Paying for Australia's Broadband

As the ILECs in the United States beg for handouts, Australia's ILEC, along with major U.S. corporations, is paying into a fund that will assist Australia's broadband buildout.

by Craig Liddell of internetnews.com [March 4, 2002]

Telstra, Australia's ILEC, will chip in A$50 million over seven years as a stimulus package "for the Australian broadband market and called on other industry participants to invest in Australia's broadband future."

At the World IT Congress in Adelaide, Telstra's CEO, Dr Ziggy Switkowski said the package was designed to "move the Australian market into the next phase of growth by fast tracking the development of the right tools and applications."

The imitative has a three-pronged approach.

Firstly, a broadband development fund which Telstra will contribute A$10 million over two years and a further A$15 million over five years. According to the incumbent telco, this matches "dollar for dollar, contributions from other industry participants which stand to make commercial gains from broadband use in Australia, like Microsoft, Computer Associates and Silicon Graphics."

The fund will be administered by board of government and industry representatives, including Telstra. The board will oversee grants of up to $250,000 to local educational institutions and accredited developers and businesses. The aim, "development of tools for promoting efficient bandwidth utilisation such as compression technologies, technologies to encourage utilisation of broadband (DSL, satellite and cable), [such as] video streaming and video on demand and applications to enhance business and consumer adoption of broadband."

The second part of the initiative is a bandwidth contribution. Over two years, Telstra will contribute international bandwidth up to a value of A$10 million to be administered by the board. Half of this will be for recipients of grants under the fund in connection with development projects requiring bandwidth between Australian and Asian centres. The other half will be for use by local educational institutions between Australian and Asian centres for educational applications.

Thirdly, Telstra will develop an educational advertising campaign, a minimum of A$5 million over the next two years, "featuring the benefits of Internet and broadband use for the consumer and business segments, especially small to medium enterprises."

Dr Switkowski said that Telstra believed that the current phase of growth of the Australian broadband market was nearing completion—characterized by the 'early adopters' taking up both the cable and ADSL service. These customers were attracted to the service due to its high speed.

"To move to the next phase of growth of the broadband market, Telstra believes, based on local experience and observations made about the U.S. market, that the right tools, applications, and content must be available for consumers, to attract them to take up this service. Further, the right business models will need to exist to encourage content owners to move beyond traditional media platforms and provide their content over the internet," he said.

He also took shots at critics calling for competitive pricing structures, noting the "local experience suggests that competitive price and ubiquitous infrastructure availability alone will not stimulate sufficient levels of demand to create the next phase of growth for the broadband industry. Nor will regulatory intervention at the access or infrastructure level achieve this."

Prior to the World IT Congress, critics suggested Dr Switkowski would unveil such a sweetener package to offset community unrest about price hikes in a number of areas, including mobile telephony and Internet.

On the broadband front, the telco's ADSL service has been consistently plagued with service difficulties and outages over the past couple of years.

The announcement of a broadband stimulus package follows a similar plan unveiled by the Federal Government last year. The nationwide, A$2.1 million plan comprises a broadband content fund and "cluster study" for digital content.

"The widespread take-up of broadband in Australia will be driven largely by the creation of content that is relevant to people's lives and enhances their cultural experiences," the Department of Communications, Information Technology and the Arts (DCITA) explains.

The new project will provide "seed funding for innovative Australian content producers to pursue opportunities in new broadband applications," with a particular emphasis on interactive content. The fund will be administered by the Australian Film Commission (AFC) and run over three years with small grants provided at the early development stage.

The "Creative Industries Cluster Study" will analyse Australia's strengths and capabilities in producing digital content which a central focus on exploring the clustering approach, "identifying and strengthening linkages between related firms and associated institutions that compete but also co-operate-further defining and focusing these dynamic industries."

Despite the rhetoric, telecommunications analyst Paul Budde previously mentioned his lack of interest in the initiatives. "There is no vision, no blueprint behind all of this," he says, it "is a scatter gun approach, fighting bush fires whenever they occur. The government should immediately stop all hand-outs and sit down with the industry to develop a blueprint that includes telecoms, broadcasting (cable TV, digital TVG, datacasting), and broadband."

— End