I’m going to weigh back into the debate about the NBN after a few months not saying anything… To be honest, at the time of my last set of comments my employer at the time had a great deal of interest (financial and otherwise) at stake in the NBN, so my “point of view” could have potentially damaged that and so I kept quiet.

I’m no longer employed there and am now a free citizen so I get to speak my mind again!

The problem with the NBN is that it has become a trough of special interest and political point scoring and not a sensible technology project or government infrastructure program.  I’d always had concerns that the way that the NBN Co was throwing its weight around in the marketplace and being backed by a Minister that could best be described as a “bully” was bad for the project.  The government’s continual failure to deliver serious costings on the project made the whole thing smell even worse.  The final nail in the coffin for me was shortly after doing her “deal” with Mssrs Oakeshott and Windsor it began to become apparent that prioritising “rural interests” and in particular their two electorates with the roll-out of the NBN was part of the deal.

Any time serious infrastructure projects, particularly expensive technology projects become parts of political horse trading at the highest level things are never going to go well.

I’m someone who favours free market economics generally.  I think things tend to work out well when there is a profit motivation for companies to deliver services.

I’m also someone who likes a certain amount of socialism in my government.  I like free universal health care.  I’m in favour of paid maternity leave funded by the government for ALL women.

With that in mind I think sometimes it is important for the government to jumpstart certain infrastructure initiatives to ensure some level of equality that the free market is not inclined to deliver.  In truth, the NBN should fall into that basic, but it doesn’t.

The fact of the matter is that politics have corrupted the NBN to the point where in its current form it is probably not salvageable.  The NBN should be rolled out to the metro areas first, and not only the metro areas, but the metro areas with the highest incomes.  Why?  Simple, because those people have the money to pay an “early adopters premium” and ensure that the NBN is profitable from Day One!  The network should then progressively be rolled out to the rest of the urbanites and we should start to see some economies of scale bring the price down while maintaining profitability.

This approach does two things: first, it gets the technology into the hands of the most people, quickly and with the best financial return.  Secondly, it allows the NBN to build up a pool of funds to underwrite expansion into rural areas so that the Federal Government doesn’t get stuck wearing the full cost plus interest.

The NBN should also fall outside of the control of the Minister and be accountable to a senior bureaucrat appointed by the full parliament.  If we’re serious about telecommunications infrastructure being critical, then it needs to sit outside the political machinations of single Minister.

The deal with Telstra should be scrapped.  I agree with the idea, but the truth is, you can’t put rules in place that prevent competition like what the government and the NBN are doing.  If Telstra wants to run their own proprietary cable and limit access to it, then its their dollar – may the market decide… So long as there is an open infrastructure program like the NBN in place.  If Telstra want to build a parallel network, they should be entitled to and should be encouraged.  Thinking about this longer term, if the NBN goes in and is the only game in town, what happens in twenty years when government neglect and lack of interest sees it looking like the Sydney Rail Network?  No, if free enterprise sees and opportunity to provide a better product than so be it.

The most delicate issue of course is rural Australia.  In any free market system they would have to pay outrageous rates to get decent service because frankly, it costs an astronomical sum to deliver them the services.  I don’t really have an answer.  I think the NBN should use profits from the metro regions to underwrite the roll-out but the ongoing maintenance is another issue.  It is abjectly unfair to say that someone in a remote part of NSW should pay the same cost for broadband as someone in Surry Hills or Vaucluse.  Should I have expensive broadband so that I can have cheap milk?  Why can’t farmers just run profitable businesses?

Ultimately, the NBN has more questions than answers and is beginning to look like a train wreck waiting to happen.  Unfortunately, the Gillard government can’t (because of their backroom dealings) stop it and nor does she have the political will to do anything about it.  So eventually, we’re going to be sitting here in five years time doing a post-mortem of the wreckage of this government spending disaster which is a bit sad.

David Thodey is a nice guy and he’s very customer focussed.  His people have put in place a Social Media team who respond promptly to issues raised with @telstra.  Unfortunately, answering tweets and the telephone quickly isn’t going to be enough to fix Telstra, Thodey is going to have to go into the bowels of the organisation, to fix the mess he’s inherited.

I’m moving house and the new place has cable.  I’ve been very happy with iinet ADSL for the last two years, but due to a previous Telstra screw up, I have a $1300 credit sitting in my account.  I decided to take Telstra Bigpond Cable up as part of a bundle when I moved.  I’m now regretting that decision.

The first problem came when I called the Telstra telephone people to have my phone service moved.  As I am moving within the same suburb, I knew there was an opportunity to keep my telephone number.  The Telstra phone rep virtually begged me to get a new number because the process he had to go through to transfer my number was apparently so arduous for him.  Despite the fact that I kept repeating how great it would be for me not to have to change telephone numbers, he continued to plead his case.  Rule number one of customer service, you’re there to serve the customer, if I think something you are offering me is great and I’m excited about it, you should never tell me how hard it is for you and try and convince me to do something MORE INCONVENIENT FOR ME!  Either way, it took about fifteen minutes of being on hold for him to go through whatever systemic hoops he needed to go through.

Then it was onto my order for a Bigpond Cable service.  We went through the various deals even though I knew what I wanted and asked for the biggest and most expensive plan on offer.  Rule number two of customer service, if the customer knows what he wants, give it to me!  Spending five minutes listening to lower bandwidth plans I didn’t want or being asked to consider NextG, was just annoying.

The guy then asked me if I wanted my Foxtel through Telstra.  I’ve never once had a major problem with Foxtel customer service, I always find them prompt and helpful so I said no.  I was then offered a price more expensive than what I currently pay.  Rule number three of customer service, if I say emphatically that I don’t want a service, don’t pitch me a price unless you know it is ridiculously better than what your competitor is offering.

I was told that someone would call me within 3 business days to organise my cable modem installation and then good-bye and onto a survey.

Well, we’re now on the fourth business day, we’re moving tomorrow and guess what, no Telstra call.  Compare this to Foxtel who took my call within seconds, asked me when I was moving, told me the new place was cable, not satellite so a technician would attend to make sure everything works properly and followed it up with an email less than 10 minutes later confirming everything.  Then this morning I get a call from Foxtel just to confirm the onsite tech’s time.  Oh, did I mention I called them right after the above call to Telstra?

So today I sent out an SOS to the Telstra social media team and Carly made an attempt to help, but there was no order on file.  This necessitated a call to the Bigpond call centre.  A person, strangely enough named Carly (might it be the same person) answered my call.  We went through everything and finally she worked out that because I ordered a “bundle” my order for Bigpond Cable would not be put through UNTIL the phone was connected.  Say what now?  They also had to quote me 10-14 working days to receive my Telstra Cable modem.  That never came up during the original call.  Then the kicker was, instead of Tuesday my phone transfering across,  Telstra had it happening Thursday!  It was the trifecta of screwed over!

Carly told me that ideally the cable modem will arrive in three or four days after the order goes through.  She couldn’t do anything about the telephone order except give me a number to call when it doesn’t work.  She then put in a follow-up reminder to send the cable modem right away.  Best case scenario, I have my cable modem connection on Friday, worst case scenario, some time in mid-to-late October.  Not good.

This is the challenge Thodey faces.  The internal workings and machinations of his company are so screwed up that it is a joke.  When thinking of Telstra is it important to call a spade a spade, you are not dealing with one organisation you are  dealing with several – the Bigpond team is totally different from the telephone team and the mobile team is not the wholesale group.  Telstra is a thin veneer atop a mass of different companies with their own systems and structures.  If Thodey wants to overcome this, having a happy smiling customer facing team isn’t going to be the end game, he needs to tackle this terrible internal systemic problem.

In my original post about the NBN I put forward the open ended question as to whether or not the country could afford this particular network at this moment in time. That post generated more debate and comments than I ever imagined it would. There were some very interesting points of view on both sides of the debate and I’m glad that I posted it during the election because I think that’s a great time for voters to feverishly debate the big issues.

In a post after the election I tried to make some sense of where things stood. I do firmly believe that the majority of Australians want some form of National Broadband Network and I used that to try and formulate some kind of middle ground strategy that took some of the cost away from government and allowed the private sector and the users to underwrite much of the cash outlay. The response to this post didn’t really surprise me, people who thought it was rational said nothing and those who just want government handouts continued to press for a heavily government funded network.

Now that we have a government and the backroom deals are starting to come to light, its time to revisit the NBN. After listening to Tony Windsor, Rob Oakeshott, Julia Gillard and Stephen Conroy all speak about the future of the NBN, I now believe the country has a big problem on its hands. For me, there are three specific points that concern me:

• First of all, each of the aforementioned parties seem to agree that what’s been negotiated is a situation where the network will be rolled-out first to regional areas of Australia;
• The second red flag came from Stephen Conroy who said that the government would now need to sit down with the NBN Co and work out a new roll-out plan and schedule; and,
• Thirdly, wholesale price parity has been agreed to.

All along, the Labor government has been completely unwilling to deliver to the anyone a proper business plan for the NBN. It has said that the network would make a return on investment in a relatively short period of time and that it has provisioned enough in the budgets to deliver the network. The problem with this new deal is that no matter how you look at it, the core fundamental business plan has now been significantly altered for the NBN to the point where an entirely new business plan must be created.

The original plan obviously had the NBN Co rolling out fibre to the major metropolitan areas first because that’s the cheapest and easiest element of the project. By rolling out to the major metropolitan areas first, you get considerably more revenue quicker which would then be used to partially offset the capital cost of the continued roll-out.

We now have a situation where the more expensive parts of the roll-out, the regional areas with a blend of wireless, satellite and fibre (much of which hasn’t yet been designed) is going to be pushed forward. So as a result, more of the cost will be front-end loaded into the project and much of the cheap, urban revenue is being pushed back. You don’t need an MBA to work out that this can’t be good for the bottom line of the NBN Co as a business. Simply put, the government will need to borrow more money up front to pay for this part of the project.

The other side of the cost coin is revenue. By delaying the urban deployments the NBN Co is also going to be forgoing its cheapest (and therefore most lucrative) revenue. This is compounded by the fact that the government seems to have decided that the NBN Co will operate a flat rate wholesale model between the country areas and the city areas. This means one of two things: one, revenue will be EVEN lower in the rural areas (compounding the cost vs revenue problem) than budgeted originally, or two, the rural areas will pay what they were originally going to be charged and urban users will simply pay more.

The financial net result of this deal with Windsor and Oakeshott not only must impact the bottom line of the NBN Co, but the country as a whole. You can’t simply borrow more money and take less in and it not have an impact, especially when we’re talking about tens of billions of dollars per year. While I appreciate and concur with the view of Phil Sykes of NextGen that the NBN will come in cheaper than budgeted, it still doesn’t change the overall economics of the delivery.

Having talked about the revenue hole, the front-loaded costs and the wholesale pricing, the last piece of this thing that concerns me is something Senator Conroy said. The Senator said that the government was going to have to now sit down with the NBN Co and work out a new roll-out schedule to suit the new rural prioritisation. This just flat out is a worry. Mike Quigley was put in the role of CEO of NBN Co without much diligence because he was “the best person”. Quigley went out and hired a crack team of people to design and run this NBN project and now, you’re going to have a bunch of politicians overruling them because of back room deals? If these people are THAT good, they simply won’t accept being the puppets of the government and will no doubt stand by their work to date as the best plan for the overall network. Furthermore, how open has this now become to politics? You can bet your bottom dollar that Lyne and New England electorates get their NBN rollouts before any LNP seats do.

Rob Oakeshott ran around for 17 days spouting off about transparency. In his long-winded speech about backing Labor he dropped the bombshell that as part of this whole process he’s been offered an “executive role” in government. Which means more money for him personally and his office (which makes it easier to get re-elected). He wouldn’t then tell us what role he was offered. Clearly there’s been a deal done with the people over the NBN, if Oakeshott and Windsor are men of their word, then before any further NBN work is done, a completely re-costed business plan (including design and roll-out plans) should be made publicly available.

Enterprise IT departments make for very interesting places to work.  You often work with incredibly smart and talented people, you can find yourself working with some of the most cutting edge technology available and at times, you can be solving amazing problems while creating radical improvements in the company you work for.  Note that I said, “often”, not always.

With Information Technology being such a new field, really only deeply infiltrating businesses in the last twenty years, the area can also at times be magical and misunderstood by senior executives.  It is not at all uncommon to find people “from the business” thrust into senior decision making roles within the IT departments of many large companies.  I often liken this to pulling a really good accountant our of you finance department and parachuting them into your legal team.  That generally doesn’t happen, but within the confines of Enterprise IT, this kind of thing happens all the time.  Often times these individuals are well meaning and feel that because they know how to turn on their computer and do some internet banking that they’ve got a firm grip on technology.

This is a sign of the immaturity of the IT industry as a whole.  Enterprise IT, more than probably any other major area in most companies lacks the leadership to properly convey the value the function adds to the business.  This is compounded by the fact that senior management often has such a poor grip on technology.  As a result, senior executives know that they need technology to remain current, but there is often misalignement and misunderstanding.

The solution to this problem lies at the feet of both Senior Business Executives and Senior IT Executives.  Senior Business Executives need to take the time to try and learn more about the key technologies that are at their heart of their business.  This might be systems or manufacturing processes or whatever, but Senior Managers need to get closer to these things and understand them as well as they might understand the sales process or the customer service approach.  Likewise, Senior IT Executives need to learn to stop following vendor scripts filled with three letter acronyms and jargon.  You need to be able to find analogies and things to simplify the message, without dumbing it down to the point where Senior Executives are comfortable discussing the key issues.

A couple of great quotes can be used to sum up the recent Australian Federal election: the first one is a classic that Julia Gillard pulled out in her post-election speech last night from Bill Clinton, “The people have spoken, but its going to take a little while to determine what they said.” The second quote I like and the basis for this article in relation to the NBN is from that great American thinker, Axl Rose who poetically sang, “Where do we go now?” in the Guns’n'Roses hit, “Sweet Child O’ Mine”.

Scholars are going to dissect this election result and the campaign leading up to it in great detail for many years to come and good luck to them, they’ll find whatever answers they want to find and call it fact. The truth is, this kind of election result is like a “glitch in the Matrix”. Labor lost support from all but its most ardent constituents: the non-union Left went to the Greens and the swinging centre/right moved to the Liberals. The swing was big enough to bring down the Labor government, but because of preferences and some oddities in redistribution, who knows what’s going to happen. Again though, let’s leave that behind.

My attention is focused on trying to glean some understanding of what “the people” said about the NBN and how the parliament (both upper and lower house members of all stripes) should now act on this matter if we proceed with a minority government of some description for any length of time. Originally, in my piece about National Broadband policy, I put forward a proposition that we should simply hold off on the government’s massive expenditure until the country could better afford it. I questioned the government’s capability of successfully rolling out this plan, but go back and read it again, I’ve never once questioned whether or not we needed a National Broadband strategy – I think we do. I just believe it needs to address the problem affordably for everyone.

Before I start my analysis, let me say that by no means do I think we should take the popular vote and mash it together as some form of issue by issue referendum, but for the sake of this piece, I’m taking some liberties with the mood of the voters to infer a way forward. Effectively, I’m asking for a bit of license to find some sensible common ground, which is going to be necessary in this minority government situation if we are to have effective government.

Now that the matter has been put to the polls, here’s what I think the outcome should be. First of all, the internet filter is dead – neither the Greens nor the Coalition supported that nor did any of the minor parties, so we’re talking about 65% of the population. First up, bury that sucker in the deadpool and let’s never hear from it again – it was ill conceived, bad policy.

I do think that the majority of Australians want a strong National Broadband Network. I think we can infer that the majority of Australians want this network to close the gap between rural and urban Australians in terms of technology availability. That said, I don’t think the majority of people want the Labor party’s NBN either.

My solutions are these:

• If you’re going to be a bear, be a grizzly, so we may as well aim for Fibre-to-the-Home (FTTH). Effectively though, the NBN Co needs to rapidly deliver Fibre-to-the-Node (FTTN) and through tax policy and legislation, the last mile should be the responsibility of customers and the private sector;
• Continue with the plan to nationalise the Telstra copper network, open up the exchanges and pay them the $11b or whatever was agreed in the Heads of Agreement;
• We establish some Universal Service Obligations that work for both rural centres and remote regions of the country that commit us to delivering them great broadband services now and into the future;
• Instigate an immediate strategy to fibre up every single school, hospital, regional health facility and GP Super Clinic in the country within the next three years; and,
• Deliver a business plan for NBN Co which is publicly available takes into account the new requirements and is tabled before the end of the year.

Before I go into discussing each of those points and my thoughts behind them, I think the issue of Mike Quigley, CEO of NBN Co. and his blatant breaches of the Caretaker Conventions must be looked at. I don’t think there can be any doubt that Quigley breached the Caretaker Conventions on at least two occasions during the campaign: the first time when he announced the increase in bandwidth from 100Mbps to 1Gbps at EXACTLY the time when Labor were scoring points on the Liberals about the technicalities of the NBN. That was a clear foul, yellow card for Mr. Quigley. The second instance occurred when he derided the Coalition’s Broadband Policy. To me, that was even more flagrant because he openly criticised and chided a policy that he was personally in direct conflict of interest with. In football (soccer) parlance, that was a studs-up tackle from behind and should have been a straight red. So what do we do with Quigley?

He’s done a good job assembling a team of experts and by all accounts, the work they are doing in the planning and architecture phase is world class. He needs to be addressed because the Caretaker Conventions are very important, as has been highlighted by the result of last night’s election. However, if we’re going to proceed with this plan, we shouldn’t cut our nose off to spite our face. I think before any government is formed, Prime Minister Gillard should publicly reprimand him for his conduct, explain why she’s done so to the people of Australia and Mr. Quigley should apologise to the voters for crossing the line. Then he should get back to work with a slightly lower profile.

On to the meat and potatoes of my position and I’m going to tackle the points in a varied order from perhaps what they appear above. First of all, the Howard Government hurt the country’s telecommunications infrastructure with the way it privatised Telstra. That wrong needs to be addressed. Nationalising the core infrastructure makes sense in a country of such small population, but vast geography. The Universal Service Obligations were largely on the shoulders of Telstra, which was unfair for a publicly traded company to have to bear. NBN Co can now take over a modified version of the USO and all Retail Service Providers will have to have some responsibilities as well to ensure people have basic access like telephones and ’000′ services.

The next portion needs to be looking at the cost of this network and how we balance delivering great technology while being fiscally responsible. I think we need to deliver a hybrid FTTN and FTTH network in the short term, with a long term view (maybe six to eight years) that we’ll move to a full FTTH. As a priority, the NBN Co and Retail Service Providers should be surveying customers to find out which areas are most likely to have the highest levels of early penetration. We cannot have a system open to patronage and dirty politics – the people who most want and are willing to pay for the network should get it first.

The big cost on this NBN is the last mile and this is where the country needs to be clever about how it gets an outcome. Once the NBN Co becomes available at my nearest node, I should be able to contact any of the Retail Service Providers who wish to service my area. I should then be able to ask them for a connection cost, monthly access fee and a contract length. The cost of the connection is where some creativity needs to happen.

Some suggestions are that the NBN Co was modelling between $3000 and $4000 per household to connect in cost for the NBN. That’s not entirely accurate because it takes into account much of the infrastructure and isn’t the “last mile” cost. If you separate out the “infrastructure” and call that a required government expenditure, then what you are left with is just the last mile. If that were say, $1500 per household then that is a much more reasonable number. That number should also come down as penetration increases – for example, if running fibre to the demarkation point of my building costs $1500, then that’s done, the other sixty-seven tenants in my block of flats won’t have to pay that again because the fibre hits our demarkation point.

This is another point that needs to be better understood. Currently, Telstra’s obligation is to run services to a demarkation point on your property. That might be a switch box on the outside of your house, a comms rack in your block of flats or a telephone pole on the edge of your property. It is then your responsibility for the wiring and cabling of your property and I think this must be maintained for the NBN.

I believe this is where we need to get creative with tax incentives so that customers and the private sector fund the cash elements of the NBN to avoid the government having to borrow the money upfront. Take the issue of the $1500 cost to run from the node to the demarkation point of the property, to ensure flexibility of service provision this fibre needs to be owned by the NBN Co. You could have a scenario where if the resident wishes to pick up the cost of this themselves, then it is 100% tax deductible in that financial year. You could have a scenario where maybe the Service Provider pays for the connection on behalf of the customer if they sign-up for a three year contract. You would then allow the Service Provider to write the connection cost off in the same way you would an individual taxpayer, but you’d end up with the Service Provider’s fronting the cash for the connection.

The next piece of the puzzle is a bit complicated and that’s in relation to the work required within a property to “fibre up” the premises. This is going to require tough regulation in my view and good tax policy again. First of all, one need look at strata units. Unless the strata committee approves the onsite expenditure, then you can fibre up to the demarkation point all you like, but it won’t go any further. I have an elegant solution for this. Alter the Universal Service Obligations so that the moment fibre is available to the demarkation point of a property and a resident requests access, within twelve months the strata owners must ensure the completion of the work. Failure to comply would result in penalties that would make it worth complying with. Again, you can make the onsite work 100% tax refundable to property owners, tenants and strata companies.

The last part would be the stragglers. I would set a hard retirement date for the copper network in say eight years. In the first five years you allow the demand side economics take care of driving adoption, I’m fairly certain this would be successful. In the final three years you begin to impose punitive levies on property owners that do not comply because ultimately the government, through the NBN Co is going to have to wear the full cash cost of providing the last mile coverage. The government must make it so financially unattractive for property owners that they would certainly opt-in – along the lines of what the government does for people on high incomes to ensure they take out private health cover.

I think it is a no brainer that the NBN Co needs to get out there right now and start running fibre now to schools, hospitals, GP Super Clinics and any large government health facilities in rural Australia. That’s an infrastructure leap we can afford to take and one we should take. While I believe our roads, hospitals, power grids and water facilities have all been neglected, that’s no reason to ignore our telecommunications infrastructure needs to these key service facilities across the country. This is a cost we just must incur.

The final part of my plan that needs the most work is around rural areas. Having an economic rationalist argument about the value of rural Australia is a moot point – there are plenty of people living in non-urban centres and they are citizens, they’ve spoken and they’ve requested faster broadband access. This is where Quigley and his cohorts need to get creative and use technology well. I think firing off very expensive satellites to establish footprint with an endless supply of government money is the wrong approach. While the plan of tax incentives and tough policy will get 85% of the country in the urban areas over the line, it is not feasible to apply the same strategy in rural Australia. The best answer, let’s commit to providing our fellow citizens in those areas great service, they need to accept that it must be at a reasonable cost and let’s agree a timeline that gets it done within two full terms of office.

For me, there are two things that I’d like to see addressed. First of all, undersea capacity to the US and Asia. I think the NBN Co must as part of its mandate undertake to do something about this. Australia is an island, telecommunications connects us to the rest of the world, if we believe it necessary as a people to have our core telecommunications infrastructure owned by the government domestically, then surely it must follow that our global interconnectedness should be owned similarly. I think we can save enough from having the customers and private sector underwrite the cash component of the last mile to wear the cost of proper set of redundant undersea connections to the rest of the world.

The second issue is usage charges. I firmly believe that if our government and we as taxpayers are going to underwrite this great endeavour, then we need to legislate, unequivocally and for all time that uncapped usage is the rule. If we are paying for 100Mbps connectivity to every home, school, hospital and clinic in the country, then the users should be able to use 100Mbps at all times, 24 hours per day, 7 days per week. If the Retail Service Providers don’t like it, then they can build their own infrastructure, at their own cost.

My feeling is that this is a better plan. It gets the core infrastructure in place at a cost that should be lower than what Labor are suggesting. It shifts much of the cash burden to the private sector and the retail sector. The tax incentives can be tweaked so that high income earners or largely profitable companies don’t see a full deductible, whereas low income families and small business could avoid the cash components through a rebate scheme. I think we need to codify our resolve to our fellow citizens in rural Australia that we’ve heard their demand for faster broadband and we commit to delivering them the best we can, in a reasonable period of time at a cost we can all accept.

This “glitch in the Matrix” provides us with an opportunity. We have a chance to stop the “government of opposition” and have parties of all stripes work together on an issue to deliver not what is politically expedient or advantageous, but to deliver the people what they want and feel they need. The National Broadband initiative is an opportunity to see if we can manage a more evolved form of government where people can elect the representatives that represent their ideological views, but with the knowledge that the country will be governed in a non-dogmatic way and with greater participation.

Today the hive at Facebook have started making available their Facebook Places functionality. This piece of technology is one that will allow users to link and publish their location on Facebook via their mobile devices or whatever. This is obviously Facebook going after Foursquare, Gowalla and a few other minor players. Unfortunately for those guys, Facebook is going to totally dominate this area and it will be an utter annihilation in short order.

A while back I wrote about what I believe is the Era of Facebook. In short sumamry, I think what Facebook offers (and will offer as it continues to grow and mature) is a connectedness that has the potential to be prescient in nature. Facebook knows who we are, not some crazy online handle, we socially verify ourselves by agreeing to “friendships” with other users, we integrate other applications with our Facebook stream that both gives and takes information about us and we even go so far as to describe our likes and preferences both directly (we enter our interests) or indirectly (we sign up for fan pages). By algorithmically parsing all of our first hand data, second hand data (application updates to the stream) and even correlated third hand data (our social circle’s interest’s and likes), Facebook has the ability to deduce more accurately what we will want or what might interest us, without us even knowing such a thing exists. This is considerably different from say Google who with their search are trying to interpret where you want to go. Google is like a navigator whereas Facebook is potentially establishing the destination.

Facebook have a socialised user community who are largely, by default open to sharing much more detail about their personal lives than any other group before. Giving users the ability to update their Wall with where they are at a given time is a minor piece of technical trickery in today’s landscape. The thing is, what is does for Facebook is that it opens up a plethora of other opportunities.

Last night I was watching the movie “Up in the Air” with George Clooney. During one of the scenes, the fresh-faced know-it-all Gen Y college grad played by Anna Kendrick brings up a slide that says, “Glocal”. Obviously this is a play on the “Think Global/Act Local” meme, but with the growth of “Local” web companies that have cropped up in the past twelve months, it is easy to see how Facebook evolves their platform into competing there too. In the “local” space you’ve got your crowdsourced recommendations darling, Yelp and the “local experiences” group buying site, Group On turning heads. These two companies were some of the fastest to achieve $1b+ valuations EVER. This hasn’t gone unnoticed at Facebook and here’s how I think it can play out for them.

First of all, Facebook has gone after check-in services like Gowalla and Foursquare. Personally, I didn’t believe those companies were as tightly focussed on executing the monetisation strategy as they should have been. Its great that I can be the Mayor of Westfield Chatswood and get a badge for something stupid, but the real win should have been that when I check-in at the Coffee Club at that Westfield’s I get an immediate email telling me what the specials are and offering e a discount. Or Nando’s sends me a one time email coupon for 35% off my order if I leave Coffee Club and go there – they’re right next to each other. Either way, having the ability to know WHERE potential customers are should be dead easy to monetise and it should have been priority one for those companies. Instead, they screwed around building offices, raising capital, talking at conferences and having their pictures taken for magazines. Meanwhile Zuck’s army were preparing to attack.

Facebook has the inherent advantage in this space because they know what you like and what your friend’s like. They can appeal to advertisers on a massive scale and provide things like Fan Pages that add ongoing value beyond some stupid badge or one-time coupon offer. The moment Facebook turns Places on for everyone, provided they’ve executed well, start the clock running on Foursquare and Gowalla.

A variety of sources suggest that Facebook, as well as Yahoo! and Microsoft had offered as much as $100m for Foursquare only a few months ago in April. While a Google or Microsoft might offer that much or more now in a panic buy, its hard not to believe that Foursquare really overplayed their hand. If I were a shareholder, I would have taken the $100m and run.

Let’s move on from Foursquare and Gowalla, they have no real revenue and a clearly undefined business model anyway. Let’s look at Group On. By offering daily experience deals in local markets all over the US and more and more the world, Group On has become a massive hit and a cash cow. The beauty of their model is that they collect the money before they pay it, so they are turning over a very nice cash surplus even as they grow. For Facebook, this is a very good potential market, but one that might be difficult to get into. Group On have people on the ground in all of their markets rounding up deals, writing copy and actively promoting the idea. Facebook sees itself more as a platform and has been slow to build out any specific application let alone one that requires boots on the ground. What Facebook has in its favour though is scale and brand recognition. It could without much effort establish local markets around the world and have experience vendors coming to it to offer daily deals. Plus, imagine the power of an experience daily deal on Facebook using its social network? It could easily recommend friends who you could contact to also take up the offer, it could place in your stream that you signed up for the deal which let’s all or your friend’s know. The possibilities for Facebook in this space are endless.

Then there’s Yelp. For those of you unfamiliar with Yelp, it is a crowdsourced review site for predominantly restaurants, but also moving into other areas like shopping and services. Basically people go out, eat your restaurant and then review the experience at Yelp. It is a pretty simple concept, but where Yelp make their money is by following up the reviewed places and offering them the ability to communicate back to their readers and promotional opportunities.Again, Facebook could crush this space. They are everywhere, so they own local. One need only look at the comment traffic generated by things like photos to realise that the community on Facebook are happy to share their opinions.

Again, Facebook could offer establishment and service providers so much more by way of dedicated fan pages, access to the social graph, search ads, etc. I think it is only a matter of time before Facebook moves into this space as well.

Now let’s take it out further one step and show real usefulness. I plan an overseas trip. I take my itinerary (a la TripIt) and send it to Facebook. Facebook goes out to the cities and place I’m going, recommends hotels for me to stay at that my friends have possibly reviewed, gives me a list of restaurants in the cities (again, socially verified by my own social graph) and maybe even makes we aware of some daily deals going on in those locations so I could take part in those in anticipation of my arrival. On and on the opportunities are endless.

Will Facebook do all of this? Who knows, but the potential is out there in a few short steps for that jigsaw puzzle to be quickly assembled. I am not personally convinced that Facebook will go down all these paths, but someone will, and they’ll use Facebook as their platform of delivery. It is also likely that a Microsoft or Google will start trying to acquire these pieces and beat Facebook to the punch, but the thing is, neither of those two have an appreciable social network of any size to compete with Facebook yet. Perhaps this is Microsoft’s chance to spend its cash hordes and get back in the game. The fact is that we now live in a world where these things are possible and the idea of a “virtual concierge” might be possible.

I used to do a fair bit of blogging back in 2004 – 2006. Most of my entries were about technology, but occasionally I’d write about other things too. With all of the debate around the NBN recently and I’ve had numerous people come up to me, as though they were having some kind of religious revelation, that the requirement for the NBN is simply a result of how badly Telstra was sold off by the Howard Government. I kept thinking I’d written something about this before. So I went back through the archives and found this post from November 15, 2004 that I wrote.

Broadband in Australia – November 15, 2004

I read an interesting opinion piece today written by Greg Eaton on the poor state of Telstra’s ADSL roll-out. Greg suggests that Telstra should be split with the infrastructure staying in Government hands and the retail/commercial arm being spun off. This is a fabulous idea in my opinion and one that I’ve suggested myself to people like Lindsay Tanner, Richard Alston and Helen Coonan either in person at functions or via email. Unfortunately, I know this will never happen for purely economic reasons.

Simply put, the value of the infrastructure at Telstra is considerable. The government would have to maximise its return on selling the remaining 51% of Telstra and by splitting it apart, some form of compensation would be owed to the existing 49% of shareholders. Ultimately the shares held in Telstra by John Q Public would simply be worth less, the fundamentals of Telstra would be drastically altered and the future would simply mean, considerably lower market share and worse prospects. I don’t recall those things being talked about at the last election. Oh yeah, and Treasury would get less for the other 51% of Telstra and heavens knows, those folks don’t like leaving money on the table.

So, why is Australia in this mess? We have poor quality broadband coverage, low throughput rates and very high costs. In my opinion, the answer is the result of two things: one, access to Telstra exchanges and two, Telstra’s ISDN network.

The suggestion of Telstra being split into a commercial business and an infrastructure business is the most elegant and solves the exchange issue. You could have an independent body set the cost of access with escalating discounts based on volume – and you’d publish the price lists. The government could score some brownie points with this by then tacking on a 10% levy to be used for upgrading infrastructure in the bush. The trick to this whole scenario though is that revenue from this infrastructure business must not end up in “consolidated revenue” of Treasury – it must be used to continuously upgrade the infrastructure of the country. The worst mistake that could be made would be to allow those funds to go into some big bucket – before we know it we’d be using tin cans with strings to communicate again because the government would just nickel and dime the infrastructure to death.

The main issue with the slow roll out of the Telstra ADSL network comes back to their ISDN network. In the late 80′s/early 90′s Telstra spent alot of money upgrading their network to support the digital signaling required for ISDN. The cost of ISDN is very expensive and Telstra earns a considerable margin on these services. ADSL simply cannibalizes the ISDN market for the most part. While Telstra will suggest that these are handled by different parts of the organization, it doesn’t take a scholar to work out that Telstra wants to maintain the high margins of ISDN for as long as it can.

This discussion doesn’t even touch on the other side of the broadband debate, cable. The Keating government’s decision to force Optus and Telstra to roll-out duplicate cable infrastructures set back broadband potential in Australia at least five years, if not a full decade. Greg Eaton mentions Canada in his article, but one of the reasons the penetration of broadband is so high in Canada is because they have competing platforms. Cable television penetration rates in Canada hover around 90% and obviously telephone penetration is at 100%. As a result you have two seperate delivery platforms owned by two different industries competing for market share. As a result, the cable companies like Rogers are competing viciously with the telco’s like Bell Canada. This competition spills beyond services and price into things like content which gives the consumer added benefits. Unlike countries like South Korea where the cost of high penetration broadband is essentially being underwritten by the government, Canada’s model more suits Australia as it is driven by competition and a relaxing of government regulation.

I don’t see a quick fix for the state of Broadband in Australia in its current form. Thankfully, technology is what it is and WiMAX is coming. If the government can ensure that WiMAX doesn’t become the domain of Telstra and Optus, but is easily accessible with low barriers to entry, then perhaps this entire debate of fixed-line broadband in the metropolitan areas of Australia is moot.

One of the interesting elements for me around the NBN is what we as end customers will really see develop in terms of market dynamics. The ISP market in Australia is shrinking quickly down to a very small oligopoly. As pointed out in a Delimiter article yesterday, there are really only four major players left: Telstra, iiNet/AAPT, Optus and TPG. On the fringes you have Internode and Primus who will continue to survive. Through my lens, what I see is the government setting up a new, highly regulated government owned monopoly, NBN Co, to underwrite the next generation of service delivery capability for a small group of oligarchs.

But what does this mean for the end customer? Well, based on past comment by Michael Malone, CEO of iiNet and one of the new Internet Oligarchs, we can be certain that unlimited usage plans will not be part of our future. When acquiring AAPT’s customer base, Malone referred to the legitimate customers of unlimited plans as “leechers”, effectively calling some of his future customer base parasites. Early NBN pricing has indicated much of the same – iiNet pricing for 100/8 Mbps with 120GB of data traffic (50/50 split between peak and off peak) is $129.95/mth and your connection gets shaped down to 128/64Kbps if you exceed your thresholds.

I find this entirely fascinating. In NOTHING I’ve seen to date have Senator Conroy or Mike Quigley said anything about charging the “Retail Service Providers” (ie the ISPs) a data usage charge atop the wholesale rate. I’m happy to be proven wrong, but I’ve searched and found nothing. Glass doesn’t get “wear and tear” from light traversing it, so I don’t see how data usage charges are required.

So when you start to break it down, we the taxpayers are going to underwrite a $43B dollar piece of infrastructure, turn over public access to the infrastructure to a small group of private sector oligarchs, allow them to charge us a HANDSOME profit for providing said access and then tell us just exactly how much we can use once we’ve paid our access fee?

This doesn’t make any sense to me at all. You give me a 100Mbps connection and 120GB traffic allowance (60GB during peak hours). At full tilt during peak hours, I could download 60GB on a 100Mbps connection in UNDER an hour and a half. A BluRay disc, single layer track can contain up to 25GB. That hardly seems like much? If I sat down every Tuesday night and wanted to download and watch an HD movie, are you telling me that by week three I’ll hit my cap? Then I will get shaped down to 128Kbps? What about all of these new wonderful high bandwidth applications that requires we build this thing for, surely they’re going to be quite traffic intense?

The more you look into this NBN, the more it starts to stink. How can the government PROMISE us 100Mbps of bandwidth and then somewhere down in the fine print added by the Oligarchs it say, for only a couple hours per month, then you go back to two-channel ISDN speeds? Aren’t we the taxpayers already paying to use this network by underwriting the ENTIRE cost of construction? To then charge us USAGE on top of an access fee seems ludicrous and then the final slap in the face is giving the Oligarchs the ability to shape our traffic back to speeds from the 1990′s ACROSS OUR OWN NETWORK hardly seems like the way of the future.

Its interesting to see how Mike Malone can go from calling his customers “leechers” to being effectively a government handout parasite himself. I’m sure he’s not alone, all of them will be queuing up at the government trough to fatten their profits on our taxpayer funded largesse.

* I am a happy iiNet customer – they provide great service

Let me get this straight, I can diddle with a contractor, fiddle with my expenses and piddle away company assets and for my trouble I get a $40m severance package… Wow, wouldn’t it be nice to be Mark Hurd, former CEO of HP right about now.  Methinks there’s something stinky going on over there, let me explain…

A claim of sexual harassment gets made against the CEO, Mark Hurd, by a contractor who was terminated from her contract (but was paid) and who has a history of starring in R-Rated (soft core porn) films.  The claim is investigated by independent counsel who finds the charge without merit, but “uncovers” evidence that the CEO has been fudging his expense claims, misusing company assets and having a close personal relationship with a contractor without notifying the board.  Together those things constitute enough grounds for the HP Board to dismiss the CEO for inappropriate conduct BUT they still feel it necessary to pay him $15m in cash and $30m-$40m in stock options to get him to waive his right to sue them.  Furthermore, Hurd and Fisher have privately settled the issue, apparently no money changed hands and Ms Fisher has said she won’t pursue HP.  Say what now?

There has to be a fair bit more to this than meets the eye.  How do you fire this guy for ethics breaches and then pay him not to sue you?  Clearly their evidence is so paper thin that they doubt it would stand to any real scrutiny.  So that means that the Board wanted Mark Hurd out and was willing to write him a big cheque and take the damage of wiping out $10b of shareholder value off the stock.  Wow!  If I were an HP shareholder, I’d want a much better explanation of what’s just happened than what is leaking out of HP right now.  I mean, they Board has basically accused him of trying to embezzle money out of the company, but yet pay him to stop him from calling the on it?  What kind of dysfunctional mess is this Board?

Shareholders deserver better, but I’m almost certain there’s more to come out of this because this can’t be the whole story.

As someone who is very “pro” technology and likes to be on the cutting edge, I find myself staring at many of my colleagues and acquaintances in the industry with disbelief when the topic of the National Broadband Network comes up.  People I know (and some just email or tweet me) ask if I’ve bumped my head and forgotten what I do for a living.  It even has had me re-thinking my views, but ultimately I keep coming to the same place.

Here’s what I think…

First of all, $42b is a ridiculous sum of money to spend on anything.  It is even crazier when the country finds itself coming off a $22b surplus and staring down the barrel of $100b of debt.  I don’t think this is at all right now about need, but is entirely about our ability to cover the cost of such a thing.  Our Federal government, no matter who wins, is going to be spending about $5b – $6b per year just servicing that $100b debt – on the $30b of debt on the NBN, you’d be looking at close to $2b of servicing costs per year alone!   Why not get back into surplus, in 2012 and revisit this whole situation then?  If the US economy fully recovers, Europe looks stable and forecasts for the Australian economy look good and project us paying off that massive debt, then awesome, let’s come up with a plan and build a world class network.

The next problem I have is around the actual execution.  Does anyone think that having this big capital works program run by a guy with a hardware vendor background and some consultants is a good idea?  Not only that, it seems like they are doing it on the fly.  If we’re going to spend all this money, couldn’t we at least see a coherent plan of what’s going to be built BEFORE they start awarding contracts.  This is the exact same mess Labor created with the Insulation Program and the Building the Education Revolution – lots of spend, very poor controls, not enough safeguards and very poor oversight.  I’m not a fan of the NSW Labor Government (they don’t have many fans) but thumbs up to Premier Keneally for spending a bit more money on Project Management and diligent execution – my kid’s school is getting six new classrooms, on time and presumably in construction (of which I know a bit about) that probably means on budget.  When I hear the NBN Co talking about satellites and all kinds of other unplanned crazy, this things starts smelling like many IT projects, $42b will quickly become $50b and so on.

I have an issue with the necessity as well.  Many of my colleagues and friends in IT are running around crazily screaming that 100Mbps isn’t enough for people – we need 10Gbps.  Huh?  That’s just stupid.  Right now, most people are operating on their home internet connection at under 2Mbps and some have gone up to 8Mbps with ADSL2.  Take up on ASDL2 hasn’t been 100% – many people have chosen to remain happily on lower speeds.  I’ve had Telstra Cable and used to routinely get 15Mbps or more and I’m about as much of a power user as you’re going to find and that was good enough for me.  Right now and I’d venture a guess and say for the next 10 years, 100Mbps is going to be more than enough to meet the needs of the average person.

Capacity is my other issue.  I don’t have figures to back me up, so I’m openly winging this bit – let’s call it an educated guess.  My understanding is that a significant majority of traffic consumed by Australians comes from overseas and presumably like most other countries, the US would be a big part of that.  The NBN plan does nothing to increase the capacity between the US and Australia – so aren’t you just building a giant fat pipe to try and suck a pea through a straw?  As I’ve said on Twitter, if the NBN included a fibre run to Guam/Hawaii and onto the US, then I’d be more excited.  This would go a long way towards getting rid of “usage” based rates for internet connectivity in the US (typo, sorry) and provide a more, “all you can eat” style.

I also don’t fully understand the use cases for all this bandwidth.  One of the first things you hear talked about is remote communities getting better medical care.  Ok, maybe we’ll be able to move high-res X-Rays and MRI results around, but I think you’d have a better chance of finding a unicorn than finding a doctor willing to remotely diagnose a patient over a high speed internet connection.  Insurance companies will step in and crack down – I mean we struggle to keep obstetricians from leaving the industry because of malpractice, imagine what this would create?!?

The other big use case is improved education.  Again, I don’t understand this.  The technology exists today to record lectures, stream them live or have them up for download and with the use of stuff like Skype, people can participate remotely.  What are we talking about here, better resolution?  Come on!

The final use case myth is around the magical undiscovered future technology that is going to require bigger bandwidth or we’ll all move back into caves and be forced to live like Bear Grylls.  That is Future FUD (fear, uncertainty and doubt) – nothing more, nothing less.  People who want this to go through use the fear of “falling behind” as a passive aggressive sales technique.  The FUD runs so deep that you can’t say things like, “I can’t think of anything that could cause that disruption” because the FUDsters jump in and say, “Of course not, it hasn’t been invented yet, that’s why you should plan for it.”  Sorry, I don’t go in for that kind of thing.  When we get to that Minority Report style, 3D holographic future, then we’ll surely have seen it coming via a small series of increasing evolutions and we should then react accordingly, but technology normally doesn’t have such abnormal disruptiveness – technology is an ecosystem of continual progress, standing on the shoulders of giants.

My last issue is with the evolution of technology.  Right now the Net Neutrality debate is raging in the US.  One ugly aspect of where the discussion is headed is wireless falling outside the scope of Net Neutrality agreements.  This is simply because the carriers know that the best way to solve the last mile issue is with better wireless technology and that’s where the R&D is going.  Digging up trenches and running fibre across telephone poles is 20th Century methods of solving a 21st Century issue.  Then you have the same “technologists” who say we need all of this fibre to protect from “future unknown technology” while also saying that wireless and copper technology won’t evolve – you can’t have it both ways, you can’t KNOW what the limits of copper or wireless are while saying some undiscovered tech will come along and obliterate out bandwidth.

Overall, the best part about my position is, if I’m wrong, the country just needs to get on with building it.  However, if Labor are wrong and spend $42b on this network and it is under used and becomes a great big white elephant for the next 15 years, then what?  You can’t get that money back again.