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Australia - Telecoms Market Analyses - NBN transforms telecoms industry

This annual publication provides analysis on the telecoms market in 2010, forecasts, overview and discussion on:

  • National Broadband Network
  • International broadband and trans-sector activities
  • Mobile communications market
  • Mobile data
  • Smart grid infrastructure
  • Social networks
  • Broadcasting and pay TV

NBN full steam aheadThe industry is preparing itself for the National Broadband Network. While it will be several years before the full impact of the NBN is felt, it will also take several years to change the industry. Companies will have to reorganise themselves around:

new markets such as infrastructure and construction
middleware such as data centres, content hosting, cloud computing and OSS/BSS
retailThis reorganisation and repositioning is already noticeable in current market activities, where the focus is moving from ARPU to market share. Customer bases are becoming very valuable and more companies will want to do business with their customers through digital services. The telcos and ISPs are positioning themselves as attractive partners for such developments.
While the federal election was a cliff-hanger it was clear that the majority of Australians supported the NBN. Surveys indicated over 70% support of the NBN among voters. It is now full steam ahead with the NBN and there will be significant pressure on two areas: NBN Co will have to roll out quickly, and the minister who has been placed in charge must ensure that most, if not all, of the 30+ rollout projects have trans-sector pilots attached to them, so as to warrant government investment. By 2013 the network should be reaching 30%-40% penetration. The aim is that by that time the NBN will have become irreversible.
Soon a business plan, with proper financial information attached, will become available. There will be a focus on regional rollouts and regional application pilots. Under the NBN these projects are upscalable and this in itself will attract a great deal of business investment of the type we are already seeing from Telstra, Optus, NEC and some of the mid-sized telcos.
There is widespread attention from overseas investors and the Australian NBN market will soon be swamped by international business people. The question is: are Australian businesses up to this challenge? Will Australian organisations be able to take the lead and establish a new digital media industry that they can use as a platform to expand their businesses overseas?

Mobile market

In 2011 the mobile communications market in Australia, as in other developed economies, will see a further shift in emphasis from voice to more data-orientated services, driven by new handsets and applications. Penetration has outstripped the size of the market, which indicates that people are increasingly using multiple services and multiple devices.

While voice is still the dominant mobile service in Australia, mobile data has steadily become more popular, spurred on by the advent of smartphones from vendors like Apple and RIM, which facilitate a wide range of data applications and services. However the winner in 2011 will be the handsets based on Google’s Android operating system.

No longer held back by the mobile operators, mobile broadband growth has been rapid since late 2007 and this will also be the main feature of 2011.

Competition is set to intensify between mobile operators, resulting in lower mobile call charges for customers. Telstra has indicated that the gloves are off and that it will vigorously defend its position in this market.

This will most likely produce a continued decrease in mobile prices. Furthermore, more customers will reduce their use of fixed-line voice and data services in favour of mobile services.

However, over the next five years competition and commoditisation will lead to lower ARPUs.

Digital media - social networks

Social media developments are fascinating and exciting. They show the great potential of the new communication and information tools that are becoming available, thanks to the Internet, Web 2.0, email and broadband infrastructure.

But for these new social media tools to succeed they need to be fully integrated into our daily communication. Current social media sites such as Facebook, MySpace, LinkedIn, Plaxo, Twitter, YouTube, Wikipedia, Google, Foursquare and Second Life are great incubators for these new services; they provide us with new tools and allow us to experiment.

This report includes BuddeComm’s assessment of social media as a communication tool and includes information on some of the most prominent social media sites, including broad statistics. Online gaming, particularly games based on virtual simulations, are increasingly becoming linked to social networking services.

Broadcasting and pay TV

This report provides valuable information about the end-users of pay TV, the viewers. Subscriber pay TV statistics are provided - per operator, growth, forecast, and household penetration. The report also includes forecast scenarios to 2012. By mid-2010 pay TV penetration was just over 34% and, while growth should continue slowly in the remainder of 2010 through to 2011, Australian figures are still well below those of the developed markets around the world. The small amount of growth in 2009/10 comes from the continued pressure of the new free-to-air digital TV channels.

While it is still possible for Foxtel to reach the 40% penetration mark, the company can only reach these targets if it either offers more attractive price packages or includes a broadband offering within an affordably priced package.

With the advent of digital TV and the launch of a number of new digital FTA channels, Australian pay TV operators have been feeling the squeeze as viewers were quick to take advantage of the new conditions. By mid-2010 about 75% of Australian households had a digital TV. The newest pay TV operator, SelecTV, signed an agreement with Austar and Foxtel to take over its English packages, which are being terminated in November 2010.

Smart grids

Smart is now well and truly on the agenda of most electricity companies, worldwide - and, indeed, on many of their governments’ political agendas. It has become increasingly clear that smart grids are able to transform the energy industry, and that a much broader group of industries are also affected by this. The other industries involved are IT, telecoms, white goods, renewables, management consultants, storage, transport, etc.

The electricity grid is becoming the enabler in all these changes, and by making the grid intelligent and adding telecoms to it the power will shift away from the electricity companies and towards the customers - and the appliances that will be developed will assist this process, some of this on a M2M (machine-to-machine) basis.

This industry transformation will lead to a regulated monopoly in relation to the infrastructure, while a range of new services and applications that are becoming available over the infrastructure will create increased competition, since, with many new companies entering this retail field, that market will become truly contestable. This will, of course, also lead to friction with the existing players. Disruptive energy developments from new energy service providers, who will build new business models around distributed (renewable) energy, will also add to the dynamics of the emerging market.

A significantly large part of the population is interested in reducing energy costs and lowering their CO2 footprint and there is evidence that savings of around 30% are possible. This could largely offset the increases in electricity prices.

Smart transport systems

Smart transport systems or intelligent transport systems (ITS) encompass a range of wireless and wired communications-based information technologies that can be integrated into transportation infrastructure and vehicles.

Current ITS technologies use dedicated short-range communications (DSRC) to transfer data over short distances between in-vehicle mobile radio units and roadside units. Arrangements to facilitate the use of ITS have been developed internationally in the 5850-5925MHz band (the 5.9GHz band).

Smart infrastructure is also looked at in the context of the NBN. The aim of the NBN is to provide the basic telecommunication infrastructure for a range of sectors, including transport. In late 2009 the government took the initiative to canvass new ideas for smart infrastructure policies, while in early 2010 the Australian Communications and Media Authority (ACMA) launched its regulatory plan for DSRC.  

Smart cities, buildings and communities

The concept of smart communities is based on intelligent infrastructure such as broadband (FttH) and smart grids, so that connected and sustainable communities can be developed. However, before these smart communities can be built, trans-sector policies and strategies need to be developed. They cannot be built from the current silo structure that dominates our thinking; but require a holistic approach which includes environmental issues such as self-sufficient energy buildings, energy exchanges for renewable energy and e-cars, delivery of e-health, e-education and e-government services, as well as digital media and Internet services.

This report discusses and provides examples of some of the developments taking place around the world towards building smart cities and communities.  

Market highlights:

Prices in mobile and fixed broadband have dropped significantly during 2010 as operators try to win as many customers as possible.

With the election over it is now full steam ahead for NBN Co. A good reason to expect fast progress is that by the next election, some time in 2013, the NBN needs to be of sufficient size to ensure that it can’t be scrapped if the Opposition gets into power.

NBN Co is initially structured with the government as the majority shareholder and private investors as minority partners. The government plans an initial investment of $4.7 billion and envisages that the company will invest up to $43 billion over an eight-year period.

Over the last 12 months the whole trans-sector environment has already changed because of the National Broadband Network. Sectors are now tabling plans that have been on their shelves for many years.

We have already seen changes in Telstra’s position in relation to the NBN. There is the in-principle, rather lucrative, Heads of Agreement with NBN Co; and the company has indicated that it is on a path of transformation.

Total mobile services revenue is expected to grow to above $15 billion in 2011, representing a growth rate of around 10%.

The merger of Vodafone and 3 in 2009 was set to lead to stronger infrastructure-based competition for mobile broadband in 2010 and 2011.

In September 2010 the number of users of the social networking sites continues to grow, with over 9 million Facebook users and over 2.5 million twitter users. This rise in users continues the trend from 2009 where Australians interacting with brands via social networks jumped by more than 60%.

By mid-2010 pay TV penetration had only reached 34% and growth is expected to increase slowly and modestly to around 35% by 2011.Paul Budde, Kylie Wansink

November 2010

Data in this report is the latest available at the time of preparation and may not include the current year.

1. Analysis - Telecoms Market Late-2010
1.1 Industry analysis
1.1.1 Introduction
1.1.2 Industry tracking towards a new future
1.1.3 Telstra agreement is setting the scene
1.1.4 Other players will have to follow
1.1.5 M&As will be on the way
1.1.6 Old model still has some life in it
1.1.7 Penetration, not ARPU, is the key to success
1.2 Market analysis
1.2.1 The market in 2010
1.2.2 New business models are required
1.2.3 Triple play business models
1.2.4 VoIP added to naked DSL
1.2.5 Internet media companies
1.2.6 Mobile market
1.3 Overall size of the market
1.3.1 Total broadband subscribers
1.3.2 Subscribers by major providers/technology
1.3.3 Market shares - 2010
2. National Broadband Network
2.1 Overview and analysis
2.1.1 Overview of the National Broadband Network (NBN) plan
2.1.2 Implementation issues
2.1.3 Socio-economic benefits
2.1.4 Regional broadband
2.1.5 Where is the user in all of this?
2.1.6 Analysis of developments during 2009 and 2010
2.1.7 Opposition broadband policies
2.2 NBN after the election
2.2.1 NBN Co is building the business model
2.2.2 NBN rollouts need to include trans-sector projects
2.2.3 NBN spotlight now moving towards Telstra
2.2.4 More NBN infrastructure deals
2.2.5 Will Australia cash in on international interest?
2.3 NBN - Telstra
2.3.1 Telstra and government agree on NBN future
2.3.2 The new Telstra?
2.4 Industry at a crossroads
2.4.1 National Broadband Network (NBN) Analysis
2.4.2 NBN opportunities for the main players
2.4.3 The submarine cable conundrum
3. The Trans-sector Approach
3.1 NBN based on trans-sector model
3.1.1 Analysis late 2010
3.1.2 Trans-sector awareness update, 2010
3.1.3 E-services in the context of national broadband
3.1.4 Introduction to trans-sector thinking
3.1.5 A matter of leadership
3.1.6 Barriers to broadband adoption
3.1.7 We lack the structures to implement trans-sector visions
3.1.8 Multiplier effect for the NBN
3.1.9 Trans-sector regulation
3.2 BuddeComms international broadband and trans-sector activities
3.2.1 The birth of the trans-sector concept
3.2.2 Australia - one of the first countries to develop trans-sector policies
3.2.3 Smart grids and e-Health - the first trans-sector projects
3.2.4 Support from Obama and the FCC
3.2.5 Trans-sector innovations in the Netherlands
3.2.6 New Zealand and the UK
3.2.7 United Nations puts its weight behind trans-sector
3.2.8 Briefing International Investment Houses
3.2.9 BuddeComm proud of the part it has played
4. Mobile Communications
4.1 Analysis of the mobile industry in 2010
4.1.1 Mobile industry overview
4.1.2 Key trends and developments
4.1.3 Background information
4.2 Mobile broadband market
4.2.1 Introduction - mobile broadband in Australia
4.2.2 Key trends and developments
4.2.3 Market forecasts
5. Smart Infrastructure
5.1 Smart grids moving into 2011
5.1.1 Value of Australian smart grid market
5.1.2 Key trends going forward into 2011
5.1.3 New government initiatives
5.1.4 Policy analysis
5.1.5 Regulatory framework
5.1.6 Industry still searching for direction
5.1.7 Industry transformation
5.1.8 ICT solutions for global warming and energy saving
5.2 Smart transport systems
5.2.1 What are intelligent transport systems (ITS)?
5.2.2 Overview of ITS activities
5.2.3 Outcomes of ITS Summit, 2009
5.2.4 ITS Australia
5.2.5 Government Inquiry - 2002
5.2.6 Dedicated short-range communications (DSRC)
5.2.7 Smart transport and the National Broadband Network (NBN)
5.2.8 The electric vehicle market in Australia
5.3 Smart cities, buildings and communities
5.3.1 Introduction
5.3.2 Building smart cities to ease the stress
5.3.3 Key components of smart cities
5.3.4 Strategies for smart communities
5.3.5 Brief examples of smart communities
5.3.6 Intelligent/smart technologies and systems
5.3.7 Intelligent Communities Forum
6. Digital Media
6.1 Social networks
6.1.1 Insatiable appetite for communication
6.1.2 Social network trends in Australia
6.1.3 Key social networks
6.1.4 Statistical overview
6.1.5 Mobile social networking
6.1.6 Personal social networks
6.1.7 Incorporating social media
6.1.8 Conclusions
7. Broadcasting and Pay TV Market
7.1 Overview and analysis
7.1.1 Market statistics
7.1.2 Industry and market analysis
7.1.3 Major players - overview and major developments
7.1.4 Forecasts - Pay TV penetration - 2010 - 2015
8. Glossary of Abbreviations
List of Tables, Charts and Exhibits
Table 1 - Broadband subscribers - total market - 2003 - 2010
Table 2 - Broadband market - annual change - 2004 - 2010
Table 3 - Broadband subscribers - market shares (cable, ADSL, wireless totals) - 2004 - 2010
Table 4 - Mobile market subscribers, penetration rate and annual change - 1995 - 2010
Table 5 - Top social networking sites in Australia - 2009 - 2010
Table 6 - Growth of network sites in Australia by sector - 2009
Table 7 - Pay TV subscribers by operator - 1995 - 2011
Table 8 - Pay TV subscribers annual change by operator - 1997 - 2011
Table 9 - Pay TV viewing versus FTA channel viewing - October 2009
Table 10 - Forecast pay TV household penetration - lower market growth scenario - 2010 - 2015
Table 11 - Forecast pay TV household penetration - higher market growth scenario - 2010 - 2015
Chart 1 - Total broadband subscribers and annual change - 2000 - 2011
Chart 2- Mobile subscribers, penetration rate and annual change - 1995-2010
Chart 3 - Total fixed mobile broadband revenues and annual change - 2007-2011
Chart 4 - Total mobile services revenue and annual change - 1993-2012
Chart 5 - Pay TV household penetration rate - 1997 - 2011
Exhibit 1 - Economic benefits of broadband - overview of surveys
Exhibit 2 - Economic effects of trans-sector broadband
Exhibit 3 - Retail electricity price rises in 2010 compared with annual bill in July 2009
Exhibit 4 - eTags
Exhibit 5 - Smart city - Masdar City - Abu Dhabi
Exhibit 6 - Smart homes
Exhibit 7 - Example of trans-sector collaboration in a Smart City
Exhibit 8 - Smart shopping
Exhibit 9 - Learning from e-cars
Exhibit 10 - The Obama campaign
Exhibit 11 - Examples of Web 2.0 developments
Exhibit 12 - New media activities from pay TV operators

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