Australian NBN trials apps for FTTH

The Australian NBN is trialing applications to run over the new network in NSW. Finally stuff other than Internet access requiring OA FTTH! Here's what they will ofer 40 trial homes in the Parkbruidge Estate. Teleworking seems to be missing; the services being trialed can definitely be expanded; but smart metering - who buys that?

• Smart metering (with Integral Energy). "Allow families and business to track their energy consumption in real time and adjust energy use accordingly". This is the one application that nobody has been able to convince me about (see next post).
• Touch screen communication (by Smart Services Cooperative Research Centre and Consult Point). Basically e-health/e-care. For elderly and young children.
• Virtual world learning environment (by Smart Services CRC and NSW Department of Education and Training): An e-learning app.
• HD Internet TV (by NICTA and Opticomm). Basically a hybrid STB. You can wonder why they do not partner with Google TV or another existing player in the connected TV/hybrid TV/OTT market.

FTTH: will they ever learn?

This is a remarkable statement coming from an alternative operator, TelstraClear of New Zealand. The telco says the main result of faster broadband links to the home may be more downloads of pornography and movies rather than improvements to productivity, quotes the New Zealand Herald. "At the moment we don't believe that putting fibre into every home is economic or necessary."

My comments:

• TelstraClear is owned by Telstra, which explains a lot of the above. Telstra too thinks FTTN (instead of FTTH) is sufficient for the Australian consumer market.
  
• TelstraClear proposes FTTB (business market) instead of FTTH. I'm not sure about traffic congestion in New Zealand, but there is a lot to say for teleworking. That too is a driver on the demand side.
• I've heard the argument before: why build FTTH if all they do with it is illegal file-sharing? Who are you to say what people may or may not do with their internet connection. Let the people rule!
  
• There is some reference to wireless as an alternative. I just don't believe it.

Here is a reminder to Mr. Freeth of TelstraClear that video is not just about illegal or otherwise questionable material:

• Growth rates are still high. Think YouTube and other user-generated stuff.
• Most markets need some serious TV competition, and not just for live broadcast TV, but for VoD and catch-up TV as well. Telcos are all upgrading to offer IPTV. For that, even VDSL2 isn't enough.
• Telepresence, videoconferencing, monitoring, telehealth, teleworking, cloud computing, video calling, etc.: they all require huge bandwidths.
  
• Screens are getting bigger; movies and games are going HD, 3-D and holographic.
• Place-shifting (e.g. Slingbox).
  

And to be sure, there is more:

• Fuel and carbon savings.
• If you don't, somebody alse will build and grab some extra GDP growth (like Mauritius).
• Cablecos are upgrading to DOCSIS 3.0. If you want to keep up, you might as well leap ahead of them and acknowledge that FTTH is the end-game.
  
• The build-out of a nationwide FTTH network takes at least 10 years to reach a good portion of the population. So, you better start today.
• Many applications require symmetric connections. Only FTTH will be able to offer that.
  

Teleworking steadily progresses

Ernst & Young in the Netherlands published its new bimonthly 'ICT Barometer'. This is the result of an online survey among 600 managers and professionals across several industries.
Some more or less remarkable developments stand out:

• Teleworking is rising, but slowly. This will continue, esp. in large companies and in industrial sectors.
• Teleworking is valued higher by managers (over professionals), in the services idustries (over government, trade and industrial sectors), in SoHo companies (over SMEs and large companies) and by older workers (over younger ones).
• Efficiency of teleworking is higher (than working in an office) across all sectors and company sizes.
• The stated benefits of teleworking include: efficiency and avoiding traffic congestion.
• Those preferring the office cite these reasons: the nature of the job, direct contact with colleagues, company culture, separating work from personal life, lack of facilities.

Obviously, not all work will migrate from the office to the home, but we haven't seen the end yet. One bottleneck, a lack of facilities, will be addressed by the roll out of FTTH networks.

New Zealand: what investment vehicle?

Earlier this month, the New Zealand Institute released another paper on broadband: The Need for Change. The call for FTTH becomes increasingly explicit. They stop short of calling for separation of Telecom New Zealand and providing government funding to the passive layer.

In an earlier report (September 2007), the benefits from increased productivity and growth (through telepresence) were calculated: 2.7-4.4bn NZD/year. Also, there is a cost to waiting. The institute proposed a 10 year roll out of FTTP for a 75% coverage.
In the meantime, Telecom New Zealand (TNZ) progressed on issues such as additional fibre (to cabinets, FTTC), LLU and separation (the government is to decide on the latest proposals by March 31).
Now, the Institute says these efforts are insufficient; the 75% coverage ratio would only be reached by 2040. Just a third of the benefits would be captured.

Approaching the FTTH issue from the financing side, they hit the nail on the head and come to some remarkable conclusions. Here are some (non-literal) quotes:

• Summary: Progress is too slow, the dominant investor has weak incentives to invest, a new regulatory and funding model for rapid roll out of fibre infrastructure is recommended.
• More specifically: TNZ needs higher returns than those provided by infrastructure assets like fibre. Besides, the company perceives a regulatory risk, demand is uncertain and there is capital market resistance to increased investment.
• Even more to the point: the cost of inaction is greater than the cost of action, even though both are value negative.
• A natural monopoly is much more difficult to regulate once multiple investors have invested in fibre and xDSL. ISPs/telcos will have increased investment in xDSL and will require a return before changing platform.
• The Institute recommends accelerated, efficient roll out of fibre infrastructure. This will require a new regulatory approach and investment vehicle. Investment in fibre infrastructure made by a third party that treats the investment as an infrastructure asset. Government intervention is the only viable option to accelerate roll out through a privately funded vehicle.
• The last question remains: What investment vehicle needs to be built?

New web-based video services

After posting about the Daily Media box yesterday, I came across an apparently similar product from the US: My Broadband TV: basically an STB for personalized TV over broadband.

There are some nice extras, such as CD and DVD playing functionality and the box also serves as a DVR. (It adds WiFi connectivity, something Daily Media didn't bother to include because of interference issues.) It hasn't launched yet and details are lacking, but going by their web site makes it look like they are on the prowl for both content and distribution partners.

The company offers a $100-200 subsidy, "depending on the functionality and the length of commitment", whereas Daily Media is free for consumers and requires no subscription.

In any case, the box market is on the move. I think that price and simplicity (on the consumer side) and revenue sharing (on the partner side) are of paramount importance - things I particularly like about Daily Media.

Also worth mentioning are video solutions that add to potential congestion issues - and hence to the importance of network upgrades (FTTH).

• Telepresence, i.e. next-gen videoconferencing. Telephony ran this interesting article, highlighting the main players (HP, Cisco, Tandberg, Polycom, Teleris, LifeSize and Telanetix) and their market approach (managed services v. resellers). Still much too expensive ($250,000 for a room installation, plus bandwidth and service cost), but I suppose simpler products will come to market. Cisco: "At least 60% of our WAN traffic today is telepresence traffic." Benefits: reduction of travel cost ($70m for Cisco in 2007) and carbon emissions, increased productivity.
• Home monitoring. SureWest, an FTTH pioneer, is launching remote monitoring with partner Xanboo. They will sell to anybody in the US, but obviously only SureWest subscribers have no upload bottleneck. And the experience will only be optimal if the viewer is on a high-speed connection as well. It "can be programmed to deliver live or recorded video and still images, as well as sensor notifications for things such as motion, door and window activity, water leakage and temperature change. (...) You can control your kitchen lights, check on pets, receive e-mail alerts if a window is opened, or watch your kids come home from school from virtually anywhere in the world."

Fuel and carbon savings could help finance FTTH

My post on FNV (Dutch union) supporting teleworking led to a brief email conversation with Herman Wagter of Citynet, the Amsterdam munifiber network.

His claim: the fuel and carbon related savings, induced by teleworking, may help financing a nationwide FTTH network.

Here are some of his back-of-the-envelope calculations:

1. Travel savings: 3.7bn km/year (according to ADV, the agency that conducted the FNV survey). This translates into fuel savings of ~400m EUR/year (using ~1 EUR/liter and ~0.1 liter/km).
2. Carbon emission reduction: using 3.7bn km/year and 191 grams/km (also from ADV, based on CBS statistics) the result is ~715m kg/year.
3. Carbon-related savings: using the 715m kg/year and 23 EUR/ton (the current cost of emission rights, according to Herman) add another ~15m EUR/year (of interest may also be carbon capture and sequestration costs and carbon-offset money.)
4. Capital cost: the Netherlands have ~7m homes. At a cost of 800 EUR/home (compares nicely with Verizon FiOS numbers, but may be a bit optimistic when wiring up rural areas as well), capex would be EUR 5.6bn. At a 7% interest rate, the yearly interest bill would be ... EUR 400m!

The question obviously is: how to redirect spending on fuel and carbon to fiber? I suppose it is hard see this done without the government actively taking part. As long as the physical layer is recognized as a regulated and natural monopoly, it could be subsidized. This is exactly what is happening in Singapore (a Citynet look-alike).

Teleworking and FTTH may enter Dutch political agenda

Broadband in general, and FTTH in particular, may enter politics in the Netherlands. An FNV sponsored survey (in Dutch), conducted by ADV Market Research, revealed that people increasingly want to work from home (teleworking = working through home broadband connection).

FNV and ADV point out that teleworking will contribute to reduced pollution (less traffic congestion), increased productivity (migration of hours spent from sitting in the car to being productive), as well as more people joining the working ranks (mums returning from maternity leave; disabled people; etc.).

FNV is the largest union in the country, so this may very well be put forward in future wage negotiations and political discussions.

As I wrote before, broadband is an indispensable enabler of teleworking, and FTTH will add video conferencing. That may stimulate those managers who so far are reluctant to allow their people to work from home. According to the survey, one in three of those eligible for teleworking is refused to do so for fear of lack of oversight. A videolink will mitigate this.

To round of, here is an interesting calculation from the survey. Should all current teleworking ambitions (83% wants to telework 1 day a week, 14% wants 2 days, 3% wants 3 days) be awarded, nationwide carbondioxide reductions could reach 11%.

Teleworking (and Web 2.0 and P2P) wil drive FTTH

Here at Communications Breakdown, a Fibre Ring member blog (see right), we are strong believers in the benefits of true broadband, i.e. FTTH.

Time for a reality check, though. Below are 5 issues that may be relevant for broadband, through the laws of demand & supply.

But make no mistake: they do not reduce the urgency to build FTTH (they may necessitate a long-term view and perhaps new business models). The lesson here is, I believe, that Web 2.0 may be hyped (from a broadband point of view) and that there are other important drivers (teleworking, telemedicine, etc.), apart from P2P file sharing, that still do not get the attention they deserve.

1. Demand
As Carlota Perez put it: the recent past is not a very good indicator for the future. In other words, high growth will not continue perpetually.
As the internet moved on from providing data and voice to being an alternative channel for video, traffic surged. Growth may continue into the foreseeable future, but there is no fourth 'packet type', after the familiar 'voice, video, data' troika.
Check out this discussion: 'The bandwidth explosion myth'.

2. Competition
Don't count the incumbents out just yet. Cablecos are known to launch aggressive campaigns in Dutch towns that are trying to build munifiber. The same is happening in Provo, Utah.

3. Innovation
Who actually uses all those apps? As a blogger, I try many of them, but I am reminded of this post on Dean's blog.
At the same conference where Carlota Perez spoke, the EC advisor Jean-Claude Burgelman came up with a range of Web 2.0 apps (YouTube, MySpace, Orkut, Flickr, del.icio.us, LinkedIn), but none was really new. It could have been a 2005 presentation.
The new Google knol project doesn't seem to innovate relative to a site like Squidoo.
TechCrunch already has a 'dead pool'.

4. Advertising
Ads are practically the sole business model (except for aiming for a Google takeover). In itself, that's OK (free radio and TV have the same). Ultimately however, this will prove to be a very cyclical source of income. Hence, in due course a huge shake-out is unavoidable. Remember how hard it was for Yahoo! back in 2000 and 2001 to diversify away from ads (display ads made up some 80%)? That will be even more so now, since newer generations have grown up to expect everything on the internet to come for free.

5. UGC v. the expert
Content increasingly comes for free. This forces content providers to aim for a share of different sources of income (devices, access, software, bundles, etc.). If everybody wants a piece of the pie, and there is no pricing power, everybody's slice will shrink.

Teleworking: traffic growth to stay at the 100% level

In this release Foundry Networks announces a deal with the Amsterdam Internet Exchange (AMS-IX). In case you didn't know, it's the largest in the world.
Some interesting info in the release:

• By late October a new record was set: 350 GB/s. AMS-IX expects to maintain its c. 100% growth rate and get near the 1 Tb/s threshold by the end of 2008. By the way, in the AMS-IX stats it now appears that the new record is 371 Gb/s.
• All the usual suspects are 'blamed': video, gaming, streaming. Looking ahead, AMS-IX points to HD, and specifically to " the maturation of children of the digital revolution (...). As they embark in their professional careers, they are already accustomed to being online all the time, especially with the new Web 2.0 applications. We will potentially see traffic patterns shift to higher volumes, thus defining more critical infrastructure needs".

Approaching the matter from a completely different angle, it is interesting to take a look at slide 22 of McGraw-Hill's UBS presentation. Standard and Poor's apparently expects growth in 2008 to come a.o. from public finance for "increasing demand for new-money issuance to fund general infrastructure needs" (added at the presentation: "especially in large developing countries"). Now of course, infrastructure will entail a wide range of physical stuff, but it sounds great for us Fiber Ringers.

To end, this ties nicely into the teleworking stance we heard at the Broadband Cities conference last month. (Look out for Benoit Felten's run-down of Dirk van der Woude's presentation on his excellent Fiberevolution blog.) Reports on the benefits of true broadband i.e. FTTH abound. Personally, I am entirely convinced:

• Economic and environmental benefits: productivity goes up, GBP grab (developing nations are leapfrogging western countries' incumbent networks), the environment will benefit from reduced traffic etc.
• Appease managers who will have to put some trust in their employees: a video link requires FTTH. Take a look at this Alltel release for some added manager reassurance.
• Quality of life: teleworking is nice tool for businesses trying to attract workers in tight labour markets. I presume it will become common practice to plan houses with built-in office space. More people will own second homes!