Archive for July, 2003


Tuesday, July 29th, 2003

In May 2003, SkyNetGlobal launched W Home, a proprietary Smart Home system for apartment dwellers.

W Home uses a combination or Ethernet, WiFi and power line technologies to deliver services to apartments. W Home is the first company in Australia to use power line technology to deliver broadband Internet into homes. W Home turns every power socket in the apartment into a connection point to access W Broadband service, eliminating the need for any wiring.

Once W Home is installed tenants can use the features of a Smart Home without the need of additional wiring or the upgrade of existing infrastructure. W Home services will include wireless “WiFi” connectivity, broadband, IP Telephony and home networking, security and automation.

Business model
W home does not required capital investment from the apartment owner, developer or the tenant as all capital investment is borne by W Home. This is possible because W Home’s makes its return from services provided to tenants rather than selling technology and hardware.

It makes sense for W Home because its costs of installation per building are significantly lower that traditional Smart Home concepts due to its proprietary design, which incorporates the concept of delivering what is, required today rather than tomorrow. W Home provides the technology platform that allows features such as home automation to be “switched on” when required by the tenant rather the owners paying for something upfront, that may never be used.

W Home’s own research indicates that there are 200,000 apartments in Australia that falls into its target profile and it plans to hit 5% market share within 2 years. To provide coverage to 10,000 apartments, W Home would need to sign approximately 100 with an average of 100 apartments each. W Home expects that it will achieve a per building subscriber take up rate of about 20%.

The W Home business will be operated by W Home Pty Limited, a new subsidiary of SkyNetGlobal limited. W Home will conduct a private equity placement of up to A$1 million to improve its balance sheet and provide further working capital. W Home at present is already cash flow positive and expects to be profitable within its first year of operation after depreciation and amortisation.

Target market; apartment buildings
Although W Home is ideal for new developments, it primarily targets existing buildings with at least
100 apartments due to its reliance on service revenue. Prior to deploying a building, W Home requires an initial take up 10 subscribers during its pre marketing phase. This would ensure that that every W Home enabled building is cash flow breakeven from day one.

W Home’s first building, Hordern Towers located in Sydney has 270 apartments and is already experiencing a take up rate of about 20% at 52 subscribers. Average revenue per user for the building is approximately $90 per month. The service has been live for about 6 months from installation date. All revenues at present are generate from the W Broadband service which offers unlimited broadband wireless internet from as $29.95 to $99.95 per month.

IP telephony
W Home expects that once IP telephony is offered, the average revenue per user is likely to increase as subscribers take advantage of up to 90% savings on telephone calls and no monthly line rental charges. Pricing of the IP Telephone service call “W Mobile” is based around cheap calling card rates with per minute rates from as low as 4 cents per minute to USA and UK.

The W Mobile service operates like a standard telephone call except that the call is made over a “WiFi” Wireless IP Phone that acts like a cordless phone. Instead of being carried through one of the networks owned by a long distance telephone provider the call is routed through the Internet on the international route, delivering massive savings.

Wireless connectivity, though WiFi will be a key driver for home automation adoption as major vendors incorporate WiFi into new appliances as already occurring with laptops. W Home could be the beginning of a new standard for smart homes and the next revolution in WiFi.

See also in Broadband section:
Australia – Wireless LANs (Wi Fi) Key Players
Australia – Wireless Broadband Wi Fi Overview and Analyses
Australia – Wireless Broadband in the CAN
Australia – Wireless Broadband Projects
Australia – Wireless Broadband – Overview and Analyses

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Thursday, July 10th, 2003

The Bathurst City Council was considering a plan to charge every bank, credit union and building society $5,000 a year for any ATM which is accessed from a public pavement in November 2002. The Council claimed the fee was a matter of equity, as restaurants were charged for placing chairs and tables on footpaths. But the banks and the NSW Chamber of Commerce objected and were lodging complaints against the fee.

See also in Electronic Commerce section:
Australia – EFTPOS, ATMs – Overview and Stats
Australia – Electronic Bill Presentation and Payment
Australia – E-commerce Revenues and E-Retailing
Australia – Financial Services – Overview and Statistics
Australia – Electronic Purses (Smart Cards)

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Wednesday, July 9th, 2003

After the State Government’s startling back-flip in December 2002 it was obvious that a business case no longer existed for Downer to run a fibre-optic telecommunications network in Tasmania. The construction company had run the cable next to its gas pipeline across the island, and the State Government had committed to extending the network to businesses and residents alongside the reticulation of the gas network. Out of the blue, a few days before Christmas, the government cancelled the plan and went for a significantly smaller version of the gas plan, as proposed by New Zealand-based electricity utility, Powerco – a plan that did not include any plans for the broadband network. Subsequently the government had to bail Downer out, at a cost of $23 million.

In May the government announced it would make this stranded asset available to parties willing to broadband Tasmania in competition with Telstra, and they indicated they had secured the rights from Powerco to utilise their trenches to extend the cable to the areas where Powerco was taking the gas network.

However, without the original broadband plan (rapid roll-out of gas pipelines throughout a very large part of Tassie) the government will find it difficult (impossible) to come up with a business model that will work.

They will have to make some serious commitments before anybody is likely to show any interest in commercialising their ‘big pipe’. Broadband infrastructure is an expensive business and deployment will not happen without significant government involvement. This will need to include:
A timely roll-out agenda – if it takes too long Telstra will fill the gap and it will be extremely difficult for the new company to win those customers back.
Extensive coverage – the broadbanding of some business centres alone will not warrant the $23 million investment. Large commercial and residential areas will need to be covered.
The government has to become an anchor tenant on this new network. It will need to give its whole-of-government telecoms business to the new player and it should also fund broadband access to schools, hospitals, libraries, council offices, police stations, etc.

This will necessitate the development of a Broadband Agenda for Tasmania. Without such an Agenda nobody will be able to build an economically viable broadbanding plan for Tassie, in which case the $23 bailout will simply go down the drain.

It is to be hoped that the government will work out a more sustainable plan.

Paul Budde

For a comprehensive overview of the Tassie situation see: Australia – Regional Projects (VIC, TAS & SA)

See also:
Australia – Government Markets (NSW, Tasmania, WA, Local Govt)
Australia – Broadbanding Regional Australia
Australia – Broadbanding Local Communities

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Tuesday, July 1st, 2003

The trend in Europe to create new competition is to look at a structural separation that allows the network to be partly controlled by the government, with everything else being privatised. This would ensure an ongoing commitment from the government toward infrastructure in economic unviable areas. The option of the structural separation of Telstra has been categorically rejected by the Minister.

In June 2003, the ALP and the Democrats blamed Telstra for causing “severe disruption” to the state of broadband competition in Australia and called a Senate inquiry.

The opposition claims that the importance of this inquiry was underlined by the ACCC report, “emerging Market Structures in the Communications Sector”, which says Australia has an uncompetitive communications regime. The inquiry seeks to address the issues of; the current and prospective levels of competition in broadband services, including interconnection and pricing in both the wholesale and retail markets; impediments to competition and to uptake of broadband technology; and the implications of communications technology convergence on competition in broadband and other emerging markets.

While the Senate Environment, Communications, Information Technology and Arts committee will focus on the broadband market, the inquiry is expected to also explore the divestiture of Telstra. This will be the 2nd inquiry in one year into the possible break-up of Telstra. The Minister abruptly aborted the previous investigation into this issue earlier in 2003 after Labour withdraw itself from this inquiry.

The terms of reference cover:
Current and prospective levels of competition in broadband services, including interconnection and pricing in wholesale and retail markets;
Any impediments to competition and to the uptake of broadband technology;
Implications of communications technology convergence on competition;
Impact and relationship between ownership of content and distribution of content on competition; and
Opportunities to maximise the capacity and use of existing broadband infrastructure.

Watch this space – I am certain that the conversation on structural separation is far from over.

See also:
Australia – Regulatory – Structural Separation
Australia – Regulatory – Analysis of the Estens Report
Telstra Corporation Limited – Company analyses – 2003

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Tuesday, July 1st, 2003

Most of the first level of voice services (calls, messaging, enhanced voice, access) is driven by price.

All of these applications will be used if the price is right. For example, look at the I-mode services in Japan, where enhanced voice services (including video messages) are offered for a matter of cents.

In a different application segment another example would be the price packages such as ‘Family and Friends’. You are phoning these people anyway, so why not use an offer to do this at a lower cost?

While outside the direct voice example, the Foxtel pay TV bundle is a further example of a commodity product, where price is the most critical element on which customers base their decision: you are already using Telstra and Foxtel; you get a discount. This is a no-brainer for the customer, so you bundle them and get a discount. It doesn’t stimulate higher or more innovative usage, but the advantage for the operator is that it discourages churn.

Transaction services are another interesting segment. It is not only the time convenience that plays a role here, the ‘I am in charge’ element is also important – no ‘interference’ from bank staff, etc.

Age is a factor: for the under 35s the Internet (or SMS for that matter) would be the preferred option; over 35, telephone banking would still be more popular. However, it all comes back to personal preference and letting the customer make the decision that he/she feels most comfortable with, rather than trying to move her/him in a particular direction. This applies to a range of straightforward action-based behaviour, such as transactions, some information and messaging – the more complex the action the less likely people are to go that one step further from voice to online based communication.

However, the telephone has a major disadvantage. It is misused by organisations to deliver very poor quality customer service; long call centre queues etc. This is making the telephone a less popular option than online, especially with always-on broadband becoming more generally available.

While VoIP is certainly going to open up the voice market to innovations, I doubt if audio-conferencing will get a new lease of life from it. Beyond some niche markets, it is not widely used, although it is widely available, and at reasonable prices. An application such as community voice (chatting) would not be successful. It requires too much organisation – everybody has to be available at a specific time and, from a user point of view, participating in such an event is boring because you can’t all talk at the same time and there can be no social chatting in the background between a few people etc.

The cost of calls (especially internationally) is already so low that price is not a driver here either, so VoIP is not critical. The advantage of the Internet is that in most situations delayed communication is fine (85% of all voice interactions would be OK if there is a delayed response – hence the success of Messagebank and answering machines.

I am sure there will be niche markets for always-on voice services such as healthcare, babysitting, etc. However, the local call structure in Australia already allows for such services and I am not aware of an overwhelming (mis)use of this; which would indicate high levels of demand.

In a ‘voice’ sense the extra value of VoIP could lie in developing further innovations linked to the social, value-added experience of certain voice calls. In situations where you don’t want to establish delayed communications, the quality of the event/experience (whether it is a business call to clinch a deal or a chat with your mum) outweighs the actual cost of the call. I believe that there is room to build on that ‘quality experience’ element, resulting in some new innovative premium voice services entering the market.

Voice will also play a key role in broadband, where it will be linked with video communication.

See also:
Global – VAS – IVR, Premium Rate, Freephone
Global – VAS – Call Centres and CIT
Global – VAS – Telephone Cards
Global – Public Data – Voicemail
Global – Public Data – Unified Messaging

Australia – Enhanced Voice Services, IVR
Australia – Premium Rate Services
Australia – Call centres
Australia – Calling Card and Callback Markets

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