The Queensland Government
submission
to
the Senate Inquiry into the
Australian Telecommunications Network
“As a country
we should aim to be more than
adequate!”
August 2002
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
1
The Senate referred the inquiry into the Australian Telecommunications Network to Committee and sought
its report by 21 February 2003. The terms of reference 1 are:
(a) the capacity of the Australian telecommunications network, including the public switched
telephone network, to deliver adequate services to all Australians, particularly in rural and
regional areas;
(b) the capacity of the Australian telecommunications network, including the public switched
telephone network, to provide all Australians with reasonable, comparable and equitable access to
broadband services;
(c) current investment patterns and future investment requirements to achieve adequacy of
services in the Australian telecommunications network;
(d) regulatory or other measures which might be required to bring the Australian
telecommunications network up to an adequate level to ensure that all Australians may obtain
access to adequate telecommunications services; and
(e) any other matters, including international comparisons, which are deemed relevant to these
issues by the Committee.
1
http://www.aph.gov.au/Senate/committee/ecita_ctte/tele_network/Index.htm
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
2
Executive Summary
Australia is at a crossroads. We can choose to keep up with our first world peers or
choose to be adequate. The time to make that decision is now.
To date the focus on telecommunications adequacy has been an attempt to show that
"she'll be right mate" and as a result it is being argued we as a country can afford to lose
control of a public asset that is central to Australia's future success.
As a country we have not agreed what future we want or need. For convenience, this
future is being defined in terms of today's technologies and of low-level notions of
adequacy. Australia's international competitors are not doing the same.
This submission provides recommendations, which are hoped will provide the
Commonwealth Government with guidance on this important issue. They are listed
below as they form a summary of this report.
1. A plan is needed which maintains and enhances Australia’s position regarding
telecommunications use among its first world peers. This plan needs to take a holistic
view of telecommunications making best advantage of all tiers of government as well
as the infrastructure and content industries.
2. Any consideration of the sale of Telstra must be deferred until the Commonwealth
Government can establish a telecommunications competition regime, which supports
the long-term interests of Australian’s and the effective operation of the share market.
3. Statistical reports for the Customer Service Guarantee need to reflect real service
levels in relation to business and social needs, as straight statistical analyses can be
misleading.
4. Mobile services cannot be considered adequate while all bounded localities and major
highways and strategic roads do not have full mobile coverage. Also, mechanisms
are needed to provide cost effective roaming between carriers' networks.
5. A choice be made to adopt converged digital solutions in the future to maximize
utility, minimize overall costs and make Australia a more competitive country,
6. Australia's definition of adequacy for data services include an ability to carry a wide
range of content, including television. This definition needs to focus on functionality
rather than pure bandwidth and needs to be reviewed on a regular basis.
7. Unnecessary legal constraints on the transmission of content be removed.
8. Further support be provided to the development of Australian digital content,
including applications, to improve efficiency and effectiveness of Australians.
9. Use of converged solutions be fostered to provide a sound basis for the uptake of
broadband services.
10. Regular public reporting is needed for the “000” emergency service to provide the
public with a level of confidence that calls to 000 will be effectively carried to State
provided health and emergency services.
11. Substantial funds need to be allocated to ensure our education, research and health
sectors continue to be leading users and developers of high bandwidth applications.
12. Australia needs to find a solution, which results in appropriate investment in
infrastructure, while facilitating competition of value added services. This solution
needs to combine the efforts and assets of all levels of government.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
3
13. The full Customer Access Network be declared not just the copper wire.
14. Any future subsidization of telecommunications projects needs to support equity as
well as converged infrastructure solutions.
15. The Commonwealth Government allocates regular budget funding to manage its
telecommunications responsibility. Items would include funding for mobiles and
broadband services.
16. The Commonwealth Government institute a range of measures aimed at improving
the competitiveness of the telecommunications industry in Australia.
17. The Commonwealth Government enhance the Customer Service Guarantee and the
process for managing the Universal Service Provision to provide converged services
and all existing telecommunications services in the future.
18. Australia needs telecommunications which are more than adequate to remain
internationally competitive.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
4
Table of Contents
1. Introduction ................................................................................................................. 7
1.1.
The cost of competition ...................................................................................... 8
2. Network Capacity to deliver adequate services to all Australian’s .......................... 10
2.1.
Adequacy of Standard Telephone Services ...................................................... 10
2.2.
Adequacy of Mobile services............................................................................ 11
2.3.
Adequacy of Data Services ............................................................................... 12
2.4.
Adequacy of Television and Radio Services .................................................... 14
2.5.
Adequacy of 000 Infrastructure Services .......................................................... 15
3. Network Capacity to provide all Australians with reasonable, comparable and
equitable access to broadband services. ............................................................................ 16
3.1.
Backbone Network............................................................................................ 17
3.2.
Customer Access Network (the famous last mile) ............................................ 18
4. Current and Future investment requirements to achieve adequate services. ............ 20
5. Measures needed to achieve adequacy ..................................................................... 21
5.1.
Competitive measures ....................................................................................... 21
5.2.
Changes to the Universal Service Obligation and Customer Service. .............. 22
6. Other Matters ............................................................................................................ 23
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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1. Introduction
Adequate2 –
Equal to the requirement or occasion; fully sufficient, suitable
or fit.
The Besley Inquiry concluded3, "Australians generally have adequate access to a range of
high quality, basic and advanced telecommunications services comparable to the leading
information economies of the world".
The question we must ask is, adequate for what purpose and for how long?
Other nations look at telecommunications as an enabling infrastructure for future
economic and social development. Unfortunately at a national level, the major focus has
been how can we maximize the profits from the sale of our telecommunications asset
once adequacy of services can be asserted. Another major question is how will
adequacy be maintained and how will our definition be evolved over time?
The simple reality is that service levels are improving, but not universally, and Australia
is slipping further behind its first world peers4.
To date Commonwealth’s programs to improve services have been tightly targeted, often
requiring significant community participation and pain to achieve much needed service
improvements. Networking the Nation and the Television Black Spots are examples of
such programs.
Changes to Australia's telecommunications infrastructure will take a while to take hold.
The press releases produced by the Commonwealth detailing multimillion-dollar
expenditures are only the start of a very long implementation for many projects.
Adequacy can only be measured once sustained improvements have been achieved.
Either individually or collectively Australians’ cannot afford to fund the separate services
(eg phone, Internet and Television) offered by the telecommunications industry.
Collectively these services just do not provide sufficient value to justify expenditure of
scarce discretionary funds.
Australia needs to set a unifying vision that brings telecommunications into perspective
and guides both industry and the consumer alike.
A plan is needed which maintains and enhances Australia’s position regarding
telecommunications use among its first world peers. This plan needs to take a
holistic view of telecommunications making best advantage of all tiers of
government as well as the infrastructure and content industries.
Delbridge A, Bernard JRL, Blair D, Peters P, Butler S; “The Macquarie Dictionary – Second Edition”; The Macquarie Library pty
ltd; 1992; p 19.
3
Telecommunications Service Inquiry; “Connecting Australia”, Commonwealth Department of Communications, Information
Technology and the Arts 200o, p10.
4
http://www.oecd.org/pdf/M00020000/M00020255.pdf
2
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
7
1.1.
The cost of competition
After ten years of competition, 99 percent of revenue5 is concentrated in only eight firms.
Telstra earned 76% of this revenue. Optus Mobile Pty Ltd and Optus Networks Pty Ltd
combined represent the next largest company with just over 14% of the total revenues.
The remaining five firms earned just over nine percent of revenues.
Of these eight firms, One-Tel has gone bankrupt; and Optus (Mobile Pty Ltd and
Networks Pty Ltd) and AAPT have been the subject of takeovers by Singapore
Telecommunications and Telecom New Zealand respectively.
Never the less the Commonwealth Government continues to advocate competition as the
way forward.
Competition is having a savage impact on the share market.
Of the 67
telecommunications firms currently listed on the Australian Stock Exchange6 most have
substantially lost share value. 95 % of equipment and service providers, 75% of Network
Operators and 92% of the "other telecommunications" sector have made losses in share
price averaging over sixty percent since listing, or over the past ten years, which ever is
shorter.
The table below numerically summarises this result. Further details relating to the
performance of specific firms are listed in Attachment 1
Industry Sector
Number of firms
Equipment and Services
Network Operator
Other Telecommunications
46
8
13
Number of firms who have lost
substantial share value since
listing or over the past ten years
which ever is shorter.
44
6
12
The "tech bubble" provides an explanation for this phenomenon. A preferred explanation
is the Australian telecommunications market is fiercely monopolistic with few real
national competitors. It is considered further concentration of industry revenues, overall
declining share growth and low or no dividends will continue to emasculate the industry
and reinforce Telstra as the dominant player.
Telstra as the Universal Service Provider funds $215 million of the total estimated
Universal Service Obligation cost of $280 million7. This contribution is more than the
revenue earned by all but the five top carriers. The simple scale of this contribution
limits the extent to which other carriers can provide an alternative Customer Access
Network. The table below summarises the details of major contributors.
5
Based on Australian Communications Authority Eligible Revenue Assessment 2000-2001.
Based on 2000-01 financial data available on the Australian Stock Exchange web site.
7
Based on Australian Communications Authority Eligible Revenue Assessment 2000-2001.
6
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
8
%cumulative
total
% totall
(2) The
eligible
revenue for
the financial
year is
$15,668,077,205.00 $215,200,911.79
$1,493,650,378.00 $20,515,275.68
$1,435,164,437.00 $19,711,971.76
$873,687,500.00 $12,000,090.64
$349,080,452.00 $4,794,617.14
$159,585,252.00 $2,191,902.13
$146,259,122.00 $2,008,867.84
(3) The levy
debit under
section 67 of
the Act
Carrier
TELSTRA CORPORATION LIMITED
OPTUS MOBILE PTY LIMITED
OPTUS NETWORKS PTY LIMITED
VODAFONE PACIFIC LIMITED
AAPT LIMITED
ONE.TEL GSM 1800 PTY LIMITED
PRIMUS TELECOMMUNICATIONS PTY
LIMITED
HUTCHISON TELECOMMUNICATIONS
(AUSTRALIA)
76.60%
7.30%
7.02%
4.27%
1.71%
0.78%
0.72%
76.60%
83.91%
90.92%
95.20%
96.90%
97.68%
98.40%
$1,689,766.24
0.60%
99.00%
$20,453,345,825.00 $280,926,537.00
99.00%
99.00%
$123,026,374.00
Information released by the Australian Telecommunications User Group (ATUG)
indicates Telstra earns over 95% of the industry profit 8. This is a sad indictment on
competition and the telecommunications industry generally. In positions of similar
market power, the United States Government has used Anti-Trust legislation to break the
company into appropriate parts to reinvigorate competition. The Commonwealth should
be considering a similar course of action with Telstra.
Should Telstra be fully privatised, it will represent over 9% of Australia’s equity market
and will be the largest firm in Australia in terms of equity capital.
It is clear that Telstra now intends to capitalize on its market power and maximise its
revenue stream. It is suggested the twelve-month contracts for Internet access, selective
bundling and price increases are all intended to lock-in customer revenues and limit
opportunities for competitors.
It is recommended that any consideration of the sale of Telstra be deferred until the
Commonwealth Government can establish a telecommunications competition
regime, which supports the long-term interests of Australians and the effective
operation of the share market.
8
http://www.atug.com.au/article.cfm?newsid=129&newstype=1
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
9
2. Network Capacity to deliver adequate services to all Australian’s
Telecommunications Service Inquiry research9, indicates Australians who live in
metropolitan and regional centres enjoy good telecommunication services and are
generally satisfied with them. However, a significant proportion of those who live and
work in rural and remote Australia have concerns regarding key aspects of services,
which, at this stage, are not adequate. Their concerns relate primarily to:

the timely installation, repair and reliability of basic telephone services;

mobile phone coverage at affordable prices; and

reliable access to the Internet and data speeds generally.
2.1. Adequacy of Standard Telephone Services
The statistics in the March 2002 Telecommunications Performance Monitoring Bulletin10
when taken on face value look promising. An extract of the Queensland Statistics is
contained in Attachment 2. Many of these statistics show satisfactory performance
against the Customer Service Guarantee of at least 95 percent or higher. The statistics
also show higher performances in rural and remote areas.
In other words, Telstra demonstrates it can meet relatively undemanding standards.
Unfortunately the Customer Service Guarantee defines a differential service, which does
not adequately reflect the real service levels required by consumers. Satisfaction is based
on low standards which favour carriers rather than consumers. More remote Australians
have a to be satisfied with worse service. The table below shows guaranteed connection
times that are between three and six times worse; and repair times three times worse for
Australians living in remote locations.
Location
Urban11
Major rural13
Minor rural14
15
Remote
Connection time
Available cabling (capacity)
or other infrastructure that
carrier can use
Within five working days of
customer request
*Within 10 working days of
customer request
*Within 15 working days of
customer request
Within 15 working days of
customer request
Time of repair
No available cabling
(capacity)
or
other
infrastructure that carrier
can use
Within one month of
customer request
Within one month of
customer request
Within six months of
customer request
Within six months of
customer request for
new applications
Within one full working day12 after
being notified of a fault
Within two full working days after
being notified of a fault
Within two full working days after
being notified of a fault
Within three full working days after
being notified of a fault
* reduced from 30 working days in June 2001
The Untimed Local Calls in Extended Zones tender and the recommendations in the
Telecommunications Service Inquiry when fully implemented have the capacity to
substantially improve the adequacy to telephony services in Australia.
Telecommunications Service Inquiry; “Connecting Australia”, Commonwealth Department of Communications, Information
Technology and the Arts 200o, p10.
10
http://www.aca.gov.au/publications/performance/2002/csg032002.rtf
11
Areas in Australia with a population greater than 10,000 people
12
Note: working days are Monday to Friday and do not include public holidays
13
Areas in Australia with a population between 2,500 and 10,000 people
14
Areas in Australia with a population between 200 and 2,500 people
15
Areas in Australia with a population less than 200 people
9
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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As it will take some time for these changes be effective and statistically valid, it is
difficult to argue services have substantially improved to the point they could be certified
as adequate.
Statistical reports for the Customer Service Guarantee need to reflect real service
levels in relation to business and social needs, as straight statistical analyses can be
misleading.
2.2.
Adequacy of Mobile services
There have been improvements in mobile phone coverage in Australia. Information
provided to the Australian Communications Authority16 indicates, a large proportion of
the population, is now serviced by one or more mobile phone carriers. This information
is summarised in the table below.
Carrier
Telstra GSM
Telstra CDMA
Optus GSM
Vodafone GSM
Hutchison CDMA
Period ending March 2002
Population covered by
network per cent
95.40
97.46
94.30
92.00
96.00
While appreciating the close association between population and profitability, the real
measure of adequacy in an Australian context needs to be geographic coverage. In a
recent press release, Queensland Minister of Innovation and Information Economy Paul
Lucas summarised the difficulties with mobile phone coverage in Queensland. He
indicated:
"I'm not complaining about the coverage of our towns and cities, I’m talking about
mobile phone coverage of our major western highways,”.
“Talk to the 60,000 tourists who travel to Birdsville and through the Diamantina
Shire each year about the gaps in mobile coverage on the highways.
“Ask the businesses who have to use our western highways to travel to Mt Isa,
Charleville and Longreach.
Additional geographic coverage has been recently announced through the federally
funded “Regional Mobile Phone Program”. Announcements indicate that ten small
Queensland coastal communities and three western towns will shortly benefit from
mobile coverage as will Queensland roads. Coverage on Queensland highways will be
extended by a total of 817 km spread across 11 highways.
While this expansion of coverage is most welcome it represents an average of just 74 km
per highway. Attachment 3 indicates the vast expanses of Queensland highways which
will continue to lack mobile coverage in spite of these initiatives.
16
http://www.aca.gov.au/publications/performance/2002/mobileinternet032002.rtf
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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Even when these improvements are fully implemented, the adequacy of services will still
fall well below that required for total coverage on highways and will need to be assessed
against the real requirements of citizens living in regional and rural Australia.
Central to this adequacy will be an ability to roam across the multiple mobile telephone
infrastructures in a way that is transparent to customers.
From a Queensland Government perspective, mobile services will not be considered
adequate while all bounded localities and major highways and strategic roads do
not have full mobile coverage.
Mechanisms to provide cost effective roaming between carriers' networks also need
to be instituted.
2.3.
Adequacy of Data Services
The adequacy of data services should be measured by their ability to provide a substitute
carriage for a wide range of content including television. Data services have the capacity
to simplify the infrastructure at customers' premises and subsequently the costs for
content providers. It is this benefit and the range of services that can be converged into a
bit stream that will determine the competitiveness of Australia in a global context. To
date Australia has not focussed on converged solutions on a common infrastructure. It
has forced consumers to pay for separate services on separate infrastructures.
The end result of this divergent approach is most likely to be evidenced in remote
Australia, where services are provided through three separate satellite dishes on a roof,
one for phone services, one for television services and one for the Internet. This
approach is strongly entrenched and maintained by separate Commonwealth Government
subsidies and it also provides the Commonwealth with a range of revenue raising
opportunities. An example of this complexity is listed in the table below.
Commonwealth Subsidy programs
Telephone
Mobile phones
Television
Radio
Internet (data services)
Print Media
USO subsidy; Untimed Local Calls in
Extended Zones; USO contestability
pilots
Networking the Nation; Mobiles on
Highways; Mobile phone coverage for
towns with a population of 500 or
more; regional mobile program.
Television Blackspots Fund for
customers and the Remote Area
Broadcasting Subsidy for providers.
Digital Data Services Obligations;
Networking the Nation; Internet
Assistance
Program;
BARN;
Advanced
Networks
Program;
National Communications Fund.
Commonwealth
Source
Carrier licenses
Revenue
Spectrum sales. Eg 3G
Spectrum sales and licenses.
Spectrum sales and licenses.
Licenses
License fees.
Australia as a whole needs to choose converged solutions as a way forward. Countries
such as Canada, USA and Korea have been planning for such approaches for a number of
years. In stark comparison, while these countries were establishing the basis for
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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ubiquitous broadband communications, Australia and the Howard Government were
focussed on narrow band communications as part of Digital Data Inquiry. The final
political decision resulting from this Inquiry was a step forward (a single channel ISDN
terrestrial solution or one way satellite service where no terrestrial service was available).
Unfortunately consumers saw no real benefit and the much-debated cost blowouts in the
Digital Data Inquiry never eventuated.
The Telecommunications Performance Report17 indicates the ACA has no information
suggesting that the residential take-up of ISDN has changed substantially since the
Digital Data Inquiry 1998 – i.e. a total of 200 residential customers and only 8000
consumers outside metropolitan areas. In terms of the one-way satellite service, Telstra
only supplied 366 special digital data services in 2000–01, compared to the 84 services
that were part of Telstra ’s digital data cost claim in 1999–00 (see table below). Telstra’s
total claim for the satellite service was only $335,552 for 2000–01.
State/Territory Number of special digital data services – one way satellite service
NSW/ACT
Vic/Tas
WA
SA/NT
Qld
Total
30 June 2000
29
10
14
5
26
84
30 June 2001
142
81
39
46
58
366
To put the above table into context, based on populations, it is estimated approximately
53,000 Queenslanders would be eligible for this service. The take-up has been less than a
fraction of a percent. Australians are active users of technology, where there are real
benefits. This is evidenced by the take-up of phone-banking and widespread use of
mobile phones. Clearly the currently legislated data service packages being presented to
Australians do not provide real utility or value for money.
As part of the sweetener18 for the Untimed Local Calls in Extended Zones19 tender,
Telstra offered a range of lower cost two-way satellite services, which have the capacity
to provide low-end broadband services. While not wishing to downgrade the utility of
the offer, it is once again a single-service single-infrastructure solution rather than a
convergent solution.
Telstra has been progressively presenting Australians living in the extended zones with
this offer, indicating substantial saving (eg $1400 for a 18 month contract comprising a
64kbps connection with a free 300Mb download limit) will be made if ordered in the
eight-week offer period. Despite the closely managed approach to marketing, it is
understood take-up may be as high as twenty percent. The costs are summarised in the
table below.
17
http://www.aca.gov.au/publications/reports/performance/2000-01/chap05.pdf
The service was not requested as part of the Commonwealth tender for Untimed Calls in Extended Zones.
19
Remote customers not living in towns.
18
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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Table 2 – Comparison of costs for 2-way Satellite Internet Service
Satellite
Characteristics
Speed down / up
(kbps)
Download limit
Installation
Hardware
Monthly access fee
Total for 18
Months
Low-end 8 Week
Telstra offer to
extended zone
customers
33/33
8 Week
Telstra offer to
extended
zone
customers
64/64
Costs after
expiry of offer
to extended
zone
customers
64/64
150Mb
Free
Free
$16.95
$305.10
300Mb
Free
Free
$57.20
$1029.60
300Mb
$699.00
$699.00
$57.20
$2427.60
Costs to
standard
zone
customers
ADSL
Service
Low-end 256k
down 64k up
64/64
256/64
300Mb
$699.00
$699.00
$120.00
$3558.00
300Mb
$249.00
Free
$59.95
$1328.10
The way this offer was implemented has created significant inequity in rural Australia.
Australian's living in the small towns, servicing the more remote telecommunications
customers in Extended Zones, are disadvantaged. They have the same base infrastructure
and telecommunications needs as their neighbors in Extended Zones, but are being asked
to pay the full costs. The zoning system, which is an artifact of a bygone era, effectively
excludes these Australians from an affordable service that is ubiquitously available.
Australians in these towns are being asked to pay an additional $2500 for the 64kbps
300Mb free download service.
The data services becoming available are a substantial improvement over the services
previously available. Unfortunately they fall short of Australia's need for an affordable,
ubiquitous broadband service.
It is recommended that:
 a choice be made to adopt converged digital solutions in the future to maximize
utility, minimize overall costs and make Australia a more competitive country;
and
 Australia's definition of adequacy for data services include an ability to carry a
wide range of content including television.
2.4. Adequacy of Television and Radio Services
The quality of the content on Australia's Free-to-Air radio and television is considered to
be of a very high standard and should be the envy of the citizens of other countries.
The Television Blackspots program aimed at improving television coverage at the edges
of the network is to be commended. Lack of a converge solution, however has created
significant pain for communities which need to effectively install rebroadcast facilities.
For consumers, the use of broadband is three-fold: improving personal effectiveness,
education and entertainment. Research indicates entertainment is driving the uptake of
broadband in other jurisdictions.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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Unfortunately the very entertainment content, which could be used to drive customer
take-up of broadband services, is technology constrained by legislation. An example of
this is a limitation, in the Copyright Act 1968 where an exemption to copyright is
available for the radio broadcast of services to the print handicapped but not if the same
content is audio streamed across the Internet.
A further example has been the constraining of the content of Datacasting to the point
where the industry could not develop an appropriate business model, which would allow
it to effectively participate in a spectrum auction. This protecting of the interests of
existing broadcasters and their licensing revenues has effectively excluded many
Australians from experiencing the early benefits of the Information Economy. These
limitations have also constrained the demand for new digital televisions and set top
boxes. Prices still remain high, as purchase volumes are low.
For Australia to be successful it needs to focus on improving the quality and availability
of the content, which will flow over a range of broadband technologies.
It is recommended:
 Unnecessary legal constraints on the transmission of content be removed;
 Further support be provided to the development of Australian digital content
including applications to improve the efficiency and effectiveness of Australians;
and
 Use of converged solutions be fostered to provide a sound basis for the uptake of
broadband services.
2.5.
Adequacy of 000 Infrastructure Services
Regular public reporting is needed for 000 emergency services to provide the public
with a level of confidence that calls to 000 will be effectively carried to State
provided health and emergency services.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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3. Network Capacity to provide all Australians with reasonable,
comparable and equitable access to broadband services.
The Queensland Government supports the view that all Australians need reasonable,
comparable and equitable access to broadband services. It is agreed that a common
service level for broadband is a good start
Agencies such as the Organisation for Economic Cooperation and Development (OECD)
have defined broadband in terms of the threshold speed of 200 kilobits per second (Kbps)
or more.20 The United States Federal Communications Commission has legislated for a
minimum digital data service for its citizens at this benchmark.21
The Canadian Broadband Task Force research indicates the common usage of the term
"broadband" ranges from a low of 200 Kbps to as high as 30 Mbps in the countries that
they studied22. The Task Force agreed it would be more useful to define broadband in
terms of what it could do for Canadians and as a result have defined "broadband" as a
high-capacity, two-way link between an end user and access network suppliers capable
of supporting full-motion, interactive video applications.
The Queensland Telecommunications Strategy being developed by Department of
Innovation and Information Economy defines data services in a similar way, but has
taken a conservative position by designating a speed of 256Kbps as the baseline.
The difficulty with such a position however, is that it tends to focus on the citizens, not
all of society. Australian businesses and the Research, Education and Health Sectors
have significant broadband needs and are major contributors to this country's future.
Technically every Australian citizen and business can have access to entry level
Broadband services now. Satellite services cover all of Australia and can fill the gaps in
terrestrial broadband network coverage. The real question is affordability and whether
prices are being kept artificially high to constrain the usage of a relatively scarce
resource. Unfortunately the current pricing regime seems to imply that a scarce resource
is being protected. It is hoped this is not the case.
Health, Education and Research centres have significant telecommunications needs. The
Advanced Networks Program and the National Communications Fund are programs
aimed at satisfying this need. From a Queensland perspective substantial improvements
are still needed before services to this sector can be considered adequate.
From an adequacy perspective, the network is best described in terms of the backbone
network and the Customer Access Network.
20
http://www.microsoft.com/australia/docs/TechPolicyBlueprint2002.pdf p35
US Government;” US Telecommunications Act of 1996 – SEC. 706. Advanced Telecommunications Incentives”.
22
http://broadband.gc.ca/Broadband-document/english/executive_summary.htm
21
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
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Australia needs to adopt a definition of broadband, which focuses on functionality
rather than pure bandwidth. This definition needs to be reviewed on a regular basis
and needs to be implemented through a mechanism such as the Universal Service
Obligation.
Substantial funds need to be allocated to ensure our education, research and health
sectors continue to be leading users and developers of high bandwidth applications.
3.1.
Backbone Network
In December 1998, the Commonwealth Government established the National
Bandwidth Inquiry23 to examine the outlook for communications bandwidth and pricing
over the next five years. This report found that there is likely to be adequate bandwidth
in the backbone network on most routes to meet the majority of demand scenarios. It
also reported that prices are expected to fall in all areas over the period considered in the
report, with decreases in wholesale prices of 30-50% per annum expected on the more
competitive and thicker routes.
Queensland Government, concerned that regional Queensland would not share in these
price reductions, instigated a project to establish a competitive fibre backbone along the
Queensland Coast. Analysis by the Department of Innovation and Information
Economy indicates cost savings of approximately 60 percent, are now available given
the Reef Network is in place.
The Queensland Government is currently progressing its SmartNet project, which uses
aggregated demand from government and the community to provide improved data
services and infrastructure in Northern Queensland, as well as the data services for
Queensland schools.
Over the past five years, the Queensland Government has generated infrastructure
initiatives valued over $200 million to respond to the needs of rural and regional
Queenslanders for equitable access to telecommunication services. Independently the
Commonwealth Government has invested a similar total.
While recognizing
telecommunications is a constitutional Commonwealth Government responsibility, future
investments need to be progressed cooperatively to maximize the benefits for Queensland
and Australia as a whole
As an observer, it would appear Telstra is unwilling to offer discounts until competitive
infrastructure is fully commissioned and providing real competition. From this it is
concluded that Australia has to endure the payment of duplicated infrastructure before it
can expect significant price or efficiency benefits to flow from Telstra. This is an
untenable situation as Australia seeks to effectively compete on a global stage.
Australia needs to find a solution, which results in appropriate investment in
infrastructure, while facilitating competition of value added services. This solution
needs to combine the efforts and assets of all levels of government.
23
http://www.noie.gov.au/projects/information_economy/bandwidth/
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
17
3.2.
Customer Access Network (the famous last mile)
In Australia broadband services are provided through technologies including cable,
satellite and Digital Subscriber Line (DSL).
It is understood that the Commonwealth’s stance is affordability will come, as more
vigorous competition starts to occur in the Customer Access Network24 (CAN). From the
analysis in Section 1.1, it is evident competition is very fragile and is unlikely to produce
a timely benefit for Australia.
Telstra's cable network passes 2.1 million homes along the eastern coast of Australia.
Optus offers services to potentially 2.2 million homes in Brisbane, Sydney and
Melbourne – 70% of which are also within Telstra's reach.25 To date the services over
these, largely duplicate, infrastructures have yet to return the billions of dollar in
investment. Current losses estimated by Budde Communication are in the order of
$4Billion26.
The determination of the USO costs was a significant endeavor by the Commonwealth
Government in 2000. An assessment of costs of using future looking technologies in the
Customer Access Network was considered and formed a key plank for a low
determination of the cost of the Universal Service Obligation (USO). 27. Subsequently the
USO contestability pilots were established as a mechanism to test the business models,
commercial interests and utility of these technologies28. It is understood that while a
framework for contestability has been established, few services have actually been
provided.
The Commonwealth has made a $150m investment to improve the Customer Access
Network in the Extended Zones29. This investment in Telstra services provides improved
phone services and a minimum 14.4kbps data service.
Support through the
Commonwealth and Telstra funded Internet Assistance Program will assist most
Australians to achieve a 19.2kbps service. Unfortunately this benchmark falls woefully
short of the levels required and those set by our first world peers.
The telecommunications industry has piloted a number of alternative wireless Customer
Access Technologies, unfortunately few have been offered as actual products. It is hoped
these new technologies will be offered to Queensland as part of the State Government's
SmartNet initiative30 which is currently out to tender.
Telstra has been protective of the Customer Access Network and has effectively delayed
competitive access to this essential infrastructure for the provision of broadband services
such as DSL. Changes in Telstra's network architecture, which move fibre closer to the
curb, have also had the effect of limiting competitors' access to the copper needed to
provide DSL services.
24
Usually the copper wires that connect telephone subscribers to their local exchange.
http://www.oecd.org/pdf/M00020000/M00020255.pdf; page 21
26
Paul Budde Communication Pty Ltd; “Australia - Pay TV - Industry Developments 1996 – 2000”, p 8.
27
http://www.aca.gov.au/consumer/reports/fwltpaper.pdf
28
http://www.dcita.gov.au/Article/0,,2_1-4_15191,00.html
29
http://www.dcita.gov.au/Article/0,,2_1-4_107669,00.html
30
http://www.iie.qld.gov.au/telecommunications/projects_subpages/nth_qld/nth_qld.html
25
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
18
In order to provide an appropriate Customer Access Network it is recommended
that:
 the full Customer Access Network be declared not just the copper wire; and
 any future subsidization of telecommunications projects needs to support equity
as well as converged infrastructure solutions.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
19
4. Current and Future investment requirements to achieve adequate
services.
The recent history of telecommunications infrastructure development in Australia is a
sorry tale of wasteful duplication. In areas of demand, such as south-east Queensland,
infrastructure with very low utilisation levels is being duplicated because it is cheaper to
duplicate facilities than to participate in inter-connect arrangements.
Some may argue that duplicated infrastructure represents productive investment. In fact,
infrastructure investment that imposes excessive costs on telecommunications users
represents wasteful investments and an inappropriate use of scarce investment resources.
Budde Communications31 estimates that $5 billion is all that is needed to kick-start
broadband, mainly to ensure that everybody in Australia can profit from this
development. He considers a fully privatised Telstra will find it very difficult to find the
money to rationalise broadband investments in economically unviable regions.
It is recommended that the Commonwealth Government allocate regular budget
funding to manage its telecommunications responsibility. Items requiring regular
budget support should include:
 Subsidies to maintain mobile and extend mobile coverage;
 Contributions to the Universal Service Fund for broadband services;
 Funding to ensure bandwidth is not an impediment for Australia's world-class
researchers, education and health providers.
31
http://www.budde.com.au/TOC/TOC2743.html
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
20
5. Measures needed to achieve adequacy
The Commonwealth Government has used the privatisation of major airports32 as an
example of where legislation and regulation can be used to effectively manage a sector.
Unfortunately, apart from privatisation there are hardly any other parallels. Generally
airports consist of one infrastructure provider who is interested in doing business with
customer service providers. To be effective, this analogy would be similar to designating
Telstra as an infrastructure provider with a charter and motivation to share facilities on a
commercial basis with competitive customer service providers. Also under such an
arrangement Telstra would not be permitted to “sell seats on planes” i.e. sell services
directly to consumers.
Never-the-less telecommunication regulation is likely to remain more complex for some
time to come. The need for adequate controls will become increasingly important.
Measures suggested by the Queensland Government are outlined in the subsections on:
 Improved competitive measures; and
 Changes to the Universal Service Obligation and Customer Service.
5.1.
Competitive measures
The Queensland Government believes33 a more proactive approach to competition is
needed. A summary of the specific competition recommendations made, by the
Queensland Government, to the Commonwealth Government, in response to the
Productivity Commission’s Final Report on Telecommunications specific competition
Regulation, is listed below:
 ACCC needs to ensure cost effective broadband access by Australians is not
constrained through gaming;
 Impediments to competition need to be regularly identified and removed;
 Mobile roaming, portability and the Customer Access Network need to be declared;
 Review of information provision and reporting requirements be expedited;
 Access pricing must be realistic and not permit preferential downstream pricing
(transfer);
 Industry development planning process needs to change into a more useful process;
 Regular reviews and renewal of carrier licences; and
 Industry self-regulation needs addition support and a refined frame of reference if it is
to be effective.
In addition the Queensland Government recommends:
 the ACA ensuring the parameters for the numbering plan and the integrated
numbering databases are an Australian Public Assets not carrier assets;
 Ownership and management of charging zones should be vested in an independent
body rather than the dominant carrier; and
 Customers owning phone numbers and other identifiers.
32
http://www.abc.net.au/am/s591363.htm
Qld Response to the Recommendations of the Productivity Commission’s Final report on Telecommunications Specific Regulation,
February 2002
33
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
21
Institute a range of measures aimed at improving the competitiveness of the
telecommunications industry in Australia.
5.2.
Changes to the Universal Service Obligation and Customer Service.
The Customer Service Guarantee was discussed in some depth in section 2.1. It is
considered to the most appropriate mechanism on which to build Australia's move to
broadband and global competitiveness. The customer service guarantee needs to define
Australia's minimum telecommunications requirements, not just for the phone, but also
for Internet, broadband, mobile phones, Television etc. It needs to look at these services
in a converged way.
The process for managing these services is already well established as part of the
Universal Service provision. To date only carriers contribute to the costs of the Universal
Service Obligation (see section 1.1). The funding model needs to be extended such that
the Commonwealth Government as part of its responsibilities, Internet Service Providers,
Broadcasters and content providers can also provide their contribution.
Enhance the Customer Service Guarantee and the process for managing the
Universal Service Provision to provide converged services and all existing
telecommunications services in the future.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
22
6. Other Matters
In comparison, to the Australian Government, the Canada Government has maintained a
greater focus on Broadband technologies and their implementation. This focus has been
consistent since the early 1990's and is now producing results. 34 The most recent
program of work instigated in January 2001, was the establishment of Canada’s National
Broadband Task Force. This Task Force's principal mandate was to map out a strategy
for achieving the Government of Canada's goal of ensuring that broadband services are
available to businesses and residents in every Canadian community by 2004.35 The Task
Force has completed its work, and its report estimates progressing the broadband access
objective, in partnership with other stakeholders, will cost between 2.7 and 4.6 Billion
Canadian dollars.
Our research indicates the Japanese, Korean and Danish Government have all made
similar commitment to planning and implementation.
Australia needs to aim to be more than adequate!
34
35
http://strategis.ic.gc.ca/SSG/ih01501e.html
http://broadband.gc.ca/Broadband-document/english/executive_summary.htm
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
23
Revenues ($million)
POCKETMAIL GROUP
COMMSOFT GROUP
NSW
NSW
11-Jan-00
19-Sep-00
$2.90
$3.90
3
4
-97.84% TEE
-96.94% DCS
TELE-IP LIMITED
DCS TECHNOLOGIES
VIC
WA
5-Jan-00
16-Dec-99
$3.10
$0.40
5
6
-95.94% WSG WESTEL GROUP LIMITED
-95.80% SKG SKYNETGLOBAL LIMITED
NSW
NSW
13-Feb-95
15-Nov-00
$5.40
$2.90
7
8
-95.47% MAQ MACQUARIE CORPORATE
-95.38% MBX MBOX.COM LIMITED
NSW
WA
27-Sep-99
2-Mar-00
$219.40
$0.20
9
10
-94.31% VXS
-94.23% OTT
VOXSON LIMITED
OPEN TELECOMM.
Qld
NSW
17-Dec-99
3-Dec-99
$3.90
$88.10
11
12
-94.17% PIE
-94.03% ETT
PIENETWORKS LIMITED
ELECTRONIC TRANS.
WA
NZ
7-Apr-00
23-Feb-00
$2.00
$1.40
13
14
-93.80% FLO
-93.79% TLE
FLOWCOM LIMITED
TELE2000 LIMITED
NSW
NSW
8-Sep-00
4-Apr-00
$13.60
$2.10
15
16
-93.50% OBJ
-93.48% EFN
OBJECTIF TELECOMM.
EFTNET TECHNOLOGIES
NSW
WA
30-May-00
23-Nov-99
$3.80
$1.30
17
18
-93.43% TLO
-92.90% SCG
TELCO AUSTRALIA
SMART COMMUNICATIONS
NSW
NSW
7-Dec-98
17-Aug-00
$2.20
$25.40
19
20
-91.66% SWT SWIFTEL LIMITED
-91.64% FOC FOCUS TECHNOLOGIES
WA
Qld
2-Jul-92
29-Jul-99
$0.50
$0.10
21
22
-90.61% SRT STARTRACK COMM.
-90.37% PWT POWERTEL LIMITED
WA
NSW
9-Jul-92
24-Aug-98
$1.50
$48.00
23
24
-89.72% ESV
-89.33% BBB
NSW
WA
8-Sep-00
13-Jun-00
$43.90
$129.50
25
26
-87.50% AVC AUSTRALIAN VISUAL
-87.04% MOB MOBILE INNOVATIONS
Qld
NSW
1-Nov-00
25-Jun-99
$13.80
$63.00
27
28
-86.38% DVT
-86.21% TNY
DVT HOLDINGS LIMITED
TENNYSON NETWORKS
NSW
VIC
13-Jan-99
10-Jul-92
$75.20
$3.30
29
30
-85.29% NTC
-83.86% PCO
NETCOMM LIMITED.
PRACOM LIMITED
NSW
VIC
6-Dec-99
15-Dec-98
$17.40
$219.60
31
32
-83.61% CLA
-82.50% QTL
CLARITY INTERNATION.
QUADTEL LIMITED
NSW
NSW
11-Oct-00
30-Apr-96
$44.90
$8.90
33
34
-80.45% PHO
-78.39% STE
PHONEWARE LIMITED
STRATATEL LIMITED
VIC
WA
2-Oct-97
8-Dec-00
$12.00
$0.50
35
36
-74.55% CCO
-73.33% BRE
CIRCLECOM LIMITED
BREATHE GROUP
VIC
VIC
20-Jul-92
18-Sep-92
$20.40
$20.10
37
38
-71.20% WAL
-70.83% TML
WAVENET INTERNATION.
TIMEMAC SOLUTIONS
WA
WA
17-Mar-00
28-Oct-99
$0.70
$0.00
39
40
-65.93% PAH
-51.99% CLT
PAHTH TELECOM.
CELLNET TELECOM.
WA
Qld
9-Nov-99
17-Nov-99
$12.50
$247.50
State
ASX code
Company name
-98.25% PKT
-98.23% CSG
Share growth
1
2
Industry description
Date from which
assessment is based
Attachment 1 - Australian Listed Companies share performance36
Equipment, Services
36
ESERVGLOBAL LIMITED
B DIGITAL LIMITED
Derived from ASX Data.
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
24
Date from which
assessment is based
Revenues ($million)
VIC
19-Dec-00
$11.50
IINET LIMITED
AUTRON CORPORATION
WA
VIC
20-Sep-99
13-Jan-99
$19.90
$181.20
44
45
-15.05% CDR
2.58% ERG
COMMANDER COMMUNICA.
ERG LIMITED
NSW
WA
1-Dec-00
29-Jun-92
$146.30
$263.90
46
182.49% NTG
NATIONAL TELECOMS
NSW
14-Dec-00
$50.40
DATAFAST TELECOMM.
UECOMM LIMITED
VIC
VIC
7-Oct-99
11-Sep-00
$6.10
$30.50
$9.20
$418.60
State
ASX code
Company name
SIRIUS TELECOMMUN.
-32.73% IIN
-20.35% AAT
Share growth
-33.93% SIU
42
43
Industry description
41
Network Operator
1
2
-96.40% DFT
-94.24% UEC
3
4
-89.74% AMM AMCOM TELECOMM.
-86.52% HTA HUTCHISON
WA
NSW
8-Dec-99
17-Aug-99
5
6
-23.51% TLS
-20.33% SGT
TELSTRA CORPORATION.
SINGAPORE TELECOMM.
VIC
NSW
27-Oct-98 $18,679.00
10-Sep-01 $10,710.00
7
8
145.61% SOT
178.29% TEL
SP TELECOMMUNICATION
TELECOM CORPORATION
NSW
NZ
10-May-01
17-Jul-92
$8.00
$4,501.00
Other Telecommunications
1
2
-97.96% SPK
-95.74% IVK
SPIKE NETWORKS
INVESTIKA LIMITED
NSW
NSW
23-Jul-99
17-Sep-99
$5.00
$0.50
3
4
-91.18% CXL
-90.00% MRY
CENTRAL EXCHANGE
MONTERAY GROUP
WA
VIC
21-Dec-99
3-May-99
$0.00
$0.20
5
6
-87.50% SOU
-87.14% PUL
SOUTHPOINTE LIMITED
PULSAT COMMUNICATION
WA
VIC
28-Mar-96
27-Oct-99
$1.20
$0.60
7
8
-83.75% QAD
-81.24% ITC
QUADRANT IRIDIUM
IMPRESS VENTURES
WA
WA
17-Aug-99
26-May-99
$0.10
$0.20
9
10
-80.51% CTI
-76.32% EZY
CHARIOT INTERNET
EASYCALL INTERNAT.
SA
Singapore
23-Dec-99
16-Feb-98
$15.70
$12.80
11
12
-75.00% QUE QUESTE COMMUNICATION
-74.26% NWL NEW TEL LIMITED
WA
WA
11-Nov-98
8-Jun-99
$0.80
$30.30
WA
7-Dec-00
$1.20
13
3.91% QPX
QPSX LIMITED
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
25
Attachment 2 - Summary of carrier performance in against the Customer Service
Guarantee in Queensland37
exempt
not met
March
2002
met
exempt
not met
December
2001
met
exempt
met
not met
Table
Optus' quarterly
In-place
performance for the New services
percentage of
Faults repaired
connections provided
within the timeframes
specified in the CSG
Standard
September
2001
exempt
met
Infrastructure Availability
not met
June
2001
100 0.1
99 0.9
89 11
0 100 0
0 99 1
3 94 6
0 100 0
0 99 1
2 91 9
0 100 0.2
1 93 7.5
3 87 13
0
3
5
Telstra's quarterly
In place
performance for the
percentage of inplace connections
provided within the
timeframes specified
in the CSG Standard
95
5
-
96
4
-
97
3
-
97
3
-
Telstra's quarterly
performance for the
percentage of new
service connections
provided within the
timeframes specified
in the CSG Standard
91
92
92
90
90
90
96
92
96
97
97
97
99
92
96
94
93
96
87
9
8
8
10
10
10
4
8
4
3
3
3
1
8
4
6
7
4
13
<
<
<
<
<
<
<
<
<
<
<
<
<
<
<
-
92
92
92
91
91
91
97
87
96
96
97
96
92
91
92
94
93
96
90
8
8
8
9
9
9
3
13
4
4
3
4
8
9
8
6
7
4
10
-
93 7
97 3
93 7
92 8
96 4
92 8
96 4
92 8
95 5
96 4
98 2
96 4
99 1
99 1
99 1
89 11
87 13
93 7
93 7
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
92
96
92
91
95
91
95
94
95
96
99
96
98
95
97
87
82
94
94
8
4
8
9
5
9
5
6
5
4
1
4
2
5
3
13
18
6
6
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
#
with infrastructure
All areas, without infrastructure
All areas, with & without infrastructure
Urban with
Urban without
Urban with and without
Major Rural with
Major Rural without
Major rural with and without
Minor rural with
Minor rural without
Minor rural with or without
Remote with
Remote without
Remote with or without
Telstra's quarterly
All areas
performance for the Urban
percentage of faults Rural
repaired within the
timeframes specified Remote
in the CSG Standard
37
http://www.aca.gov.au/publications/performance/2002/data032002.rtf
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
26
Attachment 3 – Mobile coverage
Queensland Government Submission to the Senate Inquiry into the Australian Telecommunications Network
27