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Standing Committee on Infrastructure and Communications
Role and potential of the National Broadband Network

CHAIR —I now welcome representatives of the North Queensland Small Business Development Centre to today’s hearing. I think you are also accompanied by On Q Communications, but I will get you to clarify that in a moment. The committee does not require you to give evidence under oath. However, I should advise the hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses.

We do not have a written submission, although we do have some background information on the service. For the interests of those following the broadcast, I might invite both groups to make a few opening statements about what it is that you are working on, the potential of the NBN with that, and any information that you want to give to us as a committee. Mr Arnold, would you like to start?

Mr Arnold —Yes, I will start. We have had an NBN-level connection or better for over a year now. It has the capacity for 100 megabits up and down. We are also an incubator. The idea was to supply a connection to all of the tenants that was quick enough and had the upload speed to be able to incorporate VOIP. We are in a light industrial area, so it probably has not been used to its full capacity, but we do have a little Silicone Valley and there are a number of tenants that are beginning to fire with that connection. We are running some testing this week of video conferencing. While that is not new or novel, it is certainly going to be more cost effective and have a better capacity for the quality of the service.

As I said, we are now beginning our second year with this connection. Certainly here we are hoping that we can partner with RDA or DD to showcase/lift the profile of what we are doing with that one connection servicing all of the 35 businesses within our incubator.

CHAIR —Mr Arnold, can you give us a picture of the small businesses working in the incubator at the moment just to give us an understanding of the nature of those businesses?

Mr Arnold —We are very proud to say that about 15 per cent are Indigenous, in either a business or social enterprise. There is also one community group, Diversicare, some registered training organisations and some retail that has made the transition from Facebook and eBay to us.

CHAIR —Would they be home based production-type businesses? What are they selling?

Mr Arnold —I always say that we are there to make the soft transition from home based into a commercial premises. You were talking about home based, and we are very familiar with that. Townsville Home Business Group is based from the centre. They have weekly meetings there. The group has fluctuated in its membership, although it has recently come back very strong with some new people interested in getting the group going again. They have their own website,, which we funded and put forward. We provide the space. I have always quoted that at least one in six households has some sort of home based business run from it. The majority are women or ‘mumpreneurs’. The 50 to 60 people that we have seen in the meeting of that group over the last year and a half are web based.

CHAIR —Is that 50 to 60 just from the Townsville direct area?

Mr Arnold —Yes. They have come to those meetings at any one point. Some have lost interest. It is up and down with participation. We have somebody that is very dedicated now and I believe the membership will grow again. The meetings were completely women, and probably 70 per cent were web based. We have great hope and interest in what that group is going to do over the next 12 months. We hope to incorporate them into our business expos, which we ran in Townsville just recently, and we plan to do one in Cairns in November.

CHAIR —That is fantastic. We have been hearing consistently about the growth of home based businesses in communities. I think 2006 was the last time there was any ABS data on it, and it is very difficult to get a handle on what is going on and how big it might be as a sector. If you are able to provide us with some follow-up information on that group, that would be really useful to us, in particular, because of our regional and rural focus. The capacity for people to develop these home based businesses and stay in their communities is great. We are having a little look at the website as we speak.

Mr Arnold —And to stay at home with the children. One of our problems was the number of children that were in the meetings. We had to employ somebody to run a little day care area, crèche.

CHAIR —Those are quite different from what we would call teleworking. So, these were not people employed by somebody else and who were working from home, they are actually running their own small businesses?

Mr Arnold —They were quite sophisticated. It was amazing to listen to them network and how they were using a variety of different things—for example, Google, AdSense and a few other ways to market their business to a worldwide audience. What they were making was also amazing, and some of them were really coming on.

CHAIR —That is great. We will certainly have a look at the website, but if you would like to put something in writing that will get it on the record of the inquiry, which would be very useful.

Mr Arnold —Everybody should have a home based business and a website, for that matter, to supplement their income.

CHAIR —I will give Mr Frost an opportunity to fill us in on his involvement in this and then we will go to broader questions.

Mr Frost —As Mr Arnold mentioned, we provide a symmetric broadband service to the Small Business Centre. The download and the upload speed is the same. As Brian mentioned, that also has the capability to scale to 100 megabits per second. That has given them the capability to on-sell or on-provide VOIP and commercial grade web services to all their networks.

As I mentioned, we are a Townsville based licensed telecommunications carrier. Whilst this is not something that we can put into every home and business, that is where a platform like the NBN comes into it. This is an example of we always say, ‘Don’t think about the technology that is used to deliver it.’ It is like you mentioned before; it is based on the outcome and what you are trying to achieve. We use a fixed microwave technology to delivery that service. It is not the technology or what is in the middle to deliver that service, it is what is best required to do the job, and this is a classic example of that.

CHAIR —That is great. I went off the track and interrupted you before. Mr Frost, from On Q’s perspective, what is your experience? We had some evidence before from an IT provider, which you probably heard. What is your experience as a regional business in participating and taking up opportunities in the NBN rollout?

Mr Frost —We are in active discussions with NBN Co. about becoming an RSP. We see it as a great opportunity. We are a little bit different in that we are more what you would call a facilities based carrier. We have actually built our own infrastructure, but nowhere near the extent or the budget available to us compared with something on a national scale built by the government. We use a number of different technologies to best deliver the service with what we can. As I mentioned before, for the Small Business Centre we use a fixed microwave wireless technology. We have the ability to provide ADSL2 and also Ethernet over copper. As a carrier, we wholesale that copper off Telstra, which interconnects with our equipment. We can onsell that. As I said, we are a little bit different in that we do have our own infrastructure.

CHAIR —One of the things that has been raised with us, which you probably heard in our previous discussions, was the issue of an infrastructure company rolling through town. We are interested in how people maximise the opportunities that that provides, and the test sites are about identifying that. One of the things said to us was that small and medium businesses do not really understand the potential and what they might do. It would appear to me that the little Silicone Valley is a sort of microcosm of what you would want to achieve. Mr Arnold, you mentioned that you were interested in doing some partnership with RDA and so on. I am assuming that is the area that you are talking about, if you are getting a broader message out or providing a sample site that people could visit. Can you fill us in on what you are looking at there.

Mr Arnold —Yes, exactly. We would love to be able to showcase what we do at the centre and also run workshops parallel to that that talk about what they might be able to use faster speed connections for. As Mr Moffat said earlier, they are always asking what they can use it for. It is not only business; the Department of Broadband consultants have asked what they can use it for. There are some general ideas out there, but I think it is more about giving entrepreneurs the ingredients and they will bake a beautiful cake. That is the way I think about it. If you give them the opportunities, entrepreneurs are opportunistic and they will find the things. Will they tell you or will they tell other people? Probably not; that is their competitive advantage and that is the way they are going to be making money. I have no doubt that they will use it effectively in the future.

CHAIR —That is useful and very true in terms of the entrepreneurial end. But we have had a lot of evidence, for example, in the tourism sector of a very low uptake of online presence, if you drill much further down beyond the big organisations. They might have a basic website, but they do not have any online booking facility and so forth, which is actually creating some real challenges in the sector. The modern tourist expects good, quality website interaction before they book their accommodation. They expect to be able to go online and interact with the provider. Mr Read, did you have something to add to that?

Mr Read —What you are saying is 100 per cent correct. It is not just tourism but across-the-board. I can only speak for regional Australia, of course. I deal with a lot of small businesses. The problem that I see is twofold. Firstly, there has never been the bandwidth to do some of those things. Secondly, those people do not know who to approach, and when they do approach someone they normally get a lot of technical garbage. I suppose it is not garbage if you are a technical person, but when you are layman and you are running a business you do not really care.

We are a large regional centre. We would like to bring in all the small businesses and the home based businesses and run workshops and say, ‘In layman’s terms, these are the things that are going to very shortly become available. These are the things that you can grasp and this is what you need to do to go forward from this point.’ If we do not do that, I do not think there is going to be a lot of change, except that techos will be saying, ‘Yes, it’s faster!’

CHAIR —Particularly for regional areas, if we want to grow and diversify their economies we will miss that opportunity.

Mr Read —Yes. If you look at nations such as Japan, the States and Europe, they are more advanced because they have taken the mentality to the regional areas and now they can operate as if they are in a city.

CHAIR —Mr Read, it has been pointed out to us that there are opportunities for professional and creative people in regions to be employed on a contract basis internationally, let alone nationally, and not leave their regions—not have that brain drain from the regions. Have you seen examples of that locally where something might be working or could be expanded on or conversely has something been lost?

Mr Read —It is probably a bit in reverse. A real-life example is last Monday my youngest daughter and her mother, my wife, had to go down to Sydney to get a doctor’s report. My wife had a hip operation. She said that he did not really touch her. He just wanted to see if she was standing straight and walking straight. That cost me about $500. If this were in play it would have cost me about 50 cents. People in the capital cities do not realise that this happens to everybody in regional Australia every day non-stop. This technology has a way of changing that. People in rural areas are sometimes a bit blasé because they do not see that from their perspective. We need to be able to talk to them and change it.

CHAIR —I think that health is a really interesting area and one where we have had a lot of evidence. It has to be good-quality video for a specialist to look and see, with movements and so forth, but that is a great example of that. Mrs Prentice.

Mrs PRENTICE —I am just having fun on the website.

CHAIR —Mrs Prentice is caught up in your home based website.

Mrs PRENTICE —Mr Frost, you mentioned that you do this with microwave technology. But with NBN coming online will you be delivering your services down the fibre?

Mr Frost —Yes, we will. Our argument is that the NBN is great, but we need to be honest; if you think of the logistics of getting a piece of glass into every single home and business in the country. They are talking a timeline here of 13 years. That could be subject to a change of government and the deal falling over with Telstra. Our argument is that businesses need the speed now—yesterday—and we are trying to deliver that in any way possible. To answer your question, the NBN is going to be yet another method or form for us to deliver that service to the customer.

Mrs PRENTICE —As the chair said, we are trying to sell NBN by describing the outcomes as opposed to the technology. I noticed Food Fairy Catering seems quite exciting on your site. Can you give us an example of some other home businesses that you are fostering that you would see going retail, so that we can get a feel for the types of home businesses—I love your term ‘mumpreneurs’—that then move up to a retail outlet because you have gone through the incubator process.

Mr Arnold —I can use that same example that I mentioned earlier, but I can give you more specific information. It is NQ Pre-Loved Sports and Schoolwear. They started auctioning things through Facebook, I believe. She also runs a second business from there, Busted Bling—a decorative cast cover.

Mrs PRENTICE —I think that is the sort of thing that helps people understand what you can do.

Mr Arnold —Yes. They started with Facebook. They felt that they should have a retail outlet so they could sell to all the people who were going nuts about their second-hand school clothes. No-one was doing it and they have been quite successful.

I will also add that we have a remote staff member that can access our server that is based in Perth. He runs our events. One of my staff members who is going to retire and move to Brisbane will also work for us. We will get a bit more out of him before he fully retires, and will have remote access to our server. We are also looking at ways with our phone systems to be able to make them extensions of our system at the centre. We are trying to be on the leading edge with all of these technologies and to be a good example.

Mrs PRENTICE —That was a wonderful example.

CHAIR —We had a vocational educational provider that was Queensland based who has a very small head office with all of the tutors and so forth home based, because it is all delivered online. They pool expert tutors from around the country in a similar sort of model. It would be a whole new way of employment that will sort regions quite effectively. It is good that you are leading by example.

Mr Arnold —There is talk of that smaller business also expanding their business franchises for regional areas to sell second-hand clothing through their website. That is a stage that they want to grow to. That is another example of how a business can continue to grow to establish franchises in other regional areas of the country.

CHAIR —This is online presence and franchises, not physical?

Mr Arnold —That is right. It would start there. In those smaller communities of, say, a few thousand population it may not be worth it, but it could be worth it for them to come under their website to sell as well.

CHAIR —That is fascinating. Mr Symon.

Mr SYMON —Mr Frost, you were talking about the fixed microwave Ethernet that you currently have. Do you see a use for that for areas that do not end up being connected to fibre? Is it better than what can be achieved with wireless?

Mr Frost —Wireless microwave is a very similar technology, but I think that the mindset that it has to be fibre is a wrong one. As I mentioned before, it is about delivering a service with X megabits or whatever the capability for the end user, be it a business or home, so I do not think there should be a focus on the technology of it having to be fibre. It is very cost prohibitive in some cases and it may never ever be fully utilised. There are a lot of tools in the toolbox.

Mr SYMON —In one of the areas that is not in the 93 per cent footprint where there is fibre, is microwave Ethernet going to be better in some circumstances than what is proposed for wireless?

Mr Frost —They are proposing a mix of satellite and wireless. It is definitely going to be a better technology than satellite. Satellite is restricted by the rules of physics in that the latency is increased because you are shooting a long way up.

Mr SYMON —It is a long way up and a long way down.

Mr Frost —That is exactly right. That poses a number of technical challenges. It is probably going to be a better method than satellite. The wireless that they are proposing is basically fixed microwave. It is a very similar technology.

Mr SYMON —Is there a distance limitation on the microwave Ethernet you are using at the moment?

Mr Frost —There is. It depends on the configuration and the equipment. We can do a link-up to several hundred kilometres if required.

Mr SYMON —Does that reduce your bandwidth?

Mr Frost —No, it does not in most cases.

Mr SYMON —So, for many smaller towns it could be a valid option going forward, if it is a better service than can be provided off a proposed wireless solution?

Mr Frost —Very much so. Obviously satellite is definitely going to be the final option. NBN Co. is proposing to spend quite a significant amount of money launching satellites and I think that may be better spent elsewhere.

Mr SYMON —There will still be some areas where that will be the only option.

Mr Frost —That is exactly right. If you are on a couple of thousand acres in the middle of nowhere, running fibre to the farmhouse is going to cost hundreds of thousands of dollars.

Mr SYMON —The answer is that we cannot afford it?

Mr Frost —That is exactly right and it potentially will not be utilised, because there are other technologies that can fit the bill.

Mr SYMON —With the incubator that you have set up, how many users do you have on that current network?

Mr Frost —That is probably a question for Mr Read. We are just the ISP. We are supplying the connection into the building.

Mr Arnold —Fifteen of the 35 businesses. Some are still on plans with Telstra and we are still making that transition over to 100 per cent usage of the connection. Anybody new coming in is required to use that connection, because it saves them money at the end of the day and we generate some revenue to invest back in, say, our training. Not everybody is connected to it at the moment, but every unit is connected.

CHAIR —One of the issues raised with us in Tasmania was that with respect to the actual 15 per cent of retail take-up part of the reason for that figure was that there had been a very aggressive campaign by the existing providers to sign people up to two-year contracts, once it was identified as a trial area. People were saying, ‘I’m now tied into a two-year contract so I have to wait before I can sign up with the new product on the NBN.’ How many small businesses you are dealing with are in the trial site and have you had any feedback about those sorts of issues locally?

Mr Arnold —No, but we are obviously not in the trial site.

CHAIR —I wondered whether some of your business were.

Mr Arnold —No, I do not have any specifics.

Mr Read —I deal with a lot of small businesses around town. I do not think I would be lying in saying that most people do not know. It is not being promoted correctly.

CHAIR —The other problem was that the existing providers were signing people up to existing services for another two years to avoid their having the option of the new service on the NBN when it was offered. Mr Frost, have you seen that?

Mr Frost —As Mr Read said, that is an education thing in that signing up to the NBN is NBN Co. putting a box on the side of their wall and the fibre in. That does not commit them to having to buy a service. They can commit to a service with a provider for X amount of years, but they can still get that box put on the side on their house.

CHAIR —Their frustration was when the retailer followed NBN through and offered the new fibre. They said they could not get it because a month ago they had signed up for a two-year service with an existing provider.

Mr Frost —I think that is a little bit deceiving on their part.

CHAIR —Have you heard of that sort of activity?

Mr Frost —We have not seen that activity yet.

CHAIR —I just wanted to clarify that, because it was raised in Tasmania that people were frustrated that they wanted to buy the new retail product but they were locked into these two-year contracts.

Mr Frost —There was a lot more publicity surrounding the rollout in Tasmania. Hence the reason that may have attracted some interest from the service providers.

Mr SYMON —You mentioned that your tenants in the incubator use your service. Can you give us an indication of what they save by having that instead of, let us say, a Telstra provided service?

Mr Arnold —We charge $60 a month for the connection and then it is about $20 a month for their VOIP. That usually covers most of the expense associated with them making phone calls.

Mr SYMON —So, that is all their data and phone calls?

Mr Arnold —Data and phone calls. It is $60 to us. It is a way of us generating revenue not only to pay On Q for the connection, but we employ the trainee, as I said. On our phone bill I know that we are paying $200 a month, whereas with Telstra we were paying about $1,000 before we switched over. The connection costs us more and it is still costing us about the same, but we have provided the savings to our tenants.

Mr Frost —VOIP is continually looked at as a method to save money on phone calls. Whilst that is true, with a lot of small to medium business we see that they are looking at VOIP not only to save money but also to increase flexibility. I believe Mr Moffat mentioned remote extensions, or having teleworkers connecting back into a head office and then being reachable through the PABX. The receptionist can still transfer calls through to them. They can be on their mobile or sitting at home at their desk. Most people instantly think they are going to save some money, but there is the capability there with the technology to provide a lot more flexibility to a small business.

Mr Arnold —We are starting with that now. As I said, our staff members in Brisbane and Perth will be run through a PABX. That is what we are looking at right now.

Mr SYMON —Thank you.

CHAIR —It sounds like you might have a great demonstration model. One of the recommendations that we are looking at is to look for demonstration sites so that people can see what the potential is. It sounds like you are doing a fair amount of the capacity within the structure that you have set up there, which is a good example of that. You talked about both Aboriginal businesses and social enterprises. One of our criteria is the issue of inclusion and participation. Mr Arnold, can you give us a bit of a picture about what is happening in that part of the businesses that you are running and the community social enterprise?

Mr Arnold —We do a fair bit of work on Palm Island. I spend a fair bit of time there. We have not been over for a while, but we have been helping people to get businesses started. We are looking at some IEP funding to have a local based on Palm Island who will provide guidance to help people to start small businesses. A lot of them are tourist oriented.

CHAIR —Can you give us a picture of what they are?

Mr Arnold —Yes. One in particular is a bush camp. A couple want to have people come to the camp, have a variety of different experiences—fishing, spearing and history. There is a lot of history on the islands. You may not know Phantom and Punishment islands. It would be about tours. There could be more than one family running these types of tours. They might have their own area and the tourists can go around and experience their special area and what they do. We also have a strong connection at the centre with involvement with a number of Indigenous groups—Manbarra, Wodja, Gudjuda. There is BARK, which is Brothers Act of Random Kindness. Binnacle is based there.

CHAIR —What is your involvement with those organisations?

Mr Arnold —I have been asked to be a director on the board of BARK. We provide guidance like we would any of our tenants, because we are a social enterprise at the end of the day, too. We are very entrepreneurial and we are trying to impart that to those organisations as well, because they are very good entrepreneurs.

CHAIR —Is there any opportunity here? I know that you mentioned the IEP program, but is there anything that you would like to say in terms of your observations about those community and social organisations also being able to best maximise the rollout of broadband as well? We talked about the business focus, but the community capacity building is important too. They have your organisation to go to. What is your view of how best to connect them to the expertise they need to discuss what outcomes they might want to achieve and how to get there?

Mr Arnold —It is through us. They feel comfortable at our centre. It is the same thing that would apply to what we would do for any of the small businesses in the Townsville community. They are tenants of the facility and we would encourage them and make them feel comfortable to come to any workshops or anything to help that progress.

CHAIR —In a town that did not have an organisation like yours where would you see that happening? Is there a gap there that we need to have a look at?

Mr Arnold —You would be surprised to know that there are 180 BECs across Australia and 100 incubators. We have talked about this at our last conference, that the government, whilst they fund them sporadically, probably do not use them to their best ability or capacity, especially with Indigenous business development.

CHAIR —That is good feedback. We are looking for solutions as well as opportunities, so that is a good suggestion for us. Thank you for your attendance here today. If you have been asked to provide any additional information, would you please forward it to the secretary. You will be sent a copy of the transcript of your evidence, to which you can make corrections of grammar and fact. Once again, that has been really interesting and useful information. In some ways it is probably a pity we could not get out and see your facility, because it sounds very exciting, but we will certainly have a look at the online presence and the home based businesses in particular. We will now adjourn for 10 minutes.

Proceedings suspended from 11.19 am to 11.34 am