So far three-quarters have access to FttH (fibre to the home), the remainder to wireless and satellite networks. The revised rollout of the so-called MTM (multi-technology mix) based on FttN (fibre to the node) and hybrid fibre co-axial (HFC) only began in earnest in 2016. The NBN company has now fine-tuned its rollout strategy and is set to extend the network by 40,000 premises a week.

But from here on FttH will play only a minor role, mainly in greenfield installations.

After the Coalition government won the 2016 federal election, any debate about changes to the underlying infrastructure faded away, as the rollout of the MTM is now too far advanced. However, the NBN company has indicated that it does have a roadmap towards providing fibre deeper into the residential network. Fttdp (fibre to the distribution point) is one of the key technologies it is investigating.

Around the same time, the industry started to seriously question the regulatory environment around the NBN. The smaller players are in danger of being squeezed out of the market through complex and expensive NBN wholesale offerings. These same arrangements also mean that end-users are not receiving the benefits of high-speed broadband in an affordable form. The ACCC reacted to this by launching a fresh competition study, the results of which will become available in 2017.

As a result of unattractive wholesale arrangements and a second-rate NBN, several telcos are eager to skip the MTM-based infrastructure and deploy their own fibre networks. In this way, competition is arriving in multi-dwelling units (MDUs) in various cities – this despite the fact that competition is heavily restricted through government regulations. Advances in wireless technology – especially in comparison with what a second-rate NBN can deliver – has seen an explosion in new players entering this market. Furthermore, future developments in mobile technologies (LTE and 5G) will lead to more competition with the NBN, as more and more users will opt for better and more affordable high-speed broadband services through these alternative services.

All of these developments are putting a cloud over the financial future of the NBN company. Government funding runs out in 2017, and with another $20 billion likely to be needed to finish the job it is questionable whether private investors will be interested in funding this shortfall.

Apart from another two-year delay in the roll-out of the NBN – due to the political changes to the NBN since 2013 and a more than doubling of the costs – significant uncertainties still remain about some of the technical and operational issues of the MTM. There are a great number of unknowns in this process and overseas FttN (fibre to the node) experience shows that it is not all plain sailing. In many cases, large-scale replacement of old copper infrastructure will be required. At the same time, rolling out fibre has become significantly cheaper, especially when done by new companies, as is the case in the USA, France, the Netherlands and a number of other players in Northern and Eastern Europe. Most countries now skip their FttN and HFC rollouts and go straight into FttH.

While in mid-2015 the government revived some of the digital economy strategies that were put in place between 2009 and 2013, there is still no holistic approach to services such as e-health and e-education. Interestingly, we see cities developing their own strategies around the concept of smart cities. When the government announced its innovation policy it did not even mention the important role the NBN can play in that context. Cities, however, do understand the importance of such infrastructure for their economic and social developments.

These broader developments in the digital, sharing and interconnected economy will be further accelerated by a range of other industry sectors such as cloud computing, M2M and big data. The over-the-top (OTT) players are also becoming increasingly prominent in the telecoms industry and this will start to blur some of the borders between infrastructure, IT and applications.

The NBN will have to become the predominant national digital infrastructure for all of these developments; as a utilities-based network, it will also need to provide its services to those other sectors. With these sectors involved, we will see the industry developing specific new business models around infrastructure, ICT and retail. Streaming video and other media and entertainment applications are already playing an important role in the drive for high-speed broadband demand. The question here is whether the current MTM configuration of the NBN will be able to deliver the capacity, reliability, redundancy and security for such services in a ubiquitous way to all Australians. Most experts agree that only a full-fibre network can deliver that level of infrastructure robustness.

BuddeComm has released a new report, Australia – The National Broadband Network – Moving into 2017, which covers detailed information on the rollout of FttH, FttB, FttN, Fttdp, HFC, wireless and satellite infrastructure, as well as statistics on subscribers, revenues and a range of other parameters. It also provides a range of analyses and insights, plus an overview of the policies and regulations that apply to the NBN and the effect that these have on competition in the telecommunications wholesale and retail markets.

ABOUT PAUL BUDDE//

Paul Budde is the CEO of BuddeComm, an independent research and consultancy company, focusing on the telco market. Its research encompasses 190 countries, 500 companies and 200 discrete technologies and applications. Paul is also the special advisor to the UN Broadband Commission for Digital Development.

The telecommunications market continues its transformation into the industry underpinning the digital, sharing and interconnected economy, mainly driven by ongoing innovations and technological developments. More often than not, the industry itself is struggling to keep up with these changes.

Convergence, talked about for more than 20 years, is now happening, but driven by disruption rather than well-considered strategies and marketing campaigns.

The internet companies have been able to embed many traditional telecoms services into their offerings, often at little or no cost to their customers. Telecommunications is a way for them to offer a range of other internet services and it is from these that they make their money.

As a consequence, the underlying infrastructure is increasingly becoming a national utility and it will soon be treated as such from a regulatory perspective.

The New Zealand government has already foreshadowed such changes for its regulatory regime.

This, of course, is putting enormous pressure on the traditional industry. Overall the growth in this segment of the telco industry is stagnating, and often the only way to maintain profitability is through cost-cutting.

On the positive side, innovations and technological developments allow these companies to be more cost-competitive. While there is still a very large cost gap between the internet companies and the traditional telcos, the telcos are certainly getting better at becoming more efficient and effective.

Another outcome of these pressures is the ongoing consolidation of the industry, a process that will continue in 2017.

Although their revenue might not be growing much, usage of their services is, and this allows them to maintain their pricing by offering more services for the same money. Here again, significant improvements in software and network efficiencies allow them to do so.

Fixed telecoms imperilled
The fixed telecoms market in Australia is facing serious problems, evidenced by the many network outages faced by Telstra. That failures keep recurring is a clear indication that the problem is complex. Our analysis of the situation is that since the announcement of the NBN in 2009, Telstra has (understandingly) been under-investing in its landline infrastructure, as the plan was for NBN Co to take over its infrastructure and replace it with FttH. Subsequent changes in the plan, along with ongoing delays, have meant that the massive increase in traffic has still had to go over the old Telstra network – which has not been upgraded to a point where it can cope with such high increases in traffic.

In 2005, Australia occupied an already questionably low 25th position on the international country ladder in relation to broadband quality, and, depending on how one measures quality, it has now dropped to somewhere between the 50th and 60th position of this list.

It is not too difficult to conclude that the infrastructure and the services being delivered over it are failing to handle increased user demand. This is why there are ongoing network outages, most likely linked to congestions and network capacity issues at certain parts of the network.

Over the last five years many ADSL services have gone backward in quality as this old technology cannot cope with user demand.

This is also a bad omen for the FttN network that has, in the meantime, replaced the FttH plan. This second-rate network, still based to a large extent on the old copper-based network, has its own capacity problems, which will become more evident over the next five years, by which time we will again have to start looking at an upgrade – this time to a full-blown FttH network.

A worrying factor is that the NBN is a monopoly and it is unclear how it will financially manage a move from FttN to FttH. It will also most likely require a massive write-off of its (by that time) $60 billion investment. A much better solution would be to stop rolling out FttN and start looking at Fttdp (fibre to the front doors of the premises).

The mobile market
Mobile keeps moving ahead and here the story for Australia is significantly better. The country is right at the top of the international ladder in relation to the quality and the coverage of its mobile (broadband) network. Prices are above the international average, but so are the services. While mobile and fixed will always exist in parallel, there is no doubt that with a faltering fixed network and an excellent mobile network, mobile will give fixed a run for its money.

However, the reality for the success of mobile broadband is that the network will rely more and more on fibre. In the end most mobile stations will have to be connected to a fibre optic network in order to cope with the volume of traffic. 5G will create an even denser mobile tower infrastructure than that already in place, with mobile stations starting to appear on many city building and many street corners (connected to often private city fibre networks). In the end, the mobile network will be a fibre network with a fairly short wireless access signal to the end-users.

Mobile technologies are not hampered by telecom monopolies and here, technology is moving ahead quickly. For example, massive-MIMO technology is evolving rapidly and is ideally suited for the 24, 60, 70 and 80 GHz spectrum bands that will become available for commercial services over coming years; such technologies are well-suited for very high broadband services in densely populated areas.

Because of the confusing fixed line situation in Australia, it could well be that in many parts of its cities, true fast broadband will be delivered over deep fibre with these new last-mile wireless technologies.

Digital, sharing, interconnected economy
Telecoms is now all about the digital, sharing and interconnected economy and the infrastructure for this is a combination of information and communications technologies. This development requires a full integration of high-speed broadband telecom networks, cloud computing data analytics and data centres.

As a result, we see previously separate industry sectors merging. Data centre companies are building fibre infrastructure; cloud computing operators merging with data centres; and indeed several companies including all of these services within their offerings.

This is also where Internet of Things and Machine to Machine communications are important – linking sensor, devices and other elements to the telecoms network. These developments are opening up the way to smart cities and communities, smart grids, smart farms, smart factories, smart homes and buildings.

Data analytics is key to the successful outcome of these new developments. This is needed to operate our increasingly complex society and economy more efficiently and effectively and it is critical in the delivery of the services that are creating better lifestyle opportunities for all.

These developments also pose their own risks. As societies and economies become more dependent on them, it makes us more vulnerable, especially if the underlying ICT infrastructure is not sufficiently robust. Issues such as cybercrime and cyberwar are also becoming more worrying, and, in a society moving increasingly towards populist politics, misuse of data for reasons linked to racism, hatred, violence are becoming real. That’s especially so as those who are promoting it have access to telecoms and the internet equal to that enjoyed by those whose aim it is to use these technologies for the betterment of society.

There is a responsibility for the industry to take these issues into account.

For more: Australia – Telecoms Market Analyses – Top Trends Moving into 2017

ABOUT PAUL BUDDE//

Paul Budde is the CEO of BuddeComm, an independent research and consultancy company, focusing on the telco market. Its research encompasses 190 countries, 500 companies and 200 discrete technologies and applications. Paul is also the special advisor to the UN Broadband Commission for Digital Development.

Smart cities are not a thing of the far distant future. Many city councils and agencies throughout the world are embracing the use of technology and innovation to leverage data in ways that enhance the lives of citizens and a global estimate by Cisco shows that the value of having an IoT infrastructure (smart countries/cities) is worth some $5 trillion dollars to the public sector. Modelling from these numbers BuddeComm made a rough estimate for Australia as follows:

 

Table 1 – Public Sector Value Gain (A$)

Public Sector	Value Gain (A$)
Smart buildings	$2 billion
Gas monitoring	$1 billion
Smart parking	$800 million
Water management	$800 million
Road tolls/congestion charges	$350 million
Better employment productivity	$36 billion
A connected militarised defence	$30 billion
General cost reduction	$15 billion
Better citizen experience	$8 billion
Increase revenues	$2.5 billion

(Source: BuddeComm estimates based on Cisco data)

The public sector value gain above is based on increased efficiency and productivity, as well as reduced costs through the deployment of new technologies. The actual numbers are perhaps less important than the sheer size of these gains. In order for our societies to maintain their standard of living, and in order to lift that standard for those who haven’t reached it yet, it is critical that we take significant chunks of costs out of the public sector structures that we have built over the last 50-70 years, without diminishing the value we obtain from them.

We are already seeing the effect of such ‘digital’ savings in the consumer retail sector through the deployment of the internet. This gives us a glimpse of the future; but at the same time is only the tip of the iceberg, as with IoT we can go much further into such cost savings.

It is important to realise that from an economic perspective ‘smart cities’ are all about efficiency, productivity and cost savings. There are some new revenue opportunities, but in general they are only a fraction of the overall gains that can be made.

As a result of these gains, cities will be more attractive to people, businesses and investors. These cities will be more transparent and responsive to the needs of these groups. Only smart cities will allow for the creation of new value-added jobs and businesses in the emerging connected, sharing, digital economy. There is a massive move from people towards cities; and cities will increasingly have to compete with each other for people, businesses and investments. There is no doubt that the truly smart cities will be the winners in this development.

While no city in the world can claim to be the leader in this field there are thousands of examples in the leading cities around the globe – and increasingly in Australia also – that have very impressive scores on the board. The fact that most leading cities are now finally developing strategic smart city plans, or at least economically viable smart city projects, indicates that this is not just another blue sky story, but a solid business reality.

Add to this how people are embracing smartphones, the internet, and apps, and it becomes clear that people are more than ready to live in smart cities. The key to success for a smart city is to find the right investment and business models that allow us to reap those public sector gains in a collaborative way between industry and public sector. These models will increasingly have to be based on city-as-a-service models, whereby cities will have to operate their smart city services based on an opex rather than a capex model.

ABOUT PAUL BUDDE//

Paul Budde is the CEO of BuddeComm, an independent research and consultancy company, focusing on the telco market. Its research encompasses 190 countries, 500 companies and 200 discrete technologies and applications. Paul is also the special advisor to the UN Broadband Commission for Digital Development.

iStart asked Australian telecommunications policy advisor Paul Budde and New Zealand’s Minister of Communications and Information Technology, The Honourable Amy Adams, to offer their points of view on the NBN and UFB projects respectively. The results offer some stark contrasts, with one project catapulting its country to second place in the OECD for annual growth of fibre subscriptions while the other lags behind.

Paul Budde: NBN – this is as good as it gets

While we can argue that what Australia will get from NBN 2.0 is a second-rate version, the reality is that, with the new deal with Telstra now inked, for the foreseeable future this will be as good as it will get.

It looks as though all parties agree that under this new contract the multi- technology-mix (MTM) can and will be rolled out. However Telstra covered itself, with NBN Co taking care of any unexpected extra costs related to the MTM rollout. The minister is happy with that arrangement and is convinced that these costs will not blow out – but only time will tell.

Further to that we will never know if the MTM version will indeed be cheaper. It is hard to trust the Government on this. The previous Government claimed that it would be able to deliver the first class fibre-to-the-home (FttH) version for roughly the same cost as this Government will deliver its second-rate version. Both these plans were costed at around the A$40 billion mark.

In the meantime Australia wasted another year where very little broadband progress has taken place. This has happened repeatedly over the last two decades, with the result that Australia is at the bottom of the OECD heap in high-speed broadband connections. Increasingly we now hear ordinary people (not just the geeks) complaining about the quality of their broadband; and it will get worse before it gets better, as no major results of these new arrangements are expected to hit the road in any significant way before the end of next year.

“The new contract has the potential to increase the dominance Telstra already has in the market.”

As we have said repeatedly, the big winner from all of this continues to be Telstra. It had already negotiated a fantastic deal under the previous Government, and under the new deal with the current government that lucrative deal remains in place, with a range of new concessions on top of it – and for Telstra they are changes for the better.

The overall deal stayed the same, so theoretically that will result in a smooth transition. Instead of simply disconnecting and discarding the old copper and HFC cables, they will now be transferred to NBN Co – hardly any skin off the noses of Telstra and Optus. However, in order to make the arrangements for a more complex multi-technology- approach to work, some of the more detailed elements of the contract required dramatic changes. This was the main reason it took so long for these negotiations to be completed, and at the same time it allowed Telstra to negotiate for a range of changes.

It opted to hand over the infrastructure assets in exchange for the right to continue to use the HFC network to deliver its Foxtel pay TV services.

The company has secured asset disposal restrictions if NBN Co were to sell the HFC or copper network after ownership is transferred. In certain circumstances these restrictions would require a buyer – such as another large retail service provider – to enter into a direct agreement with Telstra to purchase the assets.

Also, with at least some first-hand experience, certain simplifications to the contract have been included that will have a positive effect on Telstra’s costs.

But Telstra’s greatest (extra) financial wins this time are in the area of maintenance. NBN Co has no skills – and also no capacity – to undertake the maintenance of the ageing copper network.

There is no doubt that this network still has some life left, but the mid- to longer-term question is when will it become more costly to maintain old infrastructure in comparison with deploying new infrastructure. At a certain point in time this will have to be done anyway. In the meantime, however, these ongoing, increasing maintenance costs are becoming an interesting new revenue stream.

Costs will only increase as the infrastructure ages, and therefore a significant amount of money will need to be spent by NBN Co to maintain it; and Telstra is the only company with long-standing expertise in this field, especially in the more value added areas of infrastructure planning, design, construction and maintenance.

While there will be room for competition in the actual physical work, Telstra will be hard to beat in those other areas.

Both the minister and NBN Co have indicated that they understand that the new contract has the potential to increase the dominance Telstra already has in the market. However the question will be whether the delivery of the MTM NBN or the protection of competition will get priority.

NBN connections so far

“Provide a comprehensive fibre network at least ten years before it would have been economically viable.”

The Honourable Amy Adams: the ultra-fast broadband challenge
Four years since work began to build a world-class ultra-fast broadband (UFB) network, the Government’s programme to deliver fibre to the homes and businesses of New Zealanders in the country’s 33 fastest growing towns and cities is making strong progress.

It has proven so successful that New Zealand has taken the lead as having the fastest fibre growth in the OECD and the second highest increase in fibre connections. The initiative is 40 percent complete with 30 percent of the population able to receive a service, and demand is at its strongest levels yet.

As part of our drive to provide New Zealander’s with faster access to better broadband, the Government has partnered with private sector companies for the roll out, with its NZ$1.35 billion investment being at least matched by our partner companies. Essentially this will provide a comprehensive fibre network for New Zealanders at least 10 years before it would have been economically viable for the private sector.

The UFB and RBI programme is the most ambitious infrastructure programme New Zealand has ever undertaken and it’s held in very high regard internationally.

The nine-year project has already seen New Zealand jump to second place in the OECD for annual growth of fibre subscriptions, with an annual rate of 144 percent.

While a speedy start was made, however, deployment has not been without its challenges. In New Zealand we’ve got comparatively low population density, so there’s a need to cover a lot of distance for a few customers. Partners have to manage many different local territorial authorities with associated consenting and permission-to-work standards. Mobilising work forces simultaneously across the country can also be tricky.

In addition, there is a lack of existing conduit to use for fibre, and of course New Zealand’s geological variances have seen crews both drilling in volcanic rock and tunnelling through silt.

Despite these issues, over the final few months of 2014 we saw a 39 percent increase in connections, taking connections across New Zealand to more than 10 percent, which is slightly ahead of projections at this stage of the build.

As of the end of September, 536,000 end users were able to connect. Whangarei, Te Awamutu and Oamaru have already been completed. Work will be finished in Cambridge, Tokoroa, Taupo, Hawera, Wanganui, Blenheim, Ashburton and Timaru by June 2015 and most towns and cities will have UFB fully rolled out by 2018.

For the rural programme the build is now 70 percent complete, with 282 towers having been upgraded and 98 new towers having been built to provide fixed wireless broadband to 213,000 premises. In addition 75,000 fixed lines have been upgraded.

Under current programmes, hospitals, schools and libraries in both rural and urban areas will receive fibre. More than 2200 urban and rural schools now have fibre installed and the managed network operated by the Network for Learning (N4L) is in place in more than half of those. N4L has been designed specifically for schools, providing safe, predictable and fast internet with uncapped data, online content filtering and network security services.

The results already being achieved are remarkable, with schools reporting that pupils are more engaged, their reading levels have improved, and absenteeism has dropped. Additional resources and training are being provided to ensure teachers are well equipped to make the most of the opportunities that digital learning provides to make learning fun, access the best educational resources, prepare their pupils for a digital future, and connect to other schools in other communities.

Our Telehealth initiative has particular benefits for rural communities. Being able to video conference gives rural patients quicker access to medical specialists, without the need for travel, and this saves time and money for both the patient and the health system.

These initiatives are only a small reflection of what we can achieve with UFB and RBI. As well as improving accessibility, a key focus is ensuring that ultra-fast broadband is then affordable for everyday New Zealanders as well as businesses.

One way we tackled this was to open up the telecommunications market to competition which has transformed the industry. Competition among major retail service providers has triggered attractive UFB offers for broadband customers, notably unlimited broadband plans.

As a result consumers are getting more value than ever before from their broadband and mobile plans. All the local telecommunications retailers are now selling UFB, and fibre entry-level plans are priced similar to the much slower existing ADSL copper broadband, while offering download speeds three or four times faster.

While providing access to affordable fibre-to-the-premise for 75 percent of New Zealand and improved broadband to 97.8 percent was a bold goal, we are certainly not resting on our laurels.

In a perfect world every New Zealand home and business would be connected to the highest speed and capacity possible and in that regard fibre-to-the-premise remains the gold standard. But in a country of just 4.5 million people who are widely dispersed across several islands, vast open spaces and numerous mountain ranges, the economics of that is prohibitive. In fact the economics are such that without the Government’s investment it is unlikely that the market would have provided the services now being delivered for many years, if at all.

We are, though, constantly assessing what more we can do to continue to lift connectivity for those outside the UFB footprint.

The Government has announced it will extend the target for the UFB programme to at least 80 percent of the country and invest a further NZ$150 million into rural connectivity (fixed and mobile).

This will take our total investment across these programmes to around NZ$2 billion.

It means that some South Island towns such as Motueka, Westport, Alexandra, Temuka, Cromwell, or Picton for example, could receive fibre.

We are currently working through the policy development for the extensions of these programmes and I look forward to having more to say about them in the months ahead.

We are now in transition from a time when infrastructure was our primary objective, to focus more on how we use this infrastructure to the benefit of our citizens and businesses.

Getting the connectivity infrastructure in place is of course fundamental but it is the way in which we use that connectivity that has the ability to transform New Zealand. One of my continued frustrations is how few New Zealanders know that our third largest export sector is ICT and that the sector is growing far faster than the national average with demand for staff meaning salaries in ICT are more than twice the average.

In addition to the global opportunities, better connectivity at home has the potential to completely change how we connect with each other, how we educate our children and how we provide healthcare and other services across the population. It has the ability to mean that living outside the main city centres no longer means a lesser level of opportunities to work, train or get specialist care.

It is delivering on these opportunities that is at the heart of capitalising on the better connectivity we are providing.

Transforming our cities into the ‘smart cities’ of the future will require us to incorporate technologies and key digital developments that are linked by machine-to-machine (M2M) solutions and real-time data analytics. In short; the Internet of Things. To achieve this however, smart cities will have to be underpinned by the appropriate ICT infrastructure based on fibre optic and high-speed wireless technologies. This is well underway in many developed cities around the world.

This infrastructure allows for the development of many exciting solutions in smart cities: developing smart communities; connected homes; intelligent transport systems; e-health; e-government and e-education; smart grids and smart energy solutions to name a few. Many of the technological advancements emerging around the world today can, and will be, applied to smart cities. Artificial Intelligence, electric vehicles, autonomous vehicles, mobile applications, drones, and wearable and smart devices are just some of the key developments to watch.

Artificial intelligence developments are accelerating and, as more companies enter this sector and start investments to grow it, we will see further astonishing innovations emerging over the next few years. AI applications are already being used in healthcare and gaming, just to name two sectors adopting this cutting edge technology.

“Smart cities will have to be underpinned by the appropriate ICT infrastructure based on fibre optic and high-speed wireless technologies.”

‘Smart transport’, also known as ‘intelligent transport systems’ (ITS), increases the safety and efficiency of transport networks – from public bus, tram and train transport, to rail and road freight transport, and private and commercial road transport. ITS systems include the software and hardware for electronic vehicle-to-vehicle and vehicle-to-infrastructure communication and information systems. In 2014 there are already hundreds of thousands electric vehicles (EVs) on the road around the world and by 2015 there may be more than 2.5 million plug-in electric vehicles (PEVs) in operation. It is thought that the business sector may become a key driver to the uptake of PEVs once the market is further developed and becomes a viable solution for enterprise fleets.

Unmanned aircraft, known colloquially as drones, are also certainly going to play a larger part in global developments and have many potential applications for the smart communities of the future. While most countries currently restrict the use of drone devices, it is thought that this will change quickly once the applications for such technology fully emerge and can be properly regulated. Agriculture applications in particular offer huge opportunities for drone usage along with telecommunications, defence, traffic management, surveillance, mapping, emergency services, weather monitoring, resources exploration and environmental analysis.

The development of smart cities and indeed smart countries requires vision and recognition of the fact that many of today’s social, economic and sustainability problems can only be solved with the assistance of ICT. In many situations the uniqueness, affordability, capacity, robustness, security and quality necessary for this calls for fibre optic and high-speed wireless infrastructures. This need will increase dramatically over the next five to 10 years as industries and whole sectors carry out the process of transforming themselves in order to much better address the challenges ahead.

ABOUT PAUL BUDDE//

Paul Budde is the CEO of BuddeComm, an independent research and consultancy company, focusing on the telco market. Its research encompasses 190 countries, 500 companies and 200 discrete technologies and applications. Paul is also the special advisor to the UN Broadband Commission for Digital Development.