BuddeBlog

Interest in trans-sector policies was very apparent by the 2,500 delegates who attended the recent WCIT2010 conference in Amsterdam. Developments in information and communication technology (ICT) are now clearly being seen as a catalyst to a number of fundamental changes needed in our society. Economically, this concept is also seen as a way to create new markets, jobs and generate new business opportunities.

At the same time however, the reality of the second wave of the global financial crisis is hitting Europe very hard and the market is clearly nervous. While some ICT providers appeared upbeat, a different picture emerged at private lunches and dinners. No money is available as most government budgets have been severely reduced. The large ICT companies have been affected more than the smaller companies which operate in niche markets. In addition, governments are now more inclined to splinter their budgets, and this has effectively put an end to the many ‘umbrella’ contracts which basically had put the larger ICT companies in charge of major government contracts.

However, the trans-sector approach was seen as a new and innovative way to deal with the cutbacks as sharing and open systems are now becoming more mainstream, at least at the higher levels of government. But it is still an uphill battle to convince individual sectors to think more horizontally and work together with colleagues from other sectors.

For example, several cities in Europe are now connected by FttH but the healthcare industry cannot be persuaded to use this infrastructure for e-health applications, and there is very little interest from the various sub-sectors within the healthcare industry to be willing to give up their own silo-based ICT systems and work together.

The enormous benefits of digital and green economies are mentioned in various governments’ reports and policy documents, but they fall short of following them up with national policies.

Industry and consumer groups are constantly requesting national plans and national approaches. The private sectors cannot direct them to become more digital, but the governments can. So far governments are leaving this decision to the individual ministries and departments; however, there is no incentive for these sectors to voluntarily give up their autonomy which they believe they can maintain by having closed systems which only apply to their sector or sub-sector. Sharing with others is often regarded as losing their independence. Only the government at its highest levels can direct these sectors to change their attitude and behaviour.

This illustrates the difference between trans-sector and cross-sector. Trans-sector refers to governments needing to show vision and have the political will to implement cross-sector developments. Cross-sector implementation takes place at an operational level. At WCIT the ICT Axis was mentioned as a tool in the cross-sector approach. However, horizontal integration and cooperation will not occur without governments’ trans-sector thinking.

Governments often link giving leadership with money; however, the industry is not asking for extra money. In fact, using trans-sector policies can actually cut government costs. Literally tens of billions of dollars can be saved through a trans-sector approach to healthcare, education, communications, public safety, energy and transport. Apart from perhaps some seeding money being required to change attitudes and behaviour, there is plenty of money within these sectors to use for the implementation of cross-sector strategies.

However, the reality is that most countries lack government leadership. The second wave of the GFC has had an enormous impact in Europe, where government leaders are retreating into their trenches rather than embracing the new digital and green economies as opportunities to lead them out of the crisis. A crisis will often initiate bold visions and strategies and our leaders need to be encouraged to implement them.

The highest levels of industry can assist to support these visions and strategies. In 2009 BuddeComm organised a highly successful tour of leading CEOs in Australia to speak with ministers and encourage them to support the trans-sector approach towards infrastructure investments this country; and slowly but surely progress is now being made. I have used this example during my travels as a possibility for the ICT industry in other countries to engage with their governments.

Paul Budde

See also:-

• Global – National Broadband & Trans-sector developments in Australia & New Zealand
• Global – Trans-sector strategies – an empirical approach
• Global Next Generation Telecoms – FttH and Trans-Sector Strategies
• Global Recovery will Depend on Trans-Sector Vision
• Global – Fast broadband and Trans-sector policies

There has been considerable discussion over the last few years about the spectacular growth in mobile communications. Within a rather short period of time around five billion people have been connected, and growth continues unabated. Villages in the poorer regions of the world are provided with a basic level of connectivity, and within a decade the majority of people globally will benefit in one way or another from these developments.

The 2G and 3G networks and other telecommunications infrastructure such as satellites, fixed wireless technologies and fixed networks, linked to smart phones and other smart devices, can be used to provide basic internet services. However, it is important to acknowledge the affordability of these services. Full-blown 4G broadband access and other devices such as PCs would still be out of reach of most people in the developing world for some time to come.

However, this basic ‘always on’ facility will lead to providing a range of extra services by healthcare, education and other organisation to the social and economic benefit of the local people. The more community-based social structures in these countries will enable the spread of these applications significantly further than in developed countries, where the social structure is more focussed on the individual.

These basic principles need to be taken into account when developing infrastructure. In order to be successful, a far more incremental and basic development needs to be fostered, with no gold-plated, one-off prestige projects.

Distributing small access points or basestations with radioplanning is far more expensive than using macro-cells. Only edge (pico- and femto-) cells and WiFi-cells are affordable because they are self-installed by the end-users and hooked up to a broadband line. This means there is a trade-off between radioplanning (organised coverage which may not be affordable), and unplanned coverage.

Key local facilities (eg, schools or public buildings) can be linked point-to-point to the basestation tower and backhauled together with the datastreams from the tower, whether that is done by high-bandwidth microwave or by pulling Fibre-to-the-Tower). The new deployment plans of rural broadband services to people in remote areas of Australia, New Zealand and the USA would provide good examples.

An affordable business proposition would be for more gradual infrastructure development to ensure that 2/3/4G datatraffic could provide for the aggregated traffic volume that would make FttT/1GbE microwave backhaul a method to get high-bandwidth close to communities.

Access via local point-to-point links hooked into a router/aggregator at the tower site at affordable rates to high-bandwidth backhauls, or by making those backhauls high-bandwidth through investment subsidies, are ways to tackle many of the issues around how to get broadband into undeveloped, unserved or underserved regions.

One of the main problems in any broadband deployment around the globe is overly-expensive backhaul, or with regulatory approved over-expensive leased line rates such as in the USA. This may prevent locally-focused ISPs from florishing, even when they have the ability to wire up the rural village or choose to deploy some local microwave/WLL technology themselves.

Paul Budde

See also:

• Global – Infrastructure – National Broadband Networks (NBN)
• Global – Infrastructure – National Broadband Rollouts Design and Deployment Strategies
• Global – Infrastructure – Next Generation Telecoms
• Global – National Broadband & Trans-sector developments in Australia & New Zealand

Decline in traditional telco services

Telstra’s declining revenue results are a clear indication that the traditional telecoms business has reached its peak and that growth in the S-curve is coming to an end. This decline is not related to the government’s plan for a National Broadband Network (NBN) or the regulatory changes that are under discussion, and would have occurred irrespective of these issues.

Competition has affected Telstra

Broadband competition between telcos and cablecos has been taking place in Europe and the USA since late 1999, but effective broadband competition in Australia occurred much later. Unbundled local loop (ULL) was introduced in Europe in the early 2000s, but because ULL was only introduced in Australia in late 2007, we have never profited from dynamic competition between telcos and cablecos.

Mobile competition is the only area where Australia has been on a par with the rest of the developed world.

Competition with ULL has been a problem for Telstra and is one of the main reasons for the sharp decline in fixed telephony. Many broadband customers using the competition will simply buy an add-on telephone service (VoIP) for $10 a month and abandon their fixed telephone service.

No longer a monopoly on infrastructure

At the same time mobile competition has resulted in call charges coming down to the point where it is financially viable for calls to be made over mobile networks. Because Telstra does not have a monopoly on the mobile market infrastructure (unlike the fixed market infrastructure), many customers who previously made fixed calls over the Telstra infrastructure, either direct or via resellers, are now using the infrastructure provided by Optus or Vodafone.

Telstra’s cost base is significantly higher than that of the more specialised telcos and ISPs because it is vertically integrated. Generally the base figure hovers around 30% higher costs, so Telstra has to maintain higher prices in order to achieve the same financial result as the leaner and meaner operators. This was not significant when those operators were merely niche market players, but these companies have now grown big enough to become a threat to Telstra. Because Telstra has not changed in response to that, it now finds it hard to compete and at the same time maintain the usual high return for its shareholders.

Game plan strategies are needed

In the areas of telephony, mobile and broadband, Telstra’s prices are significantly higher than those of their competitors. This is an untenable situation for Telstra and the introduction of T-hubs and T-boxes is not a solution.

For the company to remain fresh and competitive, it will need to change its game plan. BuddeComm predicted more than a decade ago that the new broadband and internet developments would totally alter the nature and structure of the telecoms industry, and encouraged Telstra to support them. Unfortunately that did not happen.

Both the current and previous governments also encouraged Telstra to change, but were also unsuccessful. By then the predicted social and economic changes towards telecoms infrastructure and broadband in particular were started to kick-in and the position Telstra had taken was rapidly becoming a major stumbling block to the digital economy and other developments related to broadband infrastructure.

The NBN is part of the changes predicted a decade ago. However the government, rather than Telstra, is now in charge of this process.

Telstra needs to regain leadership

Moving forward, Telstra will need to rapidly regain leadership in this market to be at the forefront of new developments which will allow it to tap into new emerging revenue streams. These won’t come from telephone charges but from facilitating Australia’s digital economy.

Telstra and its shareholders will have to face the reality that their assets can no longer be valued at the levels realised a decade ago. John Seely Brown, former Chief Scientist of Xerox Corporation, wrote in his recent book ‘The Power of Pull’ that the return on the assets of the Fortune 500 companies had dropped by 75% since the mid-1960s and will end up close to zero before the end of this decade. While this is extremely painful news for Telstra and its shareholders, unfortunately it is the cold hard reality.

However, it is not too late for Telstra to let bygones be bygones and to move into the future by positioning itself at the forefront of the new developments in the NBN and trans-sector services, and to align itself with the structural reforms in the growth sectors of the digital economy.

Apart from its shareholders Telstra also has to look after its customers, its staff and its other stakeholders, in the end the shareholders are only one part of that larger eco system.

Paul Budde

See also:

• Telstra Corporation Limited – Company Overview and Operating Statistics
• Telstra Corporation Limited – Financial Statistics

New Songdo City is a master-planned “Ubiquitous City” being built on a 1,500 acre man-made island off South Korea’s Incheon coast about 40 miles from Seoul. Starting the project in 2004, it is South Korea’s answer to Shanghai and Dubai. It is billed as “a city designed around one thing: the people who will live and work here. People who will experience an unparalleled quality of life as technology, resources and innovation all come together to create the ideal environment”.

With a loan of US$35 billion from Korean banks and corporations and the backing of the state, the future Korean metropolis is planned to be a highly networked “Smart City”. It is the first new city in the world designed and planned as an international business district. Mr John Kim, vice president for strategy at New Songdo City Development, envisions a central role for residents’ smart cards: “The same key can be used to get on the subway, pay a parking meter, see a movie, borrow a free public bicycle and so on. It’ll be anonymous, won’t be linked to your identity, and if lost you can quickly cancel the card and reset your door lock”.

When completed in 2015, New Songdo City will include 350 buildings, housing 65,000 residents and a workforce of 300,000 people. 40% of Songdo is officially designated “green”, including the centrepiece 100-acre park. The city’s main car depot has been buried in a sunken courtyard to keep heat and emissions down. New Songdo City is placing an emphasis on alternative transportation including bus transit, a new subway line, hydrogen buses, water taxis, over 15 miles of bike path, and bike share programs. The city was designed with a focus on density and open space with 515 acres of dedicated green space including a 18-hole golf course. Additionally, New Songdo City will feature:

• Water re-use network: grey and black-water reuse for irrigation, cooling towers, toilet flushing, street cleaning;
• Waste collection: city-wide pneumatic waste collection; extensive recycling program;
• Energy network: district heating facility

New Songdo City is touted as the “u-city” of the future. Importantly, New Songdo City isn’t an existing, older urban area that is being “computerised”. Instead, it will be a mid-sized city, built from the ground up according to a design paradigm that has as one of its primary goals the smooth introduction of computing wherever it seems useful. Computing technology will be everywhere, visibly and invisibly.

See: South Korea

Softbank, Japan’s third ranked operator in a market accounting for 110 million subscribers, has invested in more mobile sites, doubling the number over the last 3 years. However, they are still behind their competitors NTT DoCoMo and KDDI, not only in terms of market share (18% versus 49% and 28% respectively), but also in only claiming about 98% population coverage. The company is considered poorer than the other carriers in terms of the quality of mobile phone service coverage.

In May 2010 Softbank Mobile, the exclusive carrier for iPhone in Japan, started a free distribution programme of femtocell base stations for individual customers and small-sized stores. The programme aims at filling the signal-blind spots at low cost and improving the customer experience. For many mobile phone users, home is where the worst reception is. This is because the high-frequency, low-power mobile signal must travel to and from the outside cell site through various obstacles, including brick walls, metal and trees, which causes interference and dropped calls.

Small base stations called femtocells plug into a home Internet connection and improve the speed and clarity of mobile phone connections inside the home. The device picks up your mobile signal when you are at home and routes calls through your home broadband connection over the Internet to the mobile operator’s network. When you leave the house, the call roams seamlessly back onto the operator’s regular network. Femto is a decimal prefix that denotes one quadrillionth. The femtocell is so called because it is smaller than the picocell (which denotes a trillionth), which is used to improve indoor coverage in a larger area like a shopping mall. A picocell in turn is smaller than a macrocell, one of the large outdoor towers that form the backbone of mobile architecture

The global femtocell market is anticipated to be worth US$9bn per annum by 2014. Mobile phone companies could offer cheaper rates for customers with a femtocell, because by piggybacking on your Internet connection they save on the cost of a call or data download. In addition, the companies could benefit if widespread use of femtocells frees up mobile traffic on the large outdoor cell sites, boosting an operator’s network capacity. Softbank is effectively subsidising customers to offload as much traffic as possible to residential lines. This strategy is much faster than building more masts. In urban areas, where the demand is the highest it is hard to add cell towers (negotiations, permits, costs) and easy to add picocells and femtocells to residential lines.

Applicants for Softbank Mobile’s free offer need to be existing subscribers to the company’s 3G service. Once the application is approved, a femtocell base station with an ADSL service connecting the station and the carrier’s network are provided for free. It appears that the ‘free’ offer has some history. Some customers who experienced signal weakness problems with their Softbank Mobile handsets in their homes were initially forced to purchase femtocell equipment for US$120 before the program was announced. After receiving a number of complaints on the timing of the free offer, Softbank is allowing customers who missed the cut-off date, to still be eligible for the free offer.

This innovative approach however, could give SoftBank only a short-lived first mover advantage. Japan’s market is extremely competitive and any new service offerings are quickly replicated. The offer, while appealing to customers suffering from poor reception, may end up being just enough to stop existing customers from churning to the competition. Whether it is a compelling reason for new subscribers to join Softbank, just to get an acceptable level of service, is doubtful. KDDI is set to launch their “au Femtocell” service in July 2010 with a commercial service offering to customers of KDDI’s au Hikari fibre-to-the-home (FTTH) service in the Tokyo metropolitan area.

See: Japan