Delimiter » stephen conroy

IT price hike inquiry kicks off: Submissions wanted

Renai LeMay — Thu, 24 May 2012 03:48:51 +0000

news The Federal Parliament’s inquiry into local price markups on technology goods and services has gotten under way, with the committee overseeing the initiative issuing its terms of reference and calling for submissions from the general public on the issue.

In late April, Communications Minister Stephen Conroy confirmed the Government would hold an official parliamentary inquiry into the issue of technology companies marking up goods and services for Australia, following a long-running campaign by Federal Labor MP Ed Husic. Husic has been raising the issue in Parliament and publicly since the beginning of 2011 (he was elected in the 2010 Federal Election), in an attempt to get answers from technology giants such as Adobe, Microsoft, Apple and others as to why they felt it was appropriate to price products significantly higher in Australia (even after taking into consideration factors such as exchange rates and shipping) than the United States.

Earlier this month, for example, global software giant Adobe continued a long-running tradition of extensively marking up its prices for the Australian market, revealing that locals would pay up to $1,400 more for the exact same software when they buy the new version 6 of its Creative Suite platform compared to residents of the United States.

In a statement issued this morning, the House of Representatives Standing Committee on Infrastructure and Communications officially confirmed it would conduct an inquiry into the price differentiation of IT software and hardware in Australia compared to overseas markets.

The Chair of the Committee, Nick Champion, said “Australians are often forced to pay more for IT hardware and software than consumers in overseas markets. The Committee’s inquiry aims to determine the extent of these IT price differences and examine the possibility of limiting their impact on Australian consumers, businesses and governments. The Committee will look into the cost of computer hardware and software, including games, downloaded music, e-books, and professional software, to name a few. The Committee is looking forward to hearing from the companies who set these prices and the consumers and businesses that purchase their products.”

The terms of reference for the inquiry, which will take public submissions until 6 July, state that it will examine:

Whether a difference in prices exists between IT hardware and software products, including computer games and consoles, e-books and music and videos sold in Australia over the internet of in retail outlets as compared to markets in the US, UK and economics in the Asia-Pacific;
What those differences are;
Why those differences exist;
What the impacts of these differences might be on Australian businesses, governments and households; and
What actions might be taken to help address any differences that operate to the disadvantage to Australian consumers.

The committee consists of Champion, Husic, deputy chair and National MP Paul Neville, Liberal MP and former Optus executive Paul Fletcher, Labor MPs Stephen Jones and Mike Symon, independent Rob Oakeshott and Liberal MP Jane Prentice. In the past Shadow Communications Minister Malcolm Turnbull has also sat on the committee as a supplementary member for a matter related to telecommunications.

In a separate statement issued this morning, Husic said: “For too long, businesses and consumers have asked: why does it sometimes cost up to 80 per cent more to simply download software in Australia compared to overseas. The problem’s been IT vendors have seemed unwilling to explain why software and hardware costs more in Australia,” he added. “This Inquiry gives an opportunity for businesses and consumers to have their say on IT prices. But it also gives IT firms a chance to educate the public on the factors they take into account when shaping their pricing approach.”

Husic welcomed the breadth of the inquiry’s Terms of Reference. “This inquiry will look into the impact on a wide range of consumers – examining the cost of IT systems for business through to the cost of music and game downloads,” he said. “This just reflects the simple fact that with technology weaving its way into our lives in so many ways, people from all walks of life should have their say on this issue. I particularly hope that small businesses and young people take the chance to make a submission and have their concerns heard.”

After the inquiry was announced, Delimiter invited global vendors Adobe, Microsoft, Apple, Lenovo and Amazon, which are some of the most visible companies selling high-profile technology goods and services to Australians, whether they would commit to attending the parliamentary inquiry if invited, and whether they had any other statement to make on the matter.
Adobe said it would cooperate with the inquiry, and Microsoft said it would review the terms of reference. However, the other companies did not respond to requests for comment on the matter.

opinion/analysis
As Australia’s technology sector and — for want of a better, less hyped word — “digital economy” gradually expands, the issue of local price mark-ups is only going to grow in importance and prevalence in the debate about the nation’s innovative future. It will be fascinating to see what comes out of this inquiry, and I am sure it will be closely followed by Australia’s technology press on a blow by blow basis. There is the chance to enact some significant change here, and I encourage all those interested to make a submission to the review.

Image credit: Chris Gordon, royalty free

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NBN here to stay under Coalition, says analyst

Renai LeMay — Tue, 22 May 2012 01:15:42 +0000

news Labor’s flagship National Broadband Network project is here to stay in one form or another and won’t be discontinued as a whole, telecommunications analyst Paul Budde said this week, even if the Coalition was to take power in the next Federal Election.

When Shadow Communications Minister Malcolm Turnbull was appointed to the role in September 2010, the ABC reported that Opposition Leader Tony Abbott had ordered the Member for Wentworth to “demolish” the NBN. At the time, Abbott said he believed the NBN would “turn out to be a white elephant on a massive scale … school halls on steroids”.

Despite denials from Turnbull several weeks later that he would seek to “wreck” the project, the comments were seized upon by various figures in the Labor Party. Prime Minister Julia Gillard, has repeatedly claimed that a Coalition government would “rip up the fibre out of the ground” if it won power. In general, many Australians believe that the Coalition remains stalwartly against the NBN on philosophical grounds and would cancel the project if it won government — at a cost, according to the recent Federal Budget, of at least $1.8 billion.

However, that’s not the case, according to one leading telecommunications analyst. Writing on his blog this week, Paul Budde noted that while changes would definitely be made to the NBN if the Coalition wins the next Federal Election, he stated that the Coalition “also agrees that in some way the NBN is here to stay.

In separate posts over the past few months, Budde used a speech given by Turnbull to the CommsDay conference in April 2012 as well as other communications made by the Liberal MP to make his argument that the Opposition would retain key features of the NBN.

“The Coalition’s policy is, as you know focussed on achieving a comparable outcome (ubiquitious very fast broadband) but achieving it sooner in terms of rollout, cheaper in terms of cost to taxpayers, and more affordably in terms of consumers,” said Turnbull in the speech. “All of that follows from taking a pragmatic and technological neautral approach. But above all, at the front of our priorities is reducing risks for taxpayers and risks for consumers.”

“Very important and very positive was his statement that the Coalition’s aim is to achieve a comparable outcome for the NBN, sooner and cheaper,” said Budde in a post several weeks ago. “This confirms BuddeComm’s earlier claim that some form of a National Broadband Network is here to stay.” And then in April: “There is a lot of chest-beating going on, but in reality the Coalition’s views have been moving closer to the NBN as it is currently being rolled out,” wrote Budde.

The key plank of Budde’s argument regarding the Coalition appears to be that several components of the Coalition’s gradually evolving NBN policy are the same as the Government’s. For instance, the analyst noted in April that there was currently “more or less” bipartisan support for the structural separation of Telstra and the need to service rural areas with wireless and satellite broadband solutions, as opposed to fixed-line telecommunications.

One of the key differences between the two sides of politics’ policies, according to Budde, was that Labor is focusing on fibre to the home solutions, while the Coalition is focusing on fibre to the node, which would see fibre rolled out to streetside cabinets. However, he said, a FTTN solution would eventually “also need to be upgraded to FTTH”.

Perhaps the main key difference between the pair, Budde wrote, was actually not in the area of infrastructure investment at all, but the question of how to incentivise activity taking place on top of that infrastructure.

” … regardless of what the parties agree and don’t agree on, any technology solution will need to be based on a clear vision of the future for Australia in relation to the digital economy, e-health, tele-education, M2M, digital media and so on; and on the role of ICT in all of this,” the analyst wrote. ” … it is very clear that the current NBN is not there simply to deliver fast internet access.”

“The problem we have about the suggestions, comments and criticism from the Coalition is that so far we have no idea what their vision is on these matters. Do they see the need for a transformation towards a digital economy, e-health, tele-education, energy efficiency, etc? Do they believe that ICT has a role to play in this process? And, if so, what does that role have to be? If they were to present a vision on this we could debate what would be the best way to technically enable this transformation.”

opinion/analysis
I also believe that the Coalition’s telecommunications policy has shifted ever closed to the Government’s, and that the NBN project is broadly here to stay.

As Budde mentioned, both parties agree on the need to structurally separate Telstra and upgrade most of Australia’s broadband infrastructure using fibre, either to the premise or to neighbourhood nodes, and both parties agree on the need to provide rural broadband with wireless and satellite links.

Perhaps the areas where the Coalition most radically diverges from the Government’s view on the NBN are the issues of how this should be carried out, and what should be done with existing infrastructure. Clearly the Coalition wants to continue to use existing infrastructure such as the HFC cable networks operated by Telstra and Optus, as well as some portions of Telstra’s copper network — and just as clearly, the Government wants to shut such platforms down. However, in both cases, the aim is to keep on providing better broadband to Australians — so at a high level the policies are not dissimilar.

One other area is really quite unclear with respect to the Coalition’s telecommunications policy. That is the issue of how its policy would be carried out. Will NBN Co continue to exist as a corporate entity, owning telecommunications infrastructure — potentially even Telstra’s entire copper network? How will the Coalition incentivise Telstra and Optus to further upgrade their HFC cable networks and convince Telstra to help with the upgrade of its copper network?

Will the Coalition continue with NBN Co’s plan to launch its own satellites, instead of leasing capacity from existing satellites? And how and by whom will fixed wireless broadband be rolled out in rural areas? These are all questions which Australians currently have with regard to the Coalition’s telecommunications policy.

Personally, I don’t see how the Coalition could possibly get away without some form of a company like NBN Co to manage all of these issues. And with — at the very least — hundreds of thousands of Australians already having access to the NBN by the time the next Federal Election rolls around, likely in 2013, it seems that a strategy of transitioning NBN Co itself to a new model is going to pretty necessary for a Coalition Government, rather than simply abolishing the company wholesale.

In any case, I think at this stage we need to start counting our blessings with regard to telecommunications policy in Australia. While there is still a great deal of uncertainty in the political climate, the truth is that on both sides of politics we have very capable and senior leaders in the telecommunications portfolio, with deep understanding of the sector and a commitment to improving it. Whatever happens at the next election, that can only bode well for the nation’s telecommunications development as a whole.

HP completes giant new NSW datacentre

Renai LeMay — Fri, 18 May 2012 05:25:11 +0000

news Global technology giant HP has finished building its colossal $119 million new datacentre in Western Sydney and will launch the “world-class” facility next month, with a speech slated to be given by Communications Minister Stephen Conroy.

Details of the facility were revealed in February 2011. At the time, HP South-Pacific Vice President of Enterprise Services, David Caspari (pictured above at the site after it was levelled), said the new datacentre would respond to the growing demand for services that businesses and government face from their customers and communities. The project will involve a building cost of $119 million and is part of HP’s US$1 billion transformation to retire legacy assets and build new facilities. The new facility will occupy an area of more than 130,000 square metres and was previously expected to be fully operational by the end of 2011.

In a press invitation today, HP invited journalists to “the grand opening” of the datacentre in mid-June. “You will have an opportunity to tour the world-class facility and learn first-hand about how this datacentre will help HP Enterprise Services drive transformation and modernisation for organisations in Australia,” the invitation reads. “There will be an address from Senator The Hon. Stephen Conroy, Minister for Broadband, Communications and the Digital Economy.”

Due to the “high security requirements” of the datacentre, cameras and smartphones will not be allowed inside the facility on the day, although HP is planning a “photo opportunity” with Conroy, and is planning to supply its own photography of the facility.

In February 2011 when the facility was first unveiled, Caspari said HP’s next generation datacentre significantly expanded HP’s and Australia’s infrastructure capabilities, enabling local enterprise to transform their system into a more flexible and modernised “everything as a service” environment, reducing both costs and risks, while driving predictability.

The HP chef added the rollout of the NBN would enable an increasing number of organisations to adopt new IT delivery models. He said cloud computing services would take off in the near future and that delivery models would be about connecting users to the services they want.

Paul Brandling, Vice President and Managing Director of HP South Pacific, said the investment was driven by recent shifts in the use of technologies — including in telecommunications — which created an environment of media and IT convergence to which Australian organisations and institutions needed to adapt. “Investment in IT infrastructures — such as this and such as the NBN — are as critical to the economy as traditional investments in things like water, power and transport,” Brandling said at the time.

Conroy joined a HP press conference at the time to congratulate the company on the new datacentre. He said HP was making a significant investment that would further drive Australia’s participation in the digital economy, as in the next four years — Senator Conroy said — more data would be produced than in the whole of history.

opinion/analysis
Given the massive cutbacks HP is undertaking globally, its Australian management team is lucky to have gotten this project across the line when it did. It represents a huge investment in Australian infrastructure, and I anticipate HP will be successful in attracting many large customers inside its walls. I applaud the company’s investment in Australian infrastructure and wish it well at the launch, and as things get ‘bedded down’ in the datacentre’s operations over the next little while. Congratulations, HP! Some more photos of the huge site prior to construction starting:

Image credit: HP

Evidence: Rural Australia is demanding the NBN

Renai LeMay — Fri, 18 May 2012 01:28:49 +0000

news An analysis of rural coverage following the announcement of the three-year rollout plan for the National Broadband Network has shown overwhelming demand for the infrastructure from a large number of rural and regional Australian communities, with many expressing disappointment that they had been left off the list for the NBN’s first few years.

The analysis was published earlier this week (we recommend you click here and read the full article) by telecommunications industry worker and blogger Michael Wyres. In a blog post, Wyres wrote that he had examined reports from a large number of local newspapers to determine what community attitudes in the regions were to the rollout, universally finding that local community representatives wanted the new infrastructure in their areas, and wanted it fast.

In the La Trobe Valley in Victoria, for example, Latrobe City’s chief executive reportedly praised the fact that some of the region had been included in the three-year rollout plan, but expressed criticism that the rollout would not affect residents of the town of Moe.

In Western Australia, the Esperance Chamber of Commerce reportedly told the ABC that its chief executive had written to Prime Minister Julia Gillard about the city missing out on the NBN in its first three years, saying: “With the isolation factor that Esperance has we genuinely thought that we would be announced. We have an NBN working group up and running, which is looking at developing an action plan to ensure this community can take full advantage of it.”

In Bendigo, the President of the Eaglehawk Secondary College Council wrote in to the Bendigo Advertiser to register her “dismay” about the decision to include Eaglehawk from the three-year rollout. “I urge all affected internet users to make their voices heard and bring all of Bendigo into the 21st century,” Barbara Peterson wrote. In Orange in NSW, an academic from Charles Sturt University complained about the city being left out of the three-year rollout, due to the negative impact it may have on establishing the university’s medical school in the area, saying: “I want to make sure whoever makes those doors in Canberra open understands that in terms of rolling it out in rural areas Orange would have a very strong case.”

The large number of rural stakeholders demanding the NBN — Wyres catalogued about a dozen articles independently cataloguing demand for the infrastructure in rural areas — is consistent with statements by NBN Co that the company had received strong and ongoing demand for the infrastructure from a number of such areas.

In January 2011, NBN Co chief executive Mike Quigley said one of his company’s greatest problems at that point had been fighting would-be suitors off. Despite the differing political leadership of the various states, he said at the time, he didn’t expect that to be a problem. “We don’t expect the states in Australia to throw barriers up,” he said. “So far, what we’ve seen from most of the states is a keenness to get on and do the job. In fact, we’re lobbied very heavily by different shires all over the place, who want us to come there first. That’s the biggest issue we’ve got at the moment — people want us to get there sooner,” he said.

Over the past several years, there have been a number of misleading articles published in various segments of the media about the NBN. In December, the Australian Press Council expressed concern about the Daily Telegraph’s coverage of the Federal Government’s National Broadband Network project, backing a local critic’s complaint that three articles in a short period of time had contained “inaccurate or misleading assertions” about the NBN. Similarly, in March this year, another News Ltd publication, The Australian, published a correction to a story after it inaccurately alleged that a school in South Australia would have to pay $200,000 to connect to the NBN; in fact, the school will receive NBN access as part of the normal rollout.

Wyres wrote that his blog post highlighted “issues that the big metropolitan newspapers don’t give a damn about; issues that are presented without the political agendas of the Fairfax’s and News Limited’s of the world”. “No political “white elephant” rhetoric, or “biggest infrastructure project in Australia’s history” whining,” he added. “Just people calling out for what they really want for their suburbs and towns.”

All of the locations catalogued by Wyres will eventually receive NBN infrastructure, although some may be served through the project’s wireless aspect rather than the full fibre to the home experience. In addition, extremely remote areas in Australia will be able to receive substantially upgraded satellite speeds when the NBN’s dual satellites launch in several years’ time.
The Coalition’s rival broadband solution has not yet been fully detailed yet, but it is not certain that such regions will receive broadband infrastructure under the plan. This week, Shadow Communications Minister Malcolm Turnbull said a Coalition Government would provide a system of subsidies to serve rural areas.

“… where because of geography it is not economic to provide broadband services at prices comparable to those available in the big cities, rather than an opaque cross-subsidisation bolstered by a monopoly, we will provide open and transparent subsidies to ensure regional and remote Australia gets equitable access to the digital economy,” Turnbull said in a landmark speech in Malaysia. “I note that if the Labor Government hadn’t cancelled the Howard Government’s OPEL scheme those remote and regional areas would have had upgraded broadband services in operation for several years now.”

opinion/analysis
I have often said that the debate over Australia’s National Broadband Network should be based on evidence, not conjecture or speculation, and here we have a perfect example of this.

In this case, an independent blogger and industry veteran has looked at a dozen locations around Australia where a small, local debate about the NBN has been held in the pages of local newspapers, following the announcement of NBN Co’s three-year rollout plans. And in all of these cases, local representatives have praised the Government for rolling out infrastructure in their regions, while criticising it if areas have been missed out.

I also wish to point out that these results are consistent with polling figures which have consistently shown high levels of popular support for the NBN project. In February, for example, a poll released by research houses Essential Media and Your Source showed that the NBN policy has continued to enjoy strong levels of popularity, especially amongst Labor and Greens voters, since the last Federal Election.

The pair polled their audience with the following question: “From what you’ve heard, do you favour or oppose the planned National Broadband Network (NBN)”? The response displayed an enduring level of support for the NBN, with 56 percent of total respondents supporting the NBN in total, compared with 25 percent opposed and 19 percent stating that they didn’t know.

Just 10 percent of those polled strongly opposed the NBN, while 20 percent strongly favoured the project. Amongst Labor and Greens voters who responded to the poll, support was the strongest, with 80 percent and 77 percent supporting the initiative, 42 percent of Coalition voters supported it. Over the past 14 months since September 2010, Your Source has asked respondents the same question on three other occasions, with respondents displaying a very similar support rate for the project — ranging from 48 to 56 percent. Those opposing the project have ranged from 19 percent of respondents to 27 percent.

This data was largely echoed in April, when another similar poll showed support for the initiative continues to grow to record levels. According to the polling data, in total, 42 percent of respondents who identified themselves as Liberal or National voters stated that they were in favour of the NBN, while 40 percent in total opposed the project and the remaining 18 percent didn’t know. Of that 42 percent, eight percent were strongly in favour of the Labor plan, with 34 percent being in favour, and of the 40 percent against, 14 percent strongly opposed the NBN, with 26 percent opposing it. Amongst Labor and Greens voters, the numbers are much more strongly in favour of the NBN, with 80 percent of Labor voters and 68 percent of Greens voters for the plan, and with a much higher proportion of those polled being strongly in favour.

Now, I also have been a critic of the NBN on many fronts, and I think there are areas where the project could be handled better, such as the ACCC’s decision to set the number of points of interconnect with the NBN’s infrastructure quite high, when many organisations wanted a smaller number. In addition, there is still a strong debate about NBN Co’s wholesale pricing model. However, it seems clear that these issues can be addressed within the confines of the project as a whole.

Consequently, my question to the Coalition is: Why do you continue to oppose this project and slam it at every opportunity, when the evidence is consistently showing that Australians far and wide, in the bush and in the city, have read the arguments and want it to go ahead? The nation is speaking here. But I don’t feel like the Coalition is listening.

Image credit: Timo Balk, royalty free

NBN no CommBank or Qantas, says Hockey

Renai LeMay — Thu, 17 May 2012 01:35:43 +0000

news Shadow Treasurer Joe Hockey has taken an axe to the Federal Government’s budget treatment of its National Broadband Network project, arguing that NBN Co is not an asset like previous government-owned companies such as Qantas or the Commonwealth Bank, which were eventually successfully privatised.

In a post-budget address to the National Press Club this week, Hockey said that one of the reasons why Government debt kept rising while the budget was “supposedly” in surplus was that spending on the NBN and other projects such as the Clean Energy Finance Corporation were “off-budget” and financed through increased Government borrowings. “If both entities are treated on budget then the $1.5 billion surplus forecast for next year would be a $4.3 billion deficit,” Hockey said. “Add in the $8 billion of money shuffles and the deficit would be $12 billion.”

According to a research note recently published by the Parliamentary Library of Australia last year, Labor is technically correct to account for the NBN on this matter, and the Coalition is wrong.
“Australia has adopted internationally accepted accounting standards, and these are applied in the budget treatment of the NBN,” the library’s Brian Dalzell, who works in its economics division, wrote in the report (available online here in PDF format). “While the applied accounting treatment depends on the specific transaction conducted between the Government and NBN Co, this treatment is governed by accepted accounting standards and is applied equally to all government business entities (GBEs). This treatment is not determined by the return generated by NBN Co (or any other GBE).” The NBN’s long-term return is currently projected to be between $1.93 billion and $3.92 billion.

But Hockey said he didn’t accept this explanation for the NBN’s budget treatment. “The Treasurer says this is normal accounting but the $50 billion NBN and the $10 billion CEFC are not “normal”,” he said in his speech. “Their size and asset quality are not on a par with a Qantas floated for $2 billion, Commonwealth Bank floated for $8 billion, or Medibank Private valued at around $4 billion.”

“Nor is their asset quality the same. For example the CEFC is offering taxpayer funded credit for green projects where the banks will not … and on this basis it does not seem a good business proposition. And the business case for the NBN is so poor that the government refuses to have a cost/benefit analysis.”

Hockey said if the Coalition won government, one of his earliest administrative tasks to improve public finances would be to “meet with senior public servants to identify the real commercial value of the NBN and the Clean Energy Finance Corporation and their treatment in the Budget”.

However, Communications Minister Stephen Conroy didn’t take Hockey’s comments lying down, issuing his own statement following the Shadow Treasurer’s speech. “The Coalition has won the trifecta for economic illiteracy in their claims that the National Broadband Network should be treated as spending in the budget,” Conroy said.

“In his National Press Club Speech, Mr Hockey has once again shown he is unfit to be in charge of the nation’s finances. Mr Hockey not only masterminded the Coalition’s pre-election costings debacle – where the firm hired by the Coalition to audit its election promises was later fined and reprimanded for unprofessional practices – but now he wants to ignore international accounting standards.”

“The NBN is an investment in an asset from which the Government will receive a return. It is classified by International Accounting Standards as an equity investment rather than a budget expense. This is consistent with long-standing budget treatment applied by this and previous Australian Governments. Instead of wilfully misleading the public, the Coalition should support Labor’s NBN, which will provide fast, reliable, and affordable broadband to all Australians, regardless of where they live.”

opinion/analysis
As I have previously written, I believe Conroy is factually correct in his assertion that the NBN’s costs should not be on-budget as an expense. The facts of the matter are that the NBN is expected to make a return, and the government’s funding of the project is not an expense, for accounting purposes, but an investment. The Coalition has wilfully ignored the fact that even if the NBN makes a loss, that loss will not represent the entire cost of the project, but only its revenues minus its costs. Furthermore, the Coalition has not presented any analysis for what it estimates that loss might end up being.

In this sense, the Coalition’s continual claims that the NBN should be included in the budget papers as an expense appear to be quite ridiculous. If the Government did include the cost of the NBN in the budget as an expense, then later on, when it started making money from the NBN, it would then need to include those revenues as well. Frankly, this isn’t how accounting works, to my mind, and, it would appear, the mind of the Parliamentary Library, which produced a detailed paper on the issue.

I also want to address Hockey’s comments about NBN Co not being similar to Qantas and the Commonwealth Bank.

Frankly, NBN Co is the very definition of a company which is similar to Qantas and the Commonwealth Bank. And I note that there is a third company which Hockey should have included in that comment, but chose not to — another company which was also very similar to the first two and even more similar to NBN Co, because it also rolled out a national telecommunications network with government funding. A company which was also highly successfully privatised and made a stack of cash for the government in the process, and continues to make stacks of cash for its shareholders.

I speak, of course, of Telstra.

The Government’s creation of a national fibre broadband network is directly analogous to the creation of value inherent in Telstra, the Commonwealth Bank and Qantas, and my personal feeling is that this fibre infrastructure will end up being more important than any of these three companies to the long-term future of the Australian economy.

I think if we look ahead 30 years or more — and bear in mind that this time scale is “normal”, compared with the Qantas, CommBank and Telstra examples — the NBN infrastructure will continue to be worth an incredible amount to Australia, and my feeling is that the return on its investment will continue to grow over time. The estimates of NBN Co’s long-term value which we currently have, in my view, are quite conservative estimates and don’t reflect the way that financiers and the sharemarket will view the company in three to four decades.

I think at that time, the Government of the day may find that the private sector is willing to pay a very pretty penny for a well-established national company with a giant fibre network and a monopolistic grasp on its sector, with guaranteed customers. A very pretty penny indeed.

Image credit: Office of Joe Hockey

Is Abbott consciously lying on NBN costs?

Renai LeMay — Mon, 14 May 2012 00:49:20 +0000

news Opposition Leader Tony Abbott appears to have again misrepresented the cost of connecting to National Broadband Network fibre infrastructure, in comments which the Government has said represent a deliberate attempt to mislead the Australian public on the issue.

In his budget reply speech last week which was nationally broadcast from Federal Parliament, Abbott questioned the need to “spend $50 billion on a National Broadband Network so customers can subsequently spend almost three times their current monthly fee for speeds they might not need?”

“Why dig up every street when fibre to the node could more swiftly and more affordably deliver 21st century broadband?” he added. “Why put so much into the NBN when the same investment could more than duplicate the Pacific Highway, Sydney’s M5 and the road between Hobart and Launceston; build Sydney’s M4 East, the Melbourne Metro, and Brisbane’s Cross City Rail; plus upgrade Perth Airport and still leave about $10 billion for faster broadband?”

It’s not the first time a leading Opposition figure has made the claim that end user retail NBN prices will cost more. Earlier this year, Shadow Communications Minister Malcolm Turnbull stated several times that NBN prices would higher than those currently on the market.

Some of the basis for the claims has come from the fact that the NBN will see a new, government-owned company, NBN Co, entrenched as a wholesale monopoly in Australia’s telecommunications market, which Turnbull has claimed is an uncompetitive structure which will eventually see prices rise. Other such claims have come from the idea that as broadband usage increases, consumers will naturally be paying more, or from stipulations in NBN Co’s wholesale agreements which are slated to allow it to raise some of its wholesale costs which it charges ISPs.

However, despite these factors, analysis has consistently shown that it is unlikely that retail pricing levels under the NBN will significantly rise, compared with existing prices available on ADSL and HFC broadband networks.

NBN Co has committed to the Australian Competition and COnsumer Commission that it will maintain wholesale prices to a reasonable level over the 30 year period governed by the Special Access Undertaking document which sets out many of the rules for its operations. The states that NBN Co’s basic broadband pricing will remain the same until June 2017, and that after that point, price rises will be limited to half of consumer price index rises in any one year. They also can’t be accumulated over time. In addition, analysis of current NBN pricing has shown that the NBN plans released by major companies like Optus, Telstra, iiNet, Internode, Exetel and others are virtually identical to their existing broadband plans on ADSL or HFC cable networks.

In a statement last week, Communications Minister Stephen Conroy said Abbott’s claim that consumers would pay three times more for broadband under the NBN was “just wrong”. “Prices for NBN plans released to date are cheaper than, or equivalent to, existing ADSL plans, but with much improved quality of service,” Conroy added. “For example, Skymesh is offering NBN services from $29.95 per month. Exetel’s entry-level plan costs $35.00 per month. A number of other retail providers, including Optus, offer NBN services starting from $39.95 and $49.95 per month. Thanks to the NBN, competition between retail providers is increasing.”

“Tony Abbott should check his facts before delivering a national address in the Australian Parliament.”

Another aspect of Abbott’s speech may also be incorrect; his statement that the funds being ploughed into rolling out the NBN could be invested instead in building transport infrastructure such as roads, whilst still leaving “$10 billion” to invest in broadband as well.

Abbott made this same claim in February. However, at the time, analysis showed that the NBN is not an expense in terms of the Federal Government’s annual budget, and cutting the project would not free up money to be spent in other areas. This is because the project is an investment expected to make a return for the government — a long-term profit. That return is currently projected to be between $1.93 billion to $3.92 billion.

In this sense, cutting funds from the NBN would have the potential to limit any return the project makes in the long-term, potentially even costing the Government money instead of saving it. Even if the NBN project ended up making a long-term loss on the investment, the Government’s loss in that area would not constitute the entire cost of the project — merely how much money it had lost once NBN Co’s revenues had been removed from the equation. Conroy acknowledged this fact in his statement.

“In his budget reply, Mr Abbott also pretends that investing in fast affordable broadband should be replaced by additional spending on roads,” the Minister said. “Mr Abbott clearly doesn’t understand that the NBN is classified by international accounting standards as an equity investment rather than a budget expense. This is consistent with long-standing budget treatment applied by this and previous Australian Governments.”

“The equity investment in the NBN cannot simply be shifted to pay for more roads, unless those roads are being run by a government business making a return.”

opinion/analysis
Right now, in reporting comments by the Opposition on the National Broadband Network, I — and no doubt other journalists — are facing an uncomfortable decision. When do you stop reporting that a leading political figure is ‘misleading’ Australia on a certain issue, has made a ‘factually inaccurate’ statement, or is simply ‘mistaken’, and start reporting instead that that politician is deliberately ‘lying’ on an issue in public, for political gain?

Opposition Leader Tony Abbott has taken a very consistent line with respect to the NBN over the past six months or so, repeatedly alleging that the project will increase broadband costs in Australia by up to three times, and that the Government’s NBN investment could be re-allocated to other areas such as transport infrastructure.

However, over this time, as Conroy pointed out last week, these statements have been proven false. The NBN is not, and will not, cost Australians more, and cutting the project will not free up government funding to be spent on roads, as it is an investment, not an expense.

Now, I am sure that some advisers within Abbott’s staff, and perhaps even the Opposition Leader himself, are aware that this kind of analysis has been done on the Liberal leader’s statements.
In addition, it is very common in political circumstances for leaders such as Abbott to rely on their portfolio ministers to supply input in their respective fields to major speeches such as a budget reply. In this case, it is clear that Shadow Communications Minister Malcolm Turnbull is personally aware of the criticisms of Abbott’s claims. Turnbull himself, earlier this year, was active in making many of the same claims. However, the Member for Wentworth appears to have ratcheted down his comments on these areas publicly, especially in the area of retail costs, since analysis of this area and of the NBN’s return on investment was published earlier this year.

I believe that Turnbull has become aware that some of his statements in this area were on shaky ground, and that he has modified his approach on this issue in order not to risk misleading the Australian public. So the question then becomes, has Turnbull, or even Abbott’s own media advisers, discussed with Abbott the fact that many of the statements which Abbott is consistently making about the NBN are factually inaccurate? If they haven’t, why haven’t they?

As a journalist, you can only point out when a politician is mistaken on an issue so many times before you have to draw the conclusion that the politician is deliberately ignoring commentary on the issue and is choosing to, as Conroy put it last week, “wilfully mislead” — in layman’s speech, ‘lie’ — to Australians. When that politician is an important a figure as the Leader of the Opposition, that is a very serious issue indeed. Right now, on the NBN, Tony Abbott is on very shaky ground — and it may just be on the verge of collapsing underneath him.

‘Cooked books’, ‘funny money’, ‘trickery’: Coalition on NBN budgeting

Renai LeMay — Thu, 10 May 2012 00:31:52 +0000

news Leading Opposition figures have slammed the Government’s handling of funding for the National Broadband Network in this week’s Federal Budget, alleging that the project’s finances are being misallocated to cover up holes that would have sabotaged the policy aim of delivering a budget surplus. But the Government has fired back, accusing the Opposition of ‘manufacturing’ budget problems.

Most of the funding for the NBN does not appear in the budget, as, according to accounting standards, it is not an expense as generally understood, but is actually an investment expected to generate a modest return. This handling of the NBN’s finances has been backed by a report into the matter published last year by the Parliamentary Library of Australia.

However, Communications Minister Stephen Conroy’s department did disclose how much the government is funding NBN Co over the next few years, in its portfolio budget statements. In the 2012/2013 financial year, the Government will allocate $4.7 billion to the project, and more each succeeding year — peaking at $5.6 billion in 2014/2015, and then setting again to $5.1 billion in 2015/2016. In addition, in this year’s budget additional funding was also allocated for NBN-related activities such as a $20 million investment in public education and awareness.

However, this treatment of the NBN in the budget didn’t find favour with Opposition figures such as Shadow Treasurer Joe Hockey and Shadow Communications Minister Malcolm Turnbull, who have publicly slammed the Government’s financial handling of the matter over the past day or so.

“In headline cash terms, the Gillard government will spend $8.7 billion more than it earns in 2012-13 because the government continues to spend on projects such as the NBN which have been taken “off Budget”,” said Hockey in a statement. “If the government was honest, and included NBN expenditure, the Budget would show deficits over the next three years. To put it simply, there would be no surplus if the NBN was on the books.”

In a statement responding to Coalition criticism of the Government on this issue, Conroy said the claim that the NBN funding should be expensed was “completely wrong”. “The NBN is an investment in an asset from which the Government will receive a return. It is classified by International Accounting Standards as an equity investment rather than a budget expense. This is consistent with long-standing budget treatment applied by this and previous Australian Governments.”

In a separate, lengthy statement on the matter, Turnbull raised a number of other matters with respect to the NBN’s budgeting.

“The National Broadband Network is at the centre of Labor’s 2012-13 Budget cooked books,” he said. “The Government’s claim of a meagre $1.5 billion surplus rests on shifting expenses forward from 2012-13 to the current 2011-12 financial year. Almost a third of the surplus comes from Senator Stephen Conroy’s creative accounting with the NBN.”

Turnbull said that according to the previous year’s portfolio statement for Conroy’s department, the department was scheduled to spend some $57 million on broadband in the past year. However, in the new budget this week, the MP said, that figure had “exploded to $484 million”, because the Government had included in that amount the first part of the payment to Telstra over its $13 billion arrangement with NBN Co.

Turnbull also pointed out that in last year’s budget, the Government had planned to invest $14.1 billion over the three years between July 2011 and June 2014, but in the latest budget that figure had grown to an estimated $14.5 billion. “Yet the network only has 5000 or so customers currently using its fibre network, compared to the 137,000 projected by June 2012 in NBN Co’s Corporate Plan,” said Turnbull. “So taxpayers are paying far more for a rollout that has delivered a fraction of the promised connections.”

The MP said the “large increase in the equity” required by what he described as the “reckless” NBN project, added to what he said were “repeated refusals” by the Government to reveal how many households and businesses would be able to connect to the NBN at the time of the next election, pointed to a “blow-out” in its expense and schedule.

“Little wonder Labor has attempted to frustrate scrutiny of the NBN by Parliament and the Australian public at every turn,” Turnbull said. “It is imperative Senator Conroy immediately releases a revision of NBN Co’s December 2010 corporate plan – fiscal honesty and policy transparency require it.”

The Liberal MP also took aim at the Government for other areas in the budget with relation to the NBN; such as the $20 million in education and public awareness funding, as well as another $20 million allocated towards a national online educational portal in the area.

“Given NBN Co has already wasted so much money by hiring a vast public relations team and granting numerous contracts to PR and marketing consultants and other privileged insiders such as Labor’s preferred opinion polling firm UMR, Australians have every right to ask whether these funds will simply result in more pro-NBN propaganda,” Turnbull said.

However, in his own statement, Conroy said Turnbull had “manufactured claims of a ‘blowout’ and a ‘fiddle’ in the budget treatment of the NBN”. “Mr Turnbull is either lazy, financially illiterate, or both,” he added.

“As a former merchant banker, Mr Turnbull presumably knows that you pay your bills when they fall due. The $450 million additional Departmental expenditure in 2011-12 is the payments made to Telstra under the terms of the Definitive Agreements. These agreements came into force on 7 March 2012. The treatment of these amounts within the budget was outlined in a press release distributed on the same day. There is nothing new about these payments nor can they be described as having been ‘brought forward’.”

“Similarly the claim of a $400M blowout in equity is false. Mr Turnbull’s assertion that there has been an increase in equity of $400M simply reflects that equity funding of $350M was deferred from 2011-12 to 2012-13. This was detailed in the 2011-12 Departmental Portfolio Additional Estimate Statement on page 39.”

opinion/analysis
Much of what Turnbull and Hockey are talking about here is old ground. The accounting of the NBN as an investment rather than an expense has been talked about a thousand times before, and while the Coalition disagrees, there doesn’t appear to be much evidence that the NBN should be included as an expense on the Government’s books, when it is slated to make a return in the long-run. The Government is pouring capital into the NBN, it is true, but that money is not disappearing into the ether; it will make a return and come back in the form of revenue and profits.

This scenario, as many people have noted repeatedly, is virtually guaranteed by the fact that both Telstra and Optus have committed to move their fixed-line broadband customers onto the NBN in the long run. Most Australians will use the NBN for telecommunications eventually; most will have no other choice in fixed-line telecommunications.

However Turnbull does have some good points here. The shifting of funding around in DBCDE is quite interesting, and it is also interesting to see the Government’s funding commitment changing a little. Most haven’t noticed this in the budget, and it’s a legitimate point which the Government should be questioned about. To be honest, I’m not sure who is really “right” here — Conroy or Turnbull — but it’s good that Turnbull has raised these movements of capital around. It’s always good to have this stuff on the record.

I don’t personally have a problem with NBN Co spending money on ads for for public awareness (and before you ask, no, they’re not spending with Delimiter — I don’t think we’re the audience they’re trying to reach). This is a hugely important government infrastructure project which will affect all Australians, and $20 million in the context of the billions being spent on the project is a legitimate marketing and education expense.

As for the “vast public relations team” which NBN supposedly employs … I can assure Turnbull that that team is actually quite small, over-worked and full of ethical individuals, several of whom I knew previously in other positions. I deal with them every week, usually several times a week. They are doing a tough job day in day out, and I don’t think he should be attacking them for it.

Image credit: Office of Malcolm Turnbull, Wikipedia user DAEaton (Creative Commons)

The Govt should hold a referendum on the NBN

Renai LeMay — Thu, 03 May 2012 23:23:02 +0000

opinion The Federal Government should hold a non-constitutional referendum during the next Federal Election on whether Labor’s National Broadband Network should go ahead, in order to settle the long-term fate of this important decade-long infrastructure project once and for all and end the incessant political bickering around it.

In October 1916, as things were beginning to get particularly bogged down in World War I, the Australian Government held its first non-constitutional referendum, an action which is usually, in Australia, described as a plebiscite. The question, according to Wikipedia, was as follows:

“Are you in favour of the Government having, in this grave emergency, the same compulsory powers over citizens in regard to requiring their military service, for the term of this war, outside the Commonwealth, as it now has in regard to military service within the Commonwealth?”

At the time, things were getting a little hairy for the Allies. It would be some months before the United States declared war on Germany, and the famous engagement at Gallipoli the year before had resulted in some very tough times for the Allied countries involved, especially Australia, which for a small country which had travelled halfway around the world to back its British allies had suffered heavy casualties for our short military history — some 8,700 soldiers lost.

With this in mind, the Federal Government of the day had sought to increase its military resources overseas through requiring Australian citizens to serve, gaining a local mandate for the act through a non-binding poll of the Australian population. Unfortunately for the Government of the day, the population voted narrowly against the idea. However, as the war ramped up in 1917, it tried again in December that year, again seeking to bolster Australia’s military forces through conscription. The question, which was also rejected by the Australian population, was:

“Are you in favour of the proposal of the Commonwealth Government for reinforcing the Australian Imperial Force overseas?”

Sixty years later, Malcolm Fraser’s Liberal/Country Party Government held Australia’s third — and last — plebiscite. The question this time had no relation to military service, but again it related to national issues — in fact, one of the very planks of Australia’s national identity, the national anthem. The statement at the time gave Australians a chance to choose a national song to be played on occasions other than certain official ‘regal’ occasions. The options were God Save the Queen (the then national anthem), Advance Australia Fair (which was overwhelmingly the most popular option, with 43.29% of the vote), Song of Australia and Waltzing Matilda.

Since 1977, and before that time, Australia has held a number of constitutional referenda, with the most famous one of late being the 1999 vote on the establishment of a republic and the addition of a preamble to the Constution. But over the nation’s history, there have only been those three non-constitutional referenda, or plebiscites. I give you this history because I want to use it to illustrate that the issue of what type of telecommunications policy Australia should proceed with over the next decade is an issue which is worthy of a national non-constitutional referendum.

Over the past century or so since Australia formed its union, the nation’s government of the day has seen fit to poll its citizens in this fashion on three separate occasions. The first two related to a national emergency — our engagement in a global war and the need to obtain sufficient military resources through conscription. The third was the weighty (hic) matter of what song Australians should sing on occasions when they weren’t forced to sing God Save the Queen.

Clearly, the construction of national telecommunications infrastructure in Australia is not as important as determining the fate of our participation in a war. However, also clearly, it is a significantly more weighty matter than the issue of what song we should sing on particular occasions. It seems obvious that the issue of the NBN falls somewhere in between these two extremes and thus could be worthy of a referendum.

But this doesn’t get to the heart of the reason why I believe a referendum would be useful when it comes to the NBN.

For the past four and a half years since Kevin Rudd’s Labor Government took power and started enacting its then-fledgling NBN policy, Australia’s political sphere has been constantly engulfed in incessant bickering on the issue of the NBN project. The debate has raged constantly, from the technology involved to the economics, from the precise pricing structure to be used to the involvement of Telstra. It has raged through Australia’s Federal and State Parliaments. It has raged in every media platform. It raged during the 2010 Federal Election, and it will rage during the next Federal Election, likely to be held in 2013 if the current Gillard Government can hold onto power for that long.

And yet no agreement has been found.

Just this week, Opposition Leader Tony Abbott savaged the policy and Communications Minister Stephen Conroy filed a vicious salvo at his opposite, Malcolm Turnbull. Every month or so, Turnbull makes a milestone speech slamming the NBN and every other month, Labor makes a landmark national announcement regarding it.

The two sides of politics remain locked in a bitter battle regarding the NBN; one which shows no sign of ceasing.

And yet this is not the type of project which can suffer the constant interruptions which Australia’s three-year electoral cycle enforces on our political system. Any investment in national telecommunications infrastructure on the scale of either the fibre to the home NBN, or the Opposition’s rival fibre to the node plan, must be made over the period of a decade or more. The nation simply cannot change its course on this matter every three years, or even every six years. To achieve any kind of stable telecommunications sector, the nation must commit to a policy on this matter for a decade.

When it comes to roads, when it comes to rail, when it comes to electricity networks, sewers and harbours and airports; other forms of critical national infrastructure; Australia does not make plans on a three-year basis, and the same is true when it comes to telecommunications. It would be simply absurd for the Government to roll out fibre cables to half of Australia and then stop.

And, on current measures, the likelihood is that it will stop. If the Coalition wins the upcoming Federal Election, it will stop the NBN in its tracks while it considers its next step. It will stop the fibre being rolled out, it will halt the execution of plans which have been years in the making. To many Australians, and to many people internationally, this is nothing short of a bad joke.

You do not stop the construction of the Snowy Mountains Hydro-electric scheme half-way. You do not stop the construction of the Harbour Bridge half-way. You do not construct half a rail line between Adelaide and Darwin. These are absurdities. These are things we should not do. Put simply; it would be bad policy, and bad for Australia.

To avoid this absurdity occurring after the next Federal Election, I believe the current Labor Government should schedule a national non-constitutional referendum (a plebiscite) to be held during that election, on the following question:

“Are you in favour of the National Broadband Network project as envisioned by the Federal Government going ahead?”

Should the answer be “yes”, then the project should go ahead as it is, no matter what side of politics wins power. And, despite the historical trend for Australians to vote down questions in referendums, I believe there is ample evidence to suggest that answer would indeed be “yes”.

Limited polling has consistently shown that Australians are in favour of the NBN. The most recent public poll, taken by Essential Media in February, showed that overall, 56 percent of the country was in favour of the NBN, with only 25 percent opposing it. A further 19 percent didn’t know. In order for an Australian referendum to be voted up, a majority of Australians nationally must vote in favour of the proposal, as well as separate majorities in each of a majority of states (four out of six). On current polling, the NBN would be very likely to win such a double majority poll; given that almost all of the 19 percent currently undecided on the project would need to swing against the initiative, and some of those currently in favour would need to change their minds.

This is the kind of swing which we almost never see during elections; in fact during the recent Queensland State Election, the routed Labor Government only saw a swing against it of 15.61 percent. Worse would need to happen to the NBN ‘yes’ vote in a national referendum, and it’s hard to imagine that happening, given the popularity of the project and the lure of improved service delivery it promises.

Now, I’m not sure what effect such a referendum would have on the Federal Election. But I do know this: Right now, Labor’s NBN project is most likely the most important infrastructure project in Australia. The nation cannot afford to swing back and forth between competing policies for the next decade as the two sides of politics bicker over what path they are going to take every three years.

A non-constitutional referendum is a very clear and decisive way of letting the Australian public have its say on this important issue. And if it is proposed by the Federal Government, it would be a very courageous Opposition indeed which would try to block it.

If you agree with me that a non-constitutional referendum should be held on the NBN, I encourage to you make your views known. Write an article about this on your own site, contact your Member of Parliament, post this article on social media or comment stating that you agree. This is an important issue and I think we need to signal to our political representatives that we need a resolution. I myself will be contacting the various political parties over the next week to ask them if they will support an NBN referendum. And if they will not, given the billions of dollars and years of uncertainty at stake, I will be asking why.

Offshore cloud an adoption barrier, finds KPMG

Renai LeMay — Tue, 01 May 2012 06:29:56 +0000

news A research study partially funded by major offshore cloud computing vendors Salesforce.com, Microsoft, and Google has found that one of the major barriers stopping Australian organisations from migrating to cloud computing platforms is the lack of cloud infrastructure based in Australia, with legislation such as the US Patriot Act cited as key concerns with offshore hosting.

The study, entitled Modelling the Economic Impact of Cloud Computing, was launched by consulting firm KPMG in Sydney this morning, at a launch attended by Communications Minister Stephen Conroy and other senior figures in Australia’s technology sector. You can download the full report in PDF format here.

In general, it found that, should Australian organisations adopt cloud platforms over the next few years, as the experience of “more mature markets” such as the US suggest is likely, then the benefits for both enterprises and the economy as a whole could be “substantial:, lowing ICT operating and capital expenditures significantly, while still boosting overall gross domestic product by a figure of around $3.32 billion per year. However, ultimately KPMG concluded that the Australian cloud computing market was still “at the early stages of adoption”, particularly in comparison to the US and Europe.

The report was commissioned by industry lobby group the Australian Information Industry Association, in coalition with Conroy’s Department and Salesforce.com, and with the support of other vendors such as Microsoft, IBM, Optus, Fujitsu, Google, CSC, Hitachi, IPscale and Macquarie Telecom, all of whom have some skin in the cloud computing game. In its report, KPMG noted that many executives it contacted while conducting research on attitudes towards the cloud “believed that the Australian ICT market does not yet have mature offerings in cloud-deployed solutions”, with some therefore declining to participate in the study.

Additionally, in the “barriers to uptake” section of its report, KPMG noted that issues included the “location of data and related security and data sovereignty issues (including implications of the US Patriot Act)”. A 2009 survey, KPMG noted, had found that although cloud computing made it possible to access services located anywhere in the world, “there is a strong desire for services located within Australia’s borders”. Other issues also included the issue of latency when accessing cloud computing services; which would especially be an issue for services located offshore.

The comments represent something of an irony for companies like Microsoft, Salesforce.com and Google. All three have repeatedly declined over the past half-decade to invest in dedicated cloud computing infrastructure in Australia, as has rival company Amazon.com. In part because of this issue, Salesforce.com and Google have particularly struggled to make headway in Australia’s public sector, which has expressed a particularly strong interest in on-shore facilities, due to regulatory concerns associated with storing information in the US.

Microsoft is known to provide local services from Singapore, and Salesforce.com from Japan, but many Australian organisations have still continually expressed doubts about storing data even in such jurisdictions, which are not known to have the same laws allowing government access to corporate information.

At the event this morning, Conroy reportedly (click here for iTNews’ article on the subject) outlined plans to visit Google’s US headquarters, in an attempt to promote Australia as a potential cloud computing hub, especially associated with the rollout of Labor’s National Broadband Network project over the next decade.

However, the Senator’s lobbying may fall on death ears. Google has over the past several years continually refused to commit to constructing Australian datacentre infrastructure. In February 2010 the company acknowledged “intense interest” from local customers in Australia-based application hosting, but said it would be hard to say that local infrastructure would be “the right path”.
Some of the companies supporting the KPMG study, however — such as Fujitsu, CSC, Macquarie Telecom and Optus — do have Australian infrastructure, and have won significant customer contracts to use that infrastructure over the past several years, with companies as large as top-tier bank Westpac getting involved.

opinion/analysis
Another vendor-supported report produced by a consulting firm, broadly concluding that Australian organisations should adopt new technologies. We’ve seen this a billion times before. So what’s new? Interestingly, quite a lot.

Firstly, let’s be under no illusions. As anyone with any industry experience would expect, KPMG’s report attempts to paint a rosy future for cloud computing in Australia, no doubt with the intention of at least paying lip service to the interests of its corporate sponsors. Although these kinds of reports are, on paper, “independent” — as in, the AIIA and the other sponsors technically can’t pay KPMG to conclude any in particular, there’s always a fine line, and KPMG obviously knows who’s funding its research (and potential future consulting engagements).

But reading between the lines, it’s clear that KPMG has at least done an honest job here. Reading the report, one can’t help but conclude that cloud computing vendors are finding it tough in Australia just now. The hype has died down, early adopters are losing their enthusiasm for the various platforms around, and the whole industry is clearly in what Gartner would call “the trough of disillusionment”.

This, again, is no real surprise. Many within the industry have been aware of this for a while.

But what is interesting is the extent to which a great divide is emerging between the various cloud players. On the one side of the line are companies like CSC, Fujitsu, Optus, Macquarie Telecom and so on, which are implementing on-shore cloud computing solutions and winning early success. Much of what these companies are doing isn’t really technically “cloud computing”, or at least not the “public cloud” that so many people associate with true cloud computing. It tends to be things like “private cloud”, which gives customers much more control over their infrastructure.

On the other side of the line are companies like Salesforce.com, Google, Amazon and Microsoft (although Microsoft has a foot in both camps — public cloud with Azure and private through partnerships with companies like CSC and Fujitsu). These companies are struggling to win public cloud customers in Australia, due to their nature as offshore hosters. As KPMG notes in the report: “Firms are more likely to be using private than public cloud at this point.”

None of this is really a surprise. Companies which invest in Australia, meet the demands of local customers and don’t stick to hardball philosophies which mandate only public cloud and nothing else (I’m thinking here of Salesforce.com’s antiquated concept that software is dead, or Google’s refusal to acknowledge that the idea of private cloud has any merit). But it is interesting to see it spelled out this way, in a report, ironically, sponsored by both sides of the coin.

Image credit: Krystle Fleming, royalty free

IT’S ON: Govt sets up IT price hike inquiry

Renai LeMay — Sun, 29 Apr 2012 01:21:34 +0000

news Price-hiking technology vendors are set to be hauled before Australia’s Parliament to justify their local markups, with Communications Minister Stephen Conroy confirming the Government will hold an official parliamentary inquiry into the issue, following a long-running campaign by Federal Labor MP Ed Husic.

Husic (pictured right) has been raising the issue in Parliament and publicly since the beginning of 2011 (he was elected in the 2010 Federal Election), in an attempt to get answers from technology giants such as Adobe, Microsoft, Apple and others as to why they felt it was appropriate to price products significantly higher in Australia (even after taking into consideration factors such as exchange rates and shipping) than the United States.

Just last week, for example, global software giant Adobe continued a long-running tradition of extensively marking up its prices for the Australian market, revealing that locals would pay up to $1,400 more for the exact same software when they buy the new version 6 of its Creative Suite platform compared to residents of the United States.

In late March, after achieving some initial success in raising the issue with David Bradbury, Parliamentary Secretary to the Treasurer, and the Treasurer himself, Wayne Swan, Husic revealed he would write to Communications Minister Stephen Conroy (who is generally seen as having responsibility for the technology portfolio in Australia), asking for a parliamentary inquiry into the matter. In a letter to Husic on 10 April seen by Delimiter, Conroy responded.

“I agree that Australian businesses and households should have access to IT software and hardware that is priced fairly relative to other jurisdictions,” he wrote. “I also agree there is evidence to suggest that the innovative use of technology is not always matched with innovative new business models, in the case of products and services distributed online. The global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets.

“In light of your letter, I will consider possible terms of reference for the House of Representatives Standing Committee on Infrastructure and Communications to inquire into the pricing of software and other relevant IT-related material.”

Top-ranking executives from major companies are often invited to appear before such parliamentary inquiries into their sectors. In this case, it is likely that high-profile companies such as Adobe, Microsoft, Apple, Lenovo and so on, would be invited to attend, due to their existing position in the line of fire, as well as companies retailing video games for the local market, which has also been an area of focus for the criticism, and other companies ranging from top-end camera manufacturers to business software vendors.

In his earlier communications with Conroy, Husic had written that such an inquiry held by the parliamentary committee mentioned by Conroy could:

Determine whether a difference in pricing existed, as well as determining the extent of the difference
Examine why households and small businesses have to suffer the increased prices
Set out the impact of the price hikes on Australian businesses, households and even Government (“bearing in mind that $2 billion is spent on IT procurement by Government”)
Examine what might be done within the law to deal with this issue, which Husic said IT companies had failed to respond to.

The parliamentary inquiry may also be given a little more bite through the interest which the competition regulator, the Australian Competition and Consumer Commission (ACCC) has in the outcomes. In parliament last week fronting a committee on the NBN, ACCC commissioner Ed Willett was asked by Husic whether the regulator would consider pursuing the matter, “given that consumers rightly feel that they have been unfairly slugged for the prices that they are paying, particularly, as I mentioned before, on software”.

“Over time, information technology will mean it will be harder and harder for particular service providers to maintain higher prices for products in Australia compared to overseas,” Willett responded. “I think that model that we have seen in the past in a number of services has been exacerbated by the value of the dollar, and that has made those comparisons even more stark. I think those sort of practices will be harder and harder to sustain.”

“But certainly the Commission will be pretty keen to ensure that those sort of differences are not supported by contraventions of the Act.”

Technology vendors such as Adobe and Microsoft have in the past offered a number of reasons for why prices were set differently in Australia compared with their home country of the US. In August last year, Microsoft responded to Husic’s comments about Australian markups on its products by stating that it doesn’t set final prices to local customers — and stating that it was difficult to make direct pricing comparisons between countries, given differing local conditions in each jurisdiction.

Microsoft is charging Australian software developers about 83 percent more than their US counterparts to access subscription services associated with its Microsoft Developer Network (MSDN) platform, and also charges higher prices for software products and cloud computing offerings.

Adobe stated the issue wasn’t one for the technology industry alone — claiming it was a wider problem affecting other areas such as the automotive sector as well. At the time, the company said the majority of Adobe’s software in Australia was sold through channel partners — and so the prices listed on its online store may not reflect competitive pricing in the market. In fact, the price through its own online store would reflect a price towards the upper end of the range which its channel partners were charging. The company didn’t want to undercut its channel partners in Australia.

PC manufacturer Lenovo has also attempted to defend of its Australian pricing, despite in 2011 launching its flagship new ThinkPad X1 laptop in Sydney for $560 more than the same hardware will cost in the United States. Apple also commonly charges more for its products in Australia, although the company has made some moves towards international price harmonisation over the past year.

The issue has also come to the attention of the NSW Government, with NSW Fair Trading Minister and Liberal MP Anthony Roberts adding his voice to the debate about price markups on technology goods sold in Australia in October 2011, claiming iconic technology giant Apple was “price gouging” the Australian public when it comes to digital goods such as films, music and software.

opinion/analysis
In 2012, it’s common to be extremely cynical about politicians, but I think we have to re-think this approach when it comes to Labor MP Ed Husic.

Despite being a backbencher who only entered parliament in the 2010 Federal Election, Husic has proven extremely successful already at representing the views of his electorate (I note his efforts regarding the National Broadband Network) as well as the wider community. In his ongoing campaign to highlight technology product price hikes in Australia, Husic has tapped into an undercurrent of dissatisfaction on the issue on the part of the Australian community. And now his tireless efforts have paid off, with the creation of a dedicated parliamentary inquiry to look into the matter.

In some ways, Husic reminds me of that other relatively new parliamentarian interested in the technology sector — Greens Senator Scott Ludlam. Their personal styles and political affiliations are obviously markedly different, but like Ludlam, Husic has been successful at using the structures and relationships set up in Australia’s Parliament to his advantage. The Committee system, the openness of ministers to discussing issues within the Government, the Government’s relationship with regulators, the importance of comment on the Parliamentary floor (even late at night) in getting issues on the record; Husic has worked all of these tools to his advantage to a remarkable outcome.

I don’t know, at this stage, whether the inquiry will have any impact on actual prices of technology prices in Australia. However, what I do know is that it will certainly do much to highlight the issue to the broader community, and make powerful corporations accountable to their customers. And that can only be a great thing. You can bet that there will be a bevy of journalists listening in as Husic and others question the likes of Microsoft, Apple, and Adobe on Australian IT price hikes.

So for now, let’s recognise that Australia’s political process, even for the often-low profile technology sector, sometimes isn’t broken. Sometimes, when individuals such as Husic show determination and passion, it can work and achieve real outcomes. In all processes, there is a time for cynicism. But for now, with relation to the issue of IT price hikes in Australia, there is an appetite and determination for positive change. It will be fascinating to see where it takes us.