We’re broadband sluggards

This story a couple of days ago caught my attention:

AUSTRALIA is two years behind comparable developed countries in broadband services despite an accelerated uptake that doubled subscribers in the past year.

The advent of less expensive entry-level products drove demand, says the annual broadband survey of consulting giant AT Kearney.

However, the uptake of broadband services still lags countries such as the US, Canada and Sweden by a wide margin, it says.

The report says about 10 per cent of Australian households and 30 per cent of small to medium enterprises have broadband access.

Why are we so slow on the uptake? Australians have generally been very early and enthusiastic adopters of new technology, from PCs to mobile phones and VCRs. Why the difference with broadband Internet?

The simple answer is price. Broadband is significantly a little more expensive in Australia than comparable countries (see comment box discussion). And why is that so? I suspect the answer is a single word: Telstra.

Telstra has monopoly control of the great bulk of Australia’s landline infrastructure, and is also a major retail Internet Service Provider. It charges other ISPs fees to use its landlines, at rates which effectively put a floor under the prices ISPs can charge for broadband access. And that floor price is significantly higher in real terms than broadband charges in comparable countries. Telstra claims that the prices it charges are fair, and reflect the cost of maintaining the landline infrastructure, but the international comparisons suggest otherwise.

Telstra also has a major shareholding in the main cable TV operator Foxtel, even though both the ACCC and a recent Senate committee report have criticised this as seriously anti-competitive. Australia is said still to have a significant optical fibre cable overcapacity on the eastern seaboard, as a result of the botched introduction of cable TV in the early 90s and the competitive cable rollout that nearly sent Optus broke. Yet Foxtel makes no attempt to offer broadband internet service via its cable network. Instead, its major shareholder Telstra offers a cable broadband option via its ISP Bigpond, using Foxtel cables where available. But Telstra carefully keeps the price of it cable broadband option in lockstep with its ADSL broadband options, to avoid undercutting its own market.

In a normally competitive situation, you would expect Foxtel to be offering its own broadband Internet plans at significantly lower prices, because it can do so using existing under-utilised TV fibre optic cables at a very low marginal cost. Moreover, Foxtel/Murdoch is one of the world’s largest entertainment and news content providers, so you would expect it would make commercial sense for it to multiply the options for delivery of product to customers. Video-on-demand is surely the way of the future, and expanding domestic broadband connection penetration is the way to achieve it. Telstra should be forced to divest its shareholding in Foxtel.

Telstra’s indirect cartel-like control of all other ISPs through controlling the price charged for landline access is even more iniquitous. There are certainly some ISPs (e.g. iinet’s Bliink) that manage to offer some broadband options that are arguably better value for money than Telstra. For example, Bliink’s unlimited download 512kbps option for $49.95 per month is significantly better value than Telstra’s comparable option which costs $89.95 per month. Bliink’s option has a 6GB monthly limit before downloads are cut to dialup speeds, whereas Telstra’s limit is 10GB, but the great majority of customers will seldom if ever exceed 6GB, so Bliink is much better value for money.

In most other respects, however, other ISPs are forced to charge much the same as Telstra. Certainly no-one as far as I know has been able to undercut Telstra’s entry-level ADSL broadband price of $29.95 per month. But Telstra’s entry-level pricing is itself part of the problem, I suspect. The monthly download limit on this product is a measly 200MB. Now most potential new broadband customers wouldn’t have a clue how much bandwidth they’re likely to use per month, and I strongly suspect that much of the increased interest in broadband (connections have doubled), since Telstra introduced its current pricing regime about 12 months ago, has come from people taking up this cheap entry-level option.

The problem is that almost everyone will drastically exceed 200MB in most months, and end up paying 15 cents per megabyte for every bit of useage over that limit. The only way to avoid exceeding that limit is to avoid using the Internet for listening to music or watching videos, and to strictly ration viewing of static web pages as well. But of course, that completely defeats the benefit of having broadband in the first place. And it’s an impossible discipline to achieve where you have children or teenagers. I suspect there are huge numbers of new Telstra broadband customers who’ve signed on to the $29.95 plan, are now receiving huge Bigpond accounts each month, and are telling all their friends that broadband is a rip-off that they shouldn’t touch with a barge pole.

I reckon there’s a respectable argument that Telstra’s marketing of its $29.95 entry-level broadband option is misleading or deceptive conduct within the meaning of the Trade Practices Act. Be that as it may, I have no doubt that it’s inhibiting the takeup of broadband in Australia. I actively warn CDU online external law degree students against selecting an entry-level plan. Each one of our streaming audio law lectures is about 15MB, and full-time students must listen to at least 16 of them every month. Thus they exceed the entry-level download limit just on that source alone!

Fortunately, there are some developments on the horizon that may well break Telstra’s effective monopoly once and for all in the near future and ultimately lead to a significant price drop, not only for Internet but telephony as well. I’m referring to the imminent (and current in Sydney at least) introduction of wireless broadband by two different systems, iBurst (being marketed by a consortium of ISPs including Ozemail) and UnWired. This article discusses the two different systems.

Both systems operate by retrofitting “non-line-of-sight” wireless broadband receiver/transmitters to existing mobile phone towers, and both therefore offer varying degrees of wireless mobility. More importantly, they do so without relying in any way on either Telstra’s landline infrastructure or Foxtel’s optical fibre cabling. Consequently they won’t be subject to Telstra’s cartel-like price control, and will be able to compete aggressively on price as soon as they’ve installed and covered the cost of installation of mobile phone tower retrofitting in each capital city.

At present, it’s difficult to gauge exactly what prices iBurst consortium members will be charging. As far as I can see, the only one which has so far published a comprehensive price list is Veritel, whose prices range from $79.95 for a 200MB monthly download limit (totally uncompetitive and a complete rip-off for reasons discussed above) to $174.95 per month for a 1000MB limit (barely adequate for most users and even more uncompetitive). If this is typical of the prices iBurst consortium members intend charging, they have Buckley’s chance of achieving significant enough market penetration to pay for the cost of mobile phone tower infrastructure in the foreseeable future.

UnWired looks much more promising. Its initial price structure is roughly the same as existing ADSL and cable broadband options and arguably already superior in some respects: $34.95 for an entry-level product at 256kbps and 300MB monthly download limit; $44.95 for 256kbps with a 1GB monthly limit (a reasonable and affordable option for lots of people); and $89.95 for 512kbps with a 10GB monthly limit.

I reckon we won’t really see the sorts of consumer takeup rates of Europe, the US and Canada until the price of 512kbps and 1.5MBps large download limit options comes below $40.00 per month. It’s only with those sorts of speeds and download limits that people begin experiencing the real benefits of broadband in terms of full-motion video and high quality voice-over-IP services.

Those are the potential benefits that interest me, because my job involves developing and co-ordinating delivery of a full law degree program over the Internet. Many of our third and fourth year skills-based subjects (like Advocacy, Mooting, and Negotiation and Mediation) will be very difficult to deliver via the Internet unless higher speed broadband becomes readily available and affordable over the next 2 years or so. These subjects require visual as well as verbal interaction, and so can’t be taught satisfactorily without reasonably reliable full-motion video interaction. Our major provider Optecs has an excellent range of multi-screen video chatroom products, but they don’t work smoothly enough for our purposes with Internet connections any slower than 512kbps. I’m sure there must be hundreds if not thousands of other corporate and educational users whose plans and productivity are being significantly restricted by the uncompetitive pricing and availability of high speed broadband services in Australia. That’s why I’ve got my fingers crossed for UnWired and (to a lesser extent) iBurst.

PS – If you’re actively interested, iBurst already covers just about all of Sydney, and intends covering Melbourne, Brisbane and Canberra by the end of the year, and other cities progressively through 2005. That’s very impressive, but useless for practical purposes while their prices remain so uncompetitive. UnWired already covers just about all of Sydney as well, but their plans to expand to other cities are vague and non-specific (subject to takeup/demand). If you’re in Sydney and looking for a broadband ISP, I urge you to look seriously at UnWired. You’ll be doing all of us a favour, by encouraging them to expand their coverage to the rest of the country.

PPS – This article from ZDNet highlights Korea’s extraordinary takeup rates of ultra-fast broadband (8Mbps or 6-8 times faster than the fastest available services in Australia). Those sorts of speeds are really exciting, because they allow high-definition full-motion video as well as high quality interactive gaming and various other possibilities. However, Korea has only achieved this through very substantial government investment in infrastructure and subsidies to private ISPs, not to mention the fact that Korea is small and densely populated, making it commercially feasible to rollout the sort of state-of-the-art fibre optic cable you need to achieve speeds like that.

I remain to be convinced that this sort of major government investment in ultra-high speed broadband infrastructure in Australia is either possible or desirable. While high-definition movies on demand and interactive online gaming would be very nice, it isn’t obvious that they will lead to major gains in productivity. Most of the productivity gains from broadband (education and training, video-conferencing and various other voice-over-IP applications) can be achieved with universally-available and affordable 1.5Mbps services. Ultra-high speed broadband will happen in due course anyway where population is dense enough to make it commercially viable. I suspect that will mean only Sydney, Melbourne and perhaps Brisbane, at least until wireless technology develops to the point of being able to deliver data at those speeds.

Update – The extraordinary and grossly anti-competitively incestuous interlinkage between Australia’s major Internet and media coroporations is highlighted still further by this story:

Sam Chisholm has swapped allegiances, dumping his directorship at Telstra for a seat on the board of Kerry Packer’s Publishing & Broadcasting Ltd.

However, Mr Chisholm, who is widely believed to have brought about the demise of former Telstra chairman Bob Mansfield and to have helped block a merger of Telstra’s advertising business, Sensis, with John Fairfax, will remain chairman of Telstra’s 50 per cent owned pay television venture with PBL and News Corp, Foxtel. …

Mr Chisholm, who has years of experience in free-to-air and pay television, also saw no problem in retaining his chairmanship at Foxtel, of which PBL and Rupert Murdoch’s News Corp each hold a 25 per cent share.

“Telstra has the right to appoint [Foxtel’s chairman] … obviously I know what I am doing in the pay television business … why would I stand down in six months time?” he said.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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Sedgwick
2022 years ago

Case in point re Telstra’s disconnect with reality.

(From the blog of Charles Wright who writes for the Green Guide in The Age. He covers the general topic of broadband take-up, and Telstra’s niggardly approach, extensively.)

TJW
TJW
2022 years ago

http://www.whirlpool.net.au/ is the website I usually go to for up-to-date Australian broadband news. They also have an excellent forum.

http://bc.whirlpool.net.au/ is a good way to search for a broadband plan. Checking the forum is a good idea to see what sort of feedback the company is getting.

I’ve been pretty happy with my Swiftel ADSL account (512/128, 4GB on-/4GB off-peak, static) for $59 a month. Still too expensive for a lot of people but I’ve never gone over the limit.

Stan
Stan
2022 years ago

I lived in Sweden last year and there the price of cable Internet was about A$40 a month with unlimited downloads (can’t remember exactly but middle-of-the-road speed 512kbps). No retailer I was aware of had download limits in their marketing plans, just speed. In fact, you only switched ISPs if you were unhappy with speed or reliability issues.

Those packages normally included all the basic cable channels (News and some doco channels) as well as all the free to air channels in Scandinavia (about 10 from memory).

Just how much of this infrastructure was funded by government I can’t rightly say, but the Swedes would not have been shy about doing so. The TV license Nazis also visited the house at least once collecting that indirect tax as well. You end up paying for it somehow. Still, after all your taxes were paid, the consumer came off reasonably well in service terms.

Stan
Stan
2022 years ago

Maybe those TV channels should have been called *free till you’re caught or pay* channels. But you knew what I meant.

Stan
Stan
2022 years ago

I’ve just noticed part of my post is not displayed possibly because some of the symbols I used tricked it into looking like HTML code.

So let me just add that all the plans I saw in Sweden were for unlimited downloads. The only difference in price between competitors was on speed and perceived reliability. I surmise that there was excess capacity in their infrastructure but maybe somebody else has a better explanation.

Stan
Stan
2022 years ago

I did a little research and it seems Sweden might be ridiculously cheap by European standards but it’s only going to get worse…
Swedish tops European broadband affordability
Sweden has the cheapest broadband prices in Europe, according to a new report by IT consultants Quantum-Web.
The study, ‘Broadband Benchmarks Europe’, examined 83 high-speed Internet access providers in 32 European countries and some 730 billing packages.
It found that the average monthly cost of 512 kb per second broadband access was EUR 77. Prices in Sweden were considerably lower, with Swedish operator Bostream offering monthly access at that speed for EUR 27.
The most expensive tariff for 512 kbps was 17 times more expensive than the cheapest, the study said.

You thought that was fast and cheap! Check this out…
Bostream is launching a 26 Mbps broadband service via the telephone line for [Eur 43] per month

The broadband ISP Bostream, Sweden’s largest independent DSL-supplier, is today launching a new broadband service. The new service, called “scream”

Ken Parish
Ken Parish
2022 years ago

Stan

Your cited EUR 77 average for unlimited download 512kbps actually makes Telstra look quite respectable. That converts to $A133 per month, whereas Telstra’s unlimited download 512kbps ADSL monthly account charge is $89.95. The Swedish figure you quote (EUR 27) equates to $A46.92, which is roughly equivalent to what iinet Bliink charges for an apparently similar service. So maybe Australia isn’t doing so badly on price after all. Just shows, you should never trust a mainstream news story without checking the facts for yourself!!!

I’d be interested in direct comparisons with the US and Canada, and for that matter Britain.

Ian
Ian
2022 years ago

Certainly in Darwin, access to broadband is a major issue. I live only 5km from the centre of the city, in Fannie Bay, and yet broadband is only a dream. I’m currently researching *reliable* access to wireless networks as Telstra’s reply to expressions of interest is no reply!

Ken Parish
Ken Parish
2022 years ago

Ian

It depends on whether your local telephone exchange is ADSL-enabled, and how far your home is from that exchange. I think they recently extended the maximum distance criterion (presumably by some technical means) to 4 km from the exchange, so it might be worthwhile checking again whether you can get ADSL if you haven’t done so for a while. I think you can do it online by just keying your phone number in. I have ADSL broadband at Nightcliff, but Jen can’t get it only a couple of kilometres away at Rapid Creek.

I’m sure you’ll find that wireless broadband is not yet available in Darwin. As my post discussed, there are now 2 providers, but both are currently operating only in Sydney. If you’re not in an ADSL area, it may be that your only option at present is satellite, which is (a) expensive and (b) not as fast as ADSL.

yobbo
2022 years ago

Ian: it also helps if you sign up with Telstra, since many Telstra exchanges are mysteriously compatible with Telstra ADSL, but not with other suppliers’. Once Telstra have connected it for you, the exchange is then mysteriously able to function for other broadband carriers too.

So, go for a telstra no-contract connection and then switch suppliers after the first month.

Ian
Ian
2022 years ago

Thanks for the info :-)) I’ve been up Telstra since Oct ’03 but to no avail. I haven’t spoken to Darwin Wireless, an up and coming enthusiasts group, yet but I’ve been lurking at their site with great interest. I’ve got reservations about configuring the necessary security needed as my ?technical skills are limited to spelling the word without using spellcheck.

Stan
Stan
2022 years ago

Ken, I guess you’re right, but remember in the case of cable you generally get some sort of movie/TV/news/documentary package as well. (And don’t get me started about some other things you can see on Scandinavian TV).

Jacques Chester
Jacques Chester
2022 years ago

I’ll second the visit to Whirlpool.

Secondly, you can’t have the local exchange activate broadband directly; the order must come from your provider.

Thirdly, Telstra is being displaced in various parts of infrastructure as the market does its funky thing. Comindico have moved into DSL wholesaling in a big way, carrying traffic from the exchange to the edge of the country. Southern Cross Networks have begun to compete with Telstra on the Sydney-Los Angeles intercontinental uplink. Various smaller firms are starting to compete on local loop in dense markets.

Of course wireless will come in to finish the job, competing with Telstra in its most unassailable position: the last mile. I’ve said before than in a freer, less regulated market, we might have seen companies cooperating in groups to lay utilities in parallel, together. Rather than multiple government agencies or businesses protecting their own bureaucratic turf by digging the damn street up four or five times.

I wrote a paper about how Telstra “should” have been privatised – by selling the infrastructure, rather than issuing shares. I have a PDF of the report. If anyone’s interested, email me. It sparked a hellacious debate amongst Liberal students, that’s for sure! :)

Stan
Stan
2022 years ago

I found this concerning British broadband prices…
LONDON (Reuters) – Britain’s biggest supermarket chain, Tesco, has begun offering broadband Internet access to UK homeowners, becoming the latest entrant in an increasingly cut-throat market for high-speed service.
Tesco said on Tuesday its 512-kilobyte unlimited broadband service was available for 19.97 pounds a month across 700 stores in the UK and on its website, http://www.tesco.com/broadband.
“Tesco broadband … is the cheapest full 512k speed, unlimited service on offer in the UK from any major service provider,” said the supermarket group, which already has a cheaper but slower dial-up service, in a statement.
A comparison of prices provided by Tesco showed that rivals such as BT, Tiscali and AOL charged 24.99 pounds for service with similar download speeds.
By my calculations, 25 pounds =

Ken Parish
Ken Parish
2022 years ago

A quick Google of UK broadband prices suggests that the average price for a 512kbps high/unlimited download account is around

Jacques Chester
Jacques Chester
2022 years ago

“If they’re not advertising to exploit Telstra’s weaknesses, perhaps they deserve to fail.”

Amen.

Factory
Factory
2022 years ago

KP:
Erm, the Telstra has no unlimited ADSL plans, it has an Unlimited* plan which drops down to 56k modem speeds after 10gb has been reached. This type of plan is certainly the best plan Telstra has on offer, but one should also remember that Telstra has only recently introduced this plan, before it was the same cost for 3gb a month, and you would be charged at the 15cents a meg rate when you went over the allowance.
Austrlian broadband only looks good when you ignore these caps, which are rare outside of Australia.

Ken Parish
Ken Parish
2022 years ago

Factory

You’re probably correct, because I saw little or no reference to usage caps when checking rates in other comparable countries. Pretty well all other Australian ISPs have similar charging structures though i.e. they all impose similar usage caps. But that may well be because of Telstra’s landline charging regime discussed in the primary post. Nevertheless, a (say) 512kbps account with a 6GB limit is going to be plenty for the great majority of users – I don’t think I’ve ever used that much in a single month. So I still think we can say that Australia’s broadband rates stack up reasonably similar to comparable countries. One might perhaps argue that disincentives to grossly excessive usage are more important in a huge, sparsely populated country like Australia than in Europe, because the cost of increasing the size of the “pipe” would be so much greater on a per capita basis. On the other hand, what is grossly excessive usage? Should we be restraining growth of usage of the Internet for full-motion video and voice-over-IP services, or positioning ourselves to promote and expand them?

Factory
Factory
2022 years ago

KP:
Ah but then again, perhaps ‘excessive usage’ is what get’s those other countries their large broadband populations?
P2P should also be considered, it’ll chew up bandwidth like there’s no tomorrow.

Ken Parish
Ken Parish
2022 years ago

factory

You may well be right about P2P, but I don’t think it helps your argument. If we make an assumption that investment (whether public or private) in broadband infrastructure makes sense mostly only to the extent that it is likely to boost productivity, it’s difficult to see how P2P file swapping has any substantial economic/productivity benefits. I’m not suggesting that it’s especially negative either – I certainly don’t think it adversely affects the big record companies in the way they claim. But nor could it credibly said to be a productivity driver, so to the extent that high Internet usage is driven by kids swapping music using P2P I wouldn’t be campaigning actively in support of devoting major resources to rapid expansion to facilitate it.

However, whatever the current reality of P2P, I’m much more interested in the potential for video and voice-over-IP, both of which have major productivity-boosting potential.

bailz
bailz
2022 years ago

You can not compare Australian “unlimited” broadband, especially that provided by Telstra, to that which you can buy in Europe. They might claim to be “unlimited” but they are sadly not.

There are very few ISPs that are truly “unlimited” (there’s a few tiny ones in each state) in Australia, as they all use either prioritization or invisible capping to make sure that the top downloads / uploaders cant continue maxing their lines. That’s a practice that doesn’t occur in Europe.

Secondly, Australia’s only hope to getting cheap, decent ADSL is from the DSLAM rollout by some of the larger ISPs. iiNet is investing heavily in their iiSlam rollout and hopefully in a couple of years their network will rival Telstra’s and then we’ll start to see real competition. The fact that Telstra artificially caps the maximum speed you can buy at 1.5/256 when the standard can take 8/1 is pitiful.

Telstra are also dragging their knuckles on the ADSL2/2+ trials that other ISPs are after (although afaik the iiSlams are adsl2 compliant) that would allow speeds up to 24Mbit.

bailz
bailz
2022 years ago

Oh, and as a user with 1.5/256 and what you would all consider very high download caps, I look forward to the days when I dont have caps to worry about and I can download at 8Mbit++

yobbo
2022 years ago

I second what Bailz says. Im not a big downloader, but most of mates exceed their “unlimited” caps each and every month.