BuddeBlog

My recent debates on the future of mobile comms, HSDPA, CDMA and WiMAX have stirred the pot and are reflecting the warlike situation we now have with the WiMAX camp on the one side and the mobile camp on the other side. They have led to some very interesting discussions with top people from the various camps. It is also interesting to note that Qualcom has moved closer towards the WiMAX camp, might this be a sign of the times with CDMA possible becoming a casualty of the standards war with GSM?

It is easy to get an agreement from all the camps that WiMAX is going to play a role in the fixed wireless broadband market, and, as I have said before, it is only a matter of how successful WiMAX will be. Obvious markets include regional markets in western countries, and even larger opportunities exist in emerging economies.

The tricky point of course is the mobility market.

As I reported after my trip to China, Ericsson certainly is a firm believer in its own mobile comms future and doesn’t see a role for WiMAX in this market at all.

Several other vendors also question the viability of WiMAX. And it was interesting to follow the spectrum harmonisation debate in Europe – sharp demarcation lines existed, depending on the vested interests of the mobile operators and their vendors. Fixed network operators without mobile networks were all for an open approach, while those with mobile networks wanted to preserve spectrum rights linked to the technologies they deploy.

While you occasionally get really good arguments from these vested interests it is always necessary to analyse them according to where they are coming from. It’s not that their arguments are necessarily wrong, but they often suffer from tunnel vision.

There certainly are very strong arguments that WiMAX has a very tough time ahead. While technology does play a role, in the end it is market coverage, customer service and a whole range of other business issues that are crucial to whatever success you are pursuing in this market. Those entering these markets for the first time know only too well how powerful the current players are, and how difficult it is to chip market shares away. And WiMAX will not be any different in this respect.

But if we except that customers are going to pay less and less for calls (mobile or fixed), and that customers are prepared to pay for data applications based on their conditions (high speed/low cost), then that certainly has to be the future of any player in this market. The question from an operational point of view is simply: what is the best technology platform for such an environment?

The current mobile networks are optimised for calls, as 90% of the revenues come from this market segment. The GSM-based migration path is still a fair way away from becoming IP-based. And, although CDMA might already be a bit further advanced, the same question applies there – what happens if suddenly the traffic stats are reversed to read 90% data and 10% voice? Will CDMA be able to deliver under such circumstances?

To date I have not heard convincing enough arguments to place my bets on the mobile camp. But, to be honest, I also still have severe questions regarding WiMAX. Will they be able to deliver what they promise and how are they going to establish these networks in those highly competitive telco markets?

The first markets to watch are those where the leading telcos don’t have a mobile network, notably BT in the UK. I have also argued that companies such as China Telecom should very seriously consider this market approach, and there are, of course, many more players who have the resources to put their full weight behind WiMAX, if they believe the technology is robust enough and can stand up to its promises.

Paul Budde

See also:
Broadband Wireless Global
Global – Mobile Communications
Global – Mobile Data

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On the positive side, with one of the lowest broadband penetration levels in the western world, the New Zealand market can only improve from here on. This will be good news for the ISPs and BSPs in particular. They are emerging as the new movers and shakers in the Internet economy, rather than the telcos, who are still, to a large extent, stuck in the old telecoms economy.

So the future for ISPs and BSPs with the right vision and strategies is looking rather bright, with good progress expected for at least the next two years.

Interestingly, this boom will be driven by their archrival, Telecom. I expect that company to take significant initiatives in the New Year, which should produce a boom in broadband. Regulatory pressure will be the key driver of that development since, if it were left to Telecom on its own, it would wish to prolong the process for as long as possible, so as to slow down the cannibalisation of its current business and to extend the timeframe for its network upgrading investment.

An analysis of the current market situation, however, is rather negative. Although there has been a great deal of talk and activity on the telecoms market in New Zealand, there have been very little tangible outcomes.

And what has occurred has been, if anything, rather negative:
Telecom is entrenching its fortress mentality, hardening and toughening its stand
TelstraClear has withdrawn from significant parts of the market
The mobile termination review is in a shambles
The current telecoms review is far too narrow in its scope
Broadband wholesale is nowhere near what it should be, and this is hampering innovation and competition
Not everybody in New Zealand seems to fully understand that their future lies in an Internet-driven, not a telecoms-driven, economy.

However, on the positive side, the new government seems to be taking the telecoms industry more seriously. And, following a period of reflection, TelstraClear has come back with a vengeance, fighting for a better wholesale environment. Also, ihug has been revived and is back in its role as a mover and shaker; Call Plus has grown from strength to strength and is positioning itself as a key player in the broadband market; and Woosh is pressing forward with wireless broadband innovations.

Another interesting development is the proposed FttH networks from Vector in CBD Auckland and Wellington. As this is planned as a wholesale network it certainly could be the start of some more substantial facilities based competition.

While the government is making all the right noises at the moment, it is important to realise that this is a pretty unstable administration, and not all of the four parties involved have a good understanding of the importance of telecoms for the economy, and for the community at large.

Paul Budde

New Reports
2006 Telecoms, Mobile and Broadband in New Zealand Reports
2006 Mobile & Broadband in New Zealand – Single-User PDF A$495
2006 Telecoms Overview, Statistics and Analyses in New Zealand – Single-User PDF A$595

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2006 Mobile & Broadband in the South Pacific Islands – Single-User PDF A$495

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In February 2005 ihug sold the satellite arm of its Ultra Service to Bordernet – a rural Australian ISP specialising in satellite Internet access. Following the sale of the satellite business, ihug also discontinued the remaining Ultra plans.

Ihug is a major player in the Australian ISP wholesale market and is the second largest ISP in New Zealand. The company provides direct Internet access, high-speed Internet solutions, international bandwidth and a range of other services to customers throughout New Zealand and Australia.

Its Ultra satellite is a high-bandwidth Internet connection service based on a satellite dish and PCI card. The PCI card in the customer’s PC receives data from the satellite dish at high-speed, while outgoing requests are sent via their current modem. This allows customers to connect to the Internet at up to 2Mb/s, which is easily faster than the fastest analogue 56Kb/s modem or ISDN. The technology is well proven; it has been in operation since late 1997 in Sydney, Melbourne, Brisbane, Adelaide and Wollongong.

In December 2000 ihug started wholesaling a Direct-to-Home (DTH) high-speed satellite Internet service to ISPs throughout rural and regional Australia. These ISPs provide the infrastructure and use ihug’s broadband expertise and technology to provide their customers with high-speed satellite Internet. By June 2004, 92 Australian ISPs were proactively reselling the Ultra satellite product making it accessible to over 95% of Australia. This has created a large downstream broadband customer base for ihug. However, due to the increasing uptake of alternative broadband services such as ADSL, satellite is experiencing a falling growth rate.

From May 2004 ihug decided to cease its retail operation of satellite from a selling prospective to concentrate only on the wholesaling of DTH satellite to ISPs.

For more information, see separate report: ihug.

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Very much like VoIP, IPTV is an attractive proposition for ISPs to generate more revenue. With basic margins on access services going down, there is a need for these companies to move further into the value-added services that attract higher margins.

There is a whole new market around the corner for IP-based wholesale services. Several companies are already active in the VoIP wholesale market, and others are launching their services in the IPTV wholesale market.

These IP-based markets are highly specialised and comprise services that most ISPs find very hard to deliver.

On the one hand, there are the technical issues, plus issues in relation to content, such as dealing with content owners like film studios, libraries, archives, etc. And, on the other hand, problems also exist in relation to Digital Rights Management, security issues and set-top boxes – all highly specialised areas, well-suited for wholesale providers but difficult for retail providers to deal with.

The basic model that is beginning to emerge in the market is that of triple play services – combining voice, data and video. ISPs can generate additional revenue from existing and planned infrastructure.

VoIP and IPTV provide compelling reasons to move to broadband, allowing ISPs to generate additional connections and churn dial-up customers to broadband. Once that is in place the ISP can then earn extra revenue from bandwidth upgrades from these customers. Significant numbers of customers would wish to move quickly from slower speeds to at least 1.5Mb/s to allow for content-rich data and future IPTV services.

IPTV wholesale services can also be offered to TV-based customers, and this allows ISPs to expand the current user base beyond the PC.

While VoIP is often seen as the killer app in the triple play model, IPTV makes the product sticky. This enables those ISPs with good customer service to build long-lasting rewarding relationships with their customers. Think about home networking services through BPL or wireless connections and it becomes possible to provide even more enhanced services to an even wider customer base (eg individuals within a household).

With all these tools available to them well-run ISPs should find it easier to fend off competition from the vertically-integrated telcos, who won’t be able to deliver the level of tailor-made services required in these new converging environments.

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I have been trying to understand, in a bit more detail, Telstra’s $10 billion investments in NGN and FttN.

How firm are these figures – especially in relation to the regulatory provisos that Telstra has put in its documentation?

Alcatel seems to be quite confident that it is going to happen, as they have now produced several press releases on their $3.5 billion contract.

At the same time we haven’t heard anything from Cisco, supposedly one of the other big winners – reportedly good for another $1 billion, but no details whatsoever. You can buy an awful lot of routers for this amount, so what’s the story?

It will be very interesting to see what the final figure will be. I wouldn’t be surprised if it turns out to be significantly less than the stated $10 billion.

Not that I dispute the fact that this is the sort of money necessary to future-proof metro Australia. Those with long memories might recall that, for the last three years, I have been talking about a $15 billion investment over 5 to 10 years, of which $5 billion is needed for the economically unviable areas (mainly on the edges of metro and regional towns). This will be largely covered by the Regional Funds, thus leaving $10 billion to invest by Telstra in the most profitable markets.

When I first mentioned this figure, Telstra still claimed it would cost them $26 billion to do the job.

See also: Telstra Strategic Plans and our analyses

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After searching for some time in 2005 to secure continuing funding, PBA was 80% acquired by Commander Communications in July 2005.

By taking the Commander option, PBA was able to ensure its financial stability and continued development of its services. PBA remains a separately constituted and managed business within the Commander Group.

Those who have followed my past comments and analyses of PBA will not be surprised about their business challenges. As I said when the service was launched, I didn’t ever believe that there would be a large enough market for the kind of niche market product that PBA has been able to build around its wireless network.

When the company launched its service in 2004 the broadband market was different from what had been envisaged in the initial plan in the early 00s.

As we predicted, PBA was unable to come up with a competitive offering in the market. The company tried to spin this by indicating that the mobility aspects of its service would create the added value that businesses would be prepared to pay extra for – an assumption that I questioned from the very start.

There is, and was, nothing wrong with the system itself, or the service. On the contrary, I reported on our own positive experiences in using the service. However, the business model was flawed from the beginning, and in my opinion there was no hope that the company would ever become successful based on that model.

In infrastructure projects it is frequently not the first owner that makes the money, but the second – or sometimes even the third, and this will be the case here. With a large sum written off the initial investment, Commander will have a much better chance of building a better business model around the product.

While it could have residential possibilities as well I would think that Commander will maintain it as a business product. However, with a much better pricing structure linked to it, and with the opportunity to bundle it in with other products and services already offered by the company to its SME customers, the PBA service certainly has found an excellent new home.

As I have indicated in previous analyses relating to the direction of the wireless broadband market, I’m sure Commander will make the most of the many new business opportunities this technology will have on offer in years to come. True, VoIP is perhaps not yet a viable option, but given a few years and a more WiMAX-aligned service, this is bound to change. And this will also open up the way for Commander to move further into a totally new market, around the concept of Wireless Personal Area Networks (WPANs), which will allow employees within any business to be seamlessly connected with their fixed systems.

A few weeks ago I also mentioned the potential demise of Unwired, but I am pleased to see that it has been able to develop a new model in partnership with Austar. However, everything now depends on whether Austar’s investment can take the service further, and it remains to be seen if Austar is prepared to make the necessary investment. The company certainly has the potential to do so and I believe it is ready for a new challenge – and wireless broadband would certainly also be my future choice for the company.

In this latter case, I don’t subscribe to the theories of some of my colleague forecasters, who maintain that wireless broadband is going to be in competition with fixed broadband. Overall, the market for ‘fixed wireless’ broadband will be limited to regional towns with less than 10,000 people, and perhaps some regional markets. And of course, there will always be some niche markets.

But I don’t expect that wireless will take up more than 15-20% of the total broadband market. Wireless broadband will actually replace most of the current mobile data market – which, due to the current mobile technology, never got off the ground. This is where the real future of wireless broadband lies.

For more information, see separate reports: Personal Broadband Australia Pty Ltd. Or visit www.iburst.com.au

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The letterbox is the best way to reach consumers of telecommunication products according to a mid-2004 survey from TNS Research. It indicates that post is the preferred medium for receiving promotional messages, with more than half of consumers choosing a post-based medium over newspapers, television, e-mail or any other media.

The research, ‘Reaching Consumers in the Information Age’, was commissioned by Australia Post. It interviewed over 1000 Australians, looking at preferences for receiving different types of communication from the telecommunications industry. It also explored whether media preference is affected by an existing relationship with a business (customer/non-customer).

Key findings include that the letterbox is the clear favourite when it comes to receiving promotional messages from telcos. Looking at all forms of mail together (personally addressed mail, unaddressed mail, mailed catalogues and inserts with bills), 73% of customers want telcos to send them promotional messages using these methods. For non-customers the figure is 56%.

When already a customer of a telco, personally addressed mail is the most popular single medium for receiving promotional messages with 54% of Australians expressing a preference to be reached in this way. This is more than four times greater than the next most popular medium – television – which is preferred by 12% of customers. Unaddressed mail is also in the top three, with nine%.

For non-customers, the picture is similar. Personalised direct mail still comes out on top with 30%, television rises to 21% and unaddressed mail to 16%.

When it comes to receiving bills and statements, 91% of Australians prefer post, suggesting that e-mail is yet to make an impact on consumers in this area.

Looking at frequency of communication, customers want to receive advertising messages regularly, 66% preferring promotional and advertising information at least monthly. When it comes to mobile phone bills, 76% of consumers prefer to receive them monthly. Similarly, 57% prefer monthly bills for their home phone and 40% like to receive them bi-monthly or quarterly.

Additional research from Australia Post reveals that the telecommunications sector is one of the largest users of direct mail, representing 16% of the items received by Australian households. However, the study also revealed that the average household receives just 2.3 items of personally addressed advertising or promotional mail each week, suggesting there is further room for growth in the letterbox.

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The Broadband Island satellite and wireless-based solution, offered by RCS Online [www.rcsonline.biz] provides broadband data, Internet services, videoconferencing and other value-added services to regional locations throughout Australasia. It supplies an always on two-way IP network connection, independent of any existing communications infrastructure and provides high quality broadband services without distance or location constraints.

This solution provides up to 20Mbs to individual users (via the Wireless Local Loop) for the community model and 64Kbs to 1.1Mb upload/2Mb download broadband access to the Internet through the NSS6 satellite. The Broadband Island solution can be deployed in most regional sites across the satellite (NSS6) footprint, which includes Australia and Asia.

The Broadband Island has access to two satellite teleports in Adelaide and Perth, which are connected directly to an extensive, independent terrestrial fibre networks, offering affordable, fully redundant, Tier One DSL Internet access to any domestic or business user in the country.

The solution offers a complete range of services including broadband data, super fast Internet access, Internet services, Voice over Internet Protocol (VoIP), videoconferencing, interactive multimedia and a Wireless Local Loop providing all subscribers voice and data transfer at no additional cost. The Broadband Island Internet connectivity will enable e-mail, Internet browsing and other forms of electronic communication for the entire region. Prices for Internet access start from $ 75.00 per month.

The company received its carrier licence in May 2004.

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While the Internet is very much a communications medium, exemplified by the dominance of e-mail and instant messaging as applications, it began as a file-sharing network, and the success of Napster and similar peer-to-peer file sharing initiatives shows that multi-media file sharing remains a key application. More specifically, multi-media file sharing can be seen as a subset of Webcasting, of which streaming data/audio/video and Video-on-Demand (VoD) are other examples.

By 2003 it had become clear, like so many other technologies, that videostreaming was not up to customers’ expectations. Part of the problem has been the lack of broadband access, which has significantly improved over the last 18 months but to the contrary there has not been a marked improvement in videostreaming.

While up to 25% of broadband users have tried the technology the majority is disappointed by its quality.

Key issues are:

• slow loading of programs;

• poor fidelity, both in sound and video;

• intermittent stoppages of playbacks.

CTIN estimated that streaming was (2002) growing quickly, at a rate of 30-35% annually. Over the long term, however, it is broadband in general, and not streaming in particular, that will make broadcast-type content available on a one-to-one basis with improving quality. The greater transmission and storage capacities expected to be available in future broadband technologies will mean less demand for the data economising that is the strength of streaming.

Streaming was forecast, however, to grow quickly by 2004 and more moderately through to 2008. CTIN predicted that usage would then peak at some 5.5 million Australians who will stream on average for about five hours per month. Thereafter streaming will decline to 2010 with the maturing of broadband delivery and the introduction of better reception devices.

For more information, see separate report: Australia – Broadband TV.

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In January 2001 the company went into voluntary administration. However, in early 2002 there were plans to salvage some of the developments.

Australian Business Technologies Pty Ltd (ABT) was a communications company with plans to enter the national satellite communications market. The company had its own WAN with nine Points of Presence (PoPs), 200 LAN sites, some 200 managed servers and over 3,000 devices connected to its enterprise management centre in Sydney.

ABT focussed exclusively on regional and rural Australia. Its business plans revolved around the provision of high-bandwidth, cost-effective two-way communications services for small to medium businesses. It would not be providing content, such as pay TV or online information services. At the time ABT signed a Memorandum of Understanding with Gilat, and was negotiating a sizeable bandwidth chunk with a satellite provider.

Its initial plan to obtain funding through a backdoor listing failed. With mounting costs the company had to quickly find a new way to fund its plans, as it would rapidly loose momentum in this fast moving world. It initially appeared that this had happened in early 2000 when ABT received new support and established a subsidiary Heartland Communications, which would provide high-speed Internet access to regional communities. However, ongoing financial problems forced the company to appoint an administrator in early 2001.

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