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Role and potential of the National Broadband Network

CHAIR —I welcome you to today’s hearing. Although the committee does not require you to give evidence under oath, I advise you that 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 from the department. Do you want to make some opening statements before we have a question and answer session?

Mr McGee —Yes, certainly. To provide some context around my role, I am in the digital economy space; I am not in the infrastructure space. I might know about the infrastructure, but I am in the digital economy space. The Department of Premier and Cabinet has the relationship around the NBN build. The digital futures brief is around developing strategies for community, business, government, research and the ICT sector, so we have five streams of strategy for engagement in the digital economy. Over the next two years the NBN becomes a catalyst for change and an opportunity to promote engagement and participation in the digital economy. So our strategies are around business engagement and community participation—what opportunities, what strategies and what social shifts might emerge out of this opportunity? I can run through that in more detail, or I would be happy to take questions around that.

CHAIR —How long has the department existed in this structure? How long have you had this brief? I am hearing from you that this is pre-NBN. Would that be accurate?

Mr McGee —I have been with the department for eight months and this is my first job in government. It emerged in parallel, but there was a conscious decision around what the opportunities are in the digital economy. Because of the time frames for build it is really a participation strategy to say: ‘What can happen now? What are the real issues?’ It is not in the layer 2 physical infrastructure; it is what is it about online engagement that starts to be different about how businesses, in particular, behave?

In the case of the NBN, I think the real focus is on small business. As to large enterprises, in my previous employment I was with the Australian National University. I developed a thriving digital economy over a 10-year period. Large enterprises and government departments have been in the digital economy and fully participating. So this is really an opportunity around what is it about small businesses that we can create a paradigm change? I guess that is revealed in present statistics around the fact that everyone uses the internet for personal use, but their use for business or for e-commerce et cetera is amazingly low.

Tasmania is dominated, like most other jurisdictions, by small business. We are in that 95 percentile of small businesses. It is a small economy in terms of size. There are something like 38,000 businesses in Tasmania; about 36,000 are small, as in having 20 or fewer employees, and 22,000 of those are sole traders. There are about 105,000 to 106,000 people employed. So it is really exposing the opportunities for this move to an online engagement.

CHAIR —We have a particular interest, because what we are looking at is a fibre-to-the-home network, in the level of both telecommuting and home based business. Does your department, or do you know whether the state government, gather or hold data on home based businesses and/or telecommuting?

Mr McGee —No, I am not aware of what it is. The notion of 22,000 sole traders indicates that it would be a fairly high percentage. I was a teleworker for five years when I was working at the ANU. I was living where I am living now but I was working in Canberra so I know that experience in terms of what is possible from a broadband requirement versus what is available.

CHAIR —As a telecommuter yourself how were you doing that? Could you give us a picture of what you were actually doing?

Mr McGee —It was a home office environment. My responsibility was managing the telecommunications and networking service for the Australian National University. I had a team of about 20 network engineers. I was also a director in the information portfolio so I would travel to Canberra about 30 times a year.

CHAIR —What sort of internet connection were you using to try to do that?

Mr McGee —I was on an ADSL2+ connection. I was 2½ kilometres from the exchange. My peak rate was 10 megabits per second, and less than a megabit per second in the off-peak.

CHAIR —As a teleworker would you describe that as being sufficient? Was it maximised?

Mr McGee —There are an array of issues. ADSL2+ is a function of distance from the DSLAM and, therefore, the capability depends on your address. In my case the ability to have symmetrical videoconferencing was pulled back to a 512-kilobits-per-second service. That is like you wave your hand and it blurs the screen, whereas having a VOIP extension off the IP telephony system only requires about 100 kilobits per second. So there are limitations in that capability, whereas in the university there is point-to-multipoint high-resolution videoconferencing. There was very much a differentiation.

The other issue is around contention ratios. If ISPs are operating at about 200 to one, between certain periods of the day I could not even make a VOIP call. In other words, the bit rate was approaching 50 kilobits per second. It is those sorts of service certainties that, if you translate them into a small business environment, are some of the issues that an NBN connection starts to address.

CHAIR —Sorry to take you away from the more official representation you are making here, but I think one of the things we have had is with regional development. Indeed, the rural doctors when they saw us the other day were talking about attracting doctors to rural and regional areas when they may have to deal with professional partners who also need to be engaged with work. Is this capacity to keep a variety of people with professional backgrounds and expertise in our regions and rural areas? You are a living example of that for us, and that is a good piece of evidence.

Mr McGee —And into the current environment, one of the sectors that we manage is contact centres. Tasmania employs about 5½ thousand people in that space—there are about 5,000 call centre agents. There is the start of a move to in-home agents as opposed to in-building agents. One of the large call centres has just done a shift and moved 80 employees. It is trialling an in-home capability. That is an example of where location independence starts to kick in, so the availability and the skills undergo an interesting shift in that environment. That is up in Devonport. There are some interesting evolutions there.

CHAIR —That is a government call centre?

Mr McGee —No. There are maybe 30 or 40 call centres, but five of them are fairly large. They are private companies.

CHAIR —Is the government itself driving a policy agenda around telework? One of the things about telework consistently raised with me is that government should be leading by example but it is actually one of the least flexible, most problematic areas for doing telework. I am interested in your observation on that.

Mr McGee —I think it is not government; it is large organisations in my experience of transiting to find a job and say I am a well experienced teleworker. It is virtually impossible to get a connection in the large enterprises across Australia.

CHAIR —So it is more a function of size than sector for you.

Mr McGee —Yes. Like government, most large corporations say the right thing about teleworking, but it is an experiential thing. Why was I able to telework? Because I said I was going to resign. They wanted me to stay, so it was more in that environment rather than, ‘Hey, I’m living in Tasmania; give me a job at the ANU.’ I think that shift is not as quick as the Gartner Group were predicting.

CHAIR —So, from your perspective in your role with your department looking at economic development, are you looking at policies or proposals for government that might increase the capacity for government to be a leader in this field?

Mr McGee —Not explicitly, but flexible working arrangements are part of the mix. I think it probably heads in the direction of enabling flexibility.

CHAIR —Great.

Mr NEVILLE —We have received evidence that there is poor uptake, albeit in the early stages. Is it part of your role to promote the uptake of the NBN?

Mr McGee —It is. Community engagement is the opportunity.

Mr NEVILLE —And small business?

Mr McGee —Yes.

Mr NEVILLE —What is your take on it at this early stage? For example, the evidence from Scottsdale is that 70 per cent of people have accepted the boxes on their houses. Only 15 per cent have taken up an active link to an ISP. What will the drivers be that will make people want to take it up?

Mr McGee —I think there are two issues. There is the maturing of the NBN retail service provider, RSP, market. Stage 1 Tasmania is described by NBN Co. as a pre-release pilot. Its focus was on build, engineering and how fibre is deployed. I think the lesson learnt is that the RSP space was open but was not pursued; therefore the customer became a second-order participant in the arrangement. You appreciate, too, that Smithton and Scottsdale have ADSL2+ capability. The town radius is about one kilometre, so an ADSL2+ is okay in terms of a download capability.

Mr NEVILLE —It covers most of the town.

Mr McGee —A large proportion of residents in Tasmania are Telstra customers because Telstra has traditionally been the only carrier in town. Telstra is not yet an NBN retail service provider. There are an array of issues and opportunities. Just left to their own devices, the reason to move from an ISP offering a ADSL2+-type service where you can get 10 to 15 megabits per second as a download speed compared to what was initially offered—25 megabits per second but still one megabit up, so it is still very much an asymmetric service in any case. And for what? For internet access. So there was not necessarily a compelling reason apart from the curiosity factor. I am not aware of what the expectations might have been from the various RSP players. It is the RSP space that has the customers, and that was very much an exploratory proposition by Internode, iiNet and iPrimus. It was only Exetel who came in and offered a differentiated pricing model. I think it was iiNet that set a lower price. Internode changed their identical price over the weekend. So there was some price settling. The whole notion of a competitive retail service provider layout is an emerging thing. When we have ready-for-market NBN capability the expectation is that there will be a healthy retail service provider marketplace.

Mr NEVILLE —The department for which you work also has a responsibility for tourism. Do your activities extend to tourism as a dimension of small business?

Mr McGee —Yes. Tourism has been taking the lead in terms of this digital economy engagement over the last 18 months.

Mr NEVILLE —We received evidence that, by comparison with the mainland, the uptake of e-commerce in tourism here is fairly poor. Is that your experience?

Mr McGee —No. Tourism has the highest level of online presence of any sector; it is 70 per cent. The regional average in Australia for small business is around 56 per cent with a web presence and engagement in online activities. There are 2,700 tourism operators in Tasmania, and there are around 700 who do not have a web presence. There has been some interesting work in how you assist in the understanding of online engagement when the broker model of the tourist aggregator is exiting. In other words, if I want to book a holiday then I will go online and find people who are online. This group without a web presence, who have not yet engaged, do rely on passing trade, and they are comfortable with that. I think it is reflective of any sector and its engagement with the digital economy. Our work has been in providing information, tool kits and mentoring to operators who want to get involved because they can see that that is the way business is done. It is an assistance process. That model is something that we now want to extend.

Mr NEVILLE —You say you ‘mentor’ them. How do you do that?

Mr McGee —It is something called a digital coach. People register into a virtual community and have access to a paid professional to provide coaching services. Different coaches have different skill sets and address different levels and different capabilities.

Mrs PRENTICE —Can we see an example of that by going online?

Mr McGee —If you are registered for that community, yes!

Mrs PRENTICE —You said your role was to encourage uptake and educate people on the benefits, so what programs do you have going forward?

Mr McGee —There are a number in the business space, a number in the community space and a number in the research space. What is currently happening is that the state, or my department, is introducing a new economic development plan. We are taking the opportunity to integrate our digital strategy into the small business strategy so that the small business assistance the government currently gives will now incorporate elements of the digital economy as a default. That will then have different layers of access and capability so there can be self-help, online support or this digital coach type capacity.

Mrs PRENTICE —That is for people who are connected already.

Mr McGee —Yes.

Mrs PRENTICE —What are you doing to get the others connected—the ones who are not connected?

Mr McGee —One of the programs we want to look at is to take an NBN stage 2 community and start to engage the business community—the retail sector—and have some intensive interaction on stepping through the process of engagement. One of the lessons we have learned is that the notion of doing a travelling set of forums around the state, where you want to attract small business and explain what is possible, is not terribly effective. Small business operators do not leave their business and come to an hour’s forum at the whim of when the forum is on.

So this requires more intensive processes and it involves creating local regional champions. So the notion of social networking in the physical sense is really part of the strategy: identifying champions, making sure that they are as capable as they want to be and need to be and then allowing that normal social networking process to occur.

Mrs PRENTICE —So that is where we have NBN now: the 70 per cent who have said, ‘Yes, connect it,’ but have not taken the uptake. Given that it was free for them and 30 per cent still did not say, ‘Yes, put it on the side of the building,’ are you looking at a program where NBN is yet to come to town so that people take advantage of the fact that it is free as well?

Mr McGee —It is business assistance for anyone with broadband connectivity. Well over 98 per cent of businesses are connected to the internet and, of that number, 95 per cent have broadband connection, as they currently are. So the issue is not that they are not online.

Mrs PRENTICE —So you are saying that 98 per cent of businesses in Tasmania are connected to the internet?

Mr McGee —These are Australia-wide statistics, and they generally translate across to Tasmania. But there is a regional offset because of the regionality of Tasmania. Whereas the average for Australia is, I think, around 60 per cent of small businesses with websites, in Tasmania it is probably about 55 per cent. So it is the differentiation between the fact that they do email but they do not have a web presence that is the challenge.

Mr FLETCHER —Has the Tasmanian government done any survey work or projections on the likely appetite for services over the NBN?

Mr McGee —No, not that I am aware of. When you say appetite, as in?

Mr FLETCHER —I am thinking, for example, marketing, surveys, focus groups and research designed to determine the propensity of consumers to take a higher speed broadband service.

Mr McGee —What research we have engaged in use with the Institute for a Broadband Enabled Society, out of Melbourne University. They did some work in the precursor to the NBN in Tasmania, the TasCOLT trial. There was a SmartStreet component. That was looking at in-home behaviour and use of the fact that there is broadband. We want to extend our work with them into identifying usage and usage patterns and change pattern. As well as that, as we introduce a program we will have an impact assessment methodology so that, if a program starts, we know the questions we want to ask about the benefits at the other end.

Mr FLETCHER —What is the rate of broadband take-up among Tasmanian households at the moment?

Mr McGee —I think it reflects the Australian average. It is not differentiated by the Australian Bureau of Statistics. It is about to be but it has not been to date. Those figures say that it is around 80 per cent of Australian households have broadband access but around 90 per cent of people above the age of 14 make use of the internet.

Mr FLETCHER —Just to be clear: are you putting to us that the rate of broadband take-up in Tasmania is roughly the same as the national average? Is that right?

Mr McGee —Broadband as it is presently defined. How is it presently defined—256 kilobits per second or better? The availability of ADSL and ADSL 2+ across Tasmania is not as high as it is in the rest of Australia, but the offset is that people are using 3G mobile broadband capability. Broadband access is not a function of remoteness. There are couple of suburbs in Hobart that are about six or seven kilometres from their nearest DSLAM. So the people in Mount Nelson and the upper parts of Sandy Bay make use of 3G.

Mr FLETCHER —I will put the question another way. Of the total number of premises in Tasmania that can receive a fixed-line broadband service, do we know what proportion of those households in fact take and pay for a broadband service?

Mr McGee —That is information that has not yet been collected by the Australian Bureau of Statistics. However, all jurisdictions have now asked that the ABS have something called ‘home use of IT’ and that there will now be a set of digital economy questions and that the sampling and analysis will enable state based information and then regional based information. No other jurisdiction has that information.

Mr FLETCHER —So there was no separate work done by the Tasmanian government to, for example, commission market research on that point before its policy support for the National Broadband Network?

Mr McGee —Not that I am aware of. It is not part of my area of responsibility, so I do not know.

Mr FLETCHER —Does the Tasmanian government or your department have a view as to the sorts of applications that require speeds that are higher than ADSL 2+—say, 10, 12 or 15 megabits per second and the 100 megabits per second that is promised over the NBN?

Mr McGee —The view is not speed; it is need. The scenarios are that certain applications require symmetrical connections, so ADSL is not an appropriate service delivery mechanism for high-definition video consultation, for example. If six megabits per second symmetric is a requirement then ADSL does not meet that requirement.

Mr FLETCHER —There are symmetric versions of DSL, are there not?

Mr McGee —But Telstra does not offer annex M capability.

Mr FLETCHER —What is the Tasmanian government’s view about the requirement for applications to go to a home as opposed to, for example, a medical clinic, GPs’ room or a chemist?

Mr McGee —One of the projects that we are working on is in fact an in-home e-health opportunity. That is an example of leveraging the NBN. I think this will be a ubiquitous opportunity. Personal responsibility for health and personal electronic health records are examples of a couple of federal government initiatives that we are looking at. It is a measured engagement into the home. Our example is medication management and chronic disease condition monitoring.

Mr FLETCHER —Are there any applications there you could point to that need 100 megabits per second into the home?

Mr McGee —I do not think a single application needs 100 megabits per second but I have been in an environment where a gigabit per second to the desktop is the norm and the requirements for over 100 megabits per second have become standardised.

Mr FLETCHER —In the university sector, are you saying?

Mr McGee —Yes, and that tends to be a precursor of what happens in the community. So the bandwidth and the symmetry of connections are around a collaboration environment and the need for visualisation. It is a question then of resolution and how much resolution is required for the particular application.

Mr FLETCHER —Sure. I do not think you need to persuade any of us of that point when it comes to, for example, connection to schools, universities et cetera. What I am trying to get to is that we now have a policy setting under which there is going to be a high-speed connection to every home, or at least every home within the 93 per cent footprint. I am interested in understanding the thinking as to the kind of applications that require that to a home as opposed to, for example, a school, a university or a hospital.

Mr McGee —There are a couple of things there. The incremental cost of not having a gigabit ethernet interface in a GPON environment is about zero, isn’t it? If you have got fibre to the home—

Mr FLETCHER —That is the policy question: should you have fibre to the home or not?

Mr McGee —Ultimately that is the endgame. Fibre to an end point is always the endgame. It is a suite of applications and services that will become available once the endgame is achieved. This is an infrastructure setting that has a 30- to 50-year life cycle. You are saying at what point of time that should happen. That is not for me to debate, but now that it has happened what it immediately opens up is that the limitations that ADSL has, and they are very acute in Tasmania because of that regionality, become mitigated and therefore that ubiquity of service delivery becomes available so that you can have, for example, an in-home e-health opportunity anywhere. It is not 100 megabits per second but the fact that you have got a certainty of service from an infrastructure capability.

Mr FLETCHER —Just the last question to make sure I am getting that right. I think what you are saying is that it is not a particular speed but it is ubiquity and the fact that every household has ubiquitously available a certain speed and therefore people developing applications, for example, can know that that is there. Is that a fair summary?

Mr McGee —That is a true comment and that is the experience we have had in the ICT sector, to say, ‘Why would I develop an NBN-capable application, let alone even ask what is an NBN-capable application?’ But as soon as you open up that opportunity then that development is taken and therefore there is a progression on what might happen into a home.

Mr SYMON —I would like to go back to this infrastructure question about building for yesterday, as it were, versus building for the future. As you say, there are a lot of unknowns there. But I would also like to think that if we are building a large network for the future we try as best as possible at the moment to actually have that expansion in place. If a network was not built with fibre to the home and was built by, let us say, wireless to that 93 per cent, can you see a time, with your knowledge of what you are doing with the department at the moment, where something like that would not be sufficient? It is hard question, I know. It is looking into the future.

Mr McGee —I started my career as a radio-frequency design engineer, so I do not know a lot about wireless. I think that the committee needs to differentiate mobility from wireless. If you are talking wireless as in a well-designed fixed service—

Mr SYMON —I am not talking about WiFi here.

Mr McGee —or 4G mobility. The issue is that quite a relatively high proportion of Tasmanian premises will be connected by wireless, and the community’s knowledge that it is a well-designed fixed point to multipoint capability is important. It is a capability that is fourth generation, whether it is LTE or WiMAX 02.16m. In other words, the base station capability is a gigabit per second. If the points to multipoints are well managed, the notion of increasing bandwidth in a wireless environment can occur. But to what extent do you have wireless versus fibre as the two options?

Why is wireless limited? Wireless is limited because of channel allocation. It is a real estate issue in an open, shared environment. Personal area networks operating at 60 gigahertz—which can occupy a room—will support a gigabit per second, because of the physics and the channel allocations around that. Deploying wireless as a 100 per cent solution, what do you end up with? You end up with a lot of fibre—you end up fibre to base stations. So it is the incremental cost from a point to multipoint wireless compared to deploying that incremental coverage of a GPON fibre environment.

From what I have seen in terms of the NBN implementation study, they had graphs on cut-off points. For example, if it was 90 per cent fibre or 93 per cent, what were the price differentials between the increasing price of fibre compared to the increasing price of wireless compared to a fixed price of satellite? All those break points were around $8,000 per premise for when wireless kicked in over fibre at the 93 percentile. The lowest fibre-to-the-premises cost was about $1,800. The 50 percentile was $3,000. So I think when you do your sums, you are going to come up with fibre anyway.

Mr SYMON —So the last mile is very important.

Mr McGee —The lowest wireless price is about $5½ thousand. I think the argument is more around fibre to the node and the last X distance which is not fibre.

Mr SYMON —With fibre to the node you are going to push that problem down the line but you are still not going to have the full delivery to the door, are you?

Mr McGee —The end game is fibre to the end point—the a mobility solution can become available.

Mr SYMON —Inside the household and—

Mr McGee —They are very complementary. I think we will want to walk around wirelessly. So it is the infrastructure that can access and support that.

Mr SYMON —But it is the trunk infrastructure, if you like—it is the big conduit that takes it there that needs to be set as fibre. I have one last question. In terms of houses that do not get fibre or households that do not get fibre compared to those that do, will there be any limitations that you are aware of with their interaction with the digital economy?

Mr McGee —No, I think it is how it is seen and how it is played. If you are a household and you get an NBN fixed wireless 4G service where you can peak to 100 megabits per second, how many IPTV channels can you support from download? There is a comparative limitation to the peak rate from fibre of one gigabit per second. But some of the strategies in small business are about cloud computing. The change driver is about retailing collaboration. As a retailer online you can have a personal engagement with a buyer, a customer. If you are in a wireless world or a fibre world, the most likely scenario for a small business will be a cloud model, so your web service will be not on your premises. So it is really that interconnectivity into your cloud that the customers then come at. There are ways and means but there will always be differentials. The wireless growth capability will tend to keep pace and the channels just become wider. But the real issue is satellite. Satellite is a limiting service.

Mr SYMON —Because of latency?

Mr McGee —No, because of how much can the satellite transponder carry. Latency is an issue but the main thing is transponder capacity.

Mr SYMON —Thank you very much. It has been most informative.

CHAIR —Thank you, John. Thank you for your attendance here today. If you have been asked to provide any additional information, 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, thank you very much for your participation today.

Mrs PRENTICE —Can we get more information on those programs of support and encouragement?

CHAIR —If you have some promotional material to provide to the committee, that would be very useful.

Mr McGee —I think so.

Resolved (on motion by Mrs Prentice):

That this committee authorises publication, including publication on the parliamentary database, of the proof transcript of the evidence given before it at public hearing this day.

Committee adjourned at 3.07 pm