Depending on your country, the Internet has been available for ten years or more, and for individuals – at least in the developed world – it has since become ingrained in psyches as an essential commodity, akin to access to fixed-line telephony, electricity and potable water. For a growing number, the Internet is essential for work, for a greater number it is the first port of call for problem solving and information (Wiki and online Yellow pages come to mind) or getting things done (banking, finding out timetables for travel, etc). Most governments, too, now take the Internet as a key component of infrastructure, crucial to a nation’s future socio-economic potential. 

What governments may do with the Internet is another matter. A decade’s experience and use of the service has enabled a growing number of governments to manhandle the potential dangers of hacking, fraud and privacy as a means to tighten the screws on their own control of access, and of their nationals’ use of it. This is rightly opposed by the users themselves, over half of whom surveyed for the BBC believing that no government should be empowered to regulate the Internet. 

In Europe, the ‘three strikes rule’ threatens to become more fashionable, following measures first proposed in France: there, the Création et Internet Bill failed in 2009 when France’s Conseil Constitutionnel ruled that it leaned too much to ‘guilty until proven innocent’ and that it threatened major sanctions (Internet disconnection and a national blacklist on access) without judicial oversight. Nevertheless, the government shoehorned the Bill a second time, which this month came before the National Assembly for debate. 

The Bill proposes that the scheme be administered by a newly formed group called HADOPI. ISPs notified about alleged file-sharing would be required to send an e-mail to the customer involved, a registered letter at the second alleged offence and, for a third offence, terminate access for up to a year. A database managed by HADOPI could presumably prevent blocked users from switching ISPs. 

Italy looks like adopting a similar approach. Having in 2009 sued the Swedish The Pirate Bay site and attempted to force ISPs to block access to its content, the more recent charging of Google executives with criminal charges resulting from YouTube content denotes a government leaning towards authoritarianism regarding the Internet. The Italian three-strikes proposal would be complemented by a requirement that all blogs register with the government. 

In the UK, meanwhile, the government is pushing through its controversial Digital Economy Bill, which proposes empowering regulators to disconnect or slow down Internet connections of persistent illegal file-sharers. Amendments to the Bill passed this month at the report stage at the House of Lords before its third and final reading in the House of Commons, could in theory force sites such as YouTube which host copyright-infringing material to be blocked or forced offline. The UK’s three-strikes rule is similar in its essentials to those of France and the UK, with disconnection following two warnings. 

At the European Union level, the European Parliament was initially critical of the three-strikes schemes, largely due to the absence of judicial review. However, this month the Anti-Counterfeiting Trade Agreement (ACTA) was put forward for debate between the US, the EC, Japan, Switzerland, Australia, New Zealand, South Korea, Canada and Mexico. Aimed at preventing online counterfeiting, it threatens to punish ISPs for content delivered. 

Polls show the sincerity of popular regard for a free Internet, and suggest that to tackle piracy other solutions than blocking ISPs and throwing citizens offline should be considered. Until they are considered, citizens should, as always, be vigilant about what their governments are legislating, lest they find themselves with a thoroughly policed Internet far removed from what they now know it to be. 

For more information on the Internet markets in Europe, see:

• Germany – Broadband Market – Overview, Statistics & Forecasts;
• United Kingdom – Broadband – Fixed Network Overview, Statistics & Forecasts;
• Italy – Broadband Market – Overview, Statistics & Forecasts;
• Europe – Broadband Market – Overview & Statistics;
• Europe – Regulatory Environment.

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Third generation (3G) mobile technologies, coupled with improvements in international fibre and national backbone network infrastructure are now capable of delivering broadband Internet access to a wider part of the continent’s close to one billion population. However, the price of end user devices will be a key factor. The prepaid mass market will only adopt advanced services on a broad scale once prices for 3G handsets and modems as well as personal computers have reached affordable levels. 

Like elsewhere in the world, Short Message Service (SMS) still accounts for the bulk of Africa’s mobile data traffic and revenue, but in recent years there has also been an increasing interest in Multimedia Messaging Service (MMS) and other forms of mobile messaging and social media, downloads of ring tones, logos, music and games, as well as SMS-based information and lifestyle services. Premium rate and bulk SMS services are generating millions in revenues. Third parties are continuously developing new value-added services and applications. 

Mobile TV services have been launched in at least ten African countries. A boost for these services is expected from the FIFA World Cup to be hosted in South Africa in 2010. 

M-payments and mobile banking is another key growth area that is revolutionising Africa’s financial sector, where only a small percentage of the population has access to traditional banking system. In the continent’s most advanced markets, m-commerce, mobile content, applications and media have reached a level of development that is beginning to foster an associated advertising and marketing industry. 

Market highlights of new BuddeComm Report:

• 3G mobile networks have been launched in more than 20 African countries, with rollouts in progress in many others;
• Most operators have included High-Speed Packet Access (HSPA) mobile broadband in their service offerings;
• There are more 3G mobile broadband users than ADSL subscribers in key African markets;
• The first 20Mb/s mobile broadband service is expected in Africa in 2010;
• African mobile operators make up to 13% of their revenues with mobile data services;
• Non-messaging mobile data revenue grew by 70% in South Africa in 2009 while overall mobile data revenue increased by 30%;
• Mobile data services have helped to reverse declining average revenue per user (ARPU) in some markets;
• The UMTS Forum forecasts that revenues of African 3G operators will exceed US$7 billion in 2010;
• The 2010 FIFA World Cup in South Africa is expected to deliver a boost to Mobile TV services which have been launched in at least ten African countries;
• Some African banks have more customers using mobile banking than online banking;
• More than 10% of Kenya’s GDP pass through the M-Pesa mobile payment and banking service, which has more users than there are bank account holders in the country. 

For more information see: African Mobile Broadband, Data and Mobile Media Market

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Groundwork for a new direction in telecoms

Shortly before Barack Obama won the election in 2008 I started to work with what became the Obama Transition Team on some of the US telecoms policies. Obama and his small team of technological experts were aware of the developments in Australia – particularly in relation to the need for trans-sector policy on broadband infrastructure.

Together with a team of national (US) and international experts we prepared half a dozen ‘BigThink’ strategy reports for the Obama Team in the White House.

We also established a good relationship with the FCC (Blair Levin’s team) and NTIA (Larry Strickling).

ALL parties publicly agreed to a trans-sector approach and many of our suggestions are clearly reflected in the stimulus package (open networks) of the FCC national purpose strategy. And our suggestions also appear in the upcoming National Broadband Plan – in the trans-sector approach to the public safety sector and the proposed mobile broadband infrastructure for this sector.

Visionary plan now needs legislative action

However, if we’re talking about ‘national purpose’ a transformation of the telecoms industry is crucial, and the FCC has been specifically forbidden by Congress to address this topic.

The National Broadband Plan will most certainly highlight the benefits attached to a ‘national purpose’ policy but it is up to the Congress to make it happen. The plan will provide a new, visionary direction for telecoms in America but unfortunately in its current state it is a toothless tiger. It will be up to Congress to take action through legislation – without that it will be impossible to implement the plan in any timely fashion.

As matters stand at the moment the plan is the best the FCC can do. They should be applauded for the work they have done so far – they have laid the foundation for a totally new telecoms direction in the USA.

All of these trans-sector/national purpose policy proposals require very significant changes to the way the telecoms industry works and if – as has been stipulated by Congress – this can’t and therefore will not be addressed in the Plan.

Affordable access to broadband infrastructure

Another key to telco transformation is the creation of a level of ‘affordability’ both for the end-users and for the sectors that could use the infrastructure, you won’t get this without tough legislation.

To just get very fast broadband to American homes in isolation from this trans-sector approach is fairly useless. While you might get such a service to all homes the reality is that without a utilities-based trans-sector approach towards the underlying broadband infrastructure it will be impossible to make that an affordable service. We only have to look at the charges that currently apply to such (fiber-based) broadband services to realize that probably only about 25% of Americans can afford this.

While not defined as such in the USA, broadband is simply infrastructure. (Access to that infrastructure is now declared a national right in several European countries.) A problem in the US legislation is that the previous Administration gave broadband the unusual classification of ‘an information service’ and not an access service.

National purpose good for the nation and for lowering the consumer bill

If the trans-sector approach is applied other sectors (healthcare, education, energy, public safety) can be directed by the government to start using this network – thus paying their share towards the cost of the broadband infrastructure – for the delivery of their services, eg, the monitoring of aged people from their homes to reduce the need for hospitalization.

This has to be a government-driven approach as the social and economic trans-sector benefits fall outside the balance sheets of the telco providers. These benefits need to be carefully monetized and used as input by the government in developing government policies in these areas. The OECD has indicated that the savings made by using the broadband network for healthcare, education and transport alone could pay for the deployment of a national broadband network.

Unfortunately the economic benefits are very hard to calculate. But was it possible to predict the benefits of the electricity network when it was built? The naysayers in those days said that it was outrageous to pay for infrastructure that would simply replace candles.

Structural changes to the industry are needed

In order for those sectors to be able to deliver these services the broadband infrastructure needs to be made available to them on a utilities basis. This can’t be done within the vertically-integrated structure of the telecoms industry. An open network policy is required, and that is clearly not on the table in the United States – at least not for 90% of the infrastructure that will be involved in its National Broadband Plan.

So, yes, even without legislative changes the new broadband plan might indeed deliver broadband to most people in the USA – but at what cost to the average American citizen? For the moment at least, the incumbents can’t believe their luck at the honey pot the government is placing in front of them. They are in a prime position to deliver these networks and they will not be required to do this at an affordable price. The government will pay the going rack rate which will include a very fat premium to the carriers on top of costs.

This situation cries out for structural changes to the industry, but it doesn’t look as though change will take place in the foreseeable future.

The end result is that access to broadband will remain significantly more expensive to Americans than to people in countries that opt for an open network and utility approach towards basic infrastructure.

Regional and Rural America will be second rated

Another result will be that regional and rural users will get a second-rate service (lower speed). There is no way that those premium prices charged by the incumbent telcos can be afforded to build an equivalent broadband network in regional America. This is a very dangerous development as it will undermine the delivery of the trans-sector services to those communities. Healthcare, energy and public safety services require Qos,  security, reliability, privacy protection, etc. A second-rate network will certainly compromise some of that and might even render it unacceptable for the usage of such service.

As mentioned above, the incumbents are jumping up and down with joy and – in relation to voluntary cooperation to give some spectrum back – the broadcasters are arrogantly saying ‘over my dead body’. But in reality, and based on decades of anti-competitive behavior, who among these players will voluntarily give up their monopolistic rents as requested by what is, in that respect, a rather powerless FCC.

The ball is now in the court of Congress

Congress should take a very hard look at itself and answer some these questions before propping up an outmoded telecommunications structure. This money can only be spent once and at present it appears that without structural changes to the industry the new National Broadband Plan will not provide the right foundation for those national interest investments. It would be impossible to successfully implement these policies without simultaneously addressing the structural issues in the industry.

We have top-class people involved in the development of the National Broadband Plan – the ones mentioned above, as well as the excellent team of extremely hardworking people that Blair Levin has built up.

So that’s not the issue. The issue is the failure of the American political system.

For the first time in its history a different approach is being taken towards telecoms in America – we now accept such notions as open networks, network neutrality and trans-sector/national. Let us hope that Congress now takes the baton from the FCC and supplies the legislative follow-up that is required to implement this very important first step.

The plan, as it will be presented on 17 March, has gone as far as the FCC can take it. It is now up to the legislators to be visionary – to make sure that the National Broadband Plan is followed up with legislation that will enable the telecoms industry to deliver the enormous social and economic national benefits highlighted in the plan.

Paul Budde

See also:

• USA – Analysis of broadband policy developments in early 2010
• USA – Telco Transformation starts with Public Safety
• USA – Analysis of broadband developments – late 2009
• USA – Benchmarking broadband in the USA
• USA – Broadband Market – Fibre to the Home (FttH) Overview, Statistics & Forecasts
• USA – Telecommunications – Key Statistics
• Global Next Generation Telecoms – FttH and Trans-Sector Strategies
• Global Recovery will depend on Trans-Sector Vision
• Global – Infrastructure – National Broadband Networks (NBN)
• Global – Infrastructure – National Broadband Rollouts Design and Deployment Strategies
• Global – Infrastructure – Next Generation Telecoms
• Global – Internet – Net Neutrality Analysis
• Global – National Broadband & Trans-sector developments in Australia & New Zealand

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A case in point relates to Deutsche Telekom (DT). Access to DT’s network infrastructure (specifically its ducts), whether for copper or fibre, has been a long-standing saga. Although the regulator made Local Loop Unbundling (LLU) mandatory from May 1997, access did not include the supply of a wholesale product such as FRIACO to facilitate service-based competition in dial-up Internet access. Nor did the regulator require DT to provide a bitstream wholesale product until September 2006, some three years later than in most other EU countries. The EC and regulator determined that bitstream access should be required regardless of the technology used (ADSL2, ADSL2+, SDSL and VDSL), with prices below DT’s retail prices or calculated on the basis of actual costs, as provided in EU law. In May 2005 DT was required to offer a resale version of T-DSL, thereby enabling ISPs to establish a sole relationship with customers. Furthermore, in December 2007 the regulator obliged DT to provide a minimum of 330,000 LLU lines per month, or more if technically and operational possible. DT was set a table of fines per line per day for delays in providing this minimum number of lines. 

Regulatory measures have also been needed to address emerging technologies, and the migration of incumbents to an All-IP NGN. In common with other countries such as the Netherlands, alternative operators have been concerned that DT would close down main distribution frames (MDFs) when rolling out new fibre infrastructure, rendering their investments for establishing connections to the MDF worthless. 

To address this, the regulator duly imposed a number of measures to enable competitors to reach DT’s street cabinets and homes: DT’s obligation to give access to ducts or at least to the unlit fibre between the MDF and the street cabinet was in December 2009 extended to providing competitors access to its infrastructure from street cabinets to homes (the last mile), thereby enabling competitors to offer customers the same bandwidth. This measure also applies to DT’s FttC/VDSL network: DT had in 2006 secured a three-year regulatory holiday on the dubious basis that VDSL represented a new market and that its investments should be protected. The EC and European Court of Justice disagreed, but it has taken them two and a half years to overturn DT’s protected status, a status which threatened to allow DT to set excessive access prices or even to bar access to this part of its network. 

However, the writing was already on the wall, thanks to the realities of network costs and the evolving market. Having initially insisted on building and operating all of its own VDSL infrastructure, DT by the end of 2008 began co-operating with competitors to economise on CAPEX and extend the networks more widely. One of its original VDSL sharing partners, Vodafone, has now set in train an ambitious VDSL network of its own. 

As for the market, DT has recently tried to put the focus on the other foot by demanding regulated access to the cablecos’ networks. To some degree this can be interpreted as a knee-jerk response to the regulator’s December 2009 measures outlining how DT was itself to provide access to its VDSL/fibre networks. However, the regulator is not yet minded to include cable networks in its regulatory supervision, and so open usage to third parties, given that the German cable market represents only 10% of all broadband accesses. Cable operators remain except from regulation with the only set of rules applying to non-discriminatory cable TV carriage. 

This bid by DT has also happened elsewhere in Europe: in the UK, BT – which is obliged to open its ducts to competitors – is now asking for regulated access to Virgin Media’s ducts (which reach more than 50% of UK homes) as part of its plans to upgrade its own infrastructure. On the one hand this may seem rather rich (it tried this before, in mid-2008), given that BT has in the past adopted a range of excuses to delay competitor access to its own exchanges. 

Yet BT is under pressure: its 21CN is behind schedule and has proved more costly to implement than initially conceived, while it has made commitments to extend FttH to 2.5 million homes by 2012, and FttC/VDSL to five million homes by mid-2011. In the meantime, Virgin Media will provide 100Mb/ services to 12.6 million homes by 2011, and it expects to push this to 200Mb/s in some areas by 2012. 

To fulfil its commitments quickly – ideally before Virgin poaches its customers by the thousand – market pressure is pressing BT to demand the same access which it earlier fought against tooth and claw. 

For more information on the broadband markets in Germany and the UK, see:

• Germany – Broadband Market – Overview, Statistics & Forecasts;
• Germany – Convergence – Triple Play & Digital TV;
• Germany – Key Statistics, Telecom Market & Regulatory Overviews;
• United Kingdom – Broadband – Fixed Network Overview, Statistics & Forecasts;
• UK – Convergence – Triple Play & Digital TV;
• UK – Key Statistics, Telecom Market & Regulatory Overviews.

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While basic telephony stagnates or recedes in the rest of the region, Venezuela’s fixed lines in service increased at a Compound Annual Growth Rate of 13% between 2006 and 2009, pushing teledensity well above the regional average, from levels that used to be abysmally low compared with the country’s economic indicators. Provided CANTV avoids bureaucracy and corruption, state-ownership appears to be beneficial for teledensity due to the infrastructure-intensive nature of the fixed-line sector.

The country’s Internet and broadband penetration, however, are below average for Latin America and much lower than would be expected, based on the country’s GDP per capita. There exists no wholesale market for broadband in Venezuela. State-owned CANTV has a monopoly in the provision of ADSL. There are no ISPs in the country even acting as resellers of its ADSL service. The only broadband market competition comes from cable modems, wireless broadband, and satellite. As a result, ADSL in Venezuela is slower and more expensive than in other Latin American countries. 

If the government were to introduce Local Loop Unbundling, and allow private operators to lease bandwidth from CANTV for broadband services, competition would bring down prices and improve quality (and speed), and we could expect to see a boom in the country’s broadband and ICT sector. CANTV would be able to focus on infrastructure, recovering its investment costs from lease income, rather than trying to operate as a cumbersome, vertically integrated company. 

Venezuela’s mobile penetration has passed the 100% milestone, positioning itself well above the Latin American average. The mobile industry has reached a high level of maturity and remains a dynamic, competitive market with three operators vying for market share. Mobile broadband is becoming an attractive alternative for Internet users, as well as an important source of revenue for companies faced with a near-saturated market. 

Venezuela is the regional leader in terms of SMS traffic, the number of text messages being about double the number of minutes the average Venezuelan talks on a mobile phone. 

Market highlights new BuddeComm Report:

• While Venezuela’s economy contracted in 2009, its telecommunications industry registered a 10% growth, performing better than any other sector.
• The telecom market outlook is reasonably promising for 2010, but more uncertain for 2011. Laws and decrees perceived as undermining to private property rights have lessened foreign capital inflow. Indeed, telecom investment has come primarily from public spending; galloping inflation and energy shortages may erode Venezuela’s international reserves and force budget cuts in the telecom sector.
• Mobile broadband has taken off in Venezuela, and is becoming an attractive alternative for Internet users, as the country’s fixed-line broadband suffers from slow speeds and unavailability.
• Cable TV operator NetUno is deploying Venezuela’s first FttH network to connect new housing developments in Caracas.
• Mobile operator Movistar plans to deploy LTE infrastructure in Venezuela’s major cities in the second half of 2011, but is waiting for the necessary mobile spectrum.
• CANTV plans to launch IPTV in the second half of 2010, but before it can do so it will need to increase the speeds and drop the prices of its ADSL service. 

For more information see: Venezuela – Telecoms, Mobile, Broadband and Forecasts

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In some measure, the focus on broadband was stimulated by the global economic crisis which still reverberates since its first tremors were felt in mid-2008. Within months, stimulus packages were thought up across the EU and a number of projects sympathetic to taxpayers were financed and implemented. That broadband infrastructure should have been one of the key recipients of this publicly-funded largesse was not only appropriate, but it also keyed in with new – not just revised – perceptions about the national benefits which a good (i.e fast) broadband network could provide. 

So the Italian government set up a number of initiatives including tax incentives for business investment, the encouragement of a range of technologies for broadband (copper, fibre, satellite, WLL, broadband powerline), harmonising investment plans with sharing available civil works resources, and aggregating demand for broadband access through public offices (schools, hospitals, post offices, universities, court offices, etc). These measures were expected to induce higher traffic volumes and thus make the extension of broadband services economically viable within towns and in depressed and/or peripheral areas. 

The government also pushed for the use of EU structural funds and for the relaxation of spending limits under the EU Stability Pact to enable investment in communications infrastructure. Government programs also focused on reducing computer illiteracy by sponsoring home ownership of computers and residential broadband access under the ‘Vola con Internet’ and ‘PC alle famiglie’ programs, as also on reducing the digital divide between northern and southern provinces. Some of the projects supported include eHealth, digitising agricultural marketing projects, and broadband access in schools in Sicily and the Mezzogiorno. In addition to this investment, the government launched an initiative to extend WiFi and WiMAX technologies, principally to small townships in the depressed areas of southern Italy. In late 2008 the government began investing about €1 billion in improving broadband services as part of a public-private partnership, which it was believed would increase GDP by 1.5% to 2% annually. 

One government scheme, derived from the ‘Programme for infrastructural broadband coverage (2007-2009)’ and funded with €197 million, supported public initiatives to strengthen the rollout of a national broadband network, providing a minimum of 4Mb/s to 94% of the population and 2Mb/s to the remainder. A further €800 million was earmarked to 2013 for the rollout of Next Generation Networks (NGNs). 

Thus Italy is truly one of the EU countries with an effective broadband strategy in place. Indeed there are a number of government agencies and development projects guiding the national strategy, including the Interministerial Committee on Broadband development, Infratel (a company owned by the Department of Economics through the National Agency for Economic Development to address the infrastructural digital divide in remote and rural areas), Innovazione Italia (also owned by the Department of Economics, to address the socio-economic digital divide), Osservatorio Banda Larga (which measures the social and infrastructural digital divide, and advises on its findings), and the Italian Regulatory Consultation on Next Generation Broadband. 

Concerning the national broadband plan, in February 2010 the government, through the Ministry of Economic Development, signed a Memorandum of Understanding (MoU) with the Unione delle Province d’Italia (UPI), an association representing all but three Italian provinces. The agreement aims to tackle the very real digital divide in rural areas (and between the northern and southern provinces) by building broadband networks. Specifically, the agreement aims to deliver broadband to 3.2 million Italians (13% of the population in these provinces) which yet have no access to broadband. There is also provision to establish a pilot project to build NGNs in areas where no operator sees commercial advantage in investing in broadband during the next three years. 

Government direction now is timely, given that the country’s two principal broadband operators, FASTWEB and Telecom Italia, are at least temporarily preoccupied – and face the threat of being put under court administration –with money laundering and tax avoidance charges.

For more information on Italy’s broadband market, see:

• Italy – Broadband Market – Overview, Statistics & Forecasts;
• Italy – Convergence – Triple Play & Digital TV;
• Italy – Key Statistics, Telecom Market & Regulatory Overviews.

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The middleware and cloud applications that are now appearing at the edge of the network will of course, be further developed once high-speed broadband becomes available, but already they are having an enormous impact on the telecoms market.. The new user experiences that can be obtainable through these applications will enrich fast broadband networks beyond recognition. 

What we now have is, on the one hand, the Over-The-Top (OTT) applications that have conquered the world thanks to companies such as Google, Facebook, Amazon, Skype, Microsoft, Apple, Yahoo, YouTube and so on; and, on the other, the attempts by the telcos to develop these apps though their broadband and mobile portals. 

By using the OTT route one can avoid many of the problems that the telco industry has been dealing with for decades. I remember as far back as the early 1990s, when both Telstra and Optus launched their impressive new billing reforms; but today, more than twenty years later, their billing and operational support systems (BSS/OSS) are as far from completion as they were in the 1990s. In fact it is likely that they are even further behind now, since many new applications have become available since that time – applications that are making those telco systems look like dinosaurs. In the mobile market we can also refer to decade old failed strategy of introducing IMS. 

While fast broadband is the essential infrastructure of the digital economy the real action will take place on the layer above the infrastructure. This is where for many years I have envisaged the future of the telcos – facilitating the development of the digital economy, rather than concentrating on end-user products like telephone calls, mobile portals or broadband applications. 

This is the world of value-added infrastructure, middleware and cloud services. However the old infrastructure with its legacy of BSS and OSS systems has failed to make the transition to the new Internet-based ICT infrastructure, let alone being able to facilitate Web 2.0 or Web 3.0 services. 

In the meantime it is the new digital media companies that are building not national but international middleware networks. While telcos fail to service customer bases that consist of millions of users the digital media companies are able to serve hundreds of millions of customers. 

Therefore NBNs could be a godsend, since this will, potentially at least, give telcos the opportunity to build a value-added layer on top of the infrastructure that will be capable of delivering Next Generation Network (NGN) service such as Web 3.0+ services. 

However, while the digital media companies are progressing in this field on a monthly basis, telcos still measure their progress in years, so at present the gap is still growing, but not in favour of the telcos. 

So the sooner the telcos start their transformation the better. 

However, after well over a decade of calling for change time is now running out. They have now also lost the mobile portal battle against the apps market (that happened so fast they never knew what hit them). If the telcos miss this last opportunity it is indeed highly likely that they will be relegated to being basic infrastructure operators – and that market is also under threat as construction companies are better-positioned to do this job after most telcos went out of this business one or two decades ago. 

On a more positive note, while customers might not like their dinosaur telcos they do, at the same time, trust them. They have built robust systems with enormous reliability and sound security based on proper standards and availability everywhere. 

So the telcos could use this advantage to offer that same level of trust in an Internet world where it is becoming increasingly difficult to know who is trustworthy and who is not. I have made this argument for many years, trying to get the telcos to move. Again, the opportunity is still there – but for how long? 

Banks are in a similar position, but they have far more valuable data they can use to help customers navigate the digital economy. So they could easily compete in this market as well. Customer knowledge is the key element of the digital economy. 

However, more immediate competition is coming from the social media sites, which are quickly becoming the new powerhouses of the digital economy; also, they already have far more information about their customers and can use this to expand their services. 

So it is two minutes to twelve for the telcos here as well. 

Looking at some of those fantastic applications from Comverse we see a range of enriched voice and messaging services with superior user experience, complete with visualisation, personalisation, location, multi-channel applications and an openness to social networks, UGC-sites and RSS feeds. 

I can see the digital media companies offering these communications applications immediately, but the telcos may not move so fast. This would hurt the telcos right at the very core of their communications business and I can now quite easily see these products being offered by companies other than the telcos. 

Some of the mobile companies are better-positioned than the fixed operators; however if we look at the mobile portals market versus the applications market we see that the mobile operators also have largely failed to make the transition to the new open web-based world. 

Perhaps the telcos should start looking more at OTT services themselves. There are great applications with unified communication applications in relation to social sites, location-based activities, etc. If the telcos were smart they could offer voice free and allow customers to choose from a whole range of value-added voice services and to make incremental changes to the applications they really value. 

Over and again I have argued that, rather than concentrating on their retail customers, the telcos should supply their middleware and cloud services to the content and services providers. They should be the key providers to the organisations that are going to drive the digital economy. 

Paul Budde 

See also:

• Global – Infrastructure – Next Generation Telecoms
• Global Next Generation Telecoms – FttH and Trans-Sector Strategies
• Global – Infrastructure – National Broadband Networks (NBN)
• Global – Infrastructure – National Broadband Rollouts Design and Deployment Strategies
• Global – Infrastructure – Open Networks
• Global – Mobile Broadband – HSPA, LTE, WiMAX & IMS

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The problem for David Thodey is that he has inherited a company that experienced a major strategic setback under his predecessor and as a result of that the company is now ill-prepared to face the brave new world ahead of us. They have lost five years of an essential transformation process that was never begun under Sol Trujillo. There is no way in the world that David Thodey or anybody else in Telstra can change that situation overnight.

While David fully understands the future he will still have to deal with the company’s current situation and many of the decisions made before his time have, from a transformation point of view, long-term negative implications. These cannot be easily turned around. Where were all those financial analysts and other experts when Sol Trujillo made strategic mistake after strategic mistake? Look at the facts – the share price suffered much more under Trujillo than under Thodey.

What the current management of Telstra is facing is a juggling contest between the past and the future and this will not be easy. For example, it means working with existing strategies and policies that are actually undermining the long-term interest of the company. They will be fixed, but it will take time.

However, I for one believe that Telstra is significantly undervalued – for the simple reason that the company is well aware of where it needs to go – and its strategic decisions will be made with that in mind. If this results in some decisions that appear to be a setback and result in short-term negative results, so be it. Look around the world – none of the national operators got through transformation without pain – for example, look across the water at Telecom New Zealand.

As a matter of fact I classify Telstra as one of the leading national telcos in the world. It is one of the few companies with a strong sense of its future and the willingness to get there.

Yes, this must be awfully scary for Telstra, as it means leaving the familiar, well-trodden ground and facing the enormous challenges that such a transformation will create. During such a difficult time Telstra will lose many of its fiscally-focused friends who are only interested in short-term gain. However these people will happily return once Telstra has proved that it can make the transition.

So Telstra is still moving along with one foot in the past, and it will therefore make decisions that people such as myself don’t necessarily like. But I fully understand that Telstra will have to bridge the gap between now and then, and so I can understand some of those decisions.

I maintain my focus on the future of the company and I do see very good things happening there, which I fully support in broad terms, and I am therefore more than happy to cheer Telstra on during the extraordinarily difficult period of transition.

Paul Budde

• Telstra Corporation Limited – Financial Statistics
• Telstra Corporation Limited – Company Overview and Operating Statistics
• Australia – National Broadband Network – Overview & Analysis
• Australia – National Broadband Network – Critical Considerations
• Australia – National Broadband Network – Competition and Regulations
• Australia – National Broadband Network – Deployment Strategies
• Australia – National Broadband Network – Early Projects
• Australia – National Broadband Network – Industry at crossroads
• Australia – National Broadband Network – NBN Co and Infrastructure
• Australia – National Broadband Network – Overview & Analysis
• Australia – National Broadband Network – Telstra
• Australia – National Broadband Network based on Trans-sector model
• Australia – National Broadband Network Trans-sector projects
• Australia – National Broadband Network – Government’s Trans-Sector Conference

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The industry will be very nervous about this but I can see that there is room for manoeuvring here. 

In order to review this we need to go back to 2008, when the Australian telecoms world was still very much at the mercy of Telstra’s CEO Sol Trujillo. He was absolutely adamant that he wanted the company to maintain its dominant vertically-integrated position; he was not interested in expanding the wholesale business in order to facilitate competition; he had no interest in making high-speed broadband available to consumers at affordable prices; and he had very little time for any new developments in regional Australia. 

He didn’t want to talk to the government about reforms – instead he tried to sue ministers, and he permitted Telstra to abuse people involved in the industry, including yours truly. 

This was the period during which the government’s telecoms policies that we are now debating were formulated, and we need to look at them against that backdrop. 

After Mr Trujillo was ousted, the new CEO David Thodey immediately turned these policies around. He embraced the government’s plans for the NBN, offered cooperation and made changes to some of his staff and to his company’s strategies. While that certainly didn’t change the direction of the company overnight, and while significant changes still need to take place, I am rather optimistic about the company’s new direction and its willingness to progress along new lines. 

Based on the ‘new’ Telstra, therefore, we believe there is now room for some relaxation in relation to the original structural separation policies that were developed during the Trujilllo period. 

As Telstra has now publicly accepted the structural separation of the NBN, we certainly have an end destination there. So what we are basically talking about is the transition time, between now and then. 

With Telstra’s support for the structural separation of the NBN it will make sense for the company – once the negotiations between the company and the government are finalised – to ‘voluntarily’ begin actively preparing itself for a telecoms future based on structural separation. It would not make sense for the company to continue to boycott changes needed to support more competition utilising its facilities. 

The NBN is all about wholesale and Telstra had better start looking after its wholesale customers ‘quick-smart’, as they are going to be increasingly important to the bottom line of their operation. They can’t wait much longer because – as we have already seen, in the last results – even without a more competitive NBN environment the company is losing significant market share to its competitors. A different model will be required by the company to stem that tide, and the sooner it starts to change the better it will be for the company and its shareholders. Unless it significantly changes its business models it will lose more customers to its competitors and to new IP-based technologies and applications. 

So that is where there is room for negotiation. The government can stick to its structural separation policy, but allow Telstra to phase this in during the transition period. In exchange for that Telstra will develop a strategy for the transition period. 

In order to satisfy the government’s overall policies this transition model will need to support more and better competition which, in turn, will benefit the end-users (the people that the senators are keen to see benefiting from it). 

This transition plan needs to be approved by the ACCC in consultation with the rest of the industry. Once the policies are in place it is the ACCC that needs to manage the industry and not the Minister or the Department. 

Paul Budde 

See:- Australia – National Broadband Network – NBN Co and Infrastructure

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The country’s telecom infrastructure is reasonably well developed in the main business centres, where service availability is relatively high for Latin America. Facilities are quite poor, however, in small urban centres and rural areas. 

Though lower than average for South America, Colombia’s fixed-line teledensity measures up favourably with the country’s economic indicators. Colombia has some 30 local telephone providers, partly private, and partly owned by the municipalities where they operate. Long-distance services were liberalised in mid-2007. To operate, long-distance providers need a Convergence Licence and a multicarrier access code. 

Colombia’s mobile penetration is considerably higher than would be expected given the country’s general economic indicators, largely thanks to the country’s mobile rates, which have been among the lowest in Latin America. América Móvil’s Comcel is the leading cellular operator, followed by Telefónica’s Movistar and Millicom-controlled Tigo. Avantel uses iDEN technology to serve the corporate market. 

The mobile market in Colombia was gravely affected by the economic recession. In the first half of 2009, the mobile subscriber base began to shrink for the first time. The downward trend was reversed in the second part of the year, but growth has been small, and the country may be facing early mobile market saturation. The large percentage of the population living below the poverty line cannot afford a mobile phone, and many of the wealthier citizens already have two mobile lines. 

Colombia’s broadband penetration is slightly below average for Latin America but higher than would be expected given the country’s economic indicators. Helped along by a regulatory framework that encourages competition and by government efforts to reduce the ‘digital divide’, broadband is expanding strongly. ADSL is the leading broadband technology in Colombia, but cable broadband continues to grow both in subscriber numbers and in geographical coverage thanks to the popularity of triple play solutions. 

The mobile broadband market in Colombia took off in 2009, but speeds are reportedly erratic, rarely reaching 1Mb/s even in the major cities and often dropping to less than 100Kb/s. According to consumer reviews, Tigo offers a faster service but has less coverage than Comcel or Movistar. In some of its operating areas, fixed-line company UNE-EPM has replaced its WiMAX services with mobile broadband on Tigo’s network, using a SIM card and modem branded UNE. 

Market highlights from the new BuddeComm Report:

• Two state-owned companies are up for sale: ETB, with about 26% of the country’s fixed lines in services, and Emcali, with about 7%.
• Competition will receive a further boost from number portability, to be implemented by 2011.
• More than 40 companies have received access codes for long-distance telephony, but new entrants have only managed to eke out a minuscule share of the domestic long-distance market. On the other hand, they have done much better in the international telephony sector, where competitive operators have already secured more than one third of the market share.
• The Colombian government has launched a tender for the construction of a Ku-band satellite called Satélite Colombiano (Satcol).
• The government is hoping to increase mobile competition by auctioning spectrum in the 2.5GHz band to new players.
• IPTV, offered by UNE-EPM, is attracting a rapidly growing number of subscribers. 

For more information see: Colombia – Telecoms, Mobile, Broadband and Forecasts

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