Designing the Future Forum Internet Society of Australia 3 December 2002 Maddocks - Melbourne

1. Broadband: Why don’t we get it? City of Whittlesea Brad Wynter Organisation Support Executive Designing the Future Forum Internet Society of Australia 3 December 2002Maddocks - Melbourne

2. City of Whittlesea • Interface municipality • 2002 population approx. 120,000 • 54% non English speaking background • Area 490 sq kms • 35,000 homes • 3,600 businesses • Culture of Innovation8 National Innovation Awardsover past 3 years

3. Agenda 1) Current Australian situation 2) International approaches 3) Australia - what next? 4) Paradigm shifts needed 5) Different Business Models 6) WIRED Development

4. Current industry landscape • Telephony Data and Video are on different infrastructure platforms • Proprietary services are bundled with proprietary infrastructure • Broad range of video services requires multiple sets of infrastructure in the home

5. Current industry landscape • CATCH 22 • Lack of broadband infrastructure to the home due to • Lack of consumer demand due to • Lack of awareness and relevant content due to • Content developers not developing new content due to • Difficulties in accessing publishing channels due to • Lack of high bandwidth infrastructure to the home and proprietary bundling of services to infrastructure.

6. The five vendor choices 1)Telecommunication Carriers 2)PayTV providers 3)Government/Public Utilities 4)Housing Developers 5)Community Organisations r r a a a

7. US advanced network growth • FTTH Council • NEW ORLEANS – October 15, 2002 – According to a new study released during the Fiber-to-the-Home (FTTH) Conference 2002, the first annual conference hosted by the FTTH Council, FTTH installations are expected to leap by 330% • in 2003 from 72,100 homes passed to 315,000 homes passed, ultimately reaching between 800,000 and 1.4 million homes by 2004. The study, entitled “Fiber to the Home and Optical Broadband 2002,” builds on an earlier report on FTTH installations released in August that showed a 2002 growth rate of more than 200 percent. • Approx 50% Developers, • 50% Public Utilities/Gov/Community Orgs

8. Taunton Broadband Project • 1998 • School network • Hospital • 2002 • 3,400 dial up ISP • 50% broadband market

9. Taunton Broadband Project • Trial • July - Dec 2002 • 120 subscribers • Cost Recovery • 20-30 years (fibre) • 2-5 years (equipment)

10. Taunton Broadband Project

11. Taunton Broadband ProjectLearning • If telcos and PayTV don’t provide advanced network infrastructure then public utilities Local Government or community agencies will • Prepared for long periods before recovering costs • Often higher takeup because they are local organisations

12. US broadband industry significant differences Consumer awareness Big market Culture of paying for TV Availablility of services and content choices Ready demand Opportunities for niches Ready video market Small networks can get broad range of content and services

13. Australian broadband factors Low Consumer awareness Small market Good quality free to air TV Limited availability of services and content choices Small demand for broadband services Small scale niches Video market slowly developing Small networks cannot get broad range of content and services

14. Who pays? South Korea - Gov/Private investment AUS $15 billion 1998-2002 Gov/Private investment AUS $18 billion 2002-2005 Canada - Gov/Private investment AUS $2.7-$4.5 billion 2000-2004 Sweden - Government investment AUS $1.69 billion 2001-2004 US - Central Gov investment AUS $350 million 2001-2003 Major investment by developers and Public Utilities. Sources -BROADBAND SNAPSHOT TAKE-UP OF BROADBAND SERVICES IN AUSTRALIA September 2001 DCITA BBC News Wednesday 6 November 2002

15. Who pays? Source - BBC News Wednesday 6 November 2002

16. Korea • KT Corp. • Invested $2 billion since 1999 into hi-speed broadband infrastructure & web-surfing technologies • Result: attracted Microsoft’s ($500 US million investment) to develop home-networking systems, e-schooling and other broadband initiatives. • Koreans now have 4x the number of broadband connections than the U.S. (Similarly, Canada has 2x the number of connections than the U.S.) • Originally, KT Corp’s CEO, Lee Sang Chul, claimed that“the more subscribers we attracted to our broadband services, the bigger losses we had”. • Today“Our broadband network is a key money maker”Business Week, Asian Edition, March 18, 2002

17. Crystal Ball for Australia • Consumer awareness will increase • Demand for a broad range of services will increase • Telstra and other carriers will respond with interim technologies but only in profitable areas • Non profitable areas will look for other infrastructure solutions • Public Utilities/Government and developers will establish niche networks • Small scale niche networks will struggle to attract a broad range of content and services • Limited potential to deliver good outcomes to local communities and develop a healthy sustainable industry

18. Awareness Source -Telstra presentation at the 2002 ATUG annual confuracne in Melbourne

19. Paradigm shifts required to deliver advanced networks PARADIGM SHIFT Natural Monopoly in Local Loop Open Network Alternative models and financing mechanisms WHY? Benefits of competition in local loop infrastructure will not outweigh the capex costs of duplicating the local loop infrastructure Consumers want full range of services Competition on services side will keep prices competitive which leads to a healthy sustainable industry Advanced networks are expensive to establish and the benefits are widely dispersed between operators, government, business and individuals

20. Current electricity model • Single infrastructure into the home • Multiple service providers to choose from • Unbundling of infrastructure from services NOT

21. Monopoly Homes/Businesses Service Providers InfrastructureProvider

22. Full competition Homes/Businesses Service Providers InfrastructureProviders

23. Community Hub and CAN Homes/Businesses Service Providers InfrastructureProvider

24. Structural Separation Homes/Businesses Service Providers InfrastructureProvider

25. New development area issues • No overhead infrastructure so difficult to retrofit broadband solutions • Retrofits cost at least double of putting conduit in at sub-division construction time • Carriers not putting broadband infrastructure into new development areas (only putting in copper), due to “cost”, current lack of profitability in getting consumers to pay for several sets of infrastructure and no competition

26. New telecommunications model • High bandwidth infrastructure able to deliver telephony, data and video telecommunications services • Unbundled infrastructure from services • Consumers have choice of services and content without needing to install more infrastructure • Open infrastructure for all service providers Available for delivering competing PayTV bundles simultaneously or on a pay per use basis.

27. Why Growth Councils? • Lower cost barrier to carriers with very little financial exposure • Control local planning scheme and can mandate conduit installation in all new developments • Greenfield development is happening in growth Councils • Strategic advantage for both economic development and home amenity

28. What can Growth Councils do? • Choices are: • Do nothing (Your community will regret your decision in 3- 5 years time) • Invest in conduit to provide the capability for a network provider to provide infrastructure and services in the future (Suggested approach) • Invest in conduit and dark fibre and lease it out to all and sundry (Stokab) • Invest in conduit, fibre and equipment and provide network operations for all content and services (UTOPIA project)

29. WhatWhittleseadid • Created vision for delivering broadband services to our community • Researched opportunities for Council to facilitate broadband access • Met with developers to explain what Council is aiming at • Changed Local Planning Scheme to require developers to install Council owned conduit as part of the sub-division development process • Developed conduit standards and guidelines for developers to assist installing conduit • Initiated Council consortium of 6 Councils around Melbourne to duplicate process with aim of an EOI and RFP in 2003

30. New telecommunications business model • Developers required to install telecommunication conduit in the sub-division process and hand it over to Council • Council leases conduit to carrier at replacement cost plus monitoring costs over its life • Minimum service package of telephony, data and video to be met by carrier with extension of lease bonuses for exceeding the minimum service package • The more services and content provided, the more companies sharing the cost of the infrastructure • ROI can be calculated over the life of the infrastructure

31. Benefits • Maximise choice of services and content • Minimise cost through shared infrastructure • Potential to attract data rich industries • Potential to utilise infrastructure to provide better local connections • Potential to attract a new type home buyer

32. Questions G G G G G G G = Growth