Broadband: Where to next?

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This time last year, many agreed that the uptake of broadband services in this country was abysmal when compared to other developed nations around the world. In fact, Australia was ranked 19th in the Organisation for Economic Cooperation and Development's (OECD's) broadband rankings.

Even today, in a market that is dominated by the big telecommunications companies, Australia's broadband industry in a lot of ways has failed to fire and the promise of making available compelling applications such as voice, video and web conferencing to the masses over 'fat' DSL pipes seems a long way away.

At the end of 2003, Australia had a residential broadband penetration rate of only 7 percent - tiny in comparison to Canada for instance, which had a 35 percent penetration rate, according to research released last month by analyst IDC.

The total cable modem and xDSL broadband market in Australia will increase from almost 637,000 subscribers in 2003 to more than 2.35 million subscribers in 2007 at a five-year CAGR of 30 percent.

However, IDC found that apart from entry-level offerings, Australian broadband offerings were 'clearly inferior' in value to those available in Canada in terms of price, speeds and download caps. '[A total of] 80 percent of the Canadian xDSL connections are true broadband ADSL (1.5Mb/s download), which are priced under the cheapest ADSL offer of the incumbent in Australia,' IDC analyst Adrian Cotiga says in the report.

Other issues also abound, the most recent relating to the Federal Government's draft guidelines for a proposed $107.8 million Higher Bandwidth Incentive Scheme (HiBIS), a plan meant to improve broadband services in the bush.

Smaller ISPs such as Pacific Internet claim that the guidelines - while a step in the right direction - would favour large players already established in the regions over small ISPs. They argue that the major beneficiary will be Telstra and other big infrastructure players.

At Request Broadband's partner forum last month, JP Morgan telecommunications analyst Lynn Canalese, told attendees that by 2008, Telstra, which controls the nation's ADSL network, would have captured around 65 percent of the broadband services market in Australia, with capital constraints being a key barrier for competing carriers.

Overall, broadband sales revenue will generate a 38 percent annual growth rate from a base of $350 million today. Dial-up internet customers will start to reduce from FY2006 and DSL will prevail as the most prominent technology with a 60 percent penetration in this country by 2008, according to Canalese.

Customers too, seem unhappy with Telstra's dominance and its ability to 'squeeze' broadband resellers. Around 83 percent of the 10,335 responses received from a survey conducted by broadband information site Whirlpool, believed that Telstra should not own the ADSL network as well as compete with resellers. Broadband customers were also resilient to committing to long-term broadband contracts, with 58.8 percent saying that they were not willing to sign up for a broadband contract running more than six months.

With the issues aside, there may be light at the end of the tunnel and a bevy of infrastructure and application players is battling for a leading position in a market that could deliver economic benefits to Australia of between $12 and $30 billion.

For Shaun Wormald, managing director at IP conferencing services provider Broadreach Services, true broadband is the delivery of bandwidth hungry applications such as video, voice and web conferencing.
'The issue is that while we've got people adopting it for mail and internet, they're not buying broadband for the reasons that everyone seems to think they are.
'Everyone's saying they're buying it to do video on-demand, video at home [over the internet], videoconferencing or video chat or stuff like that, but that's not what's actually happening. We're not actually seeing those applications being deployed because while people think they can do it over broadband, most of them are unaware of what the actual bandwidth requirement is,' he says.

Cost also plays a major role in broadband adoption, specifically in the residential, SOHO arena, he says. In addition, service provider plans are also making things difficult.
'The plans aren't there. The service providers are all saying: "We need applications, we need content" - yet none of them have shown any understanding for what this content they keep asking for needs to actually get delivered. I mean 64Kb/s upload is not the type of speed that you could use to deliver all these types of applications that everyone's saying we need so desperately,' Wormald continues.

'One of the things I keep saying is that "Why does everyone need to spend huge amounts of money trying to develop new applications when we've got massive amounts of applications where people just want to view people [videoconferencing], which is content and it's valuable content". People are trying to look for something new and quirky and are not going back and saying "What are we actually trying to do?"'

Chris Monching, co-founder and marketing sales director, and Zac Swindells, co-founder and managing director at Melbourne wholesale, retail and business ISP Data Consulting Group (DCG), see content provision as critical in driving up demand for internet services, particularly broadband. 'We are looking at providing products and solutions tailored to our resellers' customers needs. You need to give them what they want, rather than just providing internet access,' Monching says.

DCG has partnerships with NEC, Comindico, Telstra, AAPT, Uecomm, St.George Bank, ANZ, Global Centre, Interprac and Lan 1.

Main wholesale competitors were KBS Internet (which owns the cut-rate Dodo Internet brand), Wholesale DSL, Veridas, Datafast and eventually Connect, Monching said.

Raaj Menon, managing director at ADSL product distributor PC Range, adds: 'Application delivery still has a way to go - unless they do something about the capping. I don't think that's going to take off'.

David Stewart, managing director at network equipment provider Netcomm, says that over the next year, the market will look to get ride and narrowband and move people across to broadband. 'It'll be a year or so before you'll see applications start to drive people to it. Once the base is established, new services will come into play. Ultimately, we need higher bandwidth and uncapped services before we can do video on-demand,' he says.

Broadreach's Wormald also questions published Australian broadband uptake numbers. 'Everyone's in their little dream world, saying "look at the numbers". But remove all the 64Kb/s uploads out of that list and how many then have you got? That's your actual broadband connectivity. 'Those numbers are by no means impressive at all,' he says. Most of those are residential stuff and it's 64Kb/s upload, 256Kb/s download. That's high-speed narrowband, not broadband. In Korea, you're talking about 10Mb/s into the home. We're just not anywhere even close,' he says.

Australian service providers also need to change their pricing models.

Stewart says some ISPs such as iiNet and iPrimus are modifying their plans now and re-doing their costs. 'More people will keep flooding in as the price continues to drop,' he says.

Wormald adds: 'The plans are all wrong and are not conducive to broadband applications. You just don't have the bandwidth to run the real interactive broadband applications, video on-demand and video

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