City of Whittlesea

Designing the Future ForumDesigning the Future ForumInternet Society of AustraliaInternet Society of Australia

3 December 20023 December 2002Maddocks - MelbourneMaddocks - Melbourne

City of WhittleseaCity of WhittleseaBrad WynterBrad Wynter

Organisation Support Organisation Support ExecutiveExecutive

Broadband: Broadband: Why don’t we get it?Why don’t we get it?

City of Whittlesea

City of WhittleseaCity of WhittleseaInterface municipalityInterface municipality

2002 population 2002 population approx. 120,000 approx. 120,000

54% non English 54% non English speaking background speaking background

Area 490 sq kmsArea 490 sq kms

35,000 homes35,000 homes

3,600 businesses3,600 businesses

Culture of InnovationCulture of Innovation8 National Innovation Awards8 National Innovation Awardsover past 3 yearsover past 3 years

City of Whittlesea

AgendaAgenda

1) Current Australian situation1) Current Australian situation

2) International approaches2) International approaches

3) Australia - what next?3) Australia - what next?

4) Paradigm shifts needed4) Paradigm shifts needed

5) Different Business Models5) Different Business Models

6) WIRED Development6) WIRED Development

City of Whittlesea

Current industry landscapeCurrent industry landscape

•Telephony Data and Video are on different Telephony Data and Video are on different infrastructure platforms infrastructure platforms

•Proprietary services are bundled with Proprietary services are bundled with proprietary infrastructure proprietary infrastructure

•Broad range of video services requires multiple Broad range of video services requires multiple sets of infrastructure in the home sets of infrastructure in the home

City of Whittlesea

Current industry landscapeCurrent industry landscape

CATCH 22CATCH 22•Lack of broadband infrastructure to the home due toLack of broadband infrastructure to the home due to

•Lack of consumer demand due toLack of consumer demand due to

•Lack of awareness and relevant content due toLack of awareness and relevant content due to

•Content developers not developing new content due to Content developers not developing new content due to

•Difficulties in accessing publishing channels due to Difficulties in accessing publishing channels due to

•Lack of high bandwidth infrastructure to the home and Lack of high bandwidth infrastructure to the home and proprietary bundling of services to infrastructure. proprietary bundling of services to infrastructure.

City of Whittlesea

The five vendor choicesThe five vendor choices

1)Telecommunication Carriers1)Telecommunication Carriers

2)PayTV providers2)PayTV providers

3)Government/Public Utilities3)Government/Public Utilities

4)Housing Developers4)Housing Developers

5)Community Organisations5)Community Organisations

City of Whittlesea

US advanced network growthUS advanced network growth•FTTH CouncilFTTH CouncilNEW ORLEANS – October 15, 2002 – According to a new study NEW ORLEANS – October 15, 2002 – According to a new study released during the Fiber-to-the-Home (FTTH) Conference released during the Fiber-to-the-Home (FTTH) Conference 2002, the first annual conference hosted by the FTTH 2002, the first annual conference hosted by the FTTH Council, FTTH installations are expected to leap by 330% Council, FTTH installations are expected to leap by 330% in 2003 from 72,100 homes passed to 315,000 homes passed, in 2003 from 72,100 homes passed to 315,000 homes passed, ultimately reaching between 800,000 and 1.4 million homes ultimately reaching between 800,000 and 1.4 million homes by 2004. The study, entitled “Fiber to the Home and by 2004. The study, entitled “Fiber to the Home and Optical Broadband 2002,” builds on an earlier report on Optical Broadband 2002,” builds on an earlier report on FTTH installations released in August that showed a 2002 FTTH installations released in August that showed a 2002 growth rate of more than 200 percent.growth rate of more than 200 percent.

•ApproxApprox 50% Developers, 50% Developers, 50% Public Utilities/Gov/Community Orgs50% Public Utilities/Gov/Community Orgs

City of Whittlesea

Taunton Broadband ProjectTaunton Broadband Project

1998 1998 •School networkSchool network•HospitalHospital

2002 2002 •3,400 dial up ISP3,400 dial up ISP•50% broadband 50% broadband market market

City of Whittlesea

Taunton Broadband ProjectTaunton Broadband Project

Trial Trial July - Dec 2002July - Dec 2002•120 subscribers120 subscribers

Cost Recovery Cost Recovery •20-30 years (fibre)20-30 years (fibre)•2-5 years (equipment)2-5 years (equipment)

City of Whittlesea

Taunton Broadband ProjectTaunton Broadband Project

City of Whittlesea

Taunton Broadband ProjectTaunton Broadband ProjectLearningLearning

•If telcos and PayTV don’t provide advanced If telcos and PayTV don’t provide advanced network infrastructure then public utilities network infrastructure then public utilities Local Government or community agencies will Local Government or community agencies will

•Prepared for long periods before recovering costsPrepared for long periods before recovering costs

•Often higher takeup because they are localOften higher takeup because they are local organisations organisations

City of Whittlesea

US broadband industry significant US broadband industry significant differencesdifferences

Consumer Consumer awareness awareness

Big marketBig market

Culture of Culture of paying for TV paying for TV

Availablility of Availablility of services and services and

content choices content choices

Ready demand Ready demand

Opportunities Opportunities for niches for niches

Ready video marketReady video market

Small networks Small networks can get broad can get broad

range of content range of content and services and services

City of Whittlesea

Australian broadband factors Australian broadband factors

Low Consumer Low Consumer awareness awareness

Small marketSmall market

Good quality Good quality free to air TV free to air TV

Limited Limited availability of availability of services and services and

content choices content choices

Small demand for Small demand for broadband services broadband services

Small scale niches Small scale niches

Video market Video market slowly developingslowly developing

Small networks Small networks

cannot get broad cannot get broad range of content range of content

and services and services

City of Whittlesea

Who pays?Who pays?South Korea - South Korea - Gov/Private investment AUS $15 billion 1998-2002Gov/Private investment AUS $15 billion 1998-2002Gov/Private investment AUS $18 billion 2002-2005Gov/Private investment AUS $18 billion 2002-2005

Canada - Canada - Gov/Private investment AUS $2.7-$4.5 billion 2000-2004Gov/Private investment AUS $2.7-$4.5 billion 2000-2004

Sweden - Sweden - Government investment AUS $1.69 billion 2001-2004Government investment AUS $1.69 billion 2001-2004

US - US - Central Gov investment AUS $350 million 2001-2003Central Gov investment AUS $350 million 2001-2003Major investment by developers and Public Utilities.Major investment by developers and Public Utilities.

Sources -Sources - BROADBAND SNAPSHOT TAKE-UP OF BROADBAND SERVICES IN AUSTRALIA September 2001 DCITABROADBAND SNAPSHOT TAKE-UP OF BROADBAND SERVICES IN AUSTRALIA September 2001 DCITA

BBC News Wednesday 6 November 2002BBC News Wednesday 6 November 2002

City of Whittlesea

Who pays?Who pays?

Source -Source - BBC News BBC News Wednesday 6 November 2002Wednesday 6 November 2002

City of Whittlesea

KoreaKorea• KT Corp.KT Corp.

– Invested $2 billion since 1999 into hi-speed broadband Invested $2 billion since 1999 into hi-speed broadband infrastructure & web-surfing technologies infrastructure & web-surfing technologies

• Result: attracted Microsoft’s ($500 US million investment) Result: attracted Microsoft’s ($500 US million investment) to develop home-networking systems, e-schooling and to develop home-networking systems, e-schooling and other broadband initiatives. other broadband initiatives.

•Originally, KT Corp’s CEO, Lee Sang Chul, claimed thatOriginally, KT Corp’s CEO, Lee Sang Chul, claimed that “the more “the more subscribers we attracted to our broadband services, the bigger subscribers we attracted to our broadband services, the bigger losses we had”.losses we had”. •TodayToday“Our broadband network is a key money maker”“Our broadband network is a key money maker”

Business Week, Asian Edition, March 18, 2002Business Week, Asian Edition, March 18, 2002

• Koreans now have 4x the number of broadband Koreans now have 4x the number of broadband connections than the U.S. (Similarly, Canada has connections than the U.S. (Similarly, Canada has 2x the number of connections than the U.S.)2x the number of connections than the U.S.)

City of Whittlesea

Crystal Ball for AustraliaCrystal Ball for Australia•Consumer awareness will increaseConsumer awareness will increase

•Demand for a broad range of services will increaseDemand for a broad range of services will increase

•Telstra and other carriers will respond with interim Telstra and other carriers will respond with interim technologies but only in profitable areas technologies but only in profitable areas

•Non profitable areas will look for other infrastructure Non profitable areas will look for other infrastructure solutions solutions

•Public Utilities/Government and developers will Public Utilities/Government and developers will establish niche networks establish niche networks

•Small scale niche networks will struggle to attract a Small scale niche networks will struggle to attract a broad range of content and services broad range of content and services

•Limited potential to deliver good outcomes to local Limited potential to deliver good outcomes to local communities and develop a healthy sustainable industry communities and develop a healthy sustainable industry

City of Whittlesea

AwarenessAwareness

Source -Source - Telstra presentation at the 2002 ATUG annual confuracne in MelbourneTelstra presentation at the 2002 ATUG annual confuracne in Melbourne

City of Whittlesea

Paradigm shifts required Paradigm shifts required to deliver advanced networksto deliver advanced networks

PARADIGM SHIFTPARADIGM SHIFT

Natural Natural Monopoly Monopoly

in Local Loopin Local Loop

Open NetworkOpen Network

AlternativeAlternative

models and models and financing financing

mechanismsmechanisms

WHY?WHY?Benefits of competition in local loop Benefits of competition in local loop infrastructure will not outweigh the infrastructure will not outweigh the capex costs of duplicating the local capex costs of duplicating the local

loop infrastructureloop infrastructure

Consumers want full range of services Consumers want full range of services Competition on services side will keep Competition on services side will keep

prices competitive which leads to a prices competitive which leads to a healthy sustainable industryhealthy sustainable industry

Advanced networks are expensive to Advanced networks are expensive to establish and the benefits are widely establish and the benefits are widely

dispersed between operators, dispersed between operators, government, business and individualsgovernment, business and individuals

City of Whittlesea

Current electricity modelCurrent electricity model

•Single infrastructure into the homeSingle infrastructure into the home

•Multiple service providers to choose fromMultiple service providers to choose from

•Unbundling of infrastructure from servicesUnbundling of infrastructure from services

NOTNOT

City of Whittlesea

MonopolyMonopolyService Service ProvidersProviders InfrastructureInfrastructure

ProviderProvider

Homes/Homes/BusinessesBusinesses

City of Whittlesea

Full competitionFull competitionService Service ProvidersProviders InfrastructureInfrastructure

ProvidersProviders

Homes/Homes/BusinessesBusinesses

City of Whittlesea

Community Hub and CANCommunity Hub and CANService Service ProvidersProviders InfrastructureInfrastructure

ProviderProvider

Homes/Homes/BusinessesBusinesses

City of Whittlesea

Structural SeparationStructural SeparationService Service ProvidersProviders InfrastructureInfrastructure

ProviderProvider

Homes/Homes/BusinessesBusinesses

City of Whittlesea

New development area issuesNew development area issues

•No overhead infrastructure so difficult to No overhead infrastructure so difficult to retrofit broadband solutions retrofit broadband solutions

•Retrofits cost at least double of putting Retrofits cost at least double of putting conduit in at sub-division construction time conduit in at sub-division construction time

•Carriers not putting broadband infrastructure Carriers not putting broadband infrastructure into new development areas (only putting in into new development areas (only putting in copper), due to “cost”, current lack of copper), due to “cost”, current lack of profitability in getting consumers to pay for profitability in getting consumers to pay for several sets of infrastructure several sets of infrastructure and no competition and no competition

City of Whittlesea

New telecommunications modelNew telecommunications model

•High bandwidth infrastructure able to deliver High bandwidth infrastructure able to deliver telephony, data and video telecommunications telephony, data and video telecommunications services services

•Unbundled infrastructure from servicesUnbundled infrastructure from services• Consumers have choice of services and content Consumers have choice of services and content without needing to install more infrastructure without needing to install more infrastructure

•Open infrastructure for all service providers Open infrastructure for all service providers Available for delivering competing PayTV bundles Available for delivering competing PayTV bundles simultaneously or on a pay per use basis. simultaneously or on a pay per use basis.

City of Whittlesea

Why Growth Councils?Why Growth Councils?

•Lower cost barrier to carriers with Lower cost barrier to carriers with very little financial exposure very little financial exposure

•Control local planning scheme and Control local planning scheme and can mandate conduit installation can mandate conduit installation in all new developments in all new developments

•Greenfield development is happening in Greenfield development is happening in growth Councils growth Councils

•Strategic advantage for both economic Strategic advantage for both economic development and home amenity development and home amenity

City of Whittlesea

What can Growth Councils do?What can Growth Councils do?•Choices are:Choices are:

•Do nothing (Your community will regret Do nothing (Your community will regret your decision in 3- 5 years time) your decision in 3- 5 years time)

•Invest in conduit to provide the capability Invest in conduit to provide the capability for a network provider to provide for a network provider to provide infrastructure and services in the future infrastructure and services in the future (Suggested approach) (Suggested approach)

•Invest in conduit and dark fibre and Invest in conduit and dark fibre and lease it out to all and sundry (Stokab) lease it out to all and sundry (Stokab)

•Invest in conduit, fibre and equipment Invest in conduit, fibre and equipment and provide network operations for all and provide network operations for all content and services (UTOPIA project) content and services (UTOPIA project)

City of Whittlesea

WhatWhat WhittleseaWhittlesea diddid•Created vision for delivering broadband services to ourCreated vision for delivering broadband services to our community community

•Researched opportunities for Council to facilitate Researched opportunities for Council to facilitate broadband access broadband access

•Met with developers to explain what Council is aiming at Met with developers to explain what Council is aiming at

•Changed Local Planning Scheme to require developersChanged Local Planning Scheme to require developers to install Council owned conduit as part of the to install Council owned conduit as part of the sub-division development process sub-division development process

•Developed conduit standards and guidelines for developers Developed conduit standards and guidelines for developers to assist installing conduit to assist installing conduit

•Initiated Council consortium of 6 Councils around Melbourne Initiated Council consortium of 6 Councils around Melbourne to duplicate process with aim of an EOI and RFP in 2003 to duplicate process with aim of an EOI and RFP in 2003

City of Whittlesea

New telecommunications New telecommunications business modelbusiness model

•Developers required to install telecommunication conduit Developers required to install telecommunication conduit in the sub-division process and hand it over to Council in the sub-division process and hand it over to Council

•Council leases conduit to carrier at replacement cost Council leases conduit to carrier at replacement cost plus monitoring costs over its life plus monitoring costs over its life

•Minimum service package of telephony, data and video to Minimum service package of telephony, data and video to be met by carrier with extension of lease bonuses for be met by carrier with extension of lease bonuses for exceeding the minimum service package exceeding the minimum service package

•The more services and content provided, the more The more services and content provided, the more companies sharing the cost of the infrastructure companies sharing the cost of the infrastructure

•ROI can be calculated over the life of the infrastructureROI can be calculated over the life of the infrastructure

City of Whittlesea

BenefitsBenefits•Maximise choice of services and contentMaximise choice of services and content

•Minimise cost through shared infrastructureMinimise cost through shared infrastructure

•Potential to attract data rich industries Potential to attract data rich industries •Potential to utilise infrastructure to provide better Potential to utilise infrastructure to provide better local connections local connections

•Potential to attract a new type home buyerPotential to attract a new type home buyer

City of Whittlesea

QuestionsQuestions

G

GG G

G G

G = Growth