Senator the Hon Helen Coonan
Minister for Communications, Information Technology and the Arts
Deputy Leader of the Government in the Senate
Dispelling the Myths – the true state of broadband in Australia
Address to the Australian Financial Review Broadband Australia 2006 Conference
Sydney
Friday, 1 December 2006
Introduction
Good morning and thank you for the invitation to address you today about the importance of broadband in Australia. It is certainly topical.
Broadband is quickly moving to the status of critical infrastructure. Some have even called for it to be considered as the fifth utility after water, gas, electricity and roads.
Ubiquitous access to fast broadband will underpin our continued economic growth and improvements in business productivity and it will play an increasingly central role in our entertainment choices and how we stay in touch with our loved ones.
People want access to technology that helps them save time, do business, deliver services, work flexibly, learn by distance and stay in touch wherever they are. Broadband does this.
In the home there are a new generation of broadband users who are developing social networks and accessing a diverse range of media through Internet sites such as YouTube and MySpace.
In the workplace, broadband is providing the backbone of a new management paradigm, breaking down silos and creating flexible workplaces.
The increasing prevalence of broadband and the availability of faster broadband speeds are really at the heart of convergence. They are certainly central to the fundamental shifts in emphasis for industries within my portfolio.
Television and movies are moving online and telecommunications companies are increasingly offering content over next generation mobile phones. The lines are continually blurring between the formally distinct media and telecommunications sectors. And increasingly, both industries rely on high speed broadband to deliver the services that our increasingly sophisticated consumers are demanding.
The changing nature of broadband use
A few weeks ago I launched the first Download to Own video service in Australia. This is the evolution of the video on demand service that has already proved popular in Australia.
It allows you to download a movie on the same day as it is released on DVD for around the same price as it is available in the shops, and store it permanently in your home DVD library.
Foxtel has announced it will move into broadband TV with a Foxtel over broadband pilot project in the offing. On ninemsn you can now download and watch episodes of McLeod’s Daughters on your computer for $1.95.
All summer long, a lot of people will be enjoying watching and listening to the cricket via streamed audio or video over their computer using broadband. If cricket isn’t your thing then you can listen to and watch your favourite music videos on the Yahoo7 portal.
And savvy consumers are increasingly creating their own content and posting it online using online communities such as MySpace or via sites such as YouTube and JumpCut.
On a more serious note, businesses are using Voice over IP to reduce the costs of telephony, increase productivity and expand their markets.
Online curriculum is becoming more and more common with pools of interactive material now available on the Internet through Government funded initiatives.
And the CSIRO has developed and installed a Virtual Critical Care Unit which allows remote diagnosis and treatment of patients in real time – as if they were in the same hospital as the treating specialist. But - you can’t do any of this if you don’t have access to broadband.
The Australian appetite for the bandwidth hungry applications that broadband can facilitate is ravenous and could prove insatiable. Therefore there is a need for a coordinated and comprehensive approach to encourage the rollout of scalable broadband infrastructure.
Infrastructure that will not just meet the needs of users today – but that can scale up to speeds that will meet the demands of users tomorrow.
But we must keep the broadband debate in Australia in perspective if investment in broadband infrastructure is to continue and sound policy arrived at to continue to encourage that investment.
Dispelling Myths
I am delighted that there is now so much interest in broadband in Australia, particularly from the business sector. I acknowledge there is an inherent interest from consumers in getting access to faster broadband speeds facilitated by Government investment.
And we are making that investment. But we can and will do better.
But with $1 billion already spent on telecommunications upgrades, a further $1.1 billion slated for investment and $2 billion invested in the Communications Fund for future needs, there can be no doubt that the Government sees broadband as a national priority.
And so, whilst a broadband debate in Australia is healthy, the debate desperately needs an injection of reality. Australia’s position in the international broadband stakes is neither leader nor laggard.
Australia is in line with comparable countries, has a healthy, growing and competitive telecommunications sector and has experienced significant investment in infrastructure that has provided a large proportion of the population with fast broadband speeds.
So today, there are three broadband myths that are gaining unjustified currency that I intend to discuss. First, that Australia is a backwater in terms of broadband take-up and penetration. Second, that we have the worst broadband speeds in the world.
And third, that fibre is the ‘silver bullet’ for broadband in Australia. I will deal with each in turn.
Myth 1: Broadband Take-up and Penetration
Australia’s love affair with technology is typically slow to start - a gradual slow burn - but once we reach simmer, the rapid boil is not too far off. We did it with mobile phones, we did it with dial-up and now we are doing it with broadband. It is true that Australians did not embrace broadband in great numbers until 2003.
This was when broadband prices were substantially reduced through a combination of competition and targeted Government investment.
The reality is that over the last 12 months Australians connected to broadband faster than any other OECD country except Denmark. And there are now nearly four million premises now connected to broadband. Historically, Australia’s overall broadband take-up is well above the OECD average.
The June 2006 OECD Broadband Statistics Report shows that Australia is ranked 17th out of 30 OECD countries for broadband subscriptions and Australia is well positioned to move up the league table as well.
Broadband take-up in Australia is well progressed along the technology adoption curve and overall, there are consistently steady increases in take-up. These increases will continue as investment in infrastructure continues whether it is from the private sector or encouraged by Government incentives.
Myth 2: Speeds
Which brings me to the second broadband myth: that Australia has the slowest broadband speeds in the world. The wide availability of fast broadband in Australia seems to be overlooked and largely unacknowledged by critics.
It seems that few people are aware that close to 90 per cent of Australian households and small businesses can already access fast multi-megabit broadband speeds in Australia. Moreover, the reach of fast broadband is growing exponentially.
Many Australians living in metropolitan areas can now access fast broadband, with speeds of between 12 and 18 megabits per second (mbps) if they can access ADSL 2+ or cable networks. These new fast broadband platforms are being aggressively rolled out by service providers.
For example, at least fourteen service providers, including Telstra, already offer ADSL2+ broadband in the capital cities and major regional centres. By mid 2007 these providers are expected to have the capacity to service approximately 5.6 million premises across these areas.
Another welcome development for regional and rural areas is the launch of the Telstra Next G national wireless broadband network.
Telstra has indicated that this network will provide coverage to more than 98 per cent of the population and will offer speeds up to 3.6 Mbps initially with average speeds of at least 550 kbps – 1.5 Mbps, increasing peak speeds up to 14.4 Mbps in 2007.
Meanwhile, HFC cable networks, which pass around 2.7 million premises in major capital cities, can provide very fast broadband speeds of up to 17 mbps without the distance limitations of ADSL 2+.
Many critics of broadband speeds in Australia point to a ‘last mile’ issue such as interference, especially in relation to ADSL 2+. This is a valid concern but this is an issue that impacts around 17 per cent of households off broadband enabled exchanges.
And investments such as Telstra’s Next G are helping to cover the last mile.
Nevertheless, it is expanding the reach of reliable, affordable and fast broadband to people affected by this last mile issue that will continue to fill in the coverage gaps.
I was particularly encouraged to hear Telstra CEO Sol Trujillo’s comments about the need for faster broadband in Australia because he has part of the solution at his fingertips.
He says he has the interests of both Australian consumers as well as his shareholders at heart when it comes to broadband. I welcome those comments and he is certainly in a position to make good his claims.
Many have called on Telstra to now switch on ADSL 2+ in the further 1000 exchanges across Australia where the equipment is already installed.
ACCC Chairman Graeme Samuel made very clear at this conference yesterday – and on several public occasions before that - that the ACCC does not see a caase to declare ADSL 2+.
Accepting Mr Trujillo at his word, it is difficult to see any impediment to Telstra immediately delivering more Australians – including some who are probably Telstra shareholders – faster broadband.
I believe it is important that all stakeholders in broadband deployment play their part and as the CEO of Australia’s largest and dominant telecommunications company Mr Trujillo too has a role to play in delivering Australians the services they need and want.
And he has the capacity at his disposal, right now, today to flick the switch to fast broadband for 91 per cent of the Australian population. I urge him to just do it!
Myth 3: That Fibre is the silver bullet
A third myth I would like to address today is that fibre is the silver bullet for broadband in Australia.
Now, to clarify, there is no question that fibre-to- the-node or fibre-to-the-home are worthy broadband platforms.
But claims made quite regularly in Australia that fibre could be rolled out to 98 per cent of Australia’s population at a cost of a couple of billion dollars are simply delusional.
Everyone in the broadband debate must recognise that we are unique – geographically and demographically.
If we are to truly connect this country to scalable, fast broadband, then we must accept that it will take a mix of technologies and a mix of providers to provide scalable, national, end to end solutions.
We must carve out our own broadband story in Australia rather than simply try to emulate some other countries. While international comparisons may be useful and we can learn from their experience, very rarely are we comparing apples with apples.
For instance, many critics point to countries such as Korea and Japan as leading the way in terms of broadband. Undoubtedly, fast broadband networks have been rolled out in those countries – but at a considerable cost and questionable efficiency.
It needs to be recognised that both countries are geographically very different from Australia and have significantly larger populations that are more densely located.
And both have spent tens of billions of dollars on next generation networks, with varying degrees of success. In South Korea despite the ubiquity of fibre, by December 2005 Fibre-to-the-Home accounted for only 14 per cent of broadband subscriptions.
Optical fibre has long been discussed as a part of Australia’s emerging broadband landscape. Telstra flagged plans to replace its copper local loop with fibre optic cables as far back as 1979.
More recently Telstra has had discussions with the ACCC about competitive access arrangements for a fibre-to-the-node investment in five capital cities across Australia.
A group of nine competitors to Telstra – dubbed the G9 – have also proposed a FTTN build in metro areas and have flagged their intention to release more details on this plan next year.
There is a growing consensus that the superior bandwidth and network performance enabled by fibre will eventually lead to its use as a replacement for copper in metro areas.
But the question is when and whether it will be a commercially successful investment. Importantly, fibre is not the only solution to deliver next generation broadband to Australians.
As evidenced by the recent rollouts of 3G broadband, technology continues to evolve and the capabilities of individual platforms with it. ADSL continues to be the most prevalently taken up broadband technology. In the European Union for example, it accounts for 80 per cent of broadband subscriptions while fibre is only two per cent.
Which brings me to another point, clearly the availability of broadband is not the only indicator. Just look at the relatively low take-up of broadband over fibre in Korea as example.
Because consumers will access what they need at a price point they can afford and via a technology that suits their individual needs.
I would hazard a guess that most people – I emphasise most – aren’t particularly fussed about the technology used to deliver their broadband. They care about its ability to connect them to the services they need and that it lets them perform the tasks they want, when they want and where they want. They certainly won’t want to pay for capacity they will not use.
What is real broadband?
There is a lot of talk about ‘real’ broadband, but what constitutes ‘real’ broadband? Defining ‘real broadband’ is like trying to hit a moving target. What may be considered real broadband today will certainly not be considered real broadband tomorrow.
For real broadband is whatever is required to meet the diverse and varying needs of business, researchers and individuals.
For the average consumer this means enough bandwidth to access entertainment services online, online banking and shopping and e-mail but at an affordable price. For others, it will involve more bandwidth hungry applications.
Real broadband as a concept cannot be a target – it is a value ascribed by individual consumers and limited on where we sit on the technology continuum today – not where we will sit tomorrow.
This again highlights the importance of scalability for broadband infrastructure.
The role for Government
The Australian Government’s role in fostering a competitive environment for the delivery of broadband includes facilitating an open competitive environment, encouraging private sector investment, providing leadership and, where necessary, targeted assistance to encourage investment in under-served areas.
And this strategy has been successful to date.
The economy is more than $15 billion larger than it would have been had we not opened the market to competition whereby prices are significantly lower for consumers and there is now choice of provider.
But the Australian Government can also play an overarching strategic role to coordinate and facilitate investment in broadband across Australia by State and Territory Governments as well as industry.
I articulated this role to my State and Territory colleagues at the Online Communications Council in September.
I proposed the formation of a Broadband Blueprint to provide a mechanism for an overarching framework and continued collaboration between all tiers of Government and industry. I hope to release the Blueprint over the coming weeks.
Already we can see some encouraging signs of investment from the States – Queensland, Western Australia and New South Wales have all recently announced plans to upgrade their states to better broadband.
For the Australian Government’s part our broadband policy is not one dimensional and it is not static.
We recognise the challenge of providing broadband services right across Australia is a priority.
While I understand the individual concern of being able to access blistering fast broadband where you live, the Government is concerned to ensure all Australians can access broadband, regardless of where they live.
In August last year, the Government announced the $1.1 billion Connect Australia package and the $2 billion Communications Fund.
Connect Australia will rollout improved broadband to people living in regional, rural and remote areas, extend mobile phone coverage, build new regional communications networks and set up vital telecommunications services for remote Indigenous communities.
It will help build our advanced networks to ensure Australian researchers remain at the cutting edge.
The potential of Broadband Connect
The $878 million Broadband Connect is the largest component of the Connect Australia package and continues the good work achieved under the Higher Bandwidth Incentive Scheme (HiBIS) to extend access to metro-comparable broadband services across Australia.
As a direct result of HiBIS and now the incentive-based component of Broadband Connect, almost 1000 additional exchanges have been enabled for ADSL, a large number of new satellite and wireless providers are offering competitive services, and more than one million additional premises have gained access to terrestrial broadband.
These incentive-based programs have been successful in providing regional communities with improved access to broadband services.
There remain, however, a significant number of areas and premises that do not have access to broadband infrastructure that can provide sustainable services, comparable in price and quality to metropolitan services.
Australia has the unique challenges of relatively sparse population density, difficult terrain and remote and scattered communities.
In metropolitan and surrounding areas, broadband black spots have generally occurred due to the technical limitations of ADSL.
In regional, rural and remote Australia, these same issues exist but often with the additional hurdle of a telco provider needing to serve a relatively small population base. It makes these areas less commercially viable and has slowed the pace at which broadband services have been rolled out.
While the HiBIS and Broadband Connect incentive-based programs have been very effective in extending access to basic broadband services across regional Australia, consumers and businesses are demanding faster and more functional broadband such as those available via ADSL 2+.
The problem is, like all technology and service innovations, advanced broadband is being rolled out first in the most commercially viable parts of metropolitan areas.
And there is a considerable challenge as to how quickly this roll-out can be extended across all metropolitan areas as well as regional, rural and remote areas.
As these advanced broadband services quickly become essential for community and business participation in the online economy, there is a risk that another service gap may occur between these areas and the rest of metropolitan and regional Australia.
The need to think more pro-actively about scaling up to higher broadband speeds in regional Australia has been a key driver for our new approach to the Broadband Connect program.
The Broadband Connect Infrastructure Program will invest $600 million in major infrastructure projects in regional Australia.
The successful projects are required to provide wholesale metro-comparable sustainable wholesale broadband services as widely as possible across regional, rural and remote Australia.
We are looking for end to end solutions on a national or regional basis. Additionally, the technology platform used must be scalable, to allow services to be upgraded.
Like the Broadband Connect incentive-based program, the Broadband Connect Infrastructure Program is technology neutral and provider neutral.
The Government does not place restrictions on the types of broadband technology applicants will choose to deploy, provided it is of high quality and capable of delivering sustainable metro-comparable broadband services.
The Government has extended the deadline for Broadband Connect grant applications to the 18th of December. I expect we will be in a position to announce the successful projects this financial year.
Labor’s Sham Plan
And finally, today I would like to briefly touch on another proposal for broadband in this country. A proposal that I don’t think has had the scrutiny it truly deserves.
I usually steer away from critiquing alternative plans because I believe that people are more interested in what the Government is doing and how the Government is responsibly investing on behalf of the taxpayers.
However Labor spokesmen and, particularly Mr Beazley, have made a number of public statements about Labor’s intentions to invest in broadband. I think that consumers and the industry more broadly deserve a chance to scrutinise what those plans might be.
The Labor Party announced in May that it would abolish the better part of the $1.1 billion Connect Australia program and the $2 billion Communications Fund to fund a fibre-to-the-node network to 98 per cent of Australia’s population.
Let’s just think about that for a second - $2.7 billion for fibre to 98 per cent of the population.
Considering a fibre rollout across South Korea – a much smaller and more accessible country geographically – cost their Government (US) $40 billion and in Japan more than $10 billion, I hardly think that $2.5 billion is going to cut it for Australia.
Labor has since admitted that they don’t really know what this plan would actually cost taxpayers. My opposite number Senator Stephen Conroy told an industry conference in May just after the Budget that he would have to “sit down and work it out”.
What is deeply concerning about that statement for consumers is that Labor would seriously commit to stripping regional Australia of their earmarked on-going funding in favour of a hypothetical plan based on a very expensive technology that may not be achievable in an acceptable timeframe nor viable in the longer term.
There is no timeline for this mythical fibre network, nor any consortium in Australia interested in stumping up their own cash to fund the risk of Labor’s national network.
Even Telstra’s $4 billion FTTN plans only involved a rollout to the most populous areas of the five major capital cities.
The reality is that the Labor Party has not commited one extra cent of funding to broadband in Australia and it is basing its hopes on a completely uncosted and unworkable plan for broadband.
It is a simplistic strategy to sit on the sidelines with a sham plan and no constructive policy for broadband development in this country.
Labor have clearly discovered it is an infinitely more difficult exercise to come up with a costed and well thought out plan to connect this country.
Conclusion
Australia’s broadband story will continue to evolve. That is unavoidable when you are dealing with an industry that has constant improvements in technology and innovation at its core.
That is why the Government is so firmly focused on remaining technology and competitor neutral in our focus on broadband.
If you don’t, you can do your dough investing in technology that will quickly become obsolete to the detriment of the entire Australian population.
This is industry’s job – to compete and invest and assume commercial risks for a fair commercial return. For our part the Australian Government will continue to provide leadership to shape our broadband future for the benefit of all Australians. We will foster investment confidence through a stable yet responsive regulatory environment.
We will encourage competition to drive prices lower and deliver choice for consumers and we will continue to target taxpayer investment to areas of market failure and need.
And we will foster collaboration between all tiers of Government and industry through the auspices of the Online Communications Council.
In short, we will deliver Australians the comprehensive communications services they need and want irrespective of where they live and will work to ensure Australia is a world leader in the effective use of broadband.
I look forward to continuing to work with many of you here today. Thank you.