Paul Budde, Managing Director, BuddeComm

Paul Budde, Managing Director, BuddeComm

I formed this company back in 1978. I have a marketing degree from the Institute of Marketing in the Netherlands, my focus is business strategies and government policies. As a special consultant to the ITU/UNESCO Broadband Commission for Digital Development, I am heavily involved in international developments such as FttH, mobile broadband, trans-sector use of infrastructure and the digital economy. I write most of the international analyses and also, of course, closely follow the markets in Australia and New Zealand.

Posts by Paul:

Does Australia need a proper nbn?

Here we go again with more useless debates about whether the country needs a first-class national broadband network or a second-rate one; and again there are discussions around what other flavours of the multi-mix technology can we now add to it to strengthen the brew. By now we have lost most of Australians in this useless debate, and we are making very little progress.

Of course we need a first-class nbn, and that is what we would expect those in charge, both in government and in the nbn company, to deliver to the Australian people.

Rather than addressing the core of the problem those involved in these debates pick on certain elements; and often, yes, there are two sides to such detailed issues. But in this nitty gritty debate everyone involved misses the bigger picture – or perhaps deliberately avoids addressing it.

In such situations I have always argued for going back to the core – why we are building an nbn in the first place. Given all the government money spent, the answer has to be ‘in the national interest’, and if you dig deeper you get into the social and economic benefits we have been talking about for a decade (healthcare, education, national productivity, digital economy and so on).

So if we look at the nbn with the national interest in mind what sort of infrastructure is needed to deliver those national outcomes?

There is little argument about this from all of those involved in these endless debates. Such an infrastructure needs to deliver the following: capacity, robustness, security, low latency and ubiquity. Once we agree on this I think nearly everyone will say that the answer is FttH.

The real question then is how do we get there?

If we don’t build an infrastructure based on FttH we will get into trouble, and the endless arguments are a clear indication that the nbn in Australia is in trouble.  For example, looking at the patchwork nbn we are getting right now – because of its reliance on old technologies the mixed technology might work in one area but not in another; or better here and worse there.

Roughly a quarter of nbn users have complaints about the quality of their service. It could well be that one house has a perfect connection while the next one has an abysmal service. And there are many possible reasons for that, which sometimes makes it very hard for the nbn company to fix the different problems.

For national services such as e-health, education, government services, finance or business, a network with consistently good characteristics nationwide is necessary. If such an infrastructure can’t be delivered then the institutions that need to build those digital services simply won’t do it. It is a chicken-and-egg situation. So if you don’t build a first-class network you won’t create the supply, and when you don’t have a good supply of services you won’t get the demand.

However, it is totally wrong to then claim that because there is no demand Australians don’t need a proper nbn.

If, as Prime Minister Turnbull maintains, at this point in time we can’t afford such a network it would still be necessary to build an nbn with that end goal in mind – and to very clearly communicate the vision and provide the right strategies for it. So far neither the government nor the nbn company has provided such a vision or strategy.

Talking about money, building an nbn is one thing. Making sure that people can afford it is another. So, apart from the infrastructure characteristics that are mentioned above, an important inclusion in the business model of the nbn needs to be recognition of the reality that people will only buy what they can afford. So building any infrastructure that will result in unaffordable prices for the users is also not the right thing to do. The Government is the only one who can take the national economic and social benefits into account; commercial organisations can’t do this, as these benefits don’t show up in any financial format on their P+L.

Regrettably it appears that on both counts – proper infrastructure plans and the need for affordable services – the government and the nbn company, despite spending something like $50 billion, have failed to come up with the right solution for Australia.

Paul Budde

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We urgently need a new internet

Let’s be honest about it. Nobody – including those very clever people that were present at its birth – had the slightest idea what impact the internet would have in only a few decades after its invention.

The internet has now penetrated every single element of our society and of our economy, and if we look at how complex, varied and historically different our societies are it is no wonder that we are running into serious problems with the current version of our internet.

There are some very serious threats to the internet, the key ones being:

  • Cyber-terror and cyber-war
  • Cyber-crime
  • Political (government) interference (Russian and Chinese hackers, Prism, Stuxnet, etc)
  • Privacy intrusion (governments, Google, Facebook, Amazon, etc)

So far the reaction to all of this has been to create draconian regulations which will never be successful, because the internet was never designed to cope with such complexities.

The internet is now so critical to our society that we can’t afford to lose it and so we are beginning to accept the breaches, hacks and interferences, because the need to use it is greater than the concerns we have in relation to the abovementioned activities. This is creating very dangerous situations politically, socially and economically.

We have been somewhat  sheltered by the fact that over the last half century – in western democracies – we have had good institutions, both private and public, which in general terms have been addressing these negative outcomes with the good of all in mind.

While this is, in general, still the case it is not too difficult to see that populist regimes might have other ideas about what defines the ‘public good’ and that they will want to use the internet for their own purposes.

On the other hand, we see the more responsible governments increasingly being forced to intervene and regulate, as they are unable to get on top of the abovementioned issues. We know this is futile but they feel they have no other option.

Rather than following this path it would be much better to address the underlying technology issues of the internet. There is no way that we can avoid terrorists, criminals, and disruptive populist factions who will always look for ways to misuse the internet; but we can make the internet much safer than it is now.

Unfortunately however, the current internet cannot be fixed. So we need a new one.

My colleague Martin Geddes has written an excellent article on why the old net is broken and why it can’t be fixed.

It is not going to be easy to resolve this.  It basically means that, bit by bit, the old internet will need to be replaced by a new one. The good thing is that the engineers involved in both the old and the new internet know what this new internet should look like – in some places this (industrial) internet infrastructure already exists.

What is needed is the commercial and political will to start working on replacing the old with the new.

Based on Martin’s article a group of my colleagues have started a discussion on this topic. I am a firm believer that our industry will need to drive this new development, so we will have to create further awareness of the problem and at the same point the way forward.

There is widespread support for looking at RINA for both the strategic and the technological guidance that is needed. There is a good description of RINA on Wikipedia – the following is only the introduction to it:

RINA stands for Recursive InterNetwork Architecture and is a computer network architecture that unifies distributed computing and telecommunications. RINA’s fundamental principle is that computer networking is just Inter-Process Communication or IPC. RINA reconstructs the overall structure of the Internet, forming a model that comprises a single repeating layer, the DIF (Distributed IPC Facility), which is the minimal set of components required to allow distributed IPC between application processes. RINA inherently supports mobility, multi-homing and Quality of Service without the need for extra mechanisms, provides a secure and programmable environment, motivates for a more competitive marketplace, and allows for a seamless adoption.

As mentioned, I firmly believe that our industry has a vital responsibility to show leadership and ensure that our societies and economies get a better and safer internet than the version (Martin calls it a prototype) that we have now. The industry is starting this discussion which will hopefully lead to a safer internet for all.

Paul Budde

See also: BuddeComm Intelligence Report – Internet Governance, E-Security and Net Neutrality Insights

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The state of telecoms competition in Australia

After the rowdy 1990s and early 00s the dust did settle a bit on the competition problems that continued during that period – more than 20 Inquiries, many court cases and ongoing regulatory corrections.

The situation settled down somewhat with the arrival of a new CEO at Telstra, David Thodey in 2006. Subsequent changes to the telecoms market, along the structural separation of Telstra, also saw a more mature approach towards competition in the telecoms market.

However, it is still essential that we remain vigilant on this issue; while on the surface things have calmed down to a certain extent there are still ongoing concerns regarding the health of telecoms competition in Australia.

A key element here is the fact that, despite all the positive changes, Telstra remains the dominant player in the market. It received a substantial cash injection, worth more than $11 billion, through the deals with the government regarding the NBN. This gives the company the financial freedom to basically do anything it wants, and it has done so extensively – new IT infrastructure, mobile networks, Wi-Fi. Telstra is one of strongest financial telcos in the world.

But the reality is that the NBN didn’t proceed along the lines that were envisaged after new legislation was put in place in 2009 and 2010. With the Coalition government coming into power in 2013 most of that was undone and the present government’s version of the NBN relies heavily on the old network. As a result Telstra, being the company with the insight into and knowledge of that network, became even more powerful.

Furthermore it remained one of the most vertically-integrated telcos in the world (dominant in the fixed market, the mobile market and pay TV).

While, to its credit, Telstra has certainly become a far more responsible player in the market, offering great products and services and significantly improved customer services, the reality is that it remains the dominant player in the market. Its overall market shares still hover around the 60% and it is still taking 80%+ of the profits in the telecoms market.

Because of this – and certainly not because of unprofessional behaviour as was the case in the 1990s – we still need a regulatory regime that takes this reality into account.

A key element of that are the so-called ‘competition notices’. This provides the regulator with a powerful tool to ensure that Telstra stays within the rules, and if it doesn’t the regulator can slap a million dollar a day fine on the company for every day it defies an ACCC claim that it is acting anti-competitively. This is big money, even for a powerful company like Telstra, and it has helped greatly on the couple of occasions competition notices were issued. Basically what the result was that it brought Telstra to the negotiation table, solutions were found which were acceptable to both parties, and Telstra didn’t have to pay the fine.

The government is now proposing to revoke this regulatory tool, which would be the wrong thing to do in a market where Telstra is still so dominant. This is quite remarkable, since the only company to support this development is Telstra, while the rest of the industry is dead against it.

Why would the government want to do this?  If everybody plays a fair game within the competitive arena, Telstra doesn’t have to fear these notices, as in general it has proved itself to be willing to come to the negotiation table, and if not its competitors (each of them with much smaller market shares in the Australian market in relation to Telstra) have a powerful tool that allows them to get Telstra to the table if a serious competition issue arises.

It is important to foster competition in the Australian telecoms market and the competition notices have proved to be very effective in achieving this. With a faltering NBN ahead Telstra will undoubtedly be the major winner in the end game of the NBN, which will only make it more dominant, and so it is much better to keep the tools handy that allow the regulator to ensure that viable competition will remain a key feature of the Australian telecoms market.

Paul Budde

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NBN customer service is appalling

Back in October last year we reported on our disappointment regarding our two NBN services. We have an FttB service in Sydney (replacing our ADSL2+ service) and a satellite connection in Bucketty (100km from Sydney).

As reported, both services are disappointing.

The service in Sydney is no better than the previous ADSL2+ service, but at least no worse, fortunately.

However the satellite service is a shocker. Download speeds are usually no more than 3Mb/s, which is worse than our very basic ADSL service (where we get, on average, 5Mb/s). I am very glad that we haven’t disconnected our ADSL service here.

The NBN company has been sending us three-monthly emails with online forms, where they ask all sorts of questions about the services; and of course we fill them in. Every time they ask if I would like to be contacted by them to discuss our problems and every time I have clicked ‘yes’. Now, nearly a year later as far as our Sydney service is concerned, nobody has bothered to actually contact us to follow this up.

What is the use of such a so-called customer service if it is not acted upon?

In the meantime another interesting observation is that, as we now have two broadband access services in Bucketty, when the Telstra ADSL service in our area is being used heavily (late afternoon, early evening) the ADSL service slows down; so I then change over to the satellite service. That service typically cuts out every 10-20 minutes or so, and then reconnects automatically, mostly within a minute. When I eventually tire of these drop-outs I switch back to the ADSL service in the hope that the service performance there has improved, and remarkably this seems to work most of the time.

Is this satisfactory? Of course not. Needing to have two services in order to get some sort of accessible online connection is appalling. But I don’t have much choice as there is no light at the end of the tunnel for those who have to rely on the NBN.

Or perhaps…. we recently had a bushfire only 100 meters from our property and it also damaged the Optus mobile tower. As the community has an excellent relationship with Optus the damage was rapidly repaired and some further bushfire prevention arrangements were discussed. During these conversations Optus also mentioned its home wireless broadband service, Bucketty is anxious to know if this perhaps is an alternative to the current appalling services, perhaps at least for those who are within the direct footprint of the mobile signal.

Just so that you know I am not talking about rural Australia – we are 100km from Sydney and from our office you can see the glow of the city in the night sky.

Paul Budde

Sue list NBN reports

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Will Telstra be able to create a more affordable alternative to the NBN

If we go back to the early days of the NBN, now more than a decade ago, some of you might recall that from the very first day we have maintained that affordability was more important than the latest technology. I actually said that affordability was THE most important element of an NBN.

Subsequent governments have included this in their NBN mantras. But words are cheap.

When, back in 2011, the NBN company started to introduce the CVC (connectivity virtual circuit) – which are basically extra usage charges on top of the basic access charges – the industry sat up and took notice, as it became clear that these charges would make it very difficult for the retail service providers to build affordable broadband products. Now, six years later, that issue is still at the core of the discussion regarding affordability, with no real solution in sight.

Interestingly Telstra has recently become very vocal on this issue again and has thrown its support behind the affordability issue.

This coincided with Telstra’s announcement of its 4G Gigabit LTE service, combining its efforts with Ericsson, Qualcomm and Netgear. For this customers will have to buy the Netgear Nighthawk M1(A$360), capable of downloading a 300MB one-hour TV episode in 16 seconds; and a 3GB HD movie in three minutes.

The speeds are not symmetric so if you communicate with somebody else the ‘flow’ will be ‘up to’ 150/150 Mb/s. The number of simultaneous users obviously will affect any of these speeds. For home and small offices seeking to connect wirelessly, the Nighthawk M1 is said to support up to 20 Wi-Fi devices on a single connection and boasts download speeds up to 1Gb/s.

The all-important question, of course, will be affordability. The company has not yet announced the pricing options for the service, but it is clear that large parts of the NBN offer services well below those more modern technologies and the NBN will most certainly get increasingly more competition from premium services such as this one from Telstra. There is no doubt that the company can build further on this new product, towards 5G, and there are most certainly also options to work this in with Wi-Fi options.

This will further affect the financial situation of the NBN, as more and more premium bypasses will arrive on the market. Of course, none of this would have been necessary if the company had stuck to the original FttH plan, as that remains by far the best national solution. As mentioned before, we do support the alternative solution of FttC (fibre to the curb) which is called Fttdp (fibre to the distribution point) in Australia.

It will be very interesting to see how this will play out over coming years. Will the NBN company be able to come up with better services and for both the NBN and its competitors how affordable will those services be?

The latter is the all important issue in relation to the take-up rates that are needed to make these investments cost effective.

Paul Budde

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