Rural and Remote Broadband Access: Issues and Solutions in Australia

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1 Rural and Rmot Broadband Accss: Issus and Solutions in Australia Dr Tony Warrn Group Managr Rgulatory Stratgy Tlstra Corp Pag 1 Tlstra in confidnc

2 Ovrviw Australia s gographical siz and population dnsity prsnt an xtrm st of challngs to th provision of broadband srvics in rmot aras But this xprinc also provids valuabl lssons which can b applid to othr countris wanting to maximiz thir broadband covrag In particular, thr is no on-siz-fits-all rspons to issu, but with a combination of masurs by carrirs and targtd / markt-conforming assistanc from Govrnmnt significant gains can b achivd Pag 2

3 Th challng Brisban to Mlbourn is th sam distanc as Lisbon to Paris Sydny to Prth is sam distanc as Madrid to Moscow 80% of th population livs in 5 citis Pag 3 Tlstra is sking to supply affordabl broadband to 20m popl sprad across a landmass th siz of Europ

4 Limits on ADSL Availability 12% 2% 4% (mid 2004), and incrasing 82% Pag 4 Tlphon lins abl to rciv ADSL Broadband Srvic from non-adsl xchang Customr outsid ADSL transmission limit Non ADSL capabl CAN Elctronics

5 Currnt broadband availability (Cabl and Satllit) 100% 100% 90% Total SIOs (%) 80% 70% 60% 50% 40% 30% 20% 10% 2% 20% 25% 0% Rgional Cabl Covrag Optus HFC Covrag Tlstra HFC Covrag Satllit Covrag (multipl oprators) Pag 5

6 Hard to go much furthr: Th tyranny of dnsity DSL capabl 3962 ISDN capabl Numbr of xchangs < 500 > > 2,000-10,000 > 10,000 Numbr of Srvics (,000s) 10,000 8,000 6,000 4,000 2,000 < 1000 lin xchangs < 100 lin xchangs Srvics in Opration Exchangs Equippd Th vast majority of Tlstra s xchang srvic aras hav lss than 500 srvics Th conomics of srvicing low dnsity xchangs with DSL or cabl ar poor Yt rural customrs dmand srvic on quivalnt trms and s altrnativs to DSL/cabl as poor substituts Pag 6

7 So what is th solution? Thr is no on siz fits all solution Instad a combination of rsponss is rquird to maximis th opportunity for Australians in rmot aras to gt accss to broadband at spds and prics broadly quivalnt to thos in mtropolitan aras: Ensuring that w hav a clar pictur of dmand lvls Prioritis distanc ovr spd Adopt a multi-platform stratgy Work with govrnmnt to idntify/fill th gaps Pag 7

8 Dmand ld Ensur furthr invstmnt in xchang nablmnt focusd on aras whr dmand is sufficint with ADSL dmand rgistr (pionrd by BT) In 12 months th rgistr has rcivd 45,000 xprssions of intrst and rsultd in an additional 102 xchangs bing nabld. A furthr 256 xchangs hav bn schduld for nabling CAN lctronics rmdiation is also bing prioritisd via this procss Pag 8

9 Distanc not spd Tlstra must always sk to srvic th maximum numbr of Australians whn rolling out nw srvics For ADSL srvics this mans w hav invstd in a ntwork configuration that maximiss distanc from an xchang to nsur gratst covrag Mbps Th challng is that currnt spds do not always match thos found in high dnsity citis Km from xchang Pag 9 Tlstra will offr highr spds whn dmand and applications ar sufficint

10 Multi-platform Thr is no singl optimal tchnology for supplying broadband to all Australians diffrnt platforms ar rquird in diffrnt contxts Evn in th futur a mix of FTTP, xdsl; cabl and trrstrial wirlss tchnologis will b rquird Th ky issu hr is to nsur that comptition policy dos not undrmin invstmnt incntivs in nw platforms Pag 10

11 Th obsrvd impact of multi-platform oprators on covrag and comptition 8% 3% Chart 5 Avrag ADSL pntration Avrag ADSL pntration in OECD countris 6% 4% 2% 0% Dc 2002 Jun 2004 OECD countris with joint cabl/adsl ntwork ownrship Avrag ADSL pntration by comptiv ISPs (March 2004) 2% 1% 0% EU countris (plus Australia) w ith joint cabl/adsl ntw ork ow nrship EU countris w ith sparat cabl/adsl ntw ork ow nrship OECD countris with sparat cabl/adsl ntwork ownrship Not: Countris with lss than 60,000 broadband srvics in 2002 xcludd. Data sourc: NECG Analysis Not: EC country data for March Australia data for Jun Data sourc: NECG Analysis. Pag 11

12 Work with Govrnmnt to fill in th gaps Th Highr Bandwidth Incntiv Schm (HiBIS) Th Schm 1. 4 yar Australian govrnmnt $100m ( 60m) subsidy initiativ 2. Idntify aras whr BB is not currntly availabl at clos to city prics 3. Pay on-off subsidy ($1,540 - $3,300) for ach ligibl HiBIS customr connctd 4. Individual carrirs limitd to 60% of th funds availabl Tlstra s Rspons 1. Rduc th ADSL dmand rgistr thrsholds for xchang nablmnt by btwn 40% and 60% From 150 to 35 customrs for th chapst xchangs and from 225 to 125 for th most xpnsiv Of 256 xchangs schduld for nabling 50 got thr thanks to HiBIS 2. Rduc on- and twoway satllit packags to prics clos to thos in th citis Pag 12

13 Policy lssons Th USO is an inappropriat policy tool for broadband It is too blunt an instrumnt for what is a complx tchnological and conomic problm Vry ral risk of distorting markt outcoms and wasting community rsourcs Rathr th HiBIS schm provids a mor appropriat modl for Govrnmnt intrvntion Targt th intrvntion to whr th markt is not providing Us Govrnmnt subsidis whr possibl rathr than distortionary industry taxs Utilis a markt conforming mchanism for allocating th subsidis to nsur tchnology/comptitiv nutrality and cost minimisation Pay th subsidy whn th customr gts a srvic at th right pric rathr than subsidising th duplication of infrastructur without a customr bnfit Pag 13

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