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.

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).”

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.

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news The nation’s number two telco Optus this morning revealed plans to sack some 750 staff, in a company-wide restructure which it claimed was aimed at giving customers “a stronger voice”.

In a statement, the company said it would create a “customer division” responsible for managing all aspects of the company’s relationship with its customers throughout the lifetime of their service. This restructure would be supported by the creation of “new marketing and sales division” to support its Optus brand, alongside the centralisation of a number of other key functions, including “commercial, human resources and strategy”.

The telco said the restructure would also see it rationalise “a number of operational, back office and administrative functions” to help drive greater efficiencies. “By moving to a more streamlined and centralised structure, Optus will remove a number of areas of duplication,” the company said. “As a result, Optus is proposing to make approximately 750 roles redundant over the coming months, with an associated one-off charge of approximately $37 million. The majority of these roles will come from senior and middle management as well as operations, back office and support functions.”

The company said that in order to maintain its “customer focus”, minimal customer-facing staff would be directly affected by the announcement.

The company’s chief executive of its consumer division in Australia, Kevin Russell, who has only been in his role effectively overseeing Optus in Australia for several months, said the “competitive environment” required Optus to have “a sustainable cost structure” that would allow it to remain competitive and continue to deliver value to its customers.

“However, a key driver of the restructure has been to elevate the voice of our ten million customers to ensure they are heard loud and clear in every aspect of our business,” he said, “in our service delivery and support, in the products and services we bring to market, and in the consistent experience we provide across all our sales channels.”

“By creating a more efficient organisation with a renewed focus on the customer, we will be able to compete more effectively,” Russell added. “When combined with our reinvigorated Optus brand and stronger mobile network, these changes will put us in an even stronger position to provide our customers with an exceptional and rewarding experience, while at the same time driving sustainable growth for our business.”

The news comes as Optus continues to experience only modest levels of growth in both its customers and key financial measures. In February the company reported a net profit of A$177 million for the third quarter, representing growth of 4 percent. The company’s operating revenue was up 2 percent to A$2.42 billion, while EBITDA increased 2 percent to A$562 million. The company added a mere 182,000 mobile customers in the quarter, and experienced negligible fixed-line growth.

In comparison, Telstra bolted on some 958,000 new mobile and fixed customers to its roster over the second half of 2011.

opinion/analysis
Rather than analysing the current situation, I’ll re-post my thoughts here that I wrote after Telstra revealed its latest set of financial results in January:

“Optus chief executive Paul O’Sullivan has a huge amount to answer for here.

Right now, Optus is experiencing growth of something like one (possibly two or three, with the Christmas period?) percent growth in its mobile division. Telstra is experiencing ten. Telstra just bolted on almost a million new Australian mobile customers in six months. In that period, Optus will struggle to bolt on a third that amount — and it might even look a lot more like a quarter.

Optus might call itself Australia’s leading telco challenger brand, but right now that’s nothing more than a bad joke. Telstra is the challenger brand in Australia’s mobile market — it’s challenging the status quo in terms of what we previously thought could be done in the mobile sector, and it’s blitzing Optus and driving Vodafone into the ground in the process.

This should be particularly disturbing for Optus.

As I’ve previously written, Optus has virtually ignored Australia’s fixed broadband market recently, resulting in its lunch being completely eaten over the past five years by the likes of TPG and iiNet, which now have stronger brands than it does in fixed telecommunications. It has done this in order to focus on the more profitable and unregulated mobile sector.

However, now Optus is having its lunch eaten in the mobile market as well. Telstra is making an absolute mockery of Optus in that segment. “Challenger telco”? I think not. Right now, in mobiles, Optus is virtually stuck in neutral.”

The fact that Optus this morning claimed it was restructuring “to give customers a stronger voice” is nothing more than a bald-faced misdirection. The company is experiencing negligible growth and is clearly going through a cost-cutting exercise designed to shore up its margins. It’s hard to argue that sacking 750 staff will give customers “a stronger voice”, when it seems clear that those customers will have less people to speak to.

I have a message for Optus. You don’t drive long-term growth by creating new marketing and sales divisions, while simultaneously cutting operations, back office and support staff. You drive growth by innovating and creating new products and services that your existing salespeople can sell. You know, the kind of thing which Optus used to do, and which iiNet and Telstra are doing right now.

Image credit: Promotional shot for AMC’s The Walking Dead TV series

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This article is by Justin Norrie, news editor of The Conversation. It first appeared on The Conversation and is replicated here with permission.

Australia’s national science agency will receive $220m after settling litigation against three US companies to license the wireless local area network (WLAN) technology it invented in the early 1990s.

A US patent for the technology, created by CSIRO scientists, expires next year. By that time, it is estimated consumers worldwide will have bought more than five billion products incorporating the invention – from smartphones to laptop computers, games consoles, digital cameras and printers. To protect the patent, CSIRO has been suing companies which have been using the technology without a licence. The Minister for Science and Research, Senator Chris Evans, announced that CSIRO will receive more than $220m after settling the latest round of litigation against AT&T, Verizon Wireless and T-Mobile USA.

AT&T and Verizon are the biggest mobile operators in the US, and T-Mobile is the fourth biggest. All three sell smartphones equipped with Wi-Fi.

In 2009, CSIRO recouped $205m after settling cases against 14 companies, including Microsoft, Hewlett-Packard and Dell. The agency now has licence agreements with 23 companies, which make up about 90% of the industry. Revenue from the technology has passed $430m.

“People all over the world are using WLAN technology … to connect to the internet remotely from laptops, printers, game consoles and smart phones in their homes, workplaces and cafes,” Senator Evans said. “The work in radioastronomy by CSIRO scientists here at home is having a positive impact on the way people live right around the world. “It’s hard to imagine an Australian-invented technology that has had a greater impact on the way we live and work.”

A CSIRO team led by John O’Sullivan and including Terry Percival, Diet Ostry, Graham Daniels and John Deane working in the Division of Radiophysics (now known as the CSIRO ICT Centre), created the technology at the agency’s Marsfield office in Sydney. Using their knowledge of radio waves, electrical engineering and signal processing, the scientists invented a way to send large amounts of information very quickly, two way, using radio waves indoors – a particularly difficult environment for radio transmission. They did this at a time when many of the major communications companies around the world were trying to solve the same problem. In 2009, Dr O’Sullivan received the Prime Minister’s Award for Science.

Nigel Poole, Strategic Adviser at CSIRO, said it was hard to recall a world without wireless network connections. “Phone calls, video viewing, gaming, web browsing, and emails are now often transmitted via wireless connections. Many schools, homes and businesses have put in wireless networks, as have many universities, airports, shops, cafes, malls and restaurants. What many people don’t realise is that a team of scientists at Australia’s national science agency, CSIRO, invented the technology.

“Of course, WLAN technology adoption continues apace. Wireless networking is now going into cars, commercial aeroplanes, theatres, concert halls, and into medical devices. One market researcher has even called wireless networking technology the “Swiss Army Knife” of consumer electronics.”

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This article titled “Unified communications: how one council is making staff more productive” was written by Gill Hitchcock, for guardian.co.uk on Tuesday 27th March 2012 09.48 UTC

A unified communications (UC) project in Scotland’s second largest local authority area, Argyll and Bute, is helping staff become more productive and opening up the possibility of remote learning for local children.

The project, to introduce Microsoft’s Lync 2010 communication and collaboration technology, began in December 2010 as part of the company’s Lighthouse programme – a series of software implementation projects led or assisted by the company’s consultants.

Argyll and Bute covers almost 9% of Scotland’s land area, including 25 inhabited islands, but plays home to fewer than 100,000 residents in total. It was an early adopter site for Lync 2010 and, because it was part of Lighthouse, it paid about £50,000 less for the implementation than it would otherwise have, according to its IT infrastructure services manager, Gerry Wilson.

To date the council has deployed the software to 2,000 users at a cost of £250,000, a figure which excludes the establishment of two new datacentres. The council expects to spend a further £100,000 by the time the project is completed in 2013, mostly covering software licences and hardware for end users, such as headsets.

By then the UC will have been rolled out to 4,000 users in total, including the council’s education services staff.

Some 1,000 teachers and around the same number of pupils will be provided with Lync access to enable remote learning. “We have pupils on islands who can be taught from the mainland over Lync,” says Wilson. “For example, our Bonjour Tiree project where pupils in [the island of] Tiree are taught French by video link by a teacher in Helensburgh.”

Savings resulting from the programme are expected to exceed the £50,000 the council saved from being part of Lighthouse. “Unified communications has helped the council to meet budgetary targets – we reduced the number of offices, which has provided savings on maintenance and leasing costs; and the ability to meet virtually led to travel and subsistence costs falling by 5% in the first year,” Wilson says.

“With Lync 2010 fully rolled out and our workforce adopting new flexible work styles, we’re expecting each user to gain at least 20 minutes more productive time every working day.”

Argyll and Bute’s geography means there’s an average of 50 miles between towns and, before the Lync implementation, staff were spending long periods driving between meetings, making it difficult to make “best use” of the working day.

“We were hoping that this product would help minimise the time spent getting from one office to another and maximise the productive time that we would have,” Wilson says.

“And when you consider that we have such a dispersed geography, we have teams who never get to see each other very often, because they work across such a large area, who can now collaborate using the technology to get more in touch and see each other on a daily basis. That is what we hoped to achieve – and that is what we did achieve.”

The UC system has been deployed across a number of council teams, including buildings and Wilson’s own, enabling staff to work from any council office or from external sites.

“By logging on to a PC, my extension number becomes live and I am available on our network and the system automatically routes all of my communications through to me, no matter where I am.

“Now that may not sound incredibly advanced, but all of the people in my team know where I am and they can see when I am in a meeting, and through Microsoft Presence they can see what I am doing at any one time and I can see where they are as well.

“And, rather than just use a telephone to communicate, I can call up my video camera and we can communicate. It’s like a business version of Skype, if you like, but much more secure and manageable.”

Wilson admits that broadband and mobile connectivity have been major issues, however. The town of Helensburgh is one of a few places in the region to have the “luxury” of 3G technology, for example.

In 2007 the council began the roll out of the Scottish government’s Pathfinder North project to deliver high speed broadband access to all of its sites, in partnership with four other Highlands and Islands local authorities. All its offices and schools now have good broadband access which has laid the foundations for the Lync implementation, according to Wilson.

Pathfinder North did not totally eliminate problems, however. “When you live in and work in a remote area like Argyll and Bute the overall levels of resilience in the national infrastructure is possibly not as great as you could find in the centre of Glasgow or Edinburgh.

“But we cut our cloth accordingly and built in additional resiliency wherever we could. Lync now has a high level of resiliency in each of our main towns.

“We have become accustomed to dealing with the terrible stormy weather of the last year which left islands like Bute without electricity for days. We included resilient break out points in 11 towns around our network and the system can more or less stand alone when these sites are cut off from the centre.” he says

This article is published by Guardian Professional. For weekly updates on news, debate and best practice on public sector IT, join the Guardian Government Computing network here.

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

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news Vodafone Australia yesterday announced the appointment of Bill Morrow as the company’s new chief executive, succeeding Nigel Dews, the current Vodafone CEO who has been assigned a senior role within Vodafone part-owner Hutchison Whampoa, reporting to group managing director, Canning Fok.

Vodafone Hutchison Australia (VHA) is a joint venture between the Vodafone Group and Hutchison Whampoa, providing mobile services to over 7.0 million customers in Australia. Dews has been the CEO of VHA for three years since the merger in 2009, after leading Vodafone’s stand-alone business in Australia before it merged with Hutchison. His tenure witnessed large scale customer exits last year due to intermittent network issues and outages, forcing the telco to embark on an extensive network upgrade and a customer ‘guarantee’ program.

These measures may bring a turnaround this year to the embattled mobile company, but it is unclear yet as to what impact they are having. In fact, the changes in top management at VHA come at a time when reports even suggested that the global Vodafone group was considering offloading the Australian company.

Morrow, the new CEO designate, is a veteran in the global telecommunications industry. He was the Chief Executive of Clearwire and prior to that, was Chief Executive of the Pacific Gas and Electric Company. Morrow had a stint earlier with the Vodafone Group as Europe Chief Executive, overseeing the Group’s businesses in Japan and the UK.

On his new appointment, Morrow said: “Vodafone Hutchison Australia is a business with a great future. I am excited by the prospect of joining a strong team. I’m also committed to meeting, and listening to our customers to understand their needs, now and over the years ahead.” Dews said that he was privileged to lead Vodafone Hutchison Australia. He felt it was time for a change after nine years in the telecom business, five of them as Chief Executive of Vodafone in Austraila. He was confident that as he took on his new role, he had left behind an excellent team that would flourish under Morrow’s leadership.

The media release issued by the telco reiterated Vodafone Group and Hutchison Whampoa’s long-term commitment to VHA as the business sees positive developments in the light of increased investment in network improvement and new customer service initiatives.

Commenting on the changes in top leadership, Vodafone Group Chief Executive for Africa, Middle East and Asia Pacific, Nick Read, said: “We are strongly committed to Australia. We’ll continue to back our business here as it makes the significant investments needed to build the network of the future. Bill is an outstanding industry leader and is well-placed to drive growth.” Read also thanked Dews for his energy and commitment in leading the complex task of executing the merger of businesses under the Vodafone brand and wished him well for the future. The media release also announced that Fok is tipped to take over as VHA Chairman on a rotational basis.

opinion/analysis
Firstly, it should be clear to observers that although Vodafone has carefully worded it’s media release on Dews’ exit, the executive has not stepped down simply to spend more time with his family or seek a lifestyle or career change. The executive’s departure comes at a strategic time, and no doubt it has been carefully negotiated with Vodafone Australia’s various stakeholders — including the Hutchison Whampoa group and the global Vodafone group.

Dews presided over one of the biggest disasters in the history of Australia’s mobile sector — a disaster which continues to plague Vodafone Australia, and one which may yet see the future of the company uncertain, if it does not pull out of its current slump somehow. It would have been a bad move for Dews to have been replaced before this point, as Vodafone needed both a steady pair of hands to guide it forward through its network and brand rebuild, as well as a ‘fall guy’ to take responsibility for the issues. Dews has aptly served both these purposes as caretaker for Vodafone Australia over the past year or so.

However, now that much of its network rebuild is complete and Vodafone is attempting to woo customers back onto its network and turn its troubles around, the company clearly needs a new pair of hands to take it forward. This will serve the purpose of distancing the company from its previous issues and giving the impression that it’s back on the path forward. Morrow is that man. I don’t know a great deal about the executive, so it will be interesting to see how he positions himself in Australia over the next few months. Will he be a rambunctious foreigner like Sol Trujillo, or display more quietly spoken strength like Paul O’Sullivan or David Thodey? It remains to be seen, although at the moment I would probably lean towards the former.

As for Dews, I don’t think we should damn the executive too highly for the issues which have plagued Vodafone over the past while. The executive has clearly done as much as he could — and most of the right things — to steer the company through its crisis and put it back on the right path. Of course, as he led Hutchison Australia even before the merger, many of those problems can be laid at Dews’ feet to start with. But of course, some responsibility must also rest with his superiors — no doubt there was a reticence to invest in the business at that point.

Interesting times for Vodafone indeed.

Image credit: YourTechLife screenshot of Vodafone video. Opinion/analysis by Renai LeMay

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news The Australian newspaper has reported (click here for the full article) that embattled mobile telco Vodafone Australia has been put up for sale, with a memorandum on the issue having been issued to potential buyers such as telcos and investment houses in Asia and Europe.

The telco has been struggling for some time in the Australian market, courtesy of a series of network outages and faults in the latter months of 2010 and early 2011 which resulted in customers deserting it wholesale.

In August 2011 it revealed that its total customer base declined by 375,000 over the past six months (although that included some re-classification of customers), and in February this year the company revealed it had lost a further 200,000 customers in the second half of 2011. To resolve the issues, Vodafone has embarked on an extensive upgrade of its network infrastructure, and this month formally kicked off a customer ‘guarantee’ program which is seeing it promise customers reliable service on its network — or the customers can exit their contract gratis.

Vodafone Australia’s two major shareholders are the Hutchison Whampoa group based in Hong Kong, and the master Vodafone company, which is based in the UK. The Austraian company was formed from the merger of previously separate mobile telcos Hutchison (Three) and Vodafone Australia several years ago.

Asked by Delimiter about The Australian’s report today, a spokesperson for Vodafone Australia forwarded a statement by the global Vodafone Group. It states: “Vodafone remains fully committed to our operations in Australia and our sole focus is on the turnaround of the business.”

In addition, they highlighted a statement by Canning Fok, managing director of Hutchison Whampoa, at the February results announcement for Vodafone Australia.

At the time, Fok said: “VHA’s accelerated investment in the network and new service initiatives are our highest priority. Together with our partners at Vodafone, we have provided and will continue to provide extensive financial support for VHA in order to accelerate the work needed to ensure all of our customers in Australia enjoy state-of-the-art mobile network services. We are confident that the continued network investment will see VHA deliver stronger results in 2012.”

opinion/analysis
I would not be surprised at all to learn that options are being investigated for the future of Vodafone Australia. Why? From an investor perspective, although the company has been performing poorly in a financial sense for some time, there would appear to be strong opportunities in the company going forward.

Vodafone Australia is almost the definition of a company which a major private equity firm or infrastructure company in another country would be interested in. The company has incredibly strong brand recognition in Australia, it has a huge number of existing customers, and it’s operating in a market in which there are literally only three players. It’s almost guaranteed that the company will continue to enjoy a major share of that market merely by existing.

In addition, given that Vodafone’s network is being massively upgraded and that opportunities abound for the company to expand into the fixed broadband market as the National Broadband Network is rolled out, as well as take a bigger slice of the mobile pie from the higher priced Telstra and Optus, I would say the company is likely to have a solid future under the right management. Right now the public is probably under-valuing it, but I think those who look at the world through a financial lens might think differently.

This sounds pretty counter-intuitive, given Vodafone’s ongoing network headaches and the fact that so many customers no longer consider it an option for their mobile phone service.

However, you have to consider how fast things can turn around in this area. Just a few years ago, Telstra was one of the most hated corporations in Australia, under the rein of then-CEO Sol Trujillo. A few years later, with many of its customer service problems fixed and a new customer-centric strategy in place (coupled with and driven by a genially smiling CEO in the form of David Thodey), Telstra’s on top of the world and heading higher. There’s no reason to suggest that Vodafone isn’t capable of getting its act together in similar fashion, and I’m sure that a few international telcos and private equity groups have already run the numbers over the company over the past few years.

Of course, it’s hard to know how seriously to take The Australian’s article on the subject in the first place. With very few sources quoted in the newspaper’s article this morning, no quotations from the claimed investment document itself (it seems clear The Australian has not directly seen it) and a quote that almost amounts to a flat denial from Vodafone, one does have to wonder what’s really going on behind the scenes. Only time will tell.

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news Australia’s number two telco Optus reported a net profit of A$177 million for the third quarter, representing growth of 4 percent, according to a Singtel Group news release yesterday. The company’s operating revenue was up 2 percent to A$2.42 billion, while EBITDA increased 2 percent to A$562 million.

“Optus delivered another quarter of revenue and EBITDA growth, adding 182,000 mobile customers, in spite of the intensely competitive Australian telecommunications market. Optus continued to lead the market with new, relevant and personalised digital services while making improvements in customer experience,” said Optus Chief Executive Paul O’Sullivan in the press release.

In the mobile sector, total revenue rose 4 percent to A$1.62 billion with service revenue growth of 2 per cent. EBITDA rose 3 percent from increased service revenue and lower customer acquisition costs associated with the introduction of new postpaid price plans during the quarter. Incoming service revenue grew at 18 percent with customer growth and increase in SMS and voice revenue.

The total mobile customers grew by 182,000 to 9.41 million with a net addition of 113,000 postpaid customers and 69,000 prepaid customers during the quarter. The number of 3G customers grew to 6.24 million which is a 5 percent increase from the previous quarter. This included a base of 1.55 million wireless broadband customers, an increase of approximately 94,000 customers.

The news release claims that Optus continues to lead the market with differentiated digital services which provide customers with personalised applications and content. After Smart Safe, Optus TV Now and Go Places, Optus has now introduced another unique TV and Video application that is for the exclusive streaming of the Australian Open 2012.

Optus has commenced the rollout of Long Term Evolution (LTE) on the Optus Open Network and successfully connected Australia’s first LTE data call in the 700MHz ‘Digital Dividend’ spectrum band on 1 November 2011. From April 2012, Optus will deliver its first LTE services to Newcastle, Port Stephens, the Hunter Valley and Lake Macquarie areas. A capital city service rollout will begin in the second half of 2012 with phase one to deliver LTE services in Sydney, Melbourne and Perth, and phase two to other capital cities.

In the Business and Wholesale fixed sector, overall revenue and EBITDA were reported to be stable. Satellite and ICT and managed services revenue showed growth, while voice and data and IP revenue declined by 3 percent as growth in Optus Evolve services was offset by the accelerated exit of legacy data products. ICT and managed services grew 10 per cent due to an increase in managed services revenue from prior corporate wins. Wholesale fixed revenue grew 2 percent while total voice revenue was stable. Data and IP declined by 4 percent due to the exit of unprofitable off-net services. Satellite revenue increased 10 percent mainly due to revenue from the new NBN Interim Satellite Service contract.

In this quarter, Optus secured a multi-million dollar multi-year contract to continue to provide state-of-the-art satellite services to GlobeCast Australia, including the provision of direct-to-home broadcast services on its D2 satellite.

In the Consumer fixed business, Optus continued the exit of its fixed resale business. On-net revenue declined 5 percent due to lower on-net broadband ARPU from increased data inclusions. EBITDA decreased one per cent with lower revenue although EBITDA margin improved slightly. On-net broadband customers totalled 965,000 as on 31 December 2011.

During the third quarter, Optus disclosed details of various consumer NBN packages. Future plans include provision of enriched digital offerings such as the new Optus MeTV service that provides customers with access to on-demand television programmes at affordable prices. Optus also announced a new online forum—My Optus Community—designed to enable Optus customers interact online, provide feedback and share experiences. It will include a dedicated small and medium business forum and will also allow customers submit concepts and ideas for potential products and services.

Image credit: Optus

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In this post, Shadow Communications Minister Malcolm Turnbull responds to the claim that broadband pricing will not increase under Labor’s National Broadband Network plan.

“Now what’s going to happen here is because there is no competition, because this is a government monopoly and because they are spending so much money so they’re overcapitalising it, inevitably prices are going to be high.” — Malcolm Turnbull, 1 February 2012. [1]

But is that right? Some NBN supporters argue my comment is unfair and inaccurate. They reject any suggestion that the NBN will result in broadband costs that are higher than they would have been in its absence.

We need to get real about this. When you are committing tens of billions of dollars to replacing the entire existing infrastructure of a vital industry, you cannot be sentimental or self-deluding. There are no fairies at the bottom of the NBN garden to suspend the laws of economics.

By any measure the NBN is a massive investment. The Government says the direct capital cost of the network will be $37 billion and the peak funding required by NBN Co $41 billion. Most industry experts expect the eventual cost to be significantly higher, and some estimates exceed $60 billion.

It is difficult to demur: Let’s face it, what was the last Government infrastructure finished on time and on budget? Most projects that run over budget involve types of infrastructure where the likely costs, economic drivers and probable operational complications are well understood because of previous experience – the likes of roads, dams, tunnels and major buildings. But the NBN is entirely new in the Australian context; nobody has deployed a large scale fibre to the premises network in established areas. And insofar as there is one relevant point of comparison in South Brisbane, where Telstra is currently building an FTTP network, all publicly available information indicates that it costs a lot more and takes a lot longer than projected.

The NBN is also going to be a monopoly, given other fixed-line infrastructure will either be decommissioned or contractually prohibited from competing. So the only competition for carriage of broadband services will be provided by wireless networks, which in some cases will be a substitute product, but in many will not (as Senator Conroy is so fond of pointing out). The NBN in fixed line terms will be the only game in town.

Every enterprise wants to get a good return (ideally a high return) on its invested capital. If it cannot get a reasonable return then it won’t be able to meet its obligations to its lenders or pay dividends to its shareholders. However sometimes people do over-invest – whether it is the toll road that overestimates traffic volumes or the restaurant with an excessively flash fit out.

And if they are operating in a competitive market (if, for instance, motorists can take another route or diners choose another restaurant) they will find that the return they can earn is less than the cost of the capital they have spent, and have to write down the value of that investment. You have to meet the market price that is determined by your competition.

However where a business is a monopoly it is able to exploit its market power and charge much higher prices.

Of course, doing this is an integral part of the NBN business plan. Everywhere else in the world (and in Australia to date) HFC networks are used for high-speed broadband, and usually for voice traffic as well. In most markets the HFC networks belong to cable TV companies who compete fiercely with telco services delivered over fibre, copper or a combination of both.

However in Australia, Telstra and Optus are being paid billions NOT to use their HFC networks for broadband or voice precisely so they cannot compete with the NBN. Because the HFC networks were built a long time ago in fairly densely settled areas, Telstra and Optus would be able to offer comparable services and undercut the prices NBN wants to charge for its brand new FTTP network – resulting in NBN having to cut its rates to meet the market. So in order to prevent that happening, billions of dollars of taxes have gone to pay off Telstra and Optus not to compete.

All monopolies will attempt to charge excessive prices (extract economic rent) and so typically they will be the subject of regulation – as in the case of our water, gas and electricity providers. And that will be the case, to some degree, with the NBN which is generously proposing that it will not seek to earn more than the Government’s chosen benchmark of a 7 per cent return on its invested capital.

However, this begs the question as to whether the level of capital that is being invested is appropriate. In a competitive market a business cannot maintain high prices because it wants to get a particular return on its capital. Its customers will say “that’s your problem” and move onto a cheaper service or product.

This issue of the level of invested capital is a vexed one with regulated utilities. Many people, including Rod Sims (formerly head of IPART in NSW and now chairman of the ACCC) have argued that electricity distributors were encouraged to overinvest in their transmission and distribution networks because they were entitled to charge whatever prices were needed to deliver the return on their investment allowed by regulators – given that regulated return was higher than their cost of borrowings, it gave them an incentive to invest as heavily as they could. Regulators’ ability to declare particular investments as “unreasonable” were usually very limited – and according to Sims, this overinvestment has been the major factor behind the rapid growth in electricity prices. [2]

The Australian Energy Regulator Chairman, Andrew Reeves, recently warned against overinvestment or ‘gold plating’, saying it has led to sharp price increases:

“NSW and Queensland are getting more infrastructure than we think they need and we are required to approve price increases to pay for it. [3]

So let us re-examine the logic. A monopoly will always have the ability to charge higher prices than a business which is operating in a competitive market. An answer to that is to regulate the monopoly. But if the regulator simply requires that the prices charged by the monopoly only be constrained by a maximum allowed return on capital, that will still most likely result in higher prices – especially if the capital invested is far greater than is needed to deliver the services or products consumers actually want at a given point in time.

And the more desperate a Government is to prevent its supposedly ‘commercial’ investment from turning up as red ink on the budget, the more certain you can be that it will do everything in its power to recoup money from consumers and keep ROI up.

When the NBN Co talks about ‘flexibility’ in future pricing in documents submitted as part of its Special Access Undertaking, there should be no doubt what they are really talking about: sacrificing affordability. Analyst Ian Martin, for one, has noted that for the NBN business case to be viable, average wholesale revenue per customer will have to increase by 34 per cent from current levels.[4]

At the simplest level there is simply more capital earning a return. In its latest review of Telstra’s access charges, the ACCC valued the current Telstra network at just over $17 billion.[5] The NBN’s direct network capital cost is $35 billion in 2010 dollars or $41 billion in real dollars. Its peak funding requirement is higher taking into account the $11 billion (in after-tax 2010 dollars) paid to Telstra to shut down its network and migrate customers and $800 million paid to Optus for similar commitments. Whether these figures are counted as operational expenditure or capital expenditure is irrelevant from a customer’s point of view – any losses they lead to will be counted as recoverable capital, and thus contribute to the eventual level of charges for use of the network.

It would be wrong to assume that any prices so far offered by the NBN Co are sustainable. In its SAU lodged with the ACCC, the NBN Co included a consultant report conducted by Synergies Economic Consulting (available online here) which states:

“NBN Co has set its initial prices to ‘meet the market’ as a means of ensuring the smooth migration of end user connections from legacy networks to the NBN and to also meet the Australian’s Government’s objectives of setting wholesale prices to achieve the “broadband take up targets agreed by Government through the NBN Co Corporate Plan and Business Case”, again as set out in the Statement of Expectations”. (p.8)

As the consultants note, the low starting base for wholesale prices is an argument for granting NBN Co ‘pricing flexibility’ to recoup its costs at a later date: “the risks of having to price to ‘meet the market’ in accordance with government expectations, are best managed by providing NBN Co with a degree of pricing flexibility;” (p.9)

Until now, the deregulated Australian telecommunications market has typically led to falling nominal and real prices for most services. The nominal retail price of ADSL broadband fell by 69 per cent between 2005 and 2010, according to figures compiled by the OECD [6]. Between 1997-98 and 2008-09 inflation-adjusted prices fell 34 per cent for fixed-line telephone services and 49 per cent for mobile services, according to the ACCC. [7]

Compare that with what we know about the NBN’s plans so far. In terms of access, NBN Co has applied to the regulator for permission to raise nominal prices by 50 per cent of the rate of inflation, per year [8]. But note this restriction only applies to access – unlike current wholesale pricing, NBN Co will also be charging usage fees (via its CVC).

NBN also has made no commitments about its pricing of more sophisticated services such as multicast video. And in any case, if the NBN gets its way, the ACCC would have its power to enforce any price commitments offered in the Special Access Undertaking overridden by separate Wholesale Broadband Agreements (WBAs) NBN Co signs with individual retailers.

With barely 4000 users connected to the NBN after four years of Labor Government, NBN Co yet to report that it has earned revenue from selling broadband services, and completion of the rollout a decade away at best, claims and counterclaims about NBN pricing are at present entirely in the realm of theory. That is as true of the rate cards announced by various ISPs as any other indicator – we all know those rates can change.

But if anyone really believes all of the above points to NBN prices for broadband below where they would have been without it, I know someone who could sell them a very nice Bridge with views of the Opera House.

References:
[1] Interview with Ben Fordham on 2GB
[2] Sims, R., (2011), “IPart Concerned About Rising Electricity Network and Green Scheme Costs”, available online here. Professor Ross Garnaut also addresses the topic of overinvestment in electricity networks in a recent update on electricity prices (Garnaut, 2011, “Transforming the Electricity Sector”, available online here.
[3] Martin, P., (2011), “Pricing Rules Boost Power of Energy Suppliers”, in The Sydney Morning Herald, available online here.
[4] Martin, I., (2011), “A Significant Gap in the NBN Corporate Plan” in The Telecommunications Journal of Australia, Vol 61, No3, p.51.5 available online here.
[5] Battersby, L., (2010), “Action by the ACCC Slashed Telstra Value by Billions”, in The Sydney Morning Herald, available online here.
[6] OECD, (2011), Communications Outlook, p.293
[7] ACCC, (2011), Telecommunications Report, p.21 available online here.
[8] NBN Co, (2011), “NBN Co Special Access Undertaking”, available online here.

Image credit: Office of Malcolm Turnbull

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news The South Australian State Government today revealed that it would shortly be kicking off a huge new round of IT purchasing initiatives which would affect a string of major whole of government contracts, as part of its long-running Future ICT Services Arrangements program.

One of the aims of the program, which has been playing out over the past decade, was the realisation of South Australia’s intention to exit from its massive 10-year IT outsourcing contract with Texan giant Electronic Data Systems, with the deal to be broken up into a large number of chunks and farmed out, often to other suppliers.

The completion of that contract took place in 2007, but South Australia is still gradually working through a series of contracts which are gradually coming to full term, with the initiative being steered by the state’s whole of government chief information officer Andrew Mills.

In a notice published through the state’s tendering system this week, Mills’ office noted that on 7 March it would hold an open industry briefing to provide the industry with information regarding the next round of contracts to be signed under the Future ICT Services Arrangements program.

The state’s Minister for the Public Sector, Michael O’Brien, and its ICT Board chair, Jim Hallion will speak at the briefing. “Attendees will be given high level information regarding the State’s ICT sourcing directions with a view to supporting industry engagement in the upcoming market approach -‘Tranche 3 Services Expression of Interest (EOI),” the note states.

In late January this year South Australia updated its public status document (PDF) to detail which contracts would be within scope of the Tranche 3 contracts to be discussed at the briefing.

In that list, the state noted that it had recently completed negotiating a new client computing (desktop PCs and laptops) and server equipment panel, with new contracts expected to commence from February this year. Previously the state bought the hardware through Acer, Dell and HP, in a contract initiated back in 2006 and which had been slated to end on 30 June 2011. It is not clear which suppliers now sit on the panel.

The state is also currently negotiating a printer and photocopier equipment panel, with new contracts in that area expected to begin in July this year. It is believed that Canon, Fuji-Xerox, Kyocera-Mita and Ricoh currently provide the state with its photocopier needs, with HP, Kyocera-Mita and Ricoh working in the printer area.

In the briefing next week, the state will primarily look at telecommunications contracts, including managed network services, ISP services, mobile carriage services, telecommunications services in general, “active devices” contracts (for example, routers), PABX maintenance and electronic messaging (email). However, it will also look at its Microsoft enterprise contract.

In the past, suppliers such as Dimension Data, Telstra, Internode, NEC and Cisco have been the prime beneficiaries from new telecommunications contracts in the South Australian Government. Other major contracts not yet in scope for the state include mainframe computing, storage and hosting services.

opinion/analysis
So far South Australia is the only state jurisdiction which appears to be doing a decent job of managing its whole of government technology contracts, with every other major state appearing over the past few years to have dropped the ball completely in the area. We just don’t hear about many whole of government technology contracts from states such as Queensland, NSW and Victoria any more. And I’m not surprised, with a series of audit reports over the past few years making it clear that when it comes to the governance of technology rollouts, those states have a lot of learning to do.

So what would I like to see from South Australia’s Tranche 3 of contracts? Well, of course it’s hard to say where each vendor sits relative to each other at the moment.

However, in general, I suspect Telstra still has a huge lion’s share of telecommunications contracts in South Australia. I’d like to see some of that work farmed out to Optus, which has a good and growing enterprise division, and local player Internode continue to pick up as much Internet services work as possible as well.

When it comes to PABX gear, I’d like to see some recognition of the worth of shifting to modern IP telephony platforms, with Cisco and Avaya getting gurnseys in that area, as they’re the dominant players in that still emerging field. In switching, if that is in scope, it’d be nice to see Cisco given some competition by the likes of HP ProCurve. Switches in 2012 don’t always need to cost the earth.

As for email, if that area needs work, I’m sure an integrator like Dimension Data will pick up some work there. Realistically, for an organisation like the South Australian Government, Microsoft Outlook/Exchange is basically the only option. I’m sure there are still some Lotus Notes and even GroupWise installations in Adelaide which need to be “upgraded” to Exchange.

Did I miss anything?

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This article is by Martin Hirst, an associate professor at Deakin University. It was first published on The Conversation and is re-published here with permission.

analysis Telecommunications giant Optus managed to convince the Federal Court in Sydney this week that there’s a legal blindspot in relation to its download pay-per-view service.

Telstra – given its business relationship with The National Rugby League (NRL) and Australian Football League (NFL) – had tried to prevent Optus from recording and re-broadcasting matches screened on free-to-air television. But Justice Steven Rares found Optus’s mobile television service didn’t breach the Copyright Act for a couple of reasons: Optus keeps separate recordings for each customer, and individual customers are responsible for requesting the recordings. So what’s going on here?

To my mind, former rugby league coach Roy Masters – ever the shrewd observer – hit the nail on the head when he wrote the following for the Sydney Morning Herald yesterday:

“They framed the copyright laws to protect the average punter from being sued for taping a TV show, including a football match on his home recorder. Now, their legislation is being used by Optus to sell a service.”

Naturally, Telstra has concerns. The AFL’s A$1.25 billion five-year rights deal signed last season with Channel Seven, Foxtel and Telstra, included a A$153m payment by Telstra for the online broadcast rights to games. The NRL, likewise, expected a proportion of its next deal to come from internet rights.

We’ve done nothing wrong
Optus is not breaching current copyright laws by charging its customers for a record-and-download service that includes material in which its competitors hold some or all of the copyright.

In court, Optus successfully argued its customers already access its competitors’ content via free-to-air television and record and replay programs when they choose to. This model of free distribution is embedded in our media culture. Now that old interpretation of the law – protecting home recording rights for the “average punter” – lets Optus monetise a data stream for its customers, using free content provided at great cost by others.

The potential appeal issues confirm it’s about the income from broadcast, repackaging and online rights. The AFL and NRL are claiming a loss of trade. If they stick to their word and fight back, and Telstra joins in, it could cascade into a series of messy contract disputes.

The whole issue is further complicated by the pay-TV siphoning regulations in which all litigants are also stakeholders alongside Foxtel. As everyone knows, from the Communications Minister Stephen Conroy down, the regulatory regime and legal framework for the digital economy and the new convergent media landscape is out of step with the machinery of change. We have a high-performance engine under the hood, but the tyres and the suspension can’t really handle the speed. We are living through a techno-legal time warp.

The laws that worked to allow the “average punter” to record and replay TV shows using personal recording devices (such as TiVo) are now creating lucrative business opportunities that everyone involved in this legal stoush is keen to exploit. Monetising the click-stream is the main game in digital Dodge City and an analogue copyright law is not player-friendly for everyone. Contrast Masters’ old-hand wryness with the corporate-speak from Optus spokeswoman, Clare Gill:

“This has been a win for Australians, for innovation and for the law. This is a product similar to things that you can do today. So we see this no different (sic) from any other personal video recording device.”

As one punter wrote on sports website The Roar, it’s not a pretty sight to see communication giants slugging it out: “The battle between the telcos is getting ugly, and the sporting landscape is getting caught up in it.”

At the heart of the legal issues is the Copyright Amendment Act of 2006, which specifically allows home recording of free-to-air TV content. At the time smartphones were not so ubiquitous and the download technology was clumsy. The law worked for its time. But not any more. The techno-legal time-gap kicks in when the technology perfects a new application that the old rules were not designed to deal with. Here, the respondents argue, the law is out of date.

Under review
A review of digital copyright law was announced late last year by the then Attorney-General Robert McClelland. This is way overdue and may still take some time to come to fruition. The problem we have is that nothing in the government’s much-vaunted and much-despised Convergence Review seems to deal directly with this issue.

The interim report from the Department of Broadband, Communications and the Digital Economy (DBCDE) doesn’t even deal with copyright law and, in a section where you might expect to find some comment on it – chapter seven, entitled “Competition” – there is only hollow sentiment and principle:

“Submissions to the Review addressing competition fell into two broad categories:

• Some stakeholders argued the market is functioning effectively and existing ACCC [Australian Competition and Consumer Commission] powers are adequate when anti‑competitive situations arise (including in relation to content)
• Other submissions expressed concern that emerging market situations could reduce competition in content and communications markets and that these situations will require a flexible operational response from the regulator.

The regulator should be entrusted with suitable powers to deal with content‑related competition issues in rapidly changing markets.”

Surely taking copyrighted material and on-selling it, as Optus looks set to do, is “anti-competitive”, even if a six-year-old loophole says it’s OK to do it.

The techno-legal time-gap
I first wrote about the techno-legal time-gap in 2006 in Communication and New Media: From Broadcast to Narrowcast, a book I co-authored with John Harrison. In that book we made the point that legal, moral and ethical debates and regulation lag behind the speed of technological change.

My example at the time was peer-to-peer file-sharing, but within a year of the book’s publication, Napster and others were facing huge legal threats and were effectively shut down. The problem then migrated to The Pirate Bay and other BitTorrent) sites. As that appears to be resolved – to the commercial satisfaction of some players – a new front has opened up. The latest target for the anti-piracy forces is Kim Dotcom, the founder of the Megaupload “cyberlocker”. Dotcom’s repurposing of other peoples’ content has got him into serious trouble. Other service providers are also caught up in this net.

Private matters
The fights over copyright – or “copytheft” to some – are not the only digital skirmishes. The very concept of privacy – both real and online – has been blown wide open. Not only has there been rampantly criminal behaviour that exploited loopholes in phone security leading to a tsunami of scandal engulfing the Murdochs, it seems our total being is exposed online. Daily hacks and distributed denial of service (DDoS) attacks compromise data, much of it personal and all of it valuable in the surveillance economy.

It’s not just credit card fraud and online dating scams – seemingly innocuous transactions – buying products through online vendors, for instance – leave a trail that is collated, digested, modeled and spat back as marketing or social enhancement experiences.

It’s hard to see the “white hats” among the online baddies. But caught up in all of this today we have Julian Assange, a military whistleblower (Bradley Manning) and a collection of techno-savvy activists (Anonymous) attempting to bring down the military-industrial complex. They are all now caught up in the time warp. But the regulators are not having it all their own way.

Paradox effects
The Stop Online Piracy Act (SOPA) protests of the past few weeks forced a backdown in the US over so-called internet censorship laws.

The time-gap exists across social media too. In 2006 Facebook was new and exclusive, Twitter was just around the corner, smartphones cost a fortune but the apps weren’t that good. In half a decade things have changed dramatically. These paradox effects will continue. The review of copyright law, a new round of privacy commission policy papers and the convergence review are all institutional attempts to deal with the contradictions, loopholes and inconsistencies.

We see the same pressures exerting themselves on the Australian Press Council and other regulators too. Analogue models of regulation, control and ethical boundary-setting are no longer working smoothly. The Media and Entertainment Arts Alliance (MEAA) code of ethics was updated in 1997, but it too is now showing its age.

Where are the guidelines for journalists on managing their social media accounts? Where is the advice on how to deal with lifting material from Facebook or YouTube to illustrate a story? I have collected several examples of these problems and discuss them on my blog (Ethical Martini). Ripping images from Facebook, for example, is a breach of both copyright law and an invasion of privacy (even if legal).

None of these problems is easily fixed. They are global issues and the World Trade Organisation is one of several transnational bodies looking for answers. The danger here is that regulators go with a business-friendly commercial fix, rather than regulation in the public interest. At the heart of capitalist property law is the right to exploit: just ask Optus.

Martin Hirst is the author of News 2.0: Can Journalism Survive the Internet?

This article was originally published at The Conversation. Read the original article.

Image credit: Back to the Future, Universal Pictures

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