In this post, Shadow Communications Minister Malcolm Turnbull responds to the claim that broadband pricing will not increase under Labor’s National Broadband Network plan.

“Now what’s going to happen here is because there is no competition, because this is a government monopoly and because they are spending so much money so they’re overcapitalising it, inevitably prices are going to be high.” — Malcolm Turnbull, 1 February 2012. [1]

But is that right? Some NBN supporters argue my comment is unfair and inaccurate. They reject any suggestion that the NBN will result in broadband costs that are higher than they would have been in its absence.

We need to get real about this. When you are committing tens of billions of dollars to replacing the entire existing infrastructure of a vital industry, you cannot be sentimental or self-deluding. There are no fairies at the bottom of the NBN garden to suspend the laws of economics.

By any measure the NBN is a massive investment. The Government says the direct capital cost of the network will be $37 billion and the peak funding required by NBN Co $41 billion. Most industry experts expect the eventual cost to be significantly higher, and some estimates exceed $60 billion.

It is difficult to demur: Let’s face it, what was the last Government infrastructure finished on time and on budget? Most projects that run over budget involve types of infrastructure where the likely costs, economic drivers and probable operational complications are well understood because of previous experience – the likes of roads, dams, tunnels and major buildings. But the NBN is entirely new in the Australian context; nobody has deployed a large scale fibre to the premises network in established areas. And insofar as there is one relevant point of comparison in South Brisbane, where Telstra is currently building an FTTP network, all publicly available information indicates that it costs a lot more and takes a lot longer than projected.

The NBN is also going to be a monopoly, given other fixed-line infrastructure will either be decommissioned or contractually prohibited from competing. So the only competition for carriage of broadband services will be provided by wireless networks, which in some cases will be a substitute product, but in many will not (as Senator Conroy is so fond of pointing out). The NBN in fixed line terms will be the only game in town.

Every enterprise wants to get a good return (ideally a high return) on its invested capital. If it cannot get a reasonable return then it won’t be able to meet its obligations to its lenders or pay dividends to its shareholders. However sometimes people do over-invest – whether it is the toll road that overestimates traffic volumes or the restaurant with an excessively flash fit out.

And if they are operating in a competitive market (if, for instance, motorists can take another route or diners choose another restaurant) they will find that the return they can earn is less than the cost of the capital they have spent, and have to write down the value of that investment. You have to meet the market price that is determined by your competition.

However where a business is a monopoly it is able to exploit its market power and charge much higher prices.

Of course, doing this is an integral part of the NBN business plan. Everywhere else in the world (and in Australia to date) HFC networks are used for high-speed broadband, and usually for voice traffic as well. In most markets the HFC networks belong to cable TV companies who compete fiercely with telco services delivered over fibre, copper or a combination of both.

However in Australia, Telstra and Optus are being paid billions NOT to use their HFC networks for broadband or voice precisely so they cannot compete with the NBN. Because the HFC networks were built a long time ago in fairly densely settled areas, Telstra and Optus would be able to offer comparable services and undercut the prices NBN wants to charge for its brand new FTTP network – resulting in NBN having to cut its rates to meet the market. So in order to prevent that happening, billions of dollars of taxes have gone to pay off Telstra and Optus not to compete.

All monopolies will attempt to charge excessive prices (extract economic rent) and so typically they will be the subject of regulation – as in the case of our water, gas and electricity providers. And that will be the case, to some degree, with the NBN which is generously proposing that it will not seek to earn more than the Government’s chosen benchmark of a 7 per cent return on its invested capital.

However, this begs the question as to whether the level of capital that is being invested is appropriate. In a competitive market a business cannot maintain high prices because it wants to get a particular return on its capital. Its customers will say “that’s your problem” and move onto a cheaper service or product.

This issue of the level of invested capital is a vexed one with regulated utilities. Many people, including Rod Sims (formerly head of IPART in NSW and now chairman of the ACCC) have argued that electricity distributors were encouraged to overinvest in their transmission and distribution networks because they were entitled to charge whatever prices were needed to deliver the return on their investment allowed by regulators – given that regulated return was higher than their cost of borrowings, it gave them an incentive to invest as heavily as they could. Regulators’ ability to declare particular investments as “unreasonable” were usually very limited – and according to Sims, this overinvestment has been the major factor behind the rapid growth in electricity prices. [2]

The Australian Energy Regulator Chairman, Andrew Reeves, recently warned against overinvestment or ‘gold plating’, saying it has led to sharp price increases:

“NSW and Queensland are getting more infrastructure than we think they need and we are required to approve price increases to pay for it. [3]

So let us re-examine the logic. A monopoly will always have the ability to charge higher prices than a business which is operating in a competitive market. An answer to that is to regulate the monopoly. But if the regulator simply requires that the prices charged by the monopoly only be constrained by a maximum allowed return on capital, that will still most likely result in higher prices – especially if the capital invested is far greater than is needed to deliver the services or products consumers actually want at a given point in time.

And the more desperate a Government is to prevent its supposedly ‘commercial’ investment from turning up as red ink on the budget, the more certain you can be that it will do everything in its power to recoup money from consumers and keep ROI up.

When the NBN Co talks about ‘flexibility’ in future pricing in documents submitted as part of its Special Access Undertaking, there should be no doubt what they are really talking about: sacrificing affordability. Analyst Ian Martin, for one, has noted that for the NBN business case to be viable, average wholesale revenue per customer will have to increase by 34 per cent from current levels.[4]

At the simplest level there is simply more capital earning a return. In its latest review of Telstra’s access charges, the ACCC valued the current Telstra network at just over $17 billion.[5] The NBN’s direct network capital cost is $35 billion in 2010 dollars or $41 billion in real dollars. Its peak funding requirement is higher taking into account the $11 billion (in after-tax 2010 dollars) paid to Telstra to shut down its network and migrate customers and $800 million paid to Optus for similar commitments. Whether these figures are counted as operational expenditure or capital expenditure is irrelevant from a customer’s point of view – any losses they lead to will be counted as recoverable capital, and thus contribute to the eventual level of charges for use of the network.

It would be wrong to assume that any prices so far offered by the NBN Co are sustainable. In its SAU lodged with the ACCC, the NBN Co included a consultant report conducted by Synergies Economic Consulting (available online here) which states:

“NBN Co has set its initial prices to ‘meet the market’ as a means of ensuring the smooth migration of end user connections from legacy networks to the NBN and to also meet the Australian’s Government’s objectives of setting wholesale prices to achieve the “broadband take up targets agreed by Government through the NBN Co Corporate Plan and Business Case”, again as set out in the Statement of Expectations”. (p.8)

As the consultants note, the low starting base for wholesale prices is an argument for granting NBN Co ‘pricing flexibility’ to recoup its costs at a later date: “the risks of having to price to ‘meet the market’ in accordance with government expectations, are best managed by providing NBN Co with a degree of pricing flexibility;” (p.9)

Until now, the deregulated Australian telecommunications market has typically led to falling nominal and real prices for most services. The nominal retail price of ADSL broadband fell by 69 per cent between 2005 and 2010, according to figures compiled by the OECD [6]. Between 1997-98 and 2008-09 inflation-adjusted prices fell 34 per cent for fixed-line telephone services and 49 per cent for mobile services, according to the ACCC. [7]

Compare that with what we know about the NBN’s plans so far. In terms of access, NBN Co has applied to the regulator for permission to raise nominal prices by 50 per cent of the rate of inflation, per year [8]. But note this restriction only applies to access – unlike current wholesale pricing, NBN Co will also be charging usage fees (via its CVC).

NBN also has made no commitments about its pricing of more sophisticated services such as multicast video. And in any case, if the NBN gets its way, the ACCC would have its power to enforce any price commitments offered in the Special Access Undertaking overridden by separate Wholesale Broadband Agreements (WBAs) NBN Co signs with individual retailers.

With barely 4000 users connected to the NBN after four years of Labor Government, NBN Co yet to report that it has earned revenue from selling broadband services, and completion of the rollout a decade away at best, claims and counterclaims about NBN pricing are at present entirely in the realm of theory. That is as true of the rate cards announced by various ISPs as any other indicator – we all know those rates can change.

But if anyone really believes all of the above points to NBN prices for broadband below where they would have been without it, I know someone who could sell them a very nice Bridge with views of the Opera House.

References:
[1] Interview with Ben Fordham on 2GB
[2] Sims, R., (2011), “IPart Concerned About Rising Electricity Network and Green Scheme Costs”, available online here. Professor Ross Garnaut also addresses the topic of overinvestment in electricity networks in a recent update on electricity prices (Garnaut, 2011, “Transforming the Electricity Sector”, available online here.
[3] Martin, P., (2011), “Pricing Rules Boost Power of Energy Suppliers”, in The Sydney Morning Herald, available online here.
[4] Martin, I., (2011), “A Significant Gap in the NBN Corporate Plan” in The Telecommunications Journal of Australia, Vol 61, No3, p.51.5 available online here.
[5] Battersby, L., (2010), “Action by the ACCC Slashed Telstra Value by Billions”, in The Sydney Morning Herald, available online here.
[6] OECD, (2011), Communications Outlook, p.293
[7] ACCC, (2011), Telecommunications Report, p.21 available online here.
[8] NBN Co, (2011), “NBN Co Special Access Undertaking”, available online here.

Image credit: Office of Malcolm Turnbull

news Australia’s interactive games industry is upbeat and prospects remain bright as consumption of games continues to thrive, according to a media release from Interactive Games and Entertainment Association (iGEA). The sentiments come despite latest data showing that there was a significant dip in ‘traditional retail’ computer and video games sales in 2011.

The latest data from independent market research group NPD Group Australia, which includes all revenue generated from console hardware, games software and gaming peripherals sold through retail, reveals a 12.8 per cent contraction to $1.5 billion from the corresponding 2010 period. However, iGEA CEO Ron Curry said this did not reveal the full picture as the rising popularity in digital games wasn’t reflected in the latest results. The NPD data excludes sales from online retail, downloadable content, online games subscriptions, in-game micro-transactions and mobile games.

“As Australians continue to access video games through a host of different channels, it’s becoming more challenging to aggregate sales data through a single source. Whilst the NPD data has revealed a dip in ‘traditional retail’ sales, which according to our latest Digital Australia report still represents the lion’s share of the games industry, other research has pointed to the growth in digital downloads, multi-player online games, in-game purchases and online subscriptions,” said Curry.

Local technology analyst firm Telsyte’s estimate that Australians will spend over $450 million in online gaming subscriptions and in-game purchase in 2012 corroborates Curry’s view, according to the iGEA. Telsyte Senior Research Manager Sam Yip said in the organisation’s statement: “Online gaming subscriptions and in-game virtual goods sales are growing strongly in Australia, and will account for around 20% of the overall digital goods and online subscriptions market (which consists of 26 categories such as Internet video, Internet music and digital news subscriptions) in 2012.”

The iGEA media release also cited other reports that highlight the growth of the interactive entertainment market in Australia. PricewaterhouseCoopers forecasted revenue for both traditional and digital sales to reach $2.5 billion in 2015, with online and mobile games predicted to generate close to 50 per cent of this revenue; while IDC anticipated demand for handheld gaming hardware and software would rise by roughly 20 per cent in 2012.

Curry said: “Overall, we’re seeing a lot of evidence point towards a continuing healthy interactive games industry. The incredible success of games such as Call of Duty 3: Modern Warfare 3 which became the fastest entertainment property to hit the $1 billion milestone globally, eclipsing the previous record set in 2009 by the film Avatar, is only one example of this.”

Anthony Reed, CEO of Games Development Association of Australia (GDAA) credited the success of local games developers as a driving force behind the interactive entertainment market.

“Global consumer confidence in the digital space is encouraging exceptional growth in the Australian game development industry,” he said in the iGEA’s statement. “In 2011, Australian-made games featured highly across multiple digital platforms. For example, Brisbane’s Halfbrick Studios recorded over 120 million downloads of their smash-hit, Fruit Ninja, and 11 million for the recently released, Jetpack Joyride, and Melbourne-based IronMonkey Studios won Apple’s coveted ‘Game of the Year’ award with DeadSpace. Into 2012 we will see many more innovative and creative properties made by Australian studios releasing to a global audience.”

Some key statistics from NPD Group Australia:

• The majority of games (54 per cent) sold were rated G and PG
• The top 20 software sales featured shooter games, role playing games, dancing games, timecards and sports games
• The most popular genre are shooter and action (both at 19 per cent) followed closely by family games (16 per cent)

However, it’s not all good news for Australia’s video gaming industry. As chronicled vividly in an ABC article on the subject in October last year, many in Australia’s industry fear the local development scene is on the brink of collapse, after a string of studios — including KMM Brisbane, Pandemic, Krome, THQ’s Melbourne and Brisbane studios, Visceral Games and Team Bondi — have shut their doors in recent years. Developers have blamed the issue on the high Australian dollar.

Image credit: Screenshot from Epic’s Gears of War game

news Leading Australian online movie rental company Quickflix announced yesterday that US television giant Home Box Office (HBO) would invest $10 million for a strategic stake in the company.

HBO is the USA’s biggest premium television company and a wholly owned subsidiary of Time Warner Inc., a global leader in media and entertainment with business in television networks, filmed entertainment and publishing.

According to the terms of the investment agreement, HBO will invest $10 million in Quickflix in exchange for 83.3 million preference shares at a price of 12 cents per share. These shares are convertible to ordinary shares in the company, equivalent to a fully diluted interest of 15.7 per cent after conversion. The investment is fully endorsed by the Quickflix board, and is dependent on shareholder and Australian Stock Exchange (ASX) approval. The Quickflix board recommends that shareholders vote in favour of the investment by HBO and intend to vote any shares held by them in the same fashion.

Last week, Quickflix had announced that it had signed a content licensing agreement with HBO for streaming TV series and films in Australia. HBO will make its debut of television programming availability through Quickflix streaming, providing more than 500 hours of content.

Stephen Langsford, Quickflix executive chairman and founder welcomed HBO’s strategic investment in Quickflix. “Quickflix is achieving strong subscriber growth and we’re rapidly rolling out our streaming service. The funds from HBO’s investment will enable Quickflix to execute its strategy for growth and profitability,” Langsford explained.

Quickflix had launched WatchNow, its new instant movie streaming service in Australia, in November 2011, including a free trial in December for its subscribers. In January this year, the company had announced that it was enjoying a surge in subscriber growth, with the number of subscribers increasing by 24 per cent during the last quarter. There was an overall increase of 81 per cent in number of paying subscribers over the whole of 2011.

Earlier, in July 2011 Quickflix had revealed that it had raised over $4.6 million in funding through private investors, towards the company’s growing expansion plans for online operations. For this transaction, Quickflix had sold 55 million ordinary shares at a price of $0.085 per share.

opinion/analysis
This investment can only be a positive thing for Australia. If HBO is looking to invest locally, they are obviously interested in bringing their content to an Australian audience and finding channels for that. And, let me remind you, HBO is responsible for some of the greatest and most popular TV shows of the modern era. The Wire, true Blood, Real Time with Bill Maher, Curb your Enthusiasm, and recently, Boardwalk Empire, Treme and Game of Thrones. When it comes to great content which Australians love, HBO is packing some serious heat.

Image credit: HBO’s The Wire. Opinion/analysis by Renai LeMay.

news The nation’s number two telco Optus has released a clutch of National Broadband Network pricing plans aimed at small businesses, and has also revealed it will expand its consumer broadband plans in March, adding more bundles and 24 month contracts.

The company released its first tranche of consumer NBN pricing in November last year, with the plans being favourably compared to its current ADSL and HFC cable broadband pricing. The NBN plans are virtually identical to Optus’ current consumer broadband pricing.

The small business broadband plans released today come at six different levels ranging from $59 per month up to $129 base cost, depending on whether you purchase a bundled home phone line, and how much download quota you need per month (from 100GB up to a terabyte). They feature basic broadband speeds of 25Mbps, which is one of the NBN’s equivalent speed tiers to today’s ADSL broadband, but customers can boost the speeds of their Optus broadband connections in tiers, for $5, $10 or $20 per month. $20 extra per month, for example, will get you 100Mbps speeds on an NBN connection.

The other major ISP to have released NBN business plans is iiNet. In some areas, Optus’ plans are dramatically cheaper than those of iiNet. For example, an iiNet business NBN plan with 40GB of quota and speeds of 25Mbps will cost customers $84.95 a month. However, Optus has a 100GB plan with the same speeds for just $59 per month. At the top end, the two ISPs are more comparable — for example, a terabyte plan at 100Mbps will cost Optus SME customers $139 per month, and iiNet customers $129.95 per month.

Customers can sign up to either 12 month or 24 month contracts on the plan. The plans will come with what Optus is describing as its ‘NBN Wi-Fi modem’, although it did not clarify what brand or model that modem would be.

The packages also come with a package which Optus dubs its ‘OfficeApps’ email and collaboration licence. The package bundles Google’s software as a service Apps office suite together with the ability for small businesses to register their own domain name and associate it with their email account, and a bulk SMS package called ‘webSMS’.

As with its consumer NBN broadband plans, Optus’ new small business NBN plans are very similar to its existing ADSL/HFC cable broadband plans. For example, the company offers naked (without a phone line) business broadband packages ranging from $49 a month with 10GB of data, to $119 per month with a terabyte of data. The $59, $89 and $119 price points are virtually identical with those price points in Optus’ NBN business plans. And the same is true of its bundled offerings.

In a statement issued by Optus this morning, Rohan Ganeson, Managing Director for Optus SMB said: “The NBN opens the door for small businesses to take advantage of high speed broadband to do business in new ways, and make use of the latest digital tools to be more efficient and competitive. When you consider that 48 per cent of Australian SMBs don’t have a website and only four per cent are using cloud solutions such as web-hosted email, there is a huge opportunity for small businesses to embrace digital technologies.

“Optus NBN packages have been designed to offer great flexibility and value and make it easier for smallbusinesses to take the leap into the digital world, from establishing an online presence to reach new customers,to running their applications in the cloud for 24/7 access to business data. We’ve also combined OfficeApps with our NBN offerings for the first time to give small businesses that competitive edge and help lower their operating costs.”

“This is the first of many NBN packages Optus will offer to help small businesses make the most of the NBN to enhance and grow their business,” Mr Ganeson said. “As the roll-out progresses, we’ll expand our NBN packages to cater for larger offices and add more Optus OfficeApps inclusions to help businesses run their operations faster and smarter.”

The telco also noted that in March it was planning to expand its range of consumer broadband and home phone bundles and introduce 24 month contract plans.

opinion/analysis
Once again we see that Optus has launched a range of NBN plans which are virtually identical to its existing offerings in ADSL/HFC cable broadband, lending further credence to the idea that broadband prices will not be higher under the National Broadband Network.

Last week, I wrote on Delimiter that it was “factually inaccurate” for the Coalition to continue to claim that broadband prices would be higher under the National Broadband Network. The Office of Shadow Communications Minister Malcolm Turnbull has so far not responded to an invitation to comment on this issue. However, I would suggest that the release of Optus’ small business plans this morning is another nail in the coffin of that claim.

How long will it be until Turnbull and others within the Coalition admit they were wrong on this issue, or provide some evidence for their claims?

review Zelda’s in trouble again and the chosen one Link is the only hero who can rescue her, despite the tribulations of puberty being an ongoing concern. The Legend of Zelda: Skyward Sword takes its time to warm up, but when it does, there’s a lot to like about Nintendo’s last serious hurrah on the Wii.

Overview
I count myself fortunate that I can enjoy the myriad complexities of Skyrim and yet still sit down and find fun in the comparatively lightweight experience offered by The Legend of Zelda: Skyward.

Nintendo, borrowing from the playbook of its Super Mario series, has you chasing the elfin Zelda from dungeon to dungeon in an attempt to rescue her – at least that’s the impression you start out with. You play the role of awkward teen and Knight Academy novice Link, the only person in possession of a rare crimson “Loftwing”, or riding bird, and the fabled Goddess Sword, capably wrenched from its ancient plinth in daring Camelot fashion.

As with almost all previous games in the series, Skyward Sword isn’t a continuation, but a reboot featuring the same characters. We’re transported to an alternate dimension where enough constants exist to keep the escapades familiar, with sufficient differences that we’re not playing the same game in a slightly spicier marinade.

Skyward Sword isn’t immediately rewarding; the treats offered in the early stages of the game are scraps compared to the mid/late-game. For a good five to seven hours, there’s a lot of repetition and tedium, filler fetch quests and wasted minutes riding the clouds on your Loftwing. The situation does improve, but it’s entirely dependent on how long you’re willing to indulge Nintendo’s designers.

Speaking of design, if there are three techniques Nintendo’s mastered over the two and half decades of Zelda games, it’s layering gameplay, reusing content and hiding tantalising goodies in plain, but unreachable, sight. Ledges and chests will mock you from secure locations you’ll eventually penetrate thanks to bombs, digging gloves and a grapple (or Clawshot). Leaving an area uncleared the first time round will annoy completionists, but it’s a core element of the Zelda experience.

Nintendo’s also done a solid job of dressing up Skyward Sword’s linear adventure with what I can only describe as stuff. Hidden locations with reward-dispensing mini-games will keep you busy if you want a break from the story. Incremental item upgrades to strengthen your shield or amp up your slingshot add a traditional role-playing flavour previous games failed to provide in sufficient quantities. “Sword mowing” — cutting grass with a sword, in the finest Japanese historical tradition — continues to be a surprisingly lucrative occupation.

Ah yes, sword-fighting. If my Infinity Blade II review told you anything, it’s that I don’t want my input method to be the primary source of failure – the player’s skill level should be the deciding factor. Even with the massive strides Nintendo has taken to get its Wii Remote to act with your best intentions in mind, you’ll still shake your head when Link’s swordplay poorly reflects what your hands are actually doing.

This is more an observation that motion controls still have a ways to go, not a serious criticism of the game, as it handles the important aspects with generalised inputs, such as flicking the Nunchuk to block (which I found very satisfying). Swiping the remote will, 95 per cent of the time, result in a sword slash of some description.

Skyward Sword’s boss fights are as tricky as ever, requiring a puzzle-orientated mind to figure them out. If you’re not up for unravelling them yourself, you can lock onto your opponent and call upon “Fi”, the Goddess Sword’s science-fiction inspired guardian. Fi will deliver a sterile assessment of the targeted creature’s capabilities and weaknesses, a feature which easily makes my list of the game’s best.

Jumping and climbing are handled automatically, boiling potentially frustrating platforming segments down into manageable 3D puzzles. Just push the Nunchuk stick in the direction of a sensibly-sized gap and Link will do the rest. Snagging an overhead ledge requires additional input from the A button, but otherwise, it’s never a source of peripheral-tossing rage.

The nitty gritty: Play Asia‘s out of stock, but the ever-reliable OzGameShop is selling the game for $49.99. Locally, JB Hi-Fi’s offer of $79 beats out EB Games’ whopping $98. If you don’t own a Remote Plus or Motion Plus adaptor, add that to the shopping list. For the adaptor alone, most places stick closely to the $30 mark, while the remotes range from $59 to $68. Going to OzGameshop will shave a few more dollars of these prices.

My recommendation is that if you already have a remote, just get the adaptor. I was concerned about the additional weight and potential awkwardness from the remote’s extended length, but after an hour or so of play, I didn’t find either concern valid. Whatever you do, don’t go the eBay route – most if not all of the third-party alternatives use cheap sensors. You might get lucky with a decent one, but if you want to avoid disappointment, go with the official gear.

Conclusion
If you’re reading this review, you probably know what Zelda is by now. Skyward Sword is more of the same — reworked, and polished. My two major criticisms of the game are that it takes forever to get to the really good bits and the game plays it too safe with its admittedly well-trodden formula. If, like me, you’re not a Nintendo diehard willing to stick with a Zelda game until your bones are bleached white by the inevitable nuclear war of the 30th century, losing interest a few hours in is a distinct possibility. This links up somewhat with my second concern – the gameplay – which, while enhanced by the heavily motion-dependant combat and puzzles, never seriously engages those after a deeper role-playing experience.

Logan Booker is the for Kotaku Australia. From Monday to Friday, Logan operates a two-man indie game studio based in Melbourne. He’s previously worked as a game designer at Tantalus, writer for Firemint and editor of Atomic.

Logan Booker is the weekend editor for Kotaku Australia. From Monday to Friday, Logan operates a two-man indie game studio based in Melbourne. He’s previously worked as a game designer at Tantalus Media, writer for Firemint and editor of Atomic. Renai LeMay also contributed to this article.

Image credits: Nintendo

news Former US whole of government chief information officer Vivek Kundra will hit Australia over the next several weeks for a speaking tour that will include events for his new employer Salesforce.com, as well as the Australian Information Industry Association.

Kundra has a long history working within government organisations at various levels in the US. He served as the director of infrastructure technologies at Arlington Country in Virginia in the early years of this decade, for example, before later becoming the state’s assistant secretary of commerce and technology. After that time he became the chief information officer of the District of Columbia. He had also spent time as the vice president of software firm Evincible.

When US President Barack Obama won the 2008 US election, Kundra was appointed to be the president-elect’s technology advisor. He was then named to the post of Federal chief information officer in March 2009, several months after Obama himself took office.

Kundra’s time in the US Government saw him preside over a number of major changes which have caused wider global ripples within the public sectors of countries such as Canada, the UK and Australia. Kundra, for example, was responsible for creating a whole of government IT dashboard through which government staff could easily gain a birds’ eye view of all major projects and IT expenditure across all departments. Part of the project was that each project had a picture of the accountable executive attached to it — usually a departmental chief information officer. The technology behind the dashboard is publicly available so that other jurisdictions can adopt it.

Another initiative undertaken by the US Government under Kundra was an initiative he dubbed “TechStat”. The TechStat toolkit was also made publicly available alongside the IT Dashboard. As detailed in a very useful article on the subject published by InformationWeek, TechStat sessions see an agency’s CIO and CFO, central government analysts and officials from related departments brought together with staff from the central whole of government office of the CIO to rapidly examine and evaluate the status and future prospects of a major IT project. In many cases, after reviewing a project’s current status and likely future, the government decision-makers simply cancelled the projects or rolled them into other similar iniatives in different departments.

Kundra was also responsible for pioneering a ‘cloud first’ strategy in the US Government which saw agencies required to evaluate cloud computing options prior to making any new investments in IT.
However, Kundra’s tenure within the US administration did not last long, with the executive leaving the government just two years after he joined it, in August 2011. He then joined Harvard University as a visiting fellow, before being announced as executive vice president of emerging markets for cloud computing vendors Salesforce.com in January this year.

Kundra’s time was not without controversies. A survey of IT professionals in government by online IT community MeriTalk published in September heavily criticised the executive. “Vivek’s tenure … was like a bottle of champagne — seems like a great idea, exciting start, but the plan’s unclear, and the next morning you wake up with the same problems and a sore head,” said Steve O’Keeffe, founder, MeriTalk, at the time.

In Australia, Kundra will speak at a press event in Sydney being held by Salesforce.com on Monday 13th February, and at the AIIA’s Cloud Summit in Canberra the following Wednesday.

Kundra’s tour of Australia has already attracted a degree of controversy, however.

The AIIA notified its members of Kundra’s attendance at its cloud summit in early December, noting that the executive would “lead a US/Australian dialogue on cloud computing”. It added at the time: “The dialogue will address how to eliminate obstacles to trans-border flows of data or information, while maintaining data security and privacy as well as law enforcement and national security. The two governments will explore the possibility of future dialogues on other digital topics of mutual concern.”

However, it is believed that the AIIA was not aware at the time that Kundra would be in January appointed a senior executive at Salesforce.com. It is unclear to what extent Kundra will be speaking at the event as a Salesforce.com executive, and to what extent he will be speaking as a former US Government chief information officer.

opinion/analysis
I was invited to attend Kundra’s press event in Sydney being held by Salesforce.com. However, I have declined to attend. In addition, I will not be reporting on anything that Kundra says at the AIIA’s event in Canberra, or on any other events that the executive speaks at in Australia. In short, I have decided that Delimiter will be boycotting coverage of Kundra’s attendance in Australia.

The reason is that I am personally highly disappointed in Kundra’s somewhat cynical early departure from the US Government and into the welcoming arms of leading cloud computing vendor Salesforce.com.

Kundra had a once in a lifetime chance, with his ascension to the CIO role in the new Obama administration, to make a great deal of systemic change in the US Government’s use of technology. And he brought a huge degree of effort, energy and innovative thinking to that initiative in the two short years he was in the post — creating several landmark programs which continue to have an impact on public sector technology thinking globally.

But then Kundra instantly undercut all of that good work by not following through on his efforts. After just two short years — which is a miniscule amount of time for the slow-moving public sector — the executive abandoned the US Government to its own devices and switched sides to work for a cloud computing vendor.

Kundra had a direct connection to the administration in the form of US President Obama. By leaving the Government, he left IT executives across the US public sector without that sort of high-level sponsorship for their initiatives. And by joining Salesforce.com, he has invalidated his government ‘Cloud First’ cloud computing push. Many within the US Government will be wondering to what extent Kundra was thinking of his future career when he made that push.

We’ve seen similar examples of top-level government IT executives joining vendors, with the most notable example being former Queensland Government chief information officer Peter Grant, who left his role in 2008 to become the State Director of Microsoft, a role he held for just over a year. In December Grant was reappointed to Queensland Government CIO role. However, Grant stuck around in the Qld Govt CIO role for longer (three years, compared with two) than Kundra did in the US Govt role, and he was obviously overseeing less dramatic change than Kundra was in the US, whose Federal public sector is an order of magnitude larger than anything we see in Australia.

My opinion is that Kundra should have stuck it out in the US for at least the first term of the Obama administration, and a second term if Obama won it. That way he could have driven real change in the US Government which would have affected generations of residents. Six years in government is about enough time to get some decent stuff done. Anything less is probably not enough.

In Australia, we do have some examples of public servants who have gone beyond the call of duty in serving the cause of technology in government. One of those is Department of Defence chief information officer Greg Farr, who helped completely reform the Australian Taxation Office’s IT operations and is now doing the same at Defence. Farr’s history within Australia’s government dates back a long time and recently earned him a Public Service Medal in the Australia Day honours.

Now that’s public service worth listening to.

Image credit: US Government

news The South Australian State Government today revealed that it would shortly be kicking off a huge new round of IT purchasing initiatives which would affect a string of major whole of government contracts, as part of its long-running Future ICT Services Arrangements program.

One of the aims of the program, which has been playing out over the past decade, was the realisation of South Australia’s intention to exit from its massive 10-year IT outsourcing contract with Texan giant Electronic Data Systems, with the deal to be broken up into a large number of chunks and farmed out, often to other suppliers.

The completion of that contract took place in 2007, but South Australia is still gradually working through a series of contracts which are gradually coming to full term, with the initiative being steered by the state’s whole of government chief information officer Andrew Mills.

In a notice published through the state’s tendering system this week, Mills’ office noted that on 7 March it would hold an open industry briefing to provide the industry with information regarding the next round of contracts to be signed under the Future ICT Services Arrangements program.

The state’s Minister for the Public Sector, Michael O’Brien, and its ICT Board chair, Jim Hallion will speak at the briefing. “Attendees will be given high level information regarding the State’s ICT sourcing directions with a view to supporting industry engagement in the upcoming market approach -‘Tranche 3 Services Expression of Interest (EOI),” the note states.

In late January this year South Australia updated its public status document (PDF) to detail which contracts would be within scope of the Tranche 3 contracts to be discussed at the briefing.

In that list, the state noted that it had recently completed negotiating a new client computing (desktop PCs and laptops) and server equipment panel, with new contracts expected to commence from February this year. Previously the state bought the hardware through Acer, Dell and HP, in a contract initiated back in 2006 and which had been slated to end on 30 June 2011. It is not clear which suppliers now sit on the panel.

The state is also currently negotiating a printer and photocopier equipment panel, with new contracts in that area expected to begin in July this year. It is believed that Canon, Fuji-Xerox, Kyocera-Mita and Ricoh currently provide the state with its photocopier needs, with HP, Kyocera-Mita and Ricoh working in the printer area.

In the briefing next week, the state will primarily look at telecommunications contracts, including managed network services, ISP services, mobile carriage services, telecommunications services in general, “active devices” contracts (for example, routers), PABX maintenance and electronic messaging (email). However, it will also look at its Microsoft enterprise contract.

In the past, suppliers such as Dimension Data, Telstra, Internode, NEC and Cisco have been the prime beneficiaries from new telecommunications contracts in the South Australian Government. Other major contracts not yet in scope for the state include mainframe computing, storage and hosting services.

opinion/analysis
So far South Australia is the only state jurisdiction which appears to be doing a decent job of managing its whole of government technology contracts, with every other major state appearing over the past few years to have dropped the ball completely in the area. We just don’t hear about many whole of government technology contracts from states such as Queensland, NSW and Victoria any more. And I’m not surprised, with a series of audit reports over the past few years making it clear that when it comes to the governance of technology rollouts, those states have a lot of learning to do.

So what would I like to see from South Australia’s Tranche 3 of contracts? Well, of course it’s hard to say where each vendor sits relative to each other at the moment.

However, in general, I suspect Telstra still has a huge lion’s share of telecommunications contracts in South Australia. I’d like to see some of that work farmed out to Optus, which has a good and growing enterprise division, and local player Internode continue to pick up as much Internet services work as possible as well.

When it comes to PABX gear, I’d like to see some recognition of the worth of shifting to modern IP telephony platforms, with Cisco and Avaya getting gurnseys in that area, as they’re the dominant players in that still emerging field. In switching, if that is in scope, it’d be nice to see Cisco given some competition by the likes of HP ProCurve. Switches in 2012 don’t always need to cost the earth.

As for email, if that area needs work, I’m sure an integrator like Dimension Data will pick up some work there. Realistically, for an organisation like the South Australian Government, Microsoft Outlook/Exchange is basically the only option. I’m sure there are still some Lotus Notes and even GroupWise installations in Adelaide which need to be “upgraded” to Exchange.

Did I miss anything?

news Communications Minister Stephen Conroy has demanded that the Coalition disclose some basic details of its rival broadband policy, noting that Shadow Communications Minister Malcolm Turnbull has not substantially outlined the policy further in public since a landmark speech on the issue in the middle of 2011.

The clearest indication currently available of the Coalition’s rival telecommunications policy is contained in a speech given by Turnbull in August last year, in which he proposed focusing on upgrading the HFC cable networks operated by Telstra and Optus, splitting Telstra into wholesale and retail arms, and using wireless and satellite solutions to serve remote regions.

Since that date, Turnbull has also appeared to focus heavily on the potential for fibre to the node technology to serve Australia’s future broadband needs, in comparison with Labor’s National Broadband Network policy, which focuses on more expensive and technically capable fibre to the home technology.

However, in a statement released late last week, Conroy criticised Turnbull for not releasing significant detail of the Coalition’s policy, demanding that the Shadow Minister “come clean” on the Coalition’s plans. “Six months ago today Malcolm Turnbull addressed the National Press Club on the National Broadband Network. For the rest of 2011 and already in 2012 he has been silent on any policy detail,” Conroy said.

“In one speech, three media releases and 15 tweets this year on the NBN he has continued his negative campaign and not provided an actual broadband policy. Meanwhile, his Coalition partners continue to call for fibre to the home in regional Australia, while his leader tells Australia this week we should invest in last century road and rail infrastructure not 21st century broadband.”
Last week, Conroy pointed out, Turnbull had linked to a Financial Times article on Twitter about a fibre to the node deployment by British telco BT.

“This is the same story he told us about in December,” Conroy added. “But he gives no detail on how it would be, or even if it can be, delivered in Australia. How many powered cabinets will be required to get within 400 metres of every premise? What is the actual speed that customers get rather than just ‘up to 80 Mbps’? How much will it cost? The Coalition needs to come clean – what is their actual policy, what technology do they propose to use and what will it cost.”

Conroy said Turnbull should answer the following questions about the Coalition’s broadband policy:

• How will the coalition achieve the structural separation of Telstra?
• How much will prices increase in regional Australia without a cross subsidy? How much will his “voucher” system for regional Australia cost?
• How many households does Mr Turnbull plan to serve with HFC?
• How many households does he plan to serve with FTTN? How many FTTN nodes does he plan to build?
• How many households does he plan to serve with wireless?
• What does he really think the requirements are for bandwidth in 2020?
• When does he expect his network will need to be replaced by FTTH (he calls it a migration path)?
• How much will his network cost?
• Why does he consisently misrepresent the $35 billion capital cost of the NBN?

The Office of Malcolm Turnbull has been invited to respond to Conroy’s statements.

opinion/analysis
It must be snowing in hell today, because I find myself in complete agreement with Conroy about the lack of detail which Turnbull has so far released about the Coalition’s broadband policy. As I wrote in November last year:

“After my initial burst of enthusiasm for Turnbull’s plan, the Shadow Communications Minister’s behaviour over the succeeding months — in which he has done virtually nothing to address its criticism or expound its merits in public — has done much to sour me on it. Watching Turnbull in action in that period, I often find it hard to believe that he has the energy and determination to see his rival proposal through, should he be appointed Communications Minister in a Coalition Government.”

No doubt it feels nice for Turnbull to be featured by outlets such as the Global Mail on its launch day as Australia’s “Prime Minister in waiting”. And it’s also no doubt nice for Turnbull to make appearances on prime-time Sydney radio discussing the NBN with sympathetic hosts and taking the chance for a few below the belt potshots at Conroy and the NBN project in general.

But policy development isn’t about feeling nice. It’s about substantive outcomes. Right now it seems very likely that the next Federal Election (generally expected to be held in 2013) could see a change in government, with a Coalition team under Opposition Leader Tony Abbott considered likely to knock Labor off its perch. With Abbott having threatened several times to tear up the NBN project, I think it’s about time we get some certainty from the Coalition about just what it’s proposing to replace it with. This is not a joke. This is about Australia’s future.

Image credit: Kim Davies, Creative Commons

This article is by Martin Hirst, an associate professor at Deakin University. It was first published on The Conversation and is re-published here with permission.

analysis Telecommunications giant Optus managed to convince the Federal Court in Sydney this week that there’s a legal blindspot in relation to its download pay-per-view service.

Telstra – given its business relationship with The National Rugby League (NRL) and Australian Football League (NFL) – had tried to prevent Optus from recording and re-broadcasting matches screened on free-to-air television. But Justice Steven Rares found Optus’s mobile television service didn’t breach the Copyright Act for a couple of reasons: Optus keeps separate recordings for each customer, and individual customers are responsible for requesting the recordings. So what’s going on here?

To my mind, former rugby league coach Roy Masters – ever the shrewd observer – hit the nail on the head when he wrote the following for the Sydney Morning Herald yesterday:

“They framed the copyright laws to protect the average punter from being sued for taping a TV show, including a football match on his home recorder. Now, their legislation is being used by Optus to sell a service.”

Naturally, Telstra has concerns. The AFL’s A$1.25 billion five-year rights deal signed last season with Channel Seven, Foxtel and Telstra, included a A$153m payment by Telstra for the online broadcast rights to games. The NRL, likewise, expected a proportion of its next deal to come from internet rights.

We’ve done nothing wrong
Optus is not breaching current copyright laws by charging its customers for a record-and-download service that includes material in which its competitors hold some or all of the copyright.

In court, Optus successfully argued its customers already access its competitors’ content via free-to-air television and record and replay programs when they choose to. This model of free distribution is embedded in our media culture. Now that old interpretation of the law – protecting home recording rights for the “average punter” – lets Optus monetise a data stream for its customers, using free content provided at great cost by others.

The potential appeal issues confirm it’s about the income from broadcast, repackaging and online rights. The AFL and NRL are claiming a loss of trade. If they stick to their word and fight back, and Telstra joins in, it could cascade into a series of messy contract disputes.

The whole issue is further complicated by the pay-TV siphoning regulations in which all litigants are also stakeholders alongside Foxtel. As everyone knows, from the Communications Minister Stephen Conroy down, the regulatory regime and legal framework for the digital economy and the new convergent media landscape is out of step with the machinery of change. We have a high-performance engine under the hood, but the tyres and the suspension can’t really handle the speed. We are living through a techno-legal time warp.

The laws that worked to allow the “average punter” to record and replay TV shows using personal recording devices (such as TiVo) are now creating lucrative business opportunities that everyone involved in this legal stoush is keen to exploit. Monetising the click-stream is the main game in digital Dodge City and an analogue copyright law is not player-friendly for everyone. Contrast Masters’ old-hand wryness with the corporate-speak from Optus spokeswoman, Clare Gill:

“This has been a win for Australians, for innovation and for the law. This is a product similar to things that you can do today. So we see this no different (sic) from any other personal video recording device.”

As one punter wrote on sports website The Roar, it’s not a pretty sight to see communication giants slugging it out: “The battle between the telcos is getting ugly, and the sporting landscape is getting caught up in it.”

At the heart of the legal issues is the Copyright Amendment Act of 2006, which specifically allows home recording of free-to-air TV content. At the time smartphones were not so ubiquitous and the download technology was clumsy. The law worked for its time. But not any more. The techno-legal time-gap kicks in when the technology perfects a new application that the old rules were not designed to deal with. Here, the respondents argue, the law is out of date.

Under review
A review of digital copyright law was announced late last year by the then Attorney-General Robert McClelland. This is way overdue and may still take some time to come to fruition. The problem we have is that nothing in the government’s much-vaunted and much-despised Convergence Review seems to deal directly with this issue.

The interim report from the Department of Broadband, Communications and the Digital Economy (DBCDE) doesn’t even deal with copyright law and, in a section where you might expect to find some comment on it – chapter seven, entitled “Competition” – there is only hollow sentiment and principle:

“Submissions to the Review addressing competition fell into two broad categories:

• Some stakeholders argued the market is functioning effectively and existing ACCC [Australian Competition and Consumer Commission] powers are adequate when anti‑competitive situations arise (including in relation to content)
• Other submissions expressed concern that emerging market situations could reduce competition in content and communications markets and that these situations will require a flexible operational response from the regulator.

The regulator should be entrusted with suitable powers to deal with content‑related competition issues in rapidly changing markets.”

Surely taking copyrighted material and on-selling it, as Optus looks set to do, is “anti-competitive”, even if a six-year-old loophole says it’s OK to do it.

The techno-legal time-gap
I first wrote about the techno-legal time-gap in 2006 in Communication and New Media: From Broadcast to Narrowcast, a book I co-authored with John Harrison. In that book we made the point that legal, moral and ethical debates and regulation lag behind the speed of technological change.

My example at the time was peer-to-peer file-sharing, but within a year of the book’s publication, Napster and others were facing huge legal threats and were effectively shut down. The problem then migrated to The Pirate Bay and other BitTorrent) sites. As that appears to be resolved – to the commercial satisfaction of some players – a new front has opened up. The latest target for the anti-piracy forces is Kim Dotcom, the founder of the Megaupload “cyberlocker”. Dotcom’s repurposing of other peoples’ content has got him into serious trouble. Other service providers are also caught up in this net.

Private matters
The fights over copyright – or “copytheft” to some – are not the only digital skirmishes. The very concept of privacy – both real and online – has been blown wide open. Not only has there been rampantly criminal behaviour that exploited loopholes in phone security leading to a tsunami of scandal engulfing the Murdochs, it seems our total being is exposed online. Daily hacks and distributed denial of service (DDoS) attacks compromise data, much of it personal and all of it valuable in the surveillance economy.

It’s not just credit card fraud and online dating scams – seemingly innocuous transactions – buying products through online vendors, for instance – leave a trail that is collated, digested, modeled and spat back as marketing or social enhancement experiences.

It’s hard to see the “white hats” among the online baddies. But caught up in all of this today we have Julian Assange, a military whistleblower (Bradley Manning) and a collection of techno-savvy activists (Anonymous) attempting to bring down the military-industrial complex. They are all now caught up in the time warp. But the regulators are not having it all their own way.

Paradox effects
The Stop Online Piracy Act (SOPA) protests of the past few weeks forced a backdown in the US over so-called internet censorship laws.

The time-gap exists across social media too. In 2006 Facebook was new and exclusive, Twitter was just around the corner, smartphones cost a fortune but the apps weren’t that good. In half a decade things have changed dramatically. These paradox effects will continue. The review of copyright law, a new round of privacy commission policy papers and the convergence review are all institutional attempts to deal with the contradictions, loopholes and inconsistencies.

We see the same pressures exerting themselves on the Australian Press Council and other regulators too. Analogue models of regulation, control and ethical boundary-setting are no longer working smoothly. The Media and Entertainment Arts Alliance (MEAA) code of ethics was updated in 1997, but it too is now showing its age.

Where are the guidelines for journalists on managing their social media accounts? Where is the advice on how to deal with lifting material from Facebook or YouTube to illustrate a story? I have collected several examples of these problems and discuss them on my blog (Ethical Martini). Ripping images from Facebook, for example, is a breach of both copyright law and an invasion of privacy (even if legal).

None of these problems is easily fixed. They are global issues and the World Trade Organisation is one of several transnational bodies looking for answers. The danger here is that regulators go with a business-friendly commercial fix, rather than regulation in the public interest. At the heart of capitalist property law is the right to exploit: just ask Optus.

Martin Hirst is the author of News 2.0: Can Journalism Survive the Internet?

This article was originally published at The Conversation. Read the original article.

Image credit: Back to the Future, Universal Pictures

newsThe National Broadband Network Company has blocked a freedom of information request which would have seen information released about the amount which it will cost Australians outside the company’s planned fibre broadband footprint extended to reach their premises, in a move first reported by iTNews.

NBN Co’s fibre optic network footprint is planned to cover 93% of the country’s population. This his has led to some discord among the remaining 7%, especially when some of those are right on the border of the fibre rollout zones. These users are expected to be served by satellite and wireless technologies, both of which have lesser capacity than fibre. NBN Co does have an option for residents on the edge of the network footprint. These customers can pay the charges for extending the cable. This offer came about mainly because residents in Tasmania, in some of the early stage rollout zones were unhappy about ‘just missing’ the fibre connection.

People who wished to have the fibre extended to their homes lying beyond the footprint were asked to call the company before 24 June, 2011 and request a no-obligation quote. The company would then determine how much each extension would cost. NBN Co also made it clear that it wouldn’t be a single number stating the cost of extension as this would have to vary depending on factors such as distance in kilometres from the actual footprint.

In June 2011, for example, a user of the online forum Whirlpool received a letter from NBN construction head Dan Flemming stating that his property would be covered by a wireless or satellite service. Flemming wrote, “It may be possible for you to connect to the National Broadband Network using fibre optic technology, if you agree to pay NBN Co to extend the fibre optic network to your property. Your property will then be connected to the fibre optic network as part of the planned rollout in your area in the coming months.”

However, it appears that NBN Co is not too keen on revealing these costs to the general public, with recipients of the extended connection signing non-disclosure agreements, and hence being unable to reveal how much the extended connections cost.

In a response published last week (PDF) to a request by technology media outlet iTNews under Freedom of Information laws for NBN Co to reveal the price paid, NBN Co said that it couldn’t reveal the price, as this could snowball and lead to serious problems for the company.

In a statement emailed to Delimiter responding to the FoI issue, NBN Co said that it had “appropriately assessed the FoI request” within the terms of existing legislation and “its role as a commercial entity operating within a highly competitive market”.

“NBN Co is a government business enterprise, and like any business it doesn’t make sense to release information that could jeopardise commercial activities and our ability to negotiate prices for similar services in the future,” the company said. “The quotes provided as part of the network extension trial were based on actual costs, and will vary for each location based on distance, geography and accessibility in a specific area.”

“It is important to note that NBN Co is committed to a process of engagement with communities, and a factor that’s driving our public messaging is explaining that the NBN is delivering high-speed broadband access to every home in the country via one of three technologies – fibre, fixed wireless and satellite. As we go into communities we will provide more information about the capabilities of our network and the different technologies.”

“A fibre network extension is an option that is available, and we are in the process of finalising a formal policy to be released in the near future. However we are also in the early stages of providing greater information about the new generation wireless and satellite services that will also be available.”

opinion/analysis
It seems obvious why NBN Co doesn’t want to provide the fibre extension costs publicly. It is likely the case that the company doesn’t want to kick off yet another round of media speculation and debate about the cost of the network it’s building. If the fibre extension costs were disclosed, I’m sure many edge case Australians who were just to miss out on the fibre would come forward, demanding that the costs be waived or at least cut down.

However, NBN Co’s action here also highlights a lack of transparency. The costs of its fibre extension activities will be released eventually anyway, one way or the other. It makes no sense for the company to hide them. Those costs should be released public and become part of the public debate about the NBN.

Image credit: NBN Co. Opinion/analysis by Renai LeMay