breakdown of key operating statistics is provided for Internet, broadband, voice, and subscription TV services, along with highlights of the company’s financial results for the first half year in 2006-2007. An overview of Optus’s new strategy reveals the carrier’s plans moving into 2007 and beyond.

In Focus - Global - Digital Media - Advertising Overview, Statistics & Forecasts
In this section we showcase exceptional reports – reports that are unique in their subject matter, cover new ground, or have recently been significantly updated.

Hot Topic - Digital Media and Convergence
Here we group all the important web reports on a particular topic, providing you with easy access to all the essential reports on that subject.

PAUL BUDDE Communication Pty Ltd,
T/As BuddeComm
http://www.budde.com.au

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