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A national plan for broadband:speech to the ATUG Regional Conference: Canberra: 15 May 2006.



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Senator the Hon Helen Coonan Minister for Communications, Information Technology and the Arts

Deputy Leader of the Government in the Senate

A national plan for broadband

ATUG Regional Conference

Canberra

Monday 15 May 2006

Thank you Rosemary [Sinclair, Managing Director ATUG] for that kind introduction and for the invitation to participate in this conference.

Introduction It is time for Australia’s communications infrastructure to take the next leap forward.

High speed networks, multi-megabit services and next generation broadband are the key to our future economic and social prosperity.

The application of ICT across the economy will underpin improvements in our productivity.

But as technology changes so rapidly the definition of broadband and how best to deliver it has become what one recent report called ‘ a moving target’.

It is a journey, according to the International Telecommunications Union, of ‘ever increasing bandwidth’ and the challenge as a nation is how best to secure critical infrastructure that will remain relevant in the broadband race.

Across the world, comparable economies are grappling with how to blanket their nations with the infrastructure needed for high speed networks.

This is particularly evidenced in Canada, the country with the most similar geography and population density as Australia.

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Vigorous competition between telcos and cable companies across most larger centres in Canada has driven the rollout of competing infrastructure and impressive broadband uptake.

Australia is catching up quickly and now sits only eight percentage points behind Canada on the OECD league table.

This has happened in a short space of time as competition intensified in the Australian market and competing infrastructure, particularly wireless broadband and alternative DSLAMs, have been rolling out across the country encouraged by Government incentives to push broadband into non-commercial areas.

While the demography and geography of regional and rural Australia may restrict multiple, competing infrastructure from being rolled out - I believe we need to promote competitive infrastructure as far as possible into areas where it will be sustainable in the long term.

We also need to support the further development, of broadband infrastructure that is made available on fair terms and conditions to Internet Service Providers, to allow them to compete at the retail level.

This means access arrangements that allow retail providers to differentiate their service offerings to the maximum extent feasible, and therefore offer real choice to customers, whatever technology is rolled out in the future.

The other similarity between the Canadian and Australian experiences is that the Canadian Government is also making significant and strategic investments in broadband infrastructure or subsidising satellite broadband to provide services to non-commercial areas of the country.

In Canada, where Government funded infrastructure has been rolled out, appropriate access arrangements have been put in place to allow competition to flourish.

Similarly with Broadband Connect and other Government incentive programs I am examining a revised model that will promote competition and choice for customers, particularly at the service or retail level.

Achievements In Australia we have distinct challenges in meeting our goal of providing all Australians with world class telecommunications services - not least our vast and varied geography and our scattered populations as well as the lack of well developed competition from a number of cable networks.

Despite these challenges I do not subscribe to some critic’s views that Australia could be fairly characterised as a laggard in the communications stakes.

We have a vibrant telecommunications sector in Australia less than 10 years after deregulation.

We have more than 153 telecommunications carriers, a communications sector worth more than $25 billion and the economy is $12.4 billion larger since we liberalised the market.

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And after $1 billion of investment, we now have broadband being rolled out into the most remote parts of Australia, better communications services for our Indigenous communities, high speed networks connecting our universities and hospitals and improved mobile telephony in rural and regional areas.

Government investment in broadband alone has produced great results for rural and regional Australia: æ over 950 additional exchanges enabled with ADSL equipment - enabling customers to access services up to 1.5 Megabits per second;

æ a large number of new wireless providers offering services, some well into the megabits per second range; æ increased competition in the Australian satellite broadband market has seen prices for two-way satellite service drop as low as $29.95

per month; æ more than 110 000 customers have been connected to either a HiBIS or Broadband Connect Service; and æ more than 700 000 additional premises have gained access to

terrestrial broadband.

Government incentives for improved access to broadband services have been the driving factor behind the rapid increase in broadband take-up in regional areas.

In the twelve months until December 2005 household broadband take-up grew at 137 per cent in regional areas - twice as fast as take up in metropolitan areas which had a 63 per cent increase.

However, we need to build on our decade of investment and reform and continue to ensure that we equip all Australians with technology that can connect them to jobs, education, health services, entertainment and their loved ones.

The $1.1 billion Connect Australia package and the $2 billion Communications Fund provide us with the opportunity to encourage the significant rollout of next generation telecommunications infrastructure across this vast country.

At its core, Connect Australia is about future-proofing regional Australia’s communications infrastructure and extending essential services into underserved areas.

This isn’t about protecting Australians from the future as some have suggested, it is about ensuring as a nation we have the resources, the vision and the industry support for connecting Australia.

But Connect Australia should be seen as more than just a fund for rural Australia, it should be seen as a lever for larger-scale infrastructure roll out in our metropolitan and regional centres.

Therefore, it is critical that the Connect Australia funding is viewed as but one element of a national communications infrastructure strategy.

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Next Steps - Broadband Connect Given the critical importance of broadband as fundamental economic infrastructure - the $1.1 billion Connect Australia funding is a true nation-building investment and will be critical to the future of regional and rural Australia.

An investment of this magnitude requires careful consideration and deliberate planning. But fortunately it is not a journey I have had to travel alone. I have been greatly assisted by the thoughtful and constructive feedback received through the recent public consultation process.

This has reinforced my own view that in relation to the $878 million Broadband Connect program, continuing to rely solely on a per-service incentive payment approach will not likely be the most effective way to achieve our long term access objectives.

The remaining under-served areas and blackspots are now more costly and problematic to address and a per-service approach may not provide the necessary scale to enable providers to roll out sustainable infrastructure.

It is for these reasons that I consider it is time to take a fresh approach. I believe that the best possible use of Broadband Connect is to set aside the majority of the funding to stimulate investment in large scale infrastructure.

This will see sustainable, open and scalable broadband infrastructure beyond the major metropolitan areas into regional centres, and across rural Australia.

This may well involve a mixture of current and emerging technologies to suit the geography and demographics of particular regions - including fibre, copper, a range of wireless technologies, broadband over powerlines, and in the more remote areas, satellite.

Shortly we will be moving to the expressions of interest phase of Broadband Connect. The purpose of the EOI process is to both set out for industry the Government's likely requirements for project proposals, and to seek views from industry about how they could meet these requirements.

The EOI will seek information from the industry about the likely scope and scale of proposals under consideration, both in respect of geographic coverage, as well as the technologies to be deployed and the services to be offered.

We will be seeking to encourage projects of major scale that would address existing coverage gaps in a sustainable way and help connect this country. To achieve the necessary scale may require a collaborative, partnership or consortium-based approach.

Last week, one such proposal emerged with Austar, Unwired and SP Telemedia - Soul proposing the Ausalliance to roll out a national fibre, ADSL2+ and Wi-Max network with the support of Broadband Connect funding.

This is a very welcome and exciting development and bodes well for the EOI process.

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The EOI will also seek proposals that leverage major private sector investment and support from State and Territory governments to extend the benefits of this investment across regional Australia.

Proposals will be encouraged to demonstrate significant infrastructure investment on a purely commercial basis, into urban areas and larger regional centres to ensure that we get the maximum possible coverage.

This will avoid the ‘donut effect’ - with new infrastructure in rural areas funded by the Government, major commercial rollouts in the largest metropolitan centres and nothing in between.

We will also set out in the EOI requirements to provide fair and reasonable wholesale access, in a way that allows competitors, as much as possible, to customise their services and compete on service quality and functionality, as well as price.

This is a critically important area, because while we do not want to put unreasonable wholesale requirements on successful projects, we do want to enable competitors to have the kind of wholesale access that enables them to 'value add', offer high quality retail services and give end-users real choice.

There are obvious linkages that need to be explored between major infrastructure projects that could be funded under Broadband Connect and other elements of Connect Australia.

This would include new mobile phone infrastructure that will be provided under the $30 million Mobile Connect program, and the services-focused projects funded under the $113 million Clever Networks program.

New 3G mobile technologies could equally provide broadband services and the infrastructure rolled out under Broadband Connect could assist with the delivery of essential Government services. It will be important that respondents to the EOI explore these linkages.

For this explicit purpose - the EOI process will be open to all interested parties including telecommunications companies, utilities, infrastructure investment companies, and State/Territory and Local Governments.

Even some rail companies have large fibre assets in regional Australia which may be able to be deployed in an appropriate project.

Following the EOI my intention is to implement, in the second half of this year, an application-based or tender process aimed at funding significant, scalable and competitive infrastructure projects.

While EOI is essentially a market-testing exercise to inform the final application process - it is likely that when I call for applications they will be required to demonstrate:

æ Significant coverage of and improving access in underserved regional areas;

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æ Guaranteed wholesale access to the supported infrastructure on fair and competitive terms and conditions;

æ How they overcome existing bottlenecks or restrictions that limit effective competition in the delivery of regional broadband services, such as accessing cost-effective backhaul services;

æ Scalability to next generation broadband speeds;

æ Significant private sector investment, particularly in more commercially viable regional areas - as well as in urban centres such as Geelong and Newcastle outside the major metropolitan cities;

æ Ongoing viability beyond the funding period; and

æ Links with other Connect Australia program elements as appropriate.

These projects will need to meet the needs of regional Australia, from large regional centres to smaller regional, rural and remote communities.

Given that effective and sustainable competition is a key objective of this approach, the ACCC would be closely involved throughout its development and implementation.

There is already strong support within the industry, and among other key stakeholders, for this approach. I am pleased by the positive feedback that I have received from a range of stakeholders in recent months.

Transitional Arrangements

As we move towards the new Broadband Connect model, it is equally important that we continue to assist people in regional, rural and remote Australia to get access to competitively-priced broadband.

To this end, the current incentive-based model will continue for the next financial year.

However for the next financial year there will be some changes to the current Broadband Connect guidelines, primarily to ensure consistency with the relevant aspects of the Metropolitan Broadband Connect program.

The revised Guidelines for Broadband Connect for the financial year 2006-07 will be available shortly. While I don’t want to pre-empt the outcome of the EOI process, there may be a need to continue the per-customer payment for some areas of Australia throughout the life of the program - for instance in areas where satellite is the only option.

I think it will be a case of looking at what the larger scale projects can deliver and identifying whether there are any remaining gaps and the best means of delivering services to those areas.

A Strategic, National Approach

I believe we have a good communications story to tell in Australia and a strategy - backed by significant Government spending - to achieve national coverage.

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Improved broadband speeds are becoming more widely available in metropolitan areas through ADSL2 and 2+, new wireless technologies, and the extended reach of fibre optic capacity deeper into metropolitan networks.

Promising developments in the more commercially attractive metropolitan markets are taking place which offer variety and choice in terms of speeds and available technologies.

There are already DSLAM networks operating in metropolitan areas at up to 24 Megabits per second.

There is a Broadband over Powerline network run by Aurora Energy in Hobart - and in network trials with other utilities elsewhere - providing commercial services at 12 Megabits per second and the capacity to go much faster.

Silk Telecom’s fibre-optic network already extends through Melbourne and Adelaide. Silk has also rolled out in Geelong, Bendigo and Ballarat in Victoria and is now connecting Port Lincoln, Port Augusta and Whyalla in South Australia.

There is even a wireless network being rolled out by ‘Chariot’ in parts of regional Victoria and Adelaide that will provide a 13 Megabits per second service.

Broadband Blueprint

But is important as we go forward that we take an integrated approach to this investment so Australia can truly aspire to being a world leader in the development, rollout and use of next gen networks.

A number of countries have set clear objectives for their broadband infrastructure going forward - such as the UK’s goal to have the ‘most competitive and extensive broadband network of the G7 nations’.

With a number of commercial infrastructure rollouts being proposed and the Australian Government poised to make its largest ever investment in communications infrastructure - it is timely that Australia has a clearly defined national strategy.

Australia can avoid the problem of a patchy rollout of next generation infrastructure through greater coordination, clear objectives and by the Government effectively using the many policy levers we have at our disposal to facilitate investment.

However, it is clear that we must develop a uniquely ‘Australian’ approach to encouraging infrastructure investment. There is no point in pitching to become the next Korea or the next US - that does not clearly address our unique challenges.

But we can learn from others. What is clear from international experience is that competition is the key to grow the market and foster investment in infrastructure.

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Therefore I have under development a Broadband Blueprint - a national framework for the rollout of next generation infrastructure for Australia both by Governments and by the private sector.

The blueprint will ensure that the roll out of next generation broadband is coordinated across jurisdictions with clearly delineated roles for State, Territory and Local governments that meet the needs of end users.

We need a set of guiding principles to ensure the roll out of broadband meets these aims for Australia to be a world leader in the effective use of broadband.

The Blueprint will:

æ Link the competition regime for commercial rollout with Government investment in uncommercial areas through Connect Australia to ensure that we achieve our national goals of next generation infrastructure - without mandating technologies or providers;

æ Leverage the Connect Australia funding to attract significant commercial investment and extend the network rollouts already proposed in metropolitan areas;

æ Harness State, Territory and Local Government support to better coordinate activity and investment and streamline local planning laws so that the rollout of broadband is accelerated;

æ Guide the extension of infrastructure-based competition through careful planning and mapping - to ensure that the market can make informed decisions with the objective of avoiding unnecessary duplication of infrastructure.

æ Measure the performance of Australia’s next gen broadband roll out, take-up and speed against international best practice;

æ Focus on ensuring that these networks deliver bandwidth capable of delivering the services and applications required by Australian users; and

æ Leverage Clever Networks funding to focus on the roll out of infrastructure to those sectors which will provide the greater economic and social benefits - ensuring that Australian businesses, schools, hospitals, surgeries, TAFE colleges, universities and emergency services have the bandwidth and services that they require.

I will be seeking State and Territory agreement to the Blueprint at the next meeting of the Online and Communications Council in September. The Blueprint will be a uniquely ‘Australian approach’ that takes into consideration the particular challenges we face but to also play to our strengths.

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It will take a technologically-neutral approach - promoting a range of next generation networks utilising fibre, copper, wireless and satellite infrastructure.

For example Fibre-to-the-Node might be the best solution for large metropolitan centres - but it is not an infrastructure that is suited to the sparsely populated outback of Australia.

Focusing disproportionately on infrastructure also misses the major point - it’s how the technology is used that provides the greatest economic and social benefits.

Broadband Banditry

This integrated strategy to make Australia into a leading broadband player is a significantly different approach to that announced by the Opposition last week.

What Opposition Leader Kim Beazley proposed last week is a one-size fits all approach. Picking one technology - fibre to the node - to the detriment of all others and failing to consider the mix of technologies necessary to solve Australia’s unique geographic and demographic problems is a fragmented and short sighted response likely to end in tears.

It completely ignores the current competitive landscape in Australia - for instance, major private sector investment in competing wireless broadband infrastructure from competitors like Unwired, Austar and Personal Broadband would be wiped out in the face of a huge tax-payer subsidised network.

Labor is terribly confused about its proposal. While Beazley has stated that he will roll out a ‘true broadband’ network of 6 Megabits per second, this falls short of his Shadow spokesman’s previous definition of true broadband as only 10 Megabits and above.

But the truly great rip-off behind this proposal is that Labor would be funding something that in many places the market is already taking care of.

Telstra is currently actively considering a Fibre-to-the-Node network in metropolitan areas without any contribution from the taxpayer and at much faster speeds of 12 Megabits per second.

The HFC cable networks that run past 2.5 million homes already provide around 8 Megabits per second, Telstra’s extreme cable runs at around 17 Megabits per second and there are alternative DSLAM networks operating at up to 24 Megabits per second - all faster than Labor’s proposed network.

But we all know Labor has form when it comes to mandating redundant technology. It was only two years ago that a Labor-dominated Senate committee demanded that the Government upgrade the telecommunications network at a cost of around $5 billion to provide minimum dial-up speeds - a technology already redundant at the time the Committee made its report.

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But I believe the most concerning element of Labor’s plan for rural Australians is that Beazley will pay for his new predominantly metropolitan network with your savings - the $2 billion Communications Fund that has been set aside to future proof the bush.

In summary this proposal robs from regional Australia, picks one technology solution that will leave out some Australians and is using taxpayer funding to replicate what, for a large percentage of the population, the market is likely to do anyway.

The Government on the other hand has a well advanced and comprehensive strategy to:

æ stimulate market developments further into regional Australia through Broadband Connect;

æ allow the most effective technologies for each region of Australia to be utilised and to allow infrastructure to develop;

æ meet the significant equity issues that this country faces now and into the future to deliver a fair go for the bush; and

æ develop the innovative use of broadband networks in economically and socially significant sectors like health and education.

Conclusion

We are standing on the threshold of a new era in telecommunications in Australia.

Government, carriers and other key stakeholders now have a real opportunity to make major and lasting improvements to the Australian telecommunications landscape.

I am determined to ensure that this opportunity is not wasted. I look forward to working with you all to make this opportunity a reality.

Thank you.