Broadband in Australia

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1 Broadband in Australia Vicki MacLeod Manager Public Policy and International Regulatory Legal & Regulatory 9 March 2001 Page 1

2 ADSL is rolling out fast.. Broadband in Australia is approaching 100,000 customers at the end of 2000/2001. Already 435 exchanges have been ADSL-enabled, with up to another 600 expected by June During the remainder of 2001/2002 financial year coverage and capacity will continue to expand, to exceed an estimated ADSL coverage of 80% of all premises by June March 2001 Page 2

3 DSL/ULL availability ULL is now available across the country - 7 companies other than Telstra operating broadband networks, with many more under development DSL: there are 14 SPs other than Telstra offering DSL services to residential customers, and far more than this to business customers Telstra uses several platforms to deliver broadband services - HFC covers about 2.5m homes, DSL 7.5m homes and satellite covers all. 9 March 2001 Page 3

4 DSL not universal solution DSL cannot be used in about 10-15% of urban situations (copper not suitable) - microwave is a potential fill in technology - but Telstra has been excluded from big cities Rural and remote customers are covered by a subsidised satellite service - which now offers always on, untimed calls Cable modem service available since 1997, but targeted at residential, not small business, who are now taking up ADSL. 9 March 2001 Page 4

5 Factors determining take-up Price has not been seen as a key issue - but dial-up PSTN access has been comparatively underpriced Small businesses have not been early adopters because of lack of modern business processes Applications have been lacking This is changing fast - Telstra forecasts that broadband will be very big over the next 6 to 12 months 9 March 2001 Page 5

6 Demand Drivers Why businesses don't connect % of businesses 60% 50% 40% 30% 20% 54% 26% Price and connection speed is a small factor for business adoption of the Internet 23% 19% 17% 14% 10% 7% 0% Not suited to nature of business Lack of interest Lack of skills or training Costs are high Security concerns Slow connection speeds Other Source: ABS, Cat (2000) 9 March 2001 Page 6

7 Not an issue of broadband price Cable modem prices Monthly access price (AUD) Telstra Blast Off Optus Warp Sp eed NTL Telewest Australian cable modem access prices are low 9 March 2001 Page 7

8 Not an issue of broadband price DSL prices Monthly access price (AUD) Telstra Blast Off Bell Atlantic and SBC BT OpenWorld Australian DSL access prices are comparatively low 9 March 2001 Page 8

9 Access Alternatives 100% 80% 60% 40% Australian business Internet subscribers Australians love dial-up access. Why 99.25% 20% 0% 0.07% 0.65% 0.03% DSL Cable Modem Wireless Dial up 9 March 2001 Page 9

10 Australians love dial-up USD Average cost of Internet access Australia has among the lowest dial-up Internet prices in the world Italy Australia Source: ACA (2000) Canada New Zealand US Finland France Germany Sweden OECD Average Japan UK 9 March 2001 Page 10

11 So do Americans Source: Telecommunications Reports International in The Standard, In millions. * Excludes dialup service provided by phone companies. Dominance of dial-up also apparent in the US 9 March 2001 Page 11

12 International comparisons Broadband penetration is comparable to other countries when you take into account the US s head start and the different demographics in Australia (ie lower residential disposable income). Broadband take-up in the US is about 8m (2/3 of this is cable modem penetration) Germany leads the EU with 400,000 (mainly ISDN); the UK is in ninth position with 30,000 DSL subscribers (plus 20,000 cable) Japan has only 16,000 DSL subscribers, but 625,000 cable subscribers Korea has about 1.4m DSL services, while Singapore has a reported broadband take up of 250,000 (100,000 are DSL) 9 March 2001 Page 12

13 International comparisons: one size does not fit all A range of factors make meaningful international comparisons of take up and price of services very difficult Telstra is working on a new methodology which attempts to take account of a range of factors, including: - variations in costs and prices over time - technology used; quality of service differences - geographic differences and line density between countries - differences in targeted plans offered to residential and business - bandwidth availability and reliability of service - value added benefits (ie value/price trade off) - usage patterns and customer behaviour - exchange rates vs Purchasing Price Parity (PPP) 9 March 2001 Page 13

14 Effective monthly ADSL charge $A per month TCNZ Telstra Verizon, BellSouth and PacBell BT France Telecom Deutsche Telekom 9 March 2001 Page 14

15 Major issues We need to scale up the broadband infrastructure in Australia as quickly as possible, to meet rapidly growing demand Business and Government need to develop the applications which will stimulate demand and deliver the services that people want - eg ehealth initiative 9 March 2001 Page 15

16 Regulation may harm consumers... The linking of the ULL and ADSL timetables by the ACCC slowed down broadband rollout in Australia Competitors had incentives to delay the ULL selfregulatory process until they were ready to compete in broadband access Unlike in many other countries, Australia is having to manage both ADSL rollout and ULL rollout at the same time. 9 March 2001 Page 16

17 Way forward Current regulation of the telco sector needs to be reviewed in the light of Australia s overall information economy objectives - the market should be allowed to develop efficiently, without unnecessary technological or policy restrictions Government and Business sectors must take a lead in developing services and applications which will stimulate demand. Service providers need to aggressively market to meet that demand. 9 March 2001 Page 17

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