Saturday, April 15, 2006

Broadband again, again...

I posted last week on the high cost of Australia’s low speed broadband service and the failure of the Federal Government to do a deal with Telstra to secure a better service. The Weekend Australian has a fascinating article by Michael Sainsbury suggesting a deal has been done to pave the way for a better service.

Australia's has poor quality, expensive broadband and levels of service uptake are low. It seems that the ACCCs Graeme Samuel has done a deal with Telstra which could pave the way for Telstra to spend $3 billion on a high-speed broadband internet fibre network. What is needed is for Telstra to proceed is agreement on a price at which rivals could resell services on its new network.

Currently Telstra's copper wires run from its telephone exchanges to a node, the small connection box which is usually placed on or near footpaths, and then into a home or business. By putting DSLAMS in its exchanges it turns the copper wire into a high-speed data service; the latest generation of this so-called DSL technology can create data speed of up to 24 Mpbs, fast enough for streaming high-definition TV services, several internet connections and a large number of voice services.

Until now, Telstra competitors have been able to rent Telstra's copper wires and install their own equipment in Telstra exchanges. This turns the wires into broadband pipes. The problem is that users need to be within 1.5km of the exchange to get super-fast speeds of more than about 2Mbps. Such speeds are needed to deliver the next generation of entertainment and business services.

For its proposed FTTN network, Telstra will replace copper wires between the exchange and nodes with optical fibre, which can handle almost unlimited data at super speeds. This would cost Telstra $5-$6 billion. The problem is that the new network effectively sidelines competitors and their new networks. Hence the Government has insisted that Telstra gives access on its new network to others.

Furthermore, many social objectives would not be met by a commercially-oriented broadband service. Health services to the bush, evidence in court cases and distance education would all benefit from broadband. The Government must get involved and, indeed, has set aside $3.1 billion for broadband services for the most regional and remote users. It will soon call for expressions of interest for developing a wholesale network in rural and regional Australia.

Knowledge-based industries now contribute almost half of Australia's GDP. In this environment, the skill, speed and innovation that is required to transform raw data into valuable knowledge, and then profitably exploit that knowledge, is pivotal to international competitiveness. High speed low-cost broadband will help to do this.

Of course many loose ends have to be resolved. One concerns pricing to consumers. Anoother is the respective role of Telstra and Gocvernment in laying out the specific regional network and, finally, the issue of access pricing for Telstra's competitors.

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