Wednesday, June 15, 2011

Loose thoughts by Bjorn Landfeldt

We had the pleasure of hosting Kevin Brown, the CHRO and Manager corporate services for the Australian NBN Co in School of IT at SYdney Uni last week. He was going through the reason behind the NBN roll out, the state of affairs and projections for the future. In all, the talk didn't contain any news apart from what has been covered in the media already but one thing he did state that I thought surprising was that the reason for their existence was that Telstra has failed the market and something needs to be done to break up their near monopoly. I have suspected this for some time now, that the motive behind the NBN is not to provide broadband services as such, but to correct the horrible mistakes done when Telstra was privatised. In fact, I remember telling Quentin McDermott from 4-corners about my suspicions a couple of years back when his team came to interview me about the mandatory Internet filtering.

I was reflecting on this statement for sometime after the talk and it dawned on me that this can in fact be one of the most expensive stuff ups by any Australian government in terms of cost to rectify the situation. If the point of the NBN is to create a functioning telecom market, isn't $42bn a pretty hefty bill compared to the cost of breaking up Telstra in a retail and a wholesale company from the beginning and then float one or both? True that tax payers bill is only estimated to be $27bn, the rest coming from private investments.

Since I am generally speaking a bit interested in what is happening in the telecom market around the world, and I still have pretty strong ties with Sweden I couldn't help myself but to investigate the state of affairs in that country just to compare. Sweden is an interesting country to compare with because it is just like Australia a country with high concentration of the population in few cities with much rural regions in-between. It is true that Australia is vastly larger, but the majority of Australia will be covered by satellite which in effect renders the vastness pretty unimportant. In Sweden, rural areas will be covered by LTE just as the case in Australia (Ericsson just got a large order from the NBN Co). Also, Swedes and Australians are fairly much at the same level of computer usage, literacy etc. and the envisaged applications for the NBN is the same as the applications envisaged for the broadband network in Sweden in general.

So, how do things stack up? Well, in Australia the vision for the NBN is to provide 100 mbps broadband to just over 90 % of the population with the remaining part receiving 12 Mbps. Currently, it is far from certain that one can get more than a couple of Mbps even in Sydney because the distance to exchanges can be quite long and mobile broadband deployment is pretty patchy. Of course, there is no doubt that the NBN will deliver a completely new infrastructure and service to Australians but how much ahead of the rest will AUstralia be after paying all this money?

The Swedish equivalence of ACMA, the PTS, released a report on the state of broadband in May, detailing how it sees the compliance in the country with the Swedish government's broadband policy. The policy is in many ways similar to that of the current Labour Government, including target broadband penetration, minimum rates, competition in the market etc. The difference is that in Sweden, the Government has not had to roll out anything, the market is taking care of this on its own with the aid of spectrum release and other policies.

The Swedish state of affairs is as follows; currently, 44% of the population (residential and businesses) had access to at least 100 Mbps in 2010. The Government's goal is that 90% of the population will have access to at least 100 Mbps in 2020 and PTS sees this goal as being likely to be met (nothing of concern at present). Currently, there are 1100 households that do not have access to at least 1 Mbps broadband in the country and the average broadband downstream speed is ~18Mbps.

So, it is clear that Sweden is miles ahead of Australia in this regard and it is also clear that in 2020, the two countries will have similar levels of service. It must be noted that the Australian NBN will have a larger fibre base, the Swedish rollout will incorporate a larger portion of wireless broadband through LTE2 technologies so it is most likely easier to upgrade the NBN beyond 100 Mbps when there is a need for that. However, the investment level in Sweden in broadband technologies is in the order of $1 bn per year by the market, a far cry from the NBN figures. Tax payers do not pay for the roll out and monthly broadband subscription costs are lower than they are in Australia currently.

Where there is a significant difference between Government policies is also on the focus of what to do with the beast! THe Swedish government has concerns about inclusion in the digital ecosystem, how many people feel integrated in the broadband world and do not feel excluded, alienated and disadvantaged. There is a similar goal of 90$ of the population feeling part of the digital ecosystem by 2020. Also, the Swedes are clever in that they actually discuss how to make good use of the infrastructure, how to grow industry and maximise benefits since this is the driver for the development. Sadly, in Australia we are breaking up a monopoly.