Friday, September 18, 2009

National Broadband Network: What is it for?

Deloitte Touche Tohmatsu have released a useful report: "National Broadband Network - A user's perspective" (16/09/2009). This asks the timely question as to what the NBN will do for consumers, so that they will be willing to pay for it. The report is 32 pages of PDF, but because of the use of large unnecessary images, it is more than 1 Mbyte: you may need broadband just to download it. ;-)

The report is asking the question "What will consumers want to use the NBN for?" which has a very simple answer: "Its the Internet, stupid". The real question is not what consumers will use the NBN for, but how will those industries it will challenge, particularly fixed line telephony, broadcast and pay TV, cope with the competition.

The report considers applications such as smart metering, which are not relevant to the NBN. Smart metering only requires a very low bandwidth connection and can be done with low capacity wireless, data over power lines or old fashioned telephone lines; it does not need fibre to the premises. Similarly discussion of automation of lighting, air conditioning and home security networks are not relevant to the NBN, as these applications do not need broadband and have little value for consumers in any case.

The report suffers from the assumption that the NBN will be built in the way the Government described in its initial announcement, that is as a new completely standalone, pure fibre optic network. This is unlikely to actually occur. The NBN will be assembled from existing networks, using existing fibre backbones, ADSL2+ and wireless Internet, where appropriate. This is partly a matter of engineering, as there is no point in duplicating existing working infrastructure and in some cases there will be no feasible alternative.

Also where the new NBN infrastructure is built will be a matter of economics and consumer demand. There is no point in building an expensive fibre network where there not enough customers to use, and pay for, it. In practice fibre to the home will be first installed in new suburbs and new cluster housing. It will not be feasible to retrofit most existing homes with fibre in the short term. ADSL2+ will remain the most common common for most homes of the next decade. This will be supplemented with wireless Internet.

There are some very obvious uses for the new network, where have not been highlighted by the government in their advocacy for the new system: to replace copper cable telephony and pay TV. These are far from the applications in education and medicine mentioned by the NBN advocates, but telephony and TV will provide the bulk of the revenue from the system and the bulk of the use.

These old applications create new regulatory and industry challenges. The provision of digital TV in Australia was, and still is, crippled by a regulatory regime designed to favour a few TV broadcasters. The NBN would provide the opportunity to open up digital TV to a world of content. However this will make the delivery systems of the existing Pay TV, and well as the free to air TV broadcasters, obsolete and challenge their revenue. The government will be under pressure to put in place restrictions on the use of the NBN for TV, which will then cripple its widespread use.

Similarly there are difficult issues with the provision of telephony over the NBN. Engineering and economics would suggest the NBN should replaced copper based telephone lines. However, this then will remove the need for telephone companies. Apart from threatening the business of the current Australian companies, this creates difficult issues about the provision of reliable telephone services.

Here is the text of the Executive summary of the report, minus the images:
The Federal Government’s 7 April 2009 decision to build a $43 billion national broadband network (NBN) signals the advent of a new digital era in Australia.

The NBN, created and run as a wholesale only, open-access network by the government-owned NBN Company, will operate independently of existing copper-based broadband such as ADSL2+ or legacy cable broadband networks, but may draw on some existing infrastructure in this space.

The single largest investment by any Australian government, the NBN will play a critical role in advancing key national indicators including GDP, employment and productivity.

Deloitte believes the NBN has the potential to rival the impact of other technology milestones such as the widespread adoption of personal computers in the 1980s and the mass market adoption of mobile phones during the 1990s and 2000s.

While the results of the proposed NBN implementation study will not be known until early 2010, the NBN’s future impact can already be anticipated. The proposed implementation study will need to identify what impact the NBN will have on specific industries and businesses to properly consider the likely drivers of end-user demand such as design, pricing, return on investment and funding issues.

It will need to consider uptake in the consumer market and the drivers for this.

Until now, not enough attention has been given to these likely end-user demands and key NBN stakeholders must incorporate these elements into the network design in order to achieve operational success.

Now is the time to shift from the technical discussion to the applications and innovations that are really going to transform Australia and the way we live and operate.

This report, by Deloitte’s Technology, Media & telecommunications industry team, highlights many of the likely end-user demands that should be factored into the design of the NBN.

For consumers and small-to-medium businesses (SMEs), a 100 megabit per second fibre-to-the-home (FTTH) network will usher in a new era of digital products and services. Businesses and governments will deliver more services through this network.

It forecasts the arrival of a world where high-speed broadband delivers new video content, security and utility applications directly to the home. Smart metering devices will record most household’s energy consumption in small units of time and facilitate new green-energy delivery options by national utilities.

At an even more transformational level, the NBN will unify the ability of households to deploy automation technologies such as lighting controls, heating, ventilation and air conditioning (HVAC) systems and home security networks. Widespread adoption of home automation technologies will give utility providers or telecommunications carriers the opportunity to consolidate billing services through a single provider
connected directly to the home via the new network.

Above all, it provides the opportunity to create a digitally-based country better connected both inside and outside Australia.

The NBN must also meet the demands of national objectives relating to emergency response and homeland security.

Environmental and social policy objectives will also influence the network solution, including ensuring the network extends to remote areas, fringe areas and offshore islands. In addition, the NBN must overachieve on environmental targets for energy efficiency, provide an effective basis for indigenous and SME empowerment, achieve world competitive cost levels and fuel the
export of electronic business services.

Deloitte has identified seven primary challenges that threaten the success of the NBN and the future applications and services expected to be delivered using this infrastructure:

• End-user retail packaging and migration
• Competition and regulation
• NBN Company funding and structuring
• Design and construction
• Support for innovation and delivery
of new applications
• Disruption due to the Federal Government election cycle
• Vertical and horizontal integration of private sector industries, and government departments and utilities.

These challenges are outlined in further
detail in this report. ...

National Broadband Network - A user's perspective, Deloitte Touche Tohmatsu, 16 September 2009

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