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2006 Australia - Broadband Market - Speeding up DSL


Attention: There is an updated edition available for this report.

This report analyses broadband developments in Australia in 2005 and 2006. The broadband battles have moved on from the lack of availability of broadband services to the lack of true broadband (speeds of 2Mb+), competitive prices for such high speed services and new applications such as IPTV and VoIP over broadband. In the meantime penetration is on the rise and is set to continue to do so throughout 2006 and 2007. The government has made some good commitments towards high speed broadband including in regional areas, but the policies remain nebulous.

Developments and Analysis
Statistical overview and forecast
Business Markets
Network Operators and Wholesalers
Infrastructure
Broadbanding Regional Australia
HFC, Cable Modems and Cable Telephony
FTTH Analyses and Developments
Home Networks
Convergence
Media Centres
Triple Play Models
Broadband TV


Statistical overviews and forecast
Since Telstra’s aggressive launch of its competitive DSL retail charges this market finally took off in mid-2004. By mid-2006 there were nearly 3.5 million users of which 80% were using DSL. With over 300 Broadband Service Providers (BSPs) the resale market is cut throat. Despite Telstra’s anti-competitive behaviour competitors still dominates the DSL retail market (60%). The report provides a range of statistical overviews on subscribers, revenues and market shares.

Infrastructure
The broadband infrastructure market is undergoing changes that are unprecedented in the history of the 100-year-old network. Telstra is in the process of upgrading its network to NGN and will start rolling out FttN. Its very ambitious plan is looking at a 3-5 year timeframe. Competition needs to take place over this network, so issues like structural separation, open networks, local loop unbundling and DSLAMs are all critical developments that will keep the industry occupied till at least the end of the decade.

Regional developments
All around the world countries are recognising the fact that their national telecommunications infrastructure is vital to the national interest - both socially and economically - and, in light of this, governments are increasing their involvement in telecommunications infrastructure. A large part of this infrastructure exists as a natural monopoly, and government policies and regulations need to be adjusted to reflect that reality. Furthermore, a significant section - around a third - of the infrastructure resides in areas where it will not be economically viable to upgrade the existing copper-based infrastructure to a fibre-based information highway. In late 2005 the government allocated $3 billion towards regional broadband infrastructure.

Key players
Broadband networks are based on fibre-optic backbones. From here the strategy differs. Both HFC (cable TV) networks and copper based cable (DSL) are used. Depending on how deep the fibre optic cable is deployed, higher speeds are offered. Network upgrades over the next decade will eventually lead to fibre supplying clusters of around 50 to 200 houses and from that time onwards full fibre to the home will take over. Digital Subscriber Line (DSL) wholesalers (other than Telstra) and their over 500 retail Broadband Service Providers (BSPs) are supplying 55% of the retail DSL broadband services. The report covers developments from: Telstra, Optus, NEXTEP Broadband, PowerTel, Commander, iiNet, Primus, Soul, AAPT, People Telecom, Internode, Amcom, Neighbourhood Cable, Transact and others.

Unbundled Local Loop and DSLAMs
While Telstra’s Unbundled Local Loop service was economic unviable for voice service, it provided the right platform for semi-infrastructure based broadband competition. Several telcos and ISPs are now installing their own DSLAM infrastructure and by early 2006 more than 1500 DSLAMS were either installed or commissioned. In a very limited way, ADSL2+ became available over the first installed DSLAMs in mid 2005 and this development is going to lead to a broadband capacity explosion in late 2006, with triple play business models delivering VoIP and IPTV as well as high speed Internet access.

Cable Modems
Cable modems connect fibre cable and HFC cable networks to the Internet. In Australia, the market penetration is limited by the availability of the cable TV networks. The advantage for the cable TV operators is the potential to transmit voice, data, and TV services via the same cable, with cable modems facilitating access to the Internet and potentially digital TV. The cable TV players have, unsurprisingly, been the key players in the Australian market, namely Telstra and Optus. However, both companies are concentrating on their DSL rollouts and now treat cable as a bit of an add-on. Telstra has indicated to withdraw from this market in 2008.

1. DEVELOPMENTS AND ANALYSIS 2006
1.1 Australia is catching up
1.2 Government broadband inventory
1.3 ‘Growing broke’ with broadband
1.4 Telstra creating confusion in the broadband market
1.4.1 Telstra sobbing over ULL
1.4.2 Telstra clawing back market share
1.4.3 Telstra retracting from IPTV market
1.4.4 Telstra delaying ADSL2+
1.4.5 Aggressive retail moves
1.5 Broadband speed record
1.6 Metro blackspots fund
2. STATISTICAL OVERVIEW AND FORECAST
2.1 Household statistics
2.2 Australia’s broadband ranking - mid-2006
2.3 The broadband market in numbers - 2006
2.3.1 Whirlpool survey of Australian broadband users
2.3.2 ACCC report December
2.3.3 Subscriber statistics overview and forecasts
2.4 Broadband competition
2.5 Market shares
2.6 Market statistics and forecasts 2005-2015
2.6.1 A market of pent-up demand
2.6.2 Subscriber numbers
2.6.3 Our broadband predictions are still on track
2.6.4 Revenue forecasts 2006 - 2007
2.6.5 Residential market - where the long term potential exists
2.6.6 Long-term forecast - 2015
2.6.7 Broadband capacity forecasts - towards 2015
2.6.8 Spectacular developments in bandwidth
2.6.9 Market segment forecasts - 2005-2015
2.7 Other surveys
2.7.1 Telsyte
3. INFRASTRUCTURE
3.1 Analyses
3.1.1 Open networks needed for broadband services
3.1.2 Video could choke the Internet
3.1.3 Brief introduction to key technologies
3.1.4 What is broadband and why is it needed?
3.1.5 True broadband
3.1.6 Market overview - xDSL
3.1.7 Incumbents are running behind
3.1.8 New initiatives
3.1.9 Copper is still very much alive
3.1.10 Proactive communities
3.2 Broadbanding regional Australia
3.2.1 Regional broadband - analysis mid 2006
3.2.2 Telstra’s regional scaremongering
3.2.3 The regional backhaul problem
3.2.4 Higher Bandwidth Incentive Scheme (HiBIS)
3.2.5 Infrastructure analysis - update mid-2006
3.2.6 Services-based developments
3.2.7 One third of infrastructure is not commercially upgradeable
3.2.8 Public investments
3.2.9 Governments maintain stake in telecoms
3.2.10 Privatisation not good for regional and rural customers
3.3 ADSL
3.3.1 Overview and statistics
3.3.2 DSLAMs and ADSL2+
3.4 Cable modems
3.4.1 Latest developments
3.4.2 Market Overview
3.4.3 From HFC to FttH - analysis by Paul Budde
3.4.4 The long road that led to nowhere
3.4.5 Telstra’s cable modem service
3.4.6 Optus
3.4.7 Cable modems vs xDSL
3.4.8 Cable telephony
3.5 FttH
3.5.1 Analyses and developments
3.5.2 FttH projects
4. NETWORK OPERATORS AND WHOLESALERS
4.1 The broadband ISP market - mid-2006
4.1.1 Dial-up Internet
4.2 The broadband industry
4.2.1 Industry structure
4.2.2 Too much reliance on access
4.3 DSL Operators
4.3.1 Telstra infrastructure
4.3.2 Telstra’s ADSL network
4.3.3 Optus
4.3.4 Nextep Broadband
4.3.5 PowerTel
4.3.6 Netspace
4.3.7 Commander
4.3.8 iiNet
4.3.9 Primus
4.3.10 Soul
4.3.11 AAPT
4.3.12 People Telecom
4.3.13 Internode
4.3.14 Amcom
4.4 HFC Networks
4.4.1 Telstra BigPond broadband cable
4.4.2 OptusNet cable
4.4.3 Neighbourhood Cable
4.5 TransACT
4.6 AUSalliance
4.7 Wireless broadband operators
4.8 Electricity utilities
4.9 Consolidation
5. BROADBAND ECONOMY
5.1 Broadband a $70 billion industry in the making
5.2 How to develop the broadband economy
5.2.1 Multi-billion dollar economy at stake
5.2.2 Silent changes
5.2.3 History lesson in infrastructure
5.2.4 Where are our leaders?
5.3 National Strategy
5.3.1 What happened with the BAG?
5.3.2 National Broadband Strategy Implementation Group
5.3.3 Victorian Government rejects National Broadband Strategy
5.3.4 National Strategy avoids the key issues
5.3.5 Nothing to be heard
5.4 New partnerships models needed
5.4.1 FSN approach far too slow to respond to customer demand
5.4.2 Triple play industry partnerships needed
5.4.3 FttN - the need for industry cooperation
6. BROADBANDING LOCAL COMMUNITIES
6.1 Introduction
6.1.1 Market overview
6.1.2 Progress report - mid 2006
6.1.3 Cities are taking charge
6.1.4 Visionary approach is needed
6.1.5 Significant economic and social benefits
6.1.6 How to get started
6.1.7 The roles of the players
6.1.8 Outlying areas
6.1.9 Staged developments
6.1.10 Broadband - a concept not a technology
6.1.11 A city Broadband Agenda
6.1.12 Broadband education
6.1.13 City marketing
6.1.14 Examples of tele-cities
6.1.15 Broadband analysis packages for LGAs and ROCs
6.2 Case studies - local broadbanding
6.2.1 Broadband in the Eden region of NSW
6.2.2 Broadbanding the Coorong
6.2.3 The Broadbanding of Western Australia
6.2.4 The Broadbanding of Armidale, New England
6.2.5 The Broadbanding of Central Victoria
6.2.6 Five Growth Councils in Victoria
6.2.7 Omniconnect’s broadband network in regional Victoria
6.2.8 Related reports
7. DEMAND AGGREGATION
7.1 The business case for anchor tenants
7.2 Broadband brokers
7.2.1 Brokers get $2.9 million
7.3 Firstly - local social vision required
7.4 Council-led broadbanding Steering Committee
7.5 Working with telcos
7.6 Aggregation to be addressed within steering committee
7.7 Long-term contracts are killing the model
7.8 The key is passion, combined with an entrepreneurial spirit
8. BUSINESS MARKETS
8.1 Subscriber statistics
8.2 The business ISP market - mid-2006
8.3 Revenue statistics
8.4 Business market in 2006
8.5 Pacific Internet report
8.5.1 Rapid broadband saturation in business market
8.5.2 Impact of broadband
8.5.3 Volume of data
8.5.4 Broadband spending
8.5.5 Statistical overviews
8.6 Business market statistics 2004
8.6.1 The broadband barometer
8.6.2 Broadband continues to penetrate the SME market
8.6.3 SMEs embracing broadband
9. BROADBAND TV
9.1 Are you ready for the IPTV explosion?
9.1.1 IPTV regulations?
9.2 Movies downloading
9.2.1 Starting with Video-on-Demand (VoD)
9.2.2 Primary target markets - statistics
9.3 IPTV developments
9.3.1 Introduction
9.3.2 Demand forecasts
9.3.3 Global perspective
9.4 Telstra’s complex convergence strategy
9.4.1 Introduction
9.4.2 BigPond Media
9.4.3 Sensis
9.4.4 IPTV
9.4.5 Conflicts of interest remain
9.4.6 Telstra vs News - what about Optus?
9.5 Other players
9.5.1 M2B World
9.5.2 VOD Pty Ltd
9.5.3 Reeltime
9.5.4 Anytime
9.5.5 Crank TV - IPTV music channel
9.5.6 ROO Media
9.5.7 IPTV from Video Ezy IPTV
9.5.8 Foxtel to deliver broadband content
9.5.9 Soul
9.6 Broadband HDTV
10. HOME NETWORKS
10.1 Statistics and forecasts
10.1.1 Market set to accelerate in 2006
10.1.2 Connected home technologies
10.1.3 Home networking market forecast - IDC
10.2 Home networking
10.2.1 Broadband-enabled connected homes
10.2.2 Home automation market
10.2.3 Smart Wired House - survey findings
10.2.4 Home wireless market
10.3 W Home
10.3.1 Overview
10.3.2 Customer base
10.3.3 Powerline broadband
10.3.4 Examination W Home’s of business model
10.4 Telstra gearing up to offer digital home gateway
10.5 HomePlug
10.5.1 Introduction
10.5.2 Orthogonal Frequency Division Multiplexing (OFDM)
10.5.3 56 bit DES
10.5.4 Interoperability
10.5.5 Reach - with and beyond each home
11. WHOLESALE ACCESS NETWORK - INDUSTRY COOPERATION
11.1 Analysis of the EOI
11.1.1 The nebulous description of ‘fair wholesale’
11.1.2 Disclosure
11.2 Wholesale industry cooperation
11.2.1 Regional wholesale access network
11.3 Wholesale industry group
11.3.1 Blueprint
11.3.2 Industry forum
11.4 Progress report June 2006
11.4.1 Local neutral access points
11.4.2 Planning: network capacity
11.4.3 Planning: technologies
11.4.4 Network neutrality
11.4.5 Open access code
11.4.6 State governments
11.4.7 Mapping
11.5 Regional projects
11.6 Expressions of Interest (EOI)
11.7 Strategic infrastructure funding - backgrounder
11.8 Lessons learned from the past
11.9 Government direction is essential
11.9.1 Broadband summit
11.9.2 UtiliTel
11.9.3 Broadbanding local communities
11.9.4 Telstra
11.10 Conclusions
11.11 Recommendations: how to proceed from here
11.11.1 The big picture
11.11.2 Real infrastructure competition needs to be encouraged
11.11.3 Strategic use of $ investments as well as in-kind contributions
11.12 Consortia
11.12.1 AUSalliance
12. GLOSSARY OF ABBREVIATIONS
Exhibit 1 - Advice for information highway contenders
Exhibit 2 - From Kilobit to Yottabit
Exhibit 3 - Some application bit rates
Exhibit 4 - Access technologies
Exhibit 5 - What does it mean? (DSL, 1Gb/s, DWDM transmission speeds)
Exhibit 6 - xDSL services - 2004
Exhibit 7 - xDSL services in CBD and metropolitan areas - 2004
Exhibit 8 - xDSL services in provincial areas - 2004
Exhibit 9 - xDSL services in rural and remote areas - 2004
Exhibit 10 - Method of supply of xDSL services by access type - 2004
Exhibit 11 - Overview of physical distribution networks for high-speed services
Exhibit 12 - Infrastructure - people power
Exhibit 13 - Structural or operational separation
Exhibit 14 - The national interest
Exhibit 15 - Fibre-to-the-Node (FttN)
Exhibit 16 - Cooperation scenarios
Exhibit 17 - Residential Broadband (BB) - growth predictions - next ten years
Exhibit 18 - Infrastructure blueprint
Exhibit 19 - FttH Prerequisites
Exhibit 20 - Optical access costs and performance - mid-2005
Exhibit 21 - Benefits of FttH in new development projects
Exhibit 22 - Alcatel’s BPON platform
Exhibit 23 - Key role National Broadband Strategy Implementation Group
Exhibit 24 - Key ingredients for local broadband success
Exhibit 25 - Key starting-points for local broadbanding
Exhibit 26 - Key broadbanding steps
Exhibit 27 - Some application bit rates
Exhibit 28 - Callpoint services
Exhibit 29 - Armidale demographics
Exhibit 30 - IPTV Applications
Exhibit 31 - Proposed retail pricing strategy
Exhibit 32 - Multi-dwelling units
Exhibit 33 - Key strategies
Exhibit 34 - Residential Broadband (BB) - growth predictions - next ten years
Exhibit 35 - Infrastructure blueprint


Table 1 - Number of Australian households and technology penetration - mid-2006
Table 2 - Broadband component of Internet households - 2005 - 2010, 2015
Table 3 - Broadband access amongst Internet households - 2001 - 2006
Table 4 - Broadband subscribers by technology - 2001 - 2005
Table 5 - Broadband subscribers total market (wholesale) - 1996 - 2006
Table 6 - Broadband subscribers total market (retail) - 2002 - 2007
Table 7 - Broadband subscribers annual growth - 2001 - 2007
Table 8 - Broadband DSL retail subscribers - 2002 - 2006
Table 9 - Competitor Infrastructure Coverage in Metro Areas - 2005
Table 10 - Competitor Infrastructure Regional Coverage per state - 2005
Table 11 - Competitor Infrastructure Coverage Total Market per state - 2005
Table 12 - Market share subscribers (wholesale) - 2002 - 2006
Table 13 - Market share subscribers (retail) - 2002 - 2006
Table 14 - Total broadband subscribers - 1996 - 2009
Table 15 - Broadband revenues per Telstra/Optus and ‘others’ - 2000 - 2007
Table 16 - Revenue make up scenario forecasting - 2010
Table 17 - Residential spend per household per annum - 2003; 2010; 2015
Table 18 - Overview total Telecoms/Internet market - 2015
Table 19 - Residential Broadband (BB) growth predictions - next ten years
Table 20 - Broadband revenues - 2005; 2010; 2015
Table 21 - Broadband market share by technology - 2005; 2010; 2015
Table 22 - Method of supply of xDSL services by percentage usage - 2004
Table 23 - Method of supply of xDSL services by carriers other than Telstra - 2004
Table 24 - Broadband penetration regional vs. metro households - 2003 - 2005
Table 25 - Broadband DSL retail subscribers - 2002 - 2006
Table 26 - Commercial cable modem subscribers - 1996 - 2006
Table 27 - Cable subscribers per operator- 1996 - 2006
Table 28 - Optus cable telephony subscribers - 1997 - 2005
Table 29 - Residential Broadband ARPU and change - 2004 - 2006
Table 30 - Residential Dial UP Internet ARPU and change - 2004 - 2006
Table 31 - Subscriber overview dial-up & broadband - mid-2006
Table 32 - Business Broadband subscribers - 2002 - 2008; 2010
Table 33 - Business Broadband ARPU and annual change - 2004 - 2006
Table 34 - Business market Internet revenue - 1997 - 2007
Table 35 - Small business Internet access technology by metropolitan region - 2005
Table 36 - SME broadband/Internet access technology - 2002 - 2005
Table 37 - SMBs Internet access technology - 2005
Table 38 - SMB Internet access technology (vertical segmentation) - 2005
Table 39 - Home network penetration of households - 2005; 2010; 2015
Table 40 - Australian multi dwelling units (100+) - 2003 - 2008
Table 41 - Revenue forecasts - Australian home automation market - 2003 - 2008

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