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AAPT is Australia’s third largest telecommunications carrier offering local, national and international voice, data, mobile, pay TV and Internet services to business, corporate, government and residential customers. AAPT is a wholly-owned subsidiary of Telecom New Zealand and is one of only three Australian telecom providers to own and operate its own national voice and data network.

For further information please see: 2007 Australia – Telco Company Profiles – 2nd Tier Telcos.

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Both understand telecoms
It is good to know that the two politicians who are most important to the telco industry both have an excellent understanding of it. They share the view that telecoms is important for the country and is a very important enabler in areas such as e-health, education, smart grids for energy savings, etc.

Senators Coonan and Conroy are also committed to making government funds available to provide a nationwide service that offers equivalent services at similar prices around the country. Importantly, this includes the funds needed to make infrastructure investments in regional areas.

And I believe that, from an industry perspective, most will agree that if we set the politics aside we will be able to work with either Senator Coonan or Senator Conroy.

Senator Coonan
Senator Coonan has certainly earned the respect of the industry as she has had to deal with some situations which were outside normal business practices. At a recent telco CEO dinner we expressed our gratitude to her for the support she gave to fundamental policy issues such as the safeguarding of a competitive environment.

That’s not to say there were no worrying moments for the industry. The Minister did come tantalisingly close to doing a deal with Telstra, and the industry should be grateful to the ACCC and the Treasury for making sure that this didn’t happen.

Unfortunately the Minister inherited a messy telecoms portfolio. Most of the problems that we are currently encountering would have been totally avoidable if the government had acted properly in the first place, during their first eight years in government.

Senator Conroy
Senator Conroy has made himself very accessible to our industry. He has consulted extensively with the players, taken an interest in new developments, and discussed options and plans as to how Labor can assist in developing some of the new national opportunities.

I am reasonably confident about ongoing industry cooperation under a Labor government; however, in the event that Senator Conroy becomes Minister for Communications, he will have a rather complex situation to deal with. He will need to take into account not just Labor’s plans but also the Broadband Connect (OPEL) and Expert Task Force issues. He needs to be strong and to base his approach on a sound regulatory foundation. Such an approach would earn him the support of the industry.

It would be great if Telstra were prepared to participate in this debate, but otherwise he would need to be decisive and immediately initiate the structural separation process that he has indicated he supports.

Foundations are not right
Without a sound regulatory basis any investment from either side will largely be wasted, and that would mean billions of dollars down the drain. Building on sound foundations could also cut the estimated costs of $5 billion into half. In one way or another we need equivalent and transparent access to the future FttH networks, either through commercial wholesale arrangements (as in the Netherlands, Sweden and Denmark) or through some sort of structural separation between infrastructure developments and the retail services provided over these networks (UK and New Zealand). I think neither the Minister nor the Senator would disagree with me on the need for this – it is just a matter how we get there.

Part of the Minster’s legacy is that under the sale of Telstra legal obligations now exist, which are making it difficult for her to begin a process of structural separation.

The Senator is on the public record as supporting structural separation, but he has subsequently gone extremely quiet on the issue. The fact that Telstra is supportive of the Labor infrastructure plans is also creating a sense of wariness amongst the industry players. How genuine is Labor’s commitment to structural separation? I believe Telstra is playing politics, as it knows only too well that it would be worse off under a Labor government.

Who will be the Minister
Who will the industry be working with after the election?

The Minister has already indicated her interest is in the portfolio of Attorney General and, as she has done a great job in the current Cabinet, she would certainly have a good chance of that position, if the Liberals retain government.

This would mean that we would lose our champion, and we all remember how bad things can get if the Minister does not give appropriate support to the industry.

But, equally, there is no certainty that Senator Conroy will become the Minister for Communications if Labor wins the election. My understanding is that he is genuinely interested in the portfolio but it would be up to a new Prime Minister to make the ministerial appointments.

So if a new Minister is appointed the industry would have to start from scratch. Telecoms is not an easy portfolio as it brings together rather complex technical, regulatory and political issues; and involves commercial and national interests across various disciplines, such as health, education, energy, communications, IT, science, etc.

The first year after the election will be crucial for the industry and it would be good if we had a Minister that we can rely on.

Lack of transparency
In the event of a Coalition victory it is to be hoped that the government has learned from projects such as Broadband Connect and Broadband Guarantee that a more genuine dialogue with the industry is needed, and that this should not take place behind closed DCITA doors.

I have grave doubts about this since, once again, the parameters set for the Expert Task Force for FttH are not transparent, leaving room for the possibility of negotiations taking place behind closed doors.

In the case of a Labor victory everything will hinge on the execution of the plan. They must be willing to consult with the industry and make any changes necessary to serve the country’s best interest.

So my questions are:

• In either case (a Liberal or Labor government) significant regulatory changes are required to safeguard the future large-scale national investments in telecoms infrastructure. Many countries see structural change as the basis for that process. How do the Coalition and Labor intend to go about achieving this?
• Can the Minister and the Senator tell us more about their personal commitment to the position of Minister for Communications?
• Can we expect an improvement on the cooperative models between the government and the industry in relation to their infrastructure plans? In the case of Labor, are they prepared to start afresh, with a genuine attitude of bilateral participation and collaboration.

Paul Budde

See also:
Australia – Government Broadband Policies
Australia – Government Policies – Federal Opposition Policies – 2001-2007
Australia – Structural Industry Changes
Europe – Structural Separation Developments – 2007
Australia – FttN plans from Telstra and competitors
Australia – FttH Market – Analyses
Roundtable – Strategies for Fibre-ing Australia

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Telstra cuts wholesale rates in dying markets

In September 2006, the ACCC rejected Telstra’ March 2006 proposal in which it announced a cut of 32% to its wholesale local call charges, to encourage people to make more use their home phones and the fixed network as part of a package of proposed wholesale pricing changes.

The pricing was proposed in a new undertaking lodged by Telstra with the ACCC at that time.

Of course, there is no such thing as a free lunch, so, at the same time, Telstra was seeking an increase to 2.18 cents per minute on fixed network cost recovery to terminate a call on its fixed network in 06/07.

The wholesale discount was quite a clever strategy from the incumbent, and it has used it successfully in the past. The discounts it is providing are on services that are rapidly dying out, so maximising any revenue out of an asset that is already written off makes sense from its point of view.

Furthermore, by dangling this carrot it also has, in the past, successfully prevented others, such as Optus and AAPT, from moving more quickly into building their own new networks. This is one of the main reasons AAPT has been caught, and why Optus is suffering. By falling for the inducement of more attractive resale margins in the past, and of even further discounts now, these companies were able to obtain some easy revenue.

The future, however, is in broadband and applications – not in voice. This is where Telstra is fighting with the government, the regulator and the industry, and this is where the real action is.

So fortunately the ACCC didn’t fall into this trap. As I indicated at that time I didn’t think that the industry would be caught twice.

Telstra wants to retain its stranglehold

While there was a glimmer of hope during the early 00s that the wholesale market would thaw, the reality is that the telcos maintain a very tight control over this market and have no intention whatsoever of relaxing their hold. Sol Trujillo’s blunt request for an outright monopoly sets the scene for further developments. He also vehemently opposed any separation that would create a more wholesale-friendly telco environment.

This means that the traditional telco market in Australia will unfortunately have to rely completely on regulation. This is certainly not a scenario that I would like to promote. I feel that in certain areas we are definitely over-regulated, but it is impossible to relax any of these regulations because of Telstra’s uncompromising stand.

In the meantime the broadband/Next Generation Network (NGN) market allows companies to build new services on top of the infrastructure, making them less dependent on the very low access margins.

Companies building their own infrastructure are, of course, also making themselves less dependent on wholesale services; however there are significant risks involved, as Telstra has plenty of opportunities to undermine these developments by price dumping and other monopolistic trickery.

FttN – the need for industry cooperation

When Telstra launched its FttN plans I was one of the first to congratulate the company upon this visionary approach – and in particular upon the speed with which it proposed to introduce the new network.

However, at the same time I also mentioned that Telstra would have to sit down with the industry to discuss industry cooperation. What would be the migration path from DSL to FttN, and how would the rest of the industry be able to link into the new network?

Despite Sol Trujillo’s initial statement on his arrival in mid-2005 – that we, as a country, had to discuss these issues – he has never accepted any of the numerous invitations to become engaged in that discussion, one which he himself proposed. Instead he opted for a campaign of rhetoric, aimed at undermining government policies and telecommunication regulations.

Fortunately this bullying campaign has largely failed, with both the government and the regulator standing firm on all the issues Trujillo attacked.

From the very beginning I have maintained that he was bluffing. There was no way that Telstra would not roll out an FttN network, as this would amount to cutting of its own life blood. The company simply doesn’t have a choice if it wants to stay in the telecoms business.

On several occasions both Graeme Samuel and Minister Coonan said they were sure there was a way whereby Telstra would be able to get a decent return on its FttN investment and, at the same time, establish a network that would allow wholesale access on economically viable terms for the other providers.

When Telstra finally sat down with the regulator this concept quickly came to life and Telstra began to show a more positive attitude, however by June 2006 there still was no solution.

This change in Telstra’s behaviour did cause concern within the industry, as they were worried about a possible deal behind closed doors between the ACCC and Telstra. The ACCC immediately issued a press release to debunk that rumour. It has indicated that there will be a proper, transparent and open public debate on the issue before any decisions are taken.

The issue is rather simple, but as a result not easy. There should be an open end-to-end network on a wholesale level, into which the other players in the market can link. Ideally all players should be able to use this ‘network of networks’ on a commercial but equitable basis. This would reduce duplication, increase network efficiency, reduce costs and would give us a great opportunity to build a nationwide network.

If we take the government’s $3 billion of regional network funding into account such an approach would provide by far the best outcome for everybody.

The soon to be formed industry wholesale association (see below) could play a key role in this process.

Structural industry changes are required

Furthermore, a privatised Telstra will be forced by the financial market to better utilise its assets. At present some of these assets are hardly used (eg regional backbone infrastructure) simply to allow the company to keep prices artificially high.

This can’t go on forever.

The Ofcom ruling in Britain on the operational separation of BT will set a trend for a slow and long-lasting process of industry restructuring; which will coincide with a push for better asset management. A separated network division will surely be interested in maximising its assets. The company’s 2006 results is a vindication of this development. Only because of its current vertical integration with the retail organisation, whose interests lie in making it impossible for others to compete with them, do we have such an artificial situation.

I am not an economist but even I can see that from an economic viewpoint alone, this will have to change.

See also: Australia – Operational Separation of Telstra

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Whichever way the election dice rolls, 2008 will be a very interesting year for the Australian telecoms industry.

The stakes are high, with close to $5 billion in the government coffers allocated for telecoms. There is also a unanimous understanding within the industry that, unless the foundations are right, this money could be easily wasted.

The Labor Party has indicated its commitment to structural changes, and there is little doubt that the Coalition would also move in that direction if Telstra failed to adhere to the outcomes of the Expert Task Force. It is still possible that Sol Trujillo could pre-empt all of this and start his own structural separation. As his personal windfall from that could run into tens of millions of dollars, it must be a very tempting proposition for him.

In the meantime, the regulatory changes that were established in late 2006 are starting to come into effect. The margins of the 2nd tier players are improving slowly, and this is predicted to continue during 2008 and 2009.

Any effect of more structural changes won’t become noticeable before 2009 and it will be very interesting to see what those changes will mean for the industry.

Because such changes will have far reaching consequences, companies will need to make their own assessments and plan to be well prepared for what may happen.

These issues and scenarios will be discussed at the annual State of the Industry Roundtables.

‘State of the Industry’ Roundtables with Paul Budde
cost $425 pp excl GST

Sydney – Wednesday 26 September 2007
Melbourne – Thursday 27 September 2007

Theme: Australian Telco Market moving into 2008
Next year the Australian telecoms market will top the $37 billion mark, with another $1.5 billion being added to that figure by 2009. Although the percentage growth might not look all that spectacular, when it is expressed in dollars it shows the power of this industry.

Over the last decade Telstra’s market share has only dropped by 5%; they still control two thirds of the total market; Optus is hovering around 20% market share and the other 600 providers squabble over the remaining 13%.

The smaller telcos are slowly seeing an improvement in their margins. In 2000, 48% of their total revenue went to Telstra in wholesale charges. Now this percentage is 44% and we estimate that, due to a better wholesale regime, this will further improve to 42% in 2009. At the same time the wholesale market is growing at twice the growth rate of the retail market, so the overall value of the 2nd tier market is slowly increasing in relation to Telstra and Optus.

The biggest slice of the market goes to mobile. Since 2000 its share of the total telecoms market grew from 25% to 37%. Total value grew from $6.5 billion in 2000 to $13 billion in 2007. Another billion will be added to this already significant figure over the next few years.

In 2005 Telstra’s market share in the mobile market had dropped to 40%. However, the company launched a fierce campaign following the arrival of Sol Trujillo and by 2007 had achieved a 42% market share and this could grow to 44% in 2009. Telstra’s market share increase is hurting Optus most as it depends, to a large extent, on mobile revenues (mobile accounts for 56% of total Optus revenues).

The data market remains the fastest growing market in overall terms, with a growth percentage of around 13% per annum for the 2007 – 2009 period. With the broadband market rapidly approaching 5 million subscribers, more than 60% of the population has access to email and Internet at home and close to 80% of the population has access to these services at work or school.

Data revenues, which include broadband and dial-up Internet will grow from $6 billion in 2007 to $8 billion in 2009, representing the largest growth in the industry. Telstra also dominates this market with a 66% market share. Under the current industry structure, we don’t expect any change in that percentage over the next few years.

Presentations and discussions will mainly concentrate on the latest results of our new Australian reports that we will publish at the same time.

I will bring you up to date regarding the latest research data and, perhaps more importantly, analyse the market with you – highlighting the areas where opportunities exist.

AGENDA
09.30 – 10.00Arrival and coffee
10.00 – 10.15Welcome, introduction of delegates
10.15 – 11.15Analyses of the Australian Telecommunications Industry (Revenues, Market shares, Trends and Developments) Analyses of Telstra, Optus, AAPT, Vodafone and Hutchison.

11.15 – 11.45Morning coffee

11.45 – 12.15Second tier industry
12.15 – 12.45Statistics, Trends and developments in access, infrastructure fixed voice.

12.45 – 13.45Light lunch

13.45 – 14.15Statistics, Trends and developments in mobile, Internet, Broadband
14.15 – 14.45Forecasting triple play, digital media. Conclusions.

14.45 – 15.10Afternoon coffee

15.00 – 16.30 Roundtable discussion
16.30 Close

Cost:
$425 per person (excluding GST) – this includes morning/afternoon coffee and lunch

Venue:
The Observatory Hotel
89-113 Kent Street, Sydney

Booking:
Online registration: http://www.budde.com.au/consultancy/public-workshops-seminars.html
Telephone: 02 4998 8144
Email: pbc@budde.com.au

Cancellations/Refunds Policy Roundtables
We are happy to give a refund, provided we are notified no less than 24 hours before the event.

Please notify of cancellations in writing to: pbc@budde.com.au

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Excellent government initiatives
Australian utilities stand at the threshold of some important decisions. The State Government of Victoria has mandated the rollout of new electricity meters from 2009 – and at this very moment the Commonwealth Government (through COAG) is investigating a national policy.

The current debate originated, a few years ago, from the utilities’ need to be able to capture electricity usage in 30-minute intervals. This enables differential pricing by time-of-day and enables utilities to discourage certain types of ‘non-time-critical’ use during periods of high demand. Reducing peaks has a major impact on electricity generation costs – alleviating the need for new power plants and cutting down on damaging greenhouse emissions.

Victoria should be commended for initiating the debate.

The once-in-a-lifetime smart grid opportunity for Australia
It soon became clear that the additional information these meters generate can no longer be kept in the meter to await a bi-monthly or quarterly meter reading!

So what had been a metering problem became a communications problem (unfortunately in most utilities these two activities are dealt with in separate divisions). However, utilities are increasingly accepting the fact that they will have to consider the deployment of communications technology to enable the information to be sent electronically on a regular cycle.

How often does a country get the chance to replace 10 million electricity meters? Surely this generation has the obligation to use this opportunity to get it right.

Global warming – a new important political consideration
The key reason the smart meter issue was raised was the understanding that one can’t go on building power stations forever, and that a far more efficient use of energy was required for a modern society such as Australia. On top of that are the environmental considerations, and the responsibilities that rest upon both the utilities and the state and federal governments.

Seventy per cent (70%) of the cost of the smart grid overhaul is associated with the physical replacement of the meters in residential homes. We can afford to pay a bit more for a smart meter that can be left there for the next 15 years. Furthermore, smart meters are gateway products; home-owners can link other applications also, and upgrading simply becomes a software update, not a meter replacement.

This is all the more reason to go for an open standard, which will allow customers and utilities to add plug-and-play devices to the smart grid connection in the home or on the utilities’ infrastructure. Already many new energy saving and reliability improvement applications are becoming available and this will only increase over this market over the next few years. Interoperability should be a key element in the technology selection. Globally the IP standard is accepted by every single company in the communications industry, it therefore simply also has to be the standard of any smart grid network.

40-year-old proprietary solutions are not smart
From a strategic point of view it is obvious that meter reading constitutes only a small part of a much bigger process of modernisation – one that is being undertaken by the leading utilities all over the world to deal with those economic and environmental issues. The term ‘smart grids’ is rapidly gaining currency – it involves embedding computer and communications technology throughout electricity networks to deliver significant benefits in operational efficiency, fault anticipation, problem isolation/service restoration, asset management and the like.

In the rush to get Victoria’s plans underway by 2009, a proprietary system – containing 40-year-old technologies – and based on narrowband, has been suggested. This would address the 30-minute interval reading, but it does not take into account the smart grid options that are required to create all the other economic and environmental benefits. Unfortunately the federal government plans are linked to the Victorian plans, and so Victoria could drag the whole of Australia into an inadequate solution that would exclude smart solutions for another 15 years (changing meters in people’s homes is not something you would wish to do every few years).

Shouldn’t a clever country go for smart solutions?
The potential benefits of a full smart grid implementation are dramatic. Some US studies have suggested that savings of between 10% and 25% in electricity demand (and greenhouse emissions!) are achievable. Given that electricity consumption is the cause of around 40% of greenhouse emissions in the USA there are few initiatives that promise such significant benefits at a time when global warming has become one of the hottest issues confronting humanity.

On a more everyday level, efficient electricity networks ultimately flow through to tangible savings to the consumer.

So what is the solution?
This raises the question of what level of communications will be needed to support advanced smart grid deployments. One camp, led by the Victorian State Government (not by its utilities) argues that a low performance ‘narrowband’ solution is all that is needed to read meters, and the sooner we get on with this the better! As mentioned, the risk in this approach is that, since utilities can only upgrade meters every 15 years or so, the communications solution that is deployed today is what the utility will be stuck with for the next generation of investment.

A limited, narrowband communications solution will not support the real-time information flows that are involved in a smart grid deployment. It will not have the capacity to support communication between the utility and the plethora of increasingly intelligent appliances that we can expect to see in coming years. One only has to think back 15 years to see how progress would have been limited if the decision had been taken to lock into that old 486 computer with its 32 Mbytes of memory and 20 Mbytes of hard disk capacity for the next 15 years!

Let’s make smart decisions
The pressure to modernise electricity grids is commendable! However, if in our rush to make progress we take short-sighted decisions that foreclose our future for the next 15 years or so, Australia will be the loser.

Our country needs its politicians to lead the way in this important area, with a clear and far-sighted vision for the future.

The meter manufacturers would be only too happy to come back in few years’ time and do it all again, with proper smart meters next time, but this is about our future. If we get it right now, it will be the Australian people who will profit from lower prices and a cleaner environment. If we install dumb meters it will be their tax money that will be wasted. Furthermore, they will not be able to profit from the cost savings that a smart grid can deliver.

The broader picture
Finally, the benefits of smart grids go beyond the utility. Governments are able to make decisions on the basis of a societal cost/benefit analysis and could therefore recommend solutions which a utility alone may not. The multi-utility and non-utility potential of high speed communications to the house delivered in conjunction with electrical infrastructure is another benefit of a smart grids, this could help developing compelling business models.

Building on this, we shouldn’t try to solve communications for last mile requirements in isolation from other network communications needs and thus preventing synergies from being obtained. Other Government initiatives such as Broadband Connect, Broadband Guarantee, Clever Networks and the Fibre-to-the-Home Expert Task Force are all closely connected to each other as well as to Smart Grids.
Paul Budde

Australia – Broadband Power Line – Demand Side Management

Australia – Broadband Power Line – Smart Grids

Australia – Broadband Power Line – The Market in 2007

Australia – Broadband Power Line Projects and Forecasts

Australia – Energy Utilities Markets

Australia – UtiliTel

Australia – Utilities – Major Players

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The 2006 report

In 2006 some interesting developments were reported over last years’ market research company’s Connection Research Services (CRS) report on connected home technologies. Nine out of 10 Australians are living in a household with at least one computer, and one third has more than one, according to a new survey.

Mobile phones are ubiquitous, with 98% of respondents owning them.

They also found that 20% of homes now have plasma, LCD or projection TVs while 18% have games consoles.

Some 95% of respondents rated email as “important” or “highly important” and, according to the survey, one-third of people are considering experimenting with VoIP this year.

Not so successful are home theatre systems, smart lighting and security technologies. Although there is a growing interest in networked lighting and security systems, the survey found that less than five percent of households have made an investment in this technology.

The 2005 report

In its first major study published in May 2005, CRS found massive confusion over standards and connectivity in the emerging market for the digital home.

The survey found that while Australians are keen consumers of new technology, they have very little understanding of the way different technologies are converging to form the connected home. Most have never heard of structured cabling and many people believe that home automation is all about radio-controlled garage doors.

CRS surveyed more than 1,000 Australian households about their use of what it calls ‘connected home technologies’. One question sought information about the installed base of certain device types in the home. Over 60% of homes have more than one TV, but penetration of plasma, projection and CRT screens is still relatively low (less than 10%).

Over 80% of households have a mobile phone, and most have more than one – one household reported eight! Over three-quarters have at least one computer, and two-thirds are connected to the Internet.

Another question asked about installation and installation plans for technologies such as home theatres and home automation systems. Fewer than 20% of households had a home theatre installed, though this figure rises significantly with household income. So do installation levels of home automation systems, currently installed in around 15% of Australian households.

Another 5% of households are planning to install home theatres over the next 12 months, but plans for home automation and technologies such as networked video, smart lighting and integrated security systems are not nearly so advanced.

A key finding of the research is that structured cabling and home automation are very poorly understood, indicating that the industry has a lot of education to do to ensure take up of these technologies.

One of the most valuable parts of the report examines preferred brands for a range of technologies and equipment. The results are surprising: many well-known brands are not highly rated, while a few newcomers have made significant strides in consumer awareness.

Apple did extremely well as a preferred supplier of laptop and desktop PCs, for example it actually topped the laptop table, ahead of Dell and IBM, indicating its high brand awareness in the wake of the iPod’s success. Canon rated highest as preferred printer supplier.

Sony was the preferred vendor in each of four consumer electronics categories: TVs, DVDs, hi-fi systems and home theatre. Many traditional consumer electronics suppliers are not perceived as leaders in digital entertainment, and brand awareness of many of the home automation leaders remains very low.

The survey says the results indicate suppliers marketing strategies must be intelligently developed and executed. It is not enough to assume that if you build it, they will come – you also have to tell them what it is and how it will benefit them.

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After problems arose with the use of Global Networks calling cards and consumers complaining of cards failing to work and of not receiving the full value of the amount paid for the calling card, the Australian Communications and Media Authority and the Telecommunications Industry Ombudsman issued a press release in 2006 claiming that there are risks involved in buying phone calling cards from calling card operator, Global Networks Australia.

In the course of their investigations, the TIO and ACMA became aware that the owner of the business had left the country and shared a concern that any future complaints may not be addressed.

The firm issues cards under the brands: Call Plus, Call Express, Ezycom Phone Card, Ganga, Homeland Calling Card, Matrix Calling Card, MegaAfrica, MegaIndia, MegaLebanon, MegaVietnam, Oxygen Calling Card, Victory Phonecard, Virus Phonecard, Xtra Phonecard.

Global Networks cards are still being sold by retail outlets nationwide.

The company consequently folded its operation in Australia.

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According to IDC’s 2005 study: Australia Home Networking Market Forecast and Analysis 2004-2009: Are Home Networks A Data Only Zone?, home networking functions are currently limited to basic, data transmission tasks such as sharing a broadband connection or peripherals among multiple PCs, and are only adopted by tech-savvy households. For home networking to enter mainstream, vendors in this space need to change consumers’ mindset of this technology being data-centric and complex, by improving ease of use and taking home networking beyond data-centric applications and into media applications.

The study found that it’s very important that consumers find home networking solutions easy to install, operate and maintain in order for the technology to be widely accepted. Unfortunately, as of today, most home networking solutions are far from passing the ‘grandmother test’. There will continue to be a need and thus an emergence within the Australia market of home systems integrators like the ‘Geek Squad’ in the US or D-Link’s Installation Services Packages to increase and smoothen home networking deployments.

IDC predicts that by 2009, one out of five households will have a home network.

PC networks (ie data networks) will account for more than 70% of all home networks over the next five years. By 2009, some 70.8% of households owning a PC will own at least two or more PCs while broadband will penetrate into 50.1% of all households. IDC expects the higher penetration of broadband and multiple PCs households will continue to drive PC networking functions, hence the number of installed PC networks will increase at a modest Compound Annual Growth Rate (CAGR) of 47.2%.

Proliferation of digital media will create a need for consumers to consume their digital content on Consumer Electronic (CE) devices. In addition, CE manufacturers will continue to integrate home networking capabilities into CE devices. IDC expects multimedia and entertainment networks to experience CAGRs of 114.9% and 144.4% respectively, showing much stronger growth than PC networks, albeit from a much lower base.

A home network is defined as the configuration of two or more nodes enabling the mutual transfer and sharing of communications and data. There are three different types of home networks: PC networks (also known as data networks), multimedia networks and entertainment networks.

PC network is the networking of two or more PCs/ PDAs. A multimedia network has at least one PC and one CE device. It will include a PC that stores multimedia files, which are assessed over the network by networked CE devices, such as televisions or sound systems. Entertainment network does not include a PC; it requires two or more of the same devices to connect for communication without sharing communication with other devices in the home. For example, two STBs from the same manufacturer and/or cable operator could stream video from one to the other.

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Boost-tel Pty Limited (Boost Mobile) is headquartered in Sydney, Australia. The company is a lifestyle-based telecommunications company that focuses solely on developing and distributing communications products for the youth market. The company offerings include prepaid mobile phone services, ‘Re-Boost’ pay-as-you-go airtime cards and a wide range of accessories, long-distance and international calling cards and other cutting-edge telecommunications services. Marketing is centred on youth activities such as action sports, music, fashion and entertainment.

Boost-tel has outsourced its calling card operations to Gotalk and operates as a virtual phone card operator over that network.

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Introduction
I was recently privileged to follow a presentation by the award-winning Canadian essayist and novelist, John Ralston Saul. He was lecturing at the same conference at which I was speaking – the annual local government management conference (SOLGM) in Wellington New Zealand.

John has been hailed as one of the great thinkers of our time. He gave an awe-inspiring presentation, full of new ideas and philosophies about our society, culture, economic developments, the environment and aboriginal values.

He also had also something to say about technologies, but that was certainly not the focus of his presentation. I spoke directly after him and was so inspired by his views and ideas that I threw away my prepared address and followed up on his theme, linking it, of course, to my own topic, the broadbanding of local communities.

Economic models have changed but we haven’t caught up
John mentioned that our western societies still had not adjusted to the new economic order. Our modern economic society started somewhere around 1770 and was based on competition for limited resources, capital, labour and also the products we produced – food, clothing, luxury goods and so on were scarce. However since the 1960s the economic order has changed from one based on scarcity to one based on surplus.

But companies, countries and society in general are still operating as if the competition for scarce resources still exists. This is producing faulty economic and government policies and strategies, and these are damaging to the people, the society and the world we live in.

For example, new technologies should have created more free time, but we are actually working more hours and much harder. We are turning a lot of cultural and natural values into hard economic values and often forget to put a value on community, pleasure, enjoyment, freedom, lifestyle, etc. We should spend the extra time at our disposal on these not-for-profit, but very worthwhile investments.

The fallacy of Intellectual Property rights
As we have moved away from agricultural and manufacturing societies we have changed into a society that is based on ideas and information. It is therefore unforgivable that we are limiting the growth, and the flow, of ideas and information through Intellectual Property rules and regulations.

According to John, the inclusion of Intellectual Property into the WTO is severely hampering the flow of new ideas and information; it is attempting to control the dissemination of ideas, thus making the spread and sharing of them increasingly difficult. This is damaging the new economy!

In the digital media industry we see this happening through Digital Management Rights (DMR). This is a totally unsustainable state of affairs and needs to be changed.

There must surely be better ways to protect Intellectual Property.

At the BuddeComm Digital Media Roundtable in August clear evidence was given that people are prepared to pay for Intellectual Property, but that it needs to be based on conditions that are acceptable to society as a whole, and not on power of the few who want to protect the scarcity economy.

See: Australia – Digital Media – Update Late 2007

People are changing, structures need to follow
At the same time many people are now prepared to speak out against the old world culture. The anti-globalisation protests are key developments in this respect. Despite the often violent nature of these protests it is important to recognise the underlying issues. These are clear warning signs of a society under stress.

A more peaceful, community-based form of protest (people power) is also beginning to make a significant impact on society.

The role of telecoms in all of this
I used this point about people power in my presentation, to argue for more input from local councils in setting the agenda for the broadbanding of their community. Telecoms is no longer a scarce resource either, but the establishment tries to maintain it as such, and this is contributing to the high stress levels mentioned above.

People understand the benefits of this infrastructure and want to be able to use it. From a community point of view the infrastructure is essential for e-health, tele-education, smart energy meters and so on. Why should it be in such short supply?

Australia is one of the few countries in the western world that – against the will of its people – fully privatised its national telecoms network, with disastrous results that are obvious to everybody. The incumbent is holding the country to ransom in relation to the future of its national telecoms infrastructure; and it is suing the Minister in the process.

Also, the Australian Government is realising, belatedly, how important telecoms is to society and the economy – but at what cost? If only it had listened to the people in the first place we wouldn’t be paying the price now for the government’s lack of insight.

It is up to the people – for example, through local communities (councils) to take a leading role and set the social agenda for the broadbanding of local communities – to harness the needs of the community, map the infrastructure that is available and develop plans and strategies to get ubiquitous coverage of the infrastructure throughout the community.

Local councils are experts in local infrastructure and they need to take the lead here. It is not much different from other forms of infrastructure – water, gas, electricity, roads and sewerage – the same rules apply.

See: Global Broadbanding of local communities

Information Technology is somewhat Kafkaesque
John also made a few critical remarks about some of the new technology developments. IT has the tendency to limit face-to-face communications and could even alienate people. He also was critical of the way communication is used to ‘cover people’s backsides’ by copying everybody into emails and creating complex email/paper trails. He said that this particular IT practice created a Kafkaesque environment.

On the positive side, he said that technology had ‘millions of good effects’ and only a handful of bad ones.

The new city states
John also touched upon a range of other issues that are very close to my heart, especially when he started to talk about the medieval city states.

He said that more and more of our modern cities are starting to resemble the medieval city states, and he went back in history to describe the city states that developed in Europe in the 12th and 13th centuries.

I am currently writing a history (my hobby) of these developments in Flanders and Brabant, so John had my full attention on this topic!

He spoke of how these communities organised their own affairs by harnessing the people power within the towns. For instance, the Guilds, in addition to being trade organisations, were self-help groups for members and their families. They also built orphanages, schools and other public buildings.

The’contradas’ which are still alive and well in places such as Siena, had broad social and cultural functions.

Geographically subdividing neigbourhoods they forged a very strong community feeling, stimulating the community to take control over its own social affairs. The custom operated as a social safety net for the community within the overall city structure.

As an example, when I was in Italy recently we saw the Palio di Siena, the annual horse race on the piazza in front of Siena’s town hall – broadcast live on national Italian TV. This is a clear demonstration that the age-old community structures are still relevant today.

As a start in moving towards the new social and economic order, John suggested we should send employees to do voluntary work, once a week for half a day. He said: ‘imagine what that ‘investment’ would do to boost our community, cultural and environmental values’.

Good government and bad government
Of course, we now live in a completely different society, but many of the values in life that were seen as important by our Medieval forebears are considered just as important today.

With several hundred local government managers in attendance, John also mentioned the famous frescos in the town hall of Siena, painted between 1338-40, representing good government and bad government – this confronts the local leaders of Siena, forever reminding them of their responsibilities.

These paintings also made an impact on me when, a few years ago, we spent several hours wandering through the town hall of what is one of my favourite cities in the world.

Digital media – new tools for democracy
I strongly believe that telecommunications has a key role to play in all of this. The technology creates new community (tribal) structures and enables continued participation in existing networks (old school friends, distant family members, people who share interests and hobbies, communities, cities, etc).

The rationale of the previous economy (1770 – 1960) has undermined the democratic structures we have been developing since Athens in the 5th century BC. Interestingly, democracy started when the Greek economy was improving, but, rather than working more and harder, the Greeks used the benefits of the economic boom to ‘waste’ time on discussions, arguments and philosophy…..to develop democracy.

We have become complacent, lured into an artificial comfort zone, where problems are always somebody else’s responsibility. We expect others to look after our own welfare and we tend to accept the decisions that are made ‘on our behalf’.

Citizens are now relegated to groups of representative ‘stakeholders’. They have to attend formal meetings, with set agendas and predictable outcomes. We are told that technocratic governments and corporations know what’s best for us. The reality, however, is that these processes are often driven by self interest by vested interests – a far cry from the agoras in Greece, where issues were widely discussed and hotly debated before decisions were made.

Of course, some people refuse to surrender their independence, but nowadays the tendency to relinquish control to the establishment is evident in all walks of life.

Telecoms structures are allowing us to reclaim the agora modus operandi. The Internet and related digital media are now making it possible to once more become involved in the debate.

In a separate report about the latest BuddeComm Roundtable on Digital Media I reported on the demand from the new digital media users. They want to be engaged, but they don’t want to be talked at. They are avoiding call centres and they dismiss commercial interference in their personal life (no advertisements on mobile).

At the same time they use telecoms via social networks, user-generated content and blogs to participate in quite different ways from those used in the old society, which was based on the so-called ‘scarcity’ models.

All of this is reminiscent of the 1960s, when we were all beginning to rebel against the old culture. That movement seemed to die out at that time, but email and the Internet has generated a renewal of the spirit of the 1960s.

Exploring aboriginal values
Another interesting point made by John was in relation to aboriginal values.

He said that, unlike the USA and Europe, Canada and New Zealand are privileged to contain a culture that is philosophically very different from western society. These aboriginal cultures (Inuit and Maori) are less ‘men’ centred and far more ‘nature’ centred and these societies as a whole place a much higher value on community, culture and nature.

He indicated that Canada and New Zealand were different from Australia. This country also has a native culture along these lines, but, through treaties with their aboriginal population, Canada and New Zealand have a much better basis for interaction, and a mutual respect for each other. There are also much better structures in place in these two countries, which enable the people to look into, and learn from, philosophically different social value propositions.

With the economy changing from scarcity to surplus we should use this unique opportunity to tap into these old cultures, with a view to re-evaluating ourselves, our lives and our communities. A good starting point would be to study these cultures, to try and find some answers to the environmental changes that are currently having such a serious impact. As I write this, half of Greece is on fire – how many more warnings do we need before we start to make changes?

Change need not be detrimental to the economy. It can lead to new structures, new innovations and new wealth creation. What we make of it is up to us. However, we do need to invest in it. Look what happened when investments were made in a devastated Europe after WWII. An enormous amount of new wealth was created.

The same will happen when we start taking the environment seriously.

Paul Budde

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