NBN’s journey hasn’t been smooth, but CTO claims its delivering on the promise

At Broadband World Forum one of the most common plays was to poke fun at the NBN troubles in Australia, but CTO Ray Owen’s reckons he’s got the last laugh.

According to Owen, the NBN network now carries 28 petabytes of data every day, with average user consuming 213 GB a month and the top 30% of fibre customers consuming more than a terabyte. Back in April, the team even noted one user managed to consumer more than 23 terabytes during the month. “We’re not too sure what he was actually doing, but he was definitely having a good time,” joked Owen.

The plan is to get 8 million happy homes on the NBN network by 2020, but also a minimum speed of 25 Mbps for all Australian citizens. In terms of penetration, Owen suggested the NBN network now services 4.4 Aussies, 63% of the target, though meeting the 25 Mbps government-mandated target would take more than fibre. A multi-technology mix has been tabled including Fixed Wireless Access (FWA), G.Fast, fibre and satellite to meet these demands. In a country the size of Australia, containing some very hostile environments, 100% fibre penetration is not a realistic goal.

Despite Owen’s claim on progress, it didn’t stop the mocking. Conference chairperson Richard Jones was one to poke fun, in between humble claims of founding 25 different companies over the course of his unassuming career, while Kate McKenzie, CEO of New Zealand wholesale network provider Chorus, revelled in the troubles as evidence of how wonderful she and her business is.

While the poking might have been on the obnoxious side, it isn’t untrue. The NBN rollout has been a painful journey, with the latest revelation coming from the latest budget estimates. CEO Steven Rue told Senate Estimates NBN would still be using the Fibre-to-the-Node (FTTN) approach until at least 2040. The multi-technology mix has been taking stick, but it is the only genuine option to ensure all Australian citizens are taking into the digital economy together. 100% fibre penetration is not going to be a viable option in the foreseeable future. That said, many of the criticisms of NBN do have merit.

Looking forward, NBN forecasts increased adoption of 4K and 8K video, smart home adoption will increase rapidly and augmented reality will start to make an impact over the next couple of years, while the business segment will continue to diversify. Real-time entertainment services are quickly declining, VPN uptake is on the up and file sharing is heading south. This will not only impact the technology which will be used to facilitate connectivity, but the approach to experience. As you can see from the picture below, the plans have been laid to evolve the network beyond the 2020 deadline.

“What I’m interested in as a CTO is the different technologies which can help improve this customer experience,” said Owen.

Beyond 2020, perhaps the full fibre (FTTP) vision will be revived. The current technology mix is best case scenario to meet demands, but it is by no means perfect or particularly future-proofed.

fznor

NB-IoT gathers momentum

Trials in Australia and the UK involving Ericsson and Vodafone indicate the NB-IoT is starting to become a reality.

Ericsson and Telstra are claiming the longest connection for the narrowband wireless standard that is set to be the default for IoT. The trial used a Telstra base station to communicate with an NB-IoT temperature sensor 94 km away on Mount Cenn Cruaich in New South Wales, Australia. They say the previous range limit was more like 40 km.

“We’re partnering with Telstra to deliver its customers a world-leading capability in NB-IoT extended range cells and demonstrating the huge opportunity that IoT represents in rural and regional areas for both Australia and globally, particularly for logistics and agriculture,” said Emilio Romeo, Ericsson’s MD for Australia and New Zealand.

“Telstra already had Australia’s largest IoT coverage with Cat M1 across our 4G metro, regional and rural coverage footprint,” said Channa Seneviratne, Telstra’s Executive Director of Network and Infrastructure Engineering. “With this NB-IoT extended range feature, we have now extended our coverage to more than three and a half million square kilometers, delivering our customers the best IoT coverage and capability in the country.”

Meanwhile Vodafone has started trialling NB-IoT in the UK, as reported by Light Reading. Energy company Scottish Power is Vodafone’s first UK NB-IoT customer and is using IoT temperature sensors to detect when some of its remote kit might be overheating. They’re apparently powered by standard AA batteries and each one costs a couple of quid.

Lastly Counterpoint Research has found that global cellular IoT connections grew by 72% in the first half of this year and forecasted NB-IoT will account for around half of all IoT connections in the long term. As you can see from the charts below most of the action seems to be happening in China, but Vodafone is leading the international effort.

Counterpoint IoT 1

Counterpoint IoT 2

“Emerging markets like India, Brazil and in Africa while can offer tremendous scale but will likely be late followers compared to China in this path to connected everything,” said Satyajit Sinha of Counterpoint. “However, the massive growth opportunity remains in terms of cellular-IoT connections in emerging markets which will be possibly catalysed by operators such as Jio in India but more specifically from multi-market players such as Telefónica, MTN or Vodafone with plans to deploy LPWAN networks such as NB-IoT leveraging scale across their coverage markets.”

“Revenue generation from the IoT ecosystem is not siloed to any one specific segment of the value chain, rather it is distributed among all segments,” said Neil Shah of Counterpoint. “On an average for a cellular IoT solution deployment, connectivity represents around 12%, whereas hardware components, modules and devices represent 22%.

“The rest of the bulk of the value in an IoT solution is captured by system integrators, middleware, software platforms, and cloud analytics vendors. Hence, if operators are looking to capture maximum value, the strategies need to provide an end-to-end IoT solutions by bundling IoT devices, secure connectivity, platform, and data management to capitalize on the overall opportunity.”

The big variable with IoT, of course, is revenue. It doesn’t look too tough to scatter billions of sensors all over the place and connect them to the cloud via NB-IoT or whatever, but getting companies to pay for services on the back of them is another matter. It looks like a lot of the commercial precedent will be set in China, so the rest of the world might wait to see how that plays out before committing.

Aussies telcos given yellow card for foul-play in ‘unlimited’ advertising

UK consumers might find some comfort that lying to misleading the masses isn’t a speciality of telcos here; everyone around the world is up to no good.

The Australian Competition and Consumer Commission has told telcos to keep a better handle on advertising claims, demanding more honesty. Transparency and accuracy might seem like strange concepts to telecommunications companies, who have made somewhat of a speciality of applying flexibility to the definition of certain terms, but the regulator is hitting back.

“Telecommunications companies should be wary of using absolute claims like ‘unlimited’ where that does not give a true picture to consumers of what is being offered,” said ACCC Chairperson Rod Sims.

“We have taken a range of actions against telecommunication companies for misleading consumers. It is about time they showed more respect for their customers and the Australian Consumer Law. With much higher penalties now available for breaches of consumer law, I hope they will take their obligations more seriously. From now on consumer law penalties will seriously affect their bottom line, and we will not hesitate to seek the highest possible penalties.”

The issue here is focused on the ‘unlimited’ claims put forward by telcos when promoting mobile data plans. Optus, Vodafone and Telstra are the trio under the microscope of the ACCC, alongside private litigation brought by Optus against Telstra in the Federal Court. The result of the investigation, which took place between March and June, is that while the trio of white liars did include disclaimers, these were not sufficiently prominent or clear enough to explain to consumers the existence and impacts of the limitations. In short, consumers were not told about the throttling which would take place after data limits had been reached.

While the Aussies might be the centre of criticism right now, few nationalities are innocent. The UK has consistently mislead the consumer with the dreaded ‘up-to’ metric, and while this has been addressed by the Advertising Standards Authority (ASA) there are some, including Telecoms.com, who do not believe it has gone far enough. In years gone by, telcos could make speed claims in advertisements if they could prove 10% of customers could experience the promise. While this has been raised to 50% during peak hours, there have been calls this percentage should be higher.

In another example, Vodafone UK had one of its broadband adverts bands after the ASA deemed that there was a disconnect between the buffering scenario in the advert and how it related to the refund offer or service guarantee. The ‘ultimate speed guarantee’ advert featured Martin Freeman as a gamer experiencing connectivity issues at a critical point during the game, with BT making the initial complaint.

It is certainly promising to see a watchdog taking action against the telcos, perhaps we should all just ignore the advertising for the moment. We’re struggling to think of a telco which has earned the right to be trusted after years of misleading promises, inaccurate promises or childish moaning. Trust is hard earned and easily lost, and the telco industry is running on empty.

Merged Vodafone Australia and TPG plan to raise convergence game

Competition and convergence are the key words as Vodafone Australia and TPG announce merger plans to lodge a challenge to market leaders Telstra and Optus.

Although the pair have stated there would no notable changes to either of the brands after the merger, the opportunity to cross-sell Vodafone’s mobile and TPG’s broadband offering could mount a serious challenge to the domination of Telstra and Optus who control more than 80% of the mobile market as it stands. Vodafone currently sits in third place in the market share race, accounting for just over 18% of Australian mobile consumers.

“This transaction accelerates Vodafone’s converged communications strategy and is consistent with our proactive approach to enhance the value of our portfolio of businesses,” said Nick Read, CEO-designate of Vodafone. “The combined listed company will be a more capable challenger to Telstra and Optus, and will be much better placed to invest in next generation mobile and fixed line services to benefit Australian consumers and businesses.”

TPG is currently Australia’s second largest broadband provider with 1.9 million subscribers, and has built a 11,000km-long fibre network primarily through acquisition, also offering wholesale broadband services to businesses. Alongside its solid position in the broadband space, TPG has also been registering interest for a launch into the mobile space, though what this now means for plans remains to be seen.

Over the course of the day, share price in Telstra has increased by 2.9% while Singtel, parent company of Optus, has witnessed a 2.19% boost (at the time of writing), perhaps indicating relief from investors. With TPG spending billions on a new mobile network and acquiring three of the thirty available spectrum lots in the most recent auction, the promise had been a fourth player to undercut rivals with a AUS$9.99 a month offering in Sydney, Melbourne, Adelaide, Canberra and Brisbane. While this had the potential to heavily disrupt the Australian market, it seems investors are confident such plans will be brushed aside in favour of convergence.

This does not mean clear sailing for the pair, but fighting on value is much more favourable than an troublesome challenger kicking off a race to the bottom. Vodafone has suggested the combination of the businesses will allow create a much broader footprint for the business, while also scale when investing in future-proof mobile and fixed networks. The immediate introduction of a convergence offer will certainly give disillusioned Telstra and Optus customers to think about.

Telstra has been having a rough time of it in recent years, with a 55% drop in market value since the appointment of CEO Andy Penn in May 2015. The recent launch of the Telstra2022 plan, targeting a simplified management and operational structure, had little impact on the mood of investors, perhaps as it coincided with the third network outage in seven weeks. As a strategy, it Telstra2022 was supposed to offer a vision of a more efficient and profitable organization, saving roughly $740 million over the next four years, with the ability to invest in the 5G era. Apparently not.

Optus as a business has been plodding along relatively comfortably. The last financial statement revealed revenue growth of 6%, continuing to grow its subscription base on both mobile and broadband offerings. Progress has not been exceptional, but few would complain.

The market on the whole has been pretty steady over the course of the last two years, Telstra might be losing a bit of market share to rivals, but nothing exceptional. A Vodafone/TPG tie up would change the status quo however. A third player able to offer convergent offers to the Australian customer certainly has the potential to cause problems. With a suspect nationalised network, a public spat with Huawei, the government attacking the users right to privacy through encryption and now this merger, Australia is certainly an interesting market right now.

Huawei claims Australian ban is politically motivated

Chinese kit vendor Huawei has ramped up its rhetoric following the recent announcement that it is barred from the Australian 5G market.

“The Australian Government’s decision to block Huawei from Australia’s 5G market is politically motivated, not the result of a fact-based, transparent, or equitable decision-making process,” said Huawei in a lengthy public statement. Much of it was a fairly standard diatribe about the importance of competition, apparently designed to appeal to the Australian public.

The more substantial stuff attacked the basis for the decision, which essentially amounted to a profound distrust of the Chinese state and concern that it would use Huawei (or ZTE) to get up to no good if it had half the chance. The original statement didn’t offer any concrete evidence for these concerns, however, and that seems to be especially galling to Huawei.

“Chinese law does not grant government the authority to compel telecommunications firms to install backdoors or listening devices, or engage in any behaviour that might compromise the telecommunications equipment of other nations,” says the statement. “A mistaken and narrow understanding of Chinese law should not serve as the basis for concerns about Huawei’s business. Huawei has never been asked to engage in intelligence work on behalf of any government.”

While there’s no reason to question any of that, it’s also easy to see why it provides insufficient reassurance to a country worried about the intentions of the Chinese state. President Xi Jinping has been steadily increasing his control over the Communist Party and could potentially either change the law or act extra-judicially in order to force Huawei to play ball in future.

Another good query raised in the Huawei statement concerned the technological basis for the decision, which flagged up 5G as presenting a far more significant security challenge thanks to its distributed architecture. There is no fundamental difference between 5G and 4G network architecture; the core networks and access networks are still separated,” said the statement.

“Moreover, 5G has stronger guarantees around privacy and security protection than 3G and 4G. We urge the government to take an objective and fact-based approach to security issues, and work together on effective long-term solutions. Open dialogue, joint innovation, and close collaboration are essential to the ongoing development of the telecommunications industry.”

The techies advising the Australian government would presumably take issue with that statement, but it’s hard to argue with a request to address security concerns collaboratively. The statement concludes defiantly by criticizing Australia for failing to follow due process or give Huawei the opportunity to defend itself before taking this surprise, unilateral action.

“The Australian government’s actions undermine the principles of competition and non-discrimination in fair trade,” said the statement. “The government has not issued any specific concerns about Huawei’s governance, security, or suitability to safely and securely conduct business in Australia, so we’ve been given nothing to respond to. We will continue to engage with the Australian government, and in accordance with Australian law and relevant international conventions, we will take all possible measures to protect our legal rights and interests.”

One of the co-signatories of the decision was Scott Morrison, who has completed a busy week by becoming the new Australian Prime Minister. The incumbent, Malcolm Turnbull, was booted out by his own party following profound disagreements over its immigration and energy policies. There will have to be a proper general election before long but this development would seem to cement the move for the time being at least.

It’s hard to avoid the conclusion that Huawei is being treated as a proxy in the escalating diplomatic tensions between China and the west. It may well be as innocent as it claims, but the opacity of the Chinese government and its apparently limitless global ambition is increasingly causing western governments to err on the side of caution.

It’s probable that the Australian decision was initiated by Turnbull in a failed attempt to placate hardliners with his party, but it also seems likely that US President Trump is putting pressure on allied countries to join him in his bid to shackle China. This is bad news for Huawei, which may well end up having to repurpose that statement for other countries in the not too distant future.

Aussies ban Huawei from throwing 5G on the barbie

In what could be described as an incredibly passive aggressive move, the Australian government has effectively banned Huawei from joining the Australian 5G bonanza.

In a joint statement released by Mitch Fifield, Minister for Communications and the Arts, and Scott Morrison, Acting Minister for Home Affairs, the Australian government has not specifically named Huawei, simply mentioning dodgy governments. A Huawei tweet confirms it is on the wrong side of the line and will not be able to supply Australian vendors with its 5G equipment.

“The Government considers that the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorised access or interference,” the statement reads.

The rules, which will come into place on September 18 2018, set new legal obligations on security for telcos and are based on the idea 5G networks will have a fundamentally different architecture to the networks of today. With the core and edge merging closer together, and more sensitive processes and applications moving closer to the end-user on the edge, the Australian government is yet to be convinced there are any solutions or approaches which mitigate this security risk. The belief the edge is less secure than the core is a justified one.

The new landscape will provide the Australian government much more influence over the deployment and management of telecommunications networks throughout the country. Not only will the telcos have to offer the government considerably more access to the inner on-goings of operations, the rules essentially give the government the power of veto when it comes to selecting vendors. Huawei has stated it has been barred from the 5G euphoria, and while ZTE is yet to comment, it would be a fair assumption this ban extends to all Chinese companies.

Reading between the lines, the Aussies seem to be saying they don’t trust the Chinese government, or Chinese companies. There is little, if any, concrete proof Huawei is a government puppet, but this seems to be a blanket policy covering all Chinese companies and a message to President Xi Jinping; if you want to play in the global markets, you have to adhere to the same rules as the rest of us, irrelevant of the size of your economy, you can’t have it both ways.

Of course, such actions have been bubbling below the surface for some time. Several countries around the world, with the US being the most vocal, have been airing their suspicions of eavesdropping from the Chinese government, though this is one of the first cases which is seemingly directed at China as a whole. The US did temporarily ban ZTE of course, while it and Huawei are barred from government contracts. There does seem to be an unofficial policy to screw China as hard as possible, though little has translated into hardcore, sector-wide legislation keeping the pair from getting involved with 5G networks on every front.

The UK is another which has its own concerns over Chinese companies, there is a division in GCHQ which is specifically tasked with making sure Huawei doesn’t do anything suspect, though a full ban doesn’t seem like a realistic possibility right now. The Aussies making the first move worldwide is an interesting development however.

China is Australia’s biggest trading partner, accounting for 29% of exports and 17.7% of total imports across 2016-17, creating a tricky diplomacy situation. Banning one of China’s most successful players on the international trade scene is hardly going to make for comfortable discussions in the future. It’s a bold move from the Aussies.

Perhaps this is an indication the Australian government sees profit in cosying up to the Trump administration. President Trump has been incredibly combative in dealing with the Chinese government, or governments in general, and such action might get Australia in the good books of the US authorities. The US would certainly be a successful trading partner should the Australia be able to gain favourable terms, and a ban on the US’ biggest rival on the global stage could be viewed as Trump stroking.

While losing one market is not ideal for Huawei, and presumably ZTE, it is not the end of the world. What will be a worry is the domino effect. Governments around the world, especially those who would consider themselves ‘western’, have a tendency to lean on each for guidance in creating legislation. Precedent and trends are dangerous terms for Huawei here. With the 5G bonanza set to create fortunes, it will be interesting to see how many follow the Australian trail.

Theories and predictions over the potential implications will be plentiful, but one thing you can almost guarantee is Ericsson CEO Börje Ekholm and Nokia CEO Rajeev Suri will both be smiling quite contently over the news, even if neither is prepared to take their joy public.

Vodafone Australia and TPG mull merger

The Australian mobile market may be set for consolidation with the revelation that Vodafone and TPG are thinking of hooking up.

Widespread reports in Australia compelled the two companies to publicly admit they’ve been chatting. “Vodafone Hutchison Australia (VHA) confirms it has commenced discussions with TPG in relation to a potential combination of the two highly complementary companies,” said Vodafone in a statement. “At this stage, these are exploratory non-binding discussions, with no commitment from VHA or its shareholders.” TPG seems to have issued some similarly cautious statements.

TPG is a new entrant to the Australian mobile market that is expected to launch in metropolitan areas this year, making heavy use of small cells to augment a limited macro network. It has been providing some telecoms services via a wholesale agreement with Vodafone but its move into the mass market, most probably via the tried-and-tested aggressive pricing model, is expected to significantly disrupt the Aussie market.

Vodafone is the distant third of three Australian MNOs, with a 17% subscriber share according to Ovum’s WCIS. Telstra is the dominant player, controlling a narrow majority of subscribers, and thus has the most to lose by a disruptive new entrant. All this M&A talk seems to have actually boosted Telstra’s share price, however, with distracted competitors considered to offer competitive advantage.

Telstra profits plunge thanks in part to NBN overheads

Australian operator group Telstra saw its annual profits fall by 9% thanks, at least in part, to the costs incurred in the rollout of NBN.

State-run telecoms wholesaler NBN has apparently started charging operators more to use its network, which at least provides them with a handy scapegoat when the numbers go in the wrong direction. To be fair to Telstra revenues were up 3% for the 2018 financial year so clearly overheads took a sharp turn for the worse.

“We have seen strong subscriber growth, particularly in the second half of the year, adding 342,000 retail mobile customers, 88,000 retail fixed broadband customers and 135,000 retail bundles during FY18,” said Telstra CEO Andrew Penn. “Despite this, the challenging trading conditions are expected to continue in FY19, including ongoing pressure on ARPU and further negative impact of the NBN network rollout on our underlying earnings.”

Penn was keen to stress how much of this increased overhead is also down to investment, inevitably playing the 5G card to illustrate his point. “Yesterday we announced we had switched on 5G technology across selected areas of the Gold Coast, making us the first in the country to be 5G ready, and we expect to have more than 200 5G-capable sites live

around the country by the end of 2018.”

Here are some slides from the investor presentation and you can read further analysis of these numbers at Light Reading here.

Telstra 2018 1

Telstra 2018 2

Telstra 2018 3

Telstra 2018 4

Telstra 2018 5

Aussie watchdog reviews termination regulations

The Australian Competition and Consumer Commission (ACCC) has kicked off a public inquiry to decide whether to extend, vary or revoke the domestic mobile terminating access service (MTAS) declaration.

MTAS is the wholesale service offered between the mobile operators to allow customers to call and send texts to those who might use a different providers. The terminating network (the one receiving the call or text) charges the originating one, which in turn recovers the cost from the consumer through monthly tariffs. The issue which the ACCC wants to address is the way in which consumers are communicating with each other.

“Increasingly, consumers are choosing over-the-top services to make calls and send messages,” said ACCC Commissioner Cristina Cifuentes. “These fall outside the MTAS service description and we are interested in knowing whether the ability of consumers to choose these ways of communicating means that declaration of the MTAS is no longer necessary.

“Regulation of wholesale mobile termination has, in the past, helped to lower retail prices for mobile services for the benefit of consumers. This inquiry will consider whether continued regulation is needed to deliver this result. Given the pace of technological change in mobile networks, the ACCC will seek to determine whether the service description remains fit-for-purpose and accurate. We also intend to test what effect the declaration of SMS services in 2014 has had on relevant markets, in particular its impact on consumers.”

The Competition and Consumer Act 2010 requires the ACCC to review the current MTAS declaration during the 18 month period before it expires, which will be on June 30 2019. Such is the size of the Australian landscape, the ACCC believes operators effectively have a monopoly when it comes to accessing its customers, therefore regulation is required. Back in 2014, the introduction of the original declaration was justified to ensure operators did not deny or set unreasonable terms of access to these termination services.

The review will decide whether MTAS should remain a ‘declared’ or regulated service in light of changes in the way consumers use devices. As it stands, there is a difference of opinion in the industry. During the commissions Sector Market Study, Telstra and TPG said they were in favour of a less regulated service, while Macquarie Telecom, Vodafone and MessageMedia were all in support of ongoing regulation.

Telstra slashes 8k jobs in search for simplified structure and more profit

Australian telco Telstra has announced it will be cutting 8,000 employees and contractors, as well as a reduction in 2-4 layers of management, in an effort to simply the structure of the business and improve profitability.

The headcount reduction forms part of the Telstra2022, a three-year plan building on the strategic investments Telstra announced in 2016. The aim is to create a ‘smaller, knowledge-based’ workforce which is ‘agile enough to deal with rapid change’. As part of the cuts, one in four executive and middle management roles will be removed to flatten the organizations structure.

“We will take a bolder stance and use the disruption in the telecommunications industry to lead the market for the benefit of our customers, employees and shareholders,” said Telstra CEO Andrew Penn.

“The rate and pace of change in our industry is increasingly driven by technological innovation and competition. In this environment traditional companies that do not respond are most at risk. We have worked hard preparing Telstra for this market dynamic while ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we are to continue to be the nation’s leading telecommunications company.”

The new Telstra2022 is split into four pillars:

  • Simplifying the product portfolio: retiring all of the 1,800 consumer and small business plans and introducing 20 core plans
  • Establish a standalone infrastructure business to drive performance and set up optionality post the nbn rollout
  • Restructuring the workforce, including the 8,000 reduction in headcount
  • Cost reduction programme and portfolio management

Telstra is not necessarily in a bad position, such reductions in headcount and a restructuring of the business model simply demonstrates the changing nature of the telecoms industry. While it is not a nice aspect of the business to discuss, restructuring the workforce is a necessary component of evolving the operating model. Telcos have been stuck in the past for many years, evident in the growth of the more agile internet players who are reaping the benefits of the digital economy, therefore big changes are needed to future-proof the business.

With Telstra just adding to the recent list of telcos announcing cut backs, BT and Vodafone have made headline recently, though DT’s slow and steady erosion of the workforce is another to keep an eye on, perhaps this is news we should start getting accustomed to.