Sydney, June 19, 2007 AEST (ABN Newswire) - After two years of turmoil the government has at last made a decision on how to proceed with broadband in Australia.

Is the new plan, Australia Connected, the best way forward? Probably not, but it certainly is the most realistic plan for Australia at this point in time.

The best option would have been for Telstra to work with the government and the industry, but the incumbent has clearly indicated that is has no interest in collaborating with the government, the regulator or the industry to achieve a national broadband plan.

There are/were two ways to proceed.

One would be to legislate the structural separation of Telstra; however very soon after the full privatisation of Telstra (T3) Telstra made it abundantly clear that in those circumstances it would take the government to the High Court, and this would not be an acceptable option for a government seeking re-election.

The second option would be to fund a competitive challenge to Telstra - not perhaps the most efficient and cost-effective tactic, but certainly a good way to get more innovative services and lower broadband prices into the market.

There is no doubt that the new government-funded OPEL consortium will face head-on competition from Telstra. I predict that Telstra will soon launch ADSL2+ services in regional Australia, with prices under the $35 mark (this being at the lower end of the prices that OPEL has indicated it will charge as an entry level). Telstra will want to grab as large a share of this market as possible before OPEL gets off the ground.

This will be a challenge for OPEL but certainly a great outcome for consumers, as it will speedily drive the uptake of high-speed broadband (higher than 2Mb/s) in Australia to close to 50% of all 4.5 million broadband users.

Infrastructure deployment will always be a matter of horses for courses, with fibre, ADSL2+, wireless and broadband power line (BPL) all playing a role in the overall broadband infrastructure map of Australia. There is absolutely nothing wrong with this - all these technologies are quite capable of delivering fast broadband quickly; all are scalable and able to move us towards 50Mb/s and 100Mb/s networks over the next 5 to 15 years.

Of course, I would have preferred the government to have come up with a national broadband blueprint much earlier. I began advocating for this back in 1997 and have been arguing for such a blueprint ever since. To now have yet another expert panel looking at it is a bit late.

Having said that, I am impressed with the people on the government's expert panel, and I am sure that they will come up with some sort of structural separation for the incumbent - or, if not that, then a guarantee that Telstra will be severely restricted in overbuilding and/or undermining any new FttN/FttH networks that may be built by other providers.

We all have learned a lesson from the HFC (cable TV network) overbuild in the mid-1990s, which led to a $7 billion waste of infrastructure investment.

Telstra may have succeeded in delaying the development of broadband in Australia, but it has certainly lost the case it was arguing for - that it needed a monopoly in order to advance broadband in Australia. It is now facing severe competition in both regional and metropolitan Australia. This is a far worse outcome for its shareholders than if the company had opted for a cooperative process in which it could have had a serious input. It has now been pretty much sidelined.
Sure, if the current management stays in place for another year or so we will no doubt see some more tricky tactics , but these will actually only benefit the end-users. Telstra will now be forced to show that it can be competitive. So far its proposed broadband charges would have been double those charged overseas, and the quality would be inferior to that offered elsewhere.

This was clearly picked up by the ACCC last year and when the regulator confronted Telstra on the subject the company broke off discussions. Eventually the Minister also had to accept that this was a totally unreasonable price; voters would simply not have accepted such an outcome.

Telstra's response to Australia Connected, in the form of lower broadband prices for high-speed services, will most certainly undermine some of the investments made by the government and the industry, but the outcome will be good for consumers - and both the government and the industry are going into this process with their eyes open. There is no excuse for them not to have presumed what Telstra's reaction would be in relation to their investments.

A certain waste of infrastructure investment in telecoms is the price we have to pay for ten years of mismanagement of telecoms policies, and for Telstra's bullying over the last two years.

Having accepted this, I believe we can now look ahead to:

- The implementation of Broadband Connect regional infrastructure and access networks from OPEL

- Telstra's competitive reaction to this rollout

- The outcomes of the Expert Panel of experts and the competitive position that Telstra will take in the metropolitan broadband market.

From Legion to belong

I have been following the market activities of Legion since the early nineties.

These were the audiotex days that some of our readers might still remember - providing information services via what are now the 1900 numbers.

It entailed all the drama of any other new development in the telecommunications world: big problems with Telstra, who wanted to dominate both the service and the content; margins were squeezed; and the industry often had to fight for survival. We had to deal with adult content, complete with Senate Inquiries, special regulations, calls for bans and so on.

All these issues are long gone, but Legion, and especially its CEO David Burden, played a key role in guiding the industry through these turbulent times, which attracted its share of cowboys, as well as some very serious media players.

Under David's leadership the industry survived and flourished, and his company became the leading interactive marketing services bureau, as companies like Legion were called in the late 1990s.

Mobile was then added, whereupon Legion pioneered SMS marketing and quickly became the leading partner of the broadcasting industry, both with 1900 numbers and with SMS.

However, it was the Internet that changed the industry forever and, based on the knowledge and experience built up over the years, Legion Interactive, as it was called at that time, became the country's leading digital media marketing company.

No wonder this company has featured several times at the Digital Media Roundtables that I initiated in the early 00s.

The company never sits still. It is now moving into yet another phase, and I am sure this won't be the last. It has now merged with SEE to form an even larger digital media outfit with 130 employees in three cities. SEE is also a rather new advertising company, that has specialised itself in 'branding campaigns' (SEE things differently). Both Legion Interactive and SEE were acquired last year by the Photon Group, an organisation consisting of a number of specialised marketing service companies.

The merged company, belong, claims to be the first communications company that combines purist strategic branding prowess with specialist digital and interactive marketing expertise.

It certainly is the first merger of its kind in Australia. They aim to help brands make sense of the digital age through engaging consumers in their own space, on their own terms. Interestingly, but perhaps not surprisingly, this new company will have an IT group larger than any other advertising agency in the country.

The company has indicated that it will proactively guide brands into the digital age and present them to the new digital consumers in a way that will suit them.

Given Legion's credentials the new company is well-positioned to guide its customers through an increasing number of the digital communication channels that companies can now use to communicate with consumers.


Paul Budde

ABN Newswire
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