We have prepared this report in response to the extraordinary press coverage, precipitated by the Australian government’s announcement to sell the remaining shareholding in Telstra, and to further explain the recent announcements, by Telstra itself, in reference to its technology strategy.

In this new volatile era of markets just as important as knowing "what to invest in" is realising "when to invest in it". The market is either in a trend or cycle; and once you determine which it is and strive to be in sync with the time-frame, your chances of success are maximised. After all, the purpose of investing is to not only identify what has happened but to anticipate what is likely to occur.

Hence, in this first issue we look at the growing trend of Broadband adoption and explore the options for deploying Broadband access infrastructure and the tremendous opportunity that emanates from enabling high-speed, cost-effective delivery of new media content and services.

Broadband Revolution

Arguably we are witnessing a Broadband revolution, some say of the same magnitude as the industrial revolution of the 1800s. The changes we’re going to see over the next decade will principally come from the broadband-connected home. We’ll see bandwidth increasing a thousand fold from voice band 56-Kbps modems to tens of megabits per second through DSL, cable modems, and broadband wireless technologies.

Broadband is considered key to enhancing the competitiveness of an economy and sustaining economic growth. Many governments around the world are becoming more committed than ever to extending broadband networks to their citizens.

Governments are also realising that telecommunications is infrastructure, much like building bridges, roads, or airports. Furthermore, foreign investment and the corresponding improvement in the general economic welfare are seen to go to countries where infrastructure is the strongest.

Take South Korea, for example, where the government clearly articulated the vision for modernising the country’s infrastructure. Broadband Internet access was placed as the cornerstone of a national technology initiative to help revive a devastated economy. It has created true broadband competition, which in turn has helped prices fall and speeds rise. What’s more, 16 percent of South Korea’s GDP originates in the ICT industries.

South Korea leads the world in the commercial application of broadband Internet technologies, with the highest number of broadband connections per capita. The country’s impressive broadband progress began in the late 1990s when the government issued a policy mandating that operators provide a 2Mbps connection for every citizen. This broadband policy, combined with a competitive market and a densely populated and computer literate society, laid the foundations for Korea.

South Korea has the highest broadband penetration market in the world, with over 80% of all homes having Internet access to the network via a broadband connection.

Thanks to this well-developed broadband infrastructure, the spread of the Internet and Internet-based e-commerce are rapidly changing the paradigm for economic activities and enterprises. Business-to-business and Business-to-Government transactions make up the bulk of the total at 155.71 trillion won (~$150B).

The online gaming and entertainment Industry has been extremely successful. South Koreans use their broadband for entertainment services such as video-on-demand, where there is enough capacity for people to download movies and so freeing themselves from the tyranny of scheduled TV programming.

When compared to other countries, broadband in Australia got off to a painfully slow start, with household penetration of broadband services one of the poorest in the OECD. The picture was even worse when non-OECD countries were included. Despite the fact that up to 7 million homes, or 90 per cent of the population, are DSL enabled, there were only about 423,600 subscribers at the end of March 2003 (ACCC, 2003), about 6% of the total households.

But recently, Australia has shown signs of turning this trend around by increasing broadband penetration from 2% in 2002 to now around 10%. New figures released by the Australian Competition and Consumer Commission (ACCC) show that the number of broadband subscribers in Australia continues to grow strongly, reaching 2.5 million subscribers as of end of December 2005.

Broadband is growing faster than other technologies and without a killer application

When one looks at the take up of other revolutionary inventions - the car, the phone, the TV, the Internet - the initial adoption rate for broadband surpasses them all.

So why has broadband suddenly taken off? Broadband, using whatever enabling technology, is an empowering phenomenon. New broadband technologies have been developed which are cheaper to rollout; and because of this, broadband has suddenly become accessible to smaller-to-medium enterprises (SME) and consumers. For SMEs, this means having access to the sort of communications facilities that large businesses have taken for granted for years

Studies show that Internet usage increases with the number of broadband users. Users with broadband access visit the World Wide Web 56% more than users with dial-up modems and generate more than 76% more page views.

Broadband is, however, more than a fast connection to the Internet. For example, broadband can have a dramatic impact upon a business - emails from customers are received instantly; businesses can make use of online training packages; they can use the internet to search for information about competitors; get financial information, market reports, industry news, government regulations etc.

Rising broadband adoption, and the cost efficiencies and flexibility of IP, have led all types of new service providers to offer voice - which was previously the sole domain of incumbents like Telstra - in the form of Voice over Broadband or more commonly known as Voice over IP (VoIP). More about this later!

Wiring up the broadband last mile

The investment battleground in telecommunications in recent years has been one to uncork the bottleneck in the access network and subsequently enable the delivery of broadband services. Broadband Access is the first innings of a long-term deployment game where the stakes are high, and returns still uncertain.

Broadband, technically speaking, is simply a high-speed, always on, bidirectional data connection to the telecom network. While the access network, sometimes referred to as the "local loop" or "last mile", is that part of the telecommunications network that stretches out from the customer`s premises to a Service Provider’s local exchange, or point of presence (POP). Today the access network is typically owned by the incumbent telecom operator Telstra (TLS) and is essentially copper-based and was designed and built to deliver telephony services.

Studies show the investment level for deploying a new broadband access network is comparable to that associated with the establishment of the present narrowband access network infrastructure for telephony services. In justifying this investment, an operator must first predict the uncertain nature of the enhanced services of the future broadband network, and ensure that upgrades are associated with services that generate revenue streams whilst simultaneously enabling an acceptable return on investment. This is not a task in which one can easily guarantee success.

The recent revelations in the press about Telstra’s Strategic review provide some illuminating reading on the subject. Telstra recently launched an aggressive plan to reduce costs and drastically simplify its network, which if implemented will effectively lock competitors out of its copper access network. Telstra is planning to spend $10 billion to upgrade its networks by installing fibre optic cable to street-side cabinets which then connect to customers’ houses directly using less than 1.5Km of existing copper phone line. This simplified fibre-to-the-node (FTTN) strategy will replace the ailing multi-pair copper bundles and associated impairments that reticulate through the streets and terminate back at Telstra’s exchanges – a source of huge operational and maintenance expense.

FTTN architectures represent the most cost effective solution for deploying a Multi Service Broadband Access Network with costs ranging from approximately $800 to $1500 per connected user. They benefit from the extensive re-use of the existing copper network and use of xDSL technologies over shorter distances. Moreover, they require significantly less capital than any of the other options since many of the cabinets and nodes - RIMs in Telstra’s case - are already installed.

The deployment of Telstra’s broadband access infrastructure will have a profound impact on other service provider business models, especially those reliant on access to Telstra’s bundled copper loop for providing broadband access. Obviously, if Telstra adopts a strategy that terminates copper loops at street cabinets - rather than back at exchanges where competitors co-located DSLAM equipment resides – these competitors will be left stranded. They will be left with no option but to install their own street-side cabinets – a very expensive exercise - or attempt to co-locate equipment at Telstra’s cabinets and negotiate to gain access to Telstra’s backhaul fibre link. It goes without saying that Telstra is vehemently resisting the latter scenario, to the point where Telstra is not prepared to engage and fund the large capital works for national, wholesale Broadband Access. This issue has been the subject of ministerial discussion, reaching the stage where Telstra may be forced (legislated) to provide equal access to its competitors. Perhaps now you can see what the recent war of words between Telstra, its competitors and the ACCC is all about.

Copper may be buried but it’s not dead

Civil works account for the major costs in rolling out a wireline infrastructure and remain the major impediment to the delivery of broadband services to the home as they account for up to 90% of the total capital outlay. New technologies such as DSL (Digital Subscriber Line) have enabled the incumbent to leverage the copper plant already installed and to deliver broadband services while fending off new entrants seeking to compete with them in the access network.

The secret of DSL is that it takes advantage of the copper wire’s ability to support higher frequencies, which enables these twisted copper pairs to carry multi-megabits of data per second. The current bandwidth limitations imposed on the copper pairs are the result of filters placed at the local exchange to economically band-limit voice. By removing these filters, copper can actually support much higher frequencies.

By reducing the distance of the copper wires and deploying new sophisticated digital signal processing techniques, very high bandwidths, enough to support broadcast quality video, can be transported over those copper "loops". DSL effectively breathes new life into the copper "last mile" – without digging up the streets!

ADSL (Asymmetric Digital Subscriber Line) is the flavour of DSL most people are familiar with, and is targeted primarily at domestic users. It takes its name from the comparatively high bandwidth in one direction (Downstream) from the network, with a lower bandwidth in the opposite direction (Upstream) from the user – the speeds are different or "asymmetric".

ADSL uses a single copper pair (usually the existing phone line) for transmission and has the ability to operate at downstream speeds of up to 6 Mbps (enough to support MPEG-2 compressed digital video) and upstream speeds of up to 1.5 Mbps. These data rates are for loops which are no more than, say, 2.5km from the local exchange. At distances further than this the data rate drops. In Australia, the average copper loop length to the exchange is around 2.2km, and connects to around 7 million homes.

A new family of ADSL standards called "ADSL2" adds features and functionality that boost ADSL’s performance, improves interoperability, and supports new applications, services and deployment scenarios. ADSL2 achieves downstream and upstream data rates of about 12 Mbps and 1 Mbps respectively, depending on loop length and other factors. Another forthcoming standard, ADSL2+, more than doubles the downstream data rate of ADSL to 25 Mbps. ADSL2 addresses the growing demand for bandwidth to support services such as video. Forthcoming ADSL2 and ADSL2+ equipment will interoperate with existing ADSL equipment, allowing service providers to roll out new high-speed services while gradually upgrading their legacy infrastructure.

A number of Broadband service providers are already offering ADSL2+ today including Adam Internet, Agile Communications, amnet broadband and voice, connect better and iiNet, while Optus, Primus and SP Telemedia Limited have all announced plans to rollout the technology. Telstra also has announced it will upgrade its ADSL exchange hardware to the ADSL2+ standard by 2006.

Then there is VDSL (Very-high-bit-rate DSL); the next step and highest manifestation of DSL that bridges the copper infrastructure of today with the potentially all-fibre infrastructure of the distant future. This is a Fibre to the Curb architecture, where the bandwidth delivered to the customer depends on the length of the copper loop. The data rates range from 26 Mbps for distances around 1km and up to 52Mbps for short range VDSL (< 500m). A new standard, ratified in May 2005, referred to as VDSL 2, enables symmetrical data rates (i.e. both upstream and downstream) of up to 100 Mbps over a distance of 350m.

Network Operator TransACT, spun-off from ACTEW Corporation - the energy and water utility in ACT, has built and manages a VDSL network that offers broadband services to over 95,000 homes in Canberra and environs. The TransAct network is based on a FTTC (Fibre to the Curb) architecture in which high capacity optical fibres are taken "deep" into the neighbourhood via the overhead power poles. The "drop" or last segment (up to 300 metres) of the connection to the subscriber consists of a pair of copper wires (deployed and owned by Transact), which utilise VDSL technology to achieve 50 Mbps downstream and 1.6 Mbps upstream.

As previously stated, Telstra, the only other network operator with its own copper pairs to subscribers’ homes, is likely to pursue an evolutionary path for a future broadband network based on a combination of fibre in the loop and copper for the drop segment of around 1.5Km, utilising both ADSL 2+ and perhaps VDSL. The strategy referred to as Fibre to the Node (FTTN) will be installed in five central cities covering 20,000 nodes and four million homes.

New entrants, on the other hand, whilst not being encumbered by any legacy network, have a starting position with no existing access infrastructure. They have three basic alternatives to providing access: Rental of the existing access network, building their own (wireline) access network or building their own (wireless) access network – the question is: "Which one?"

Rental of the access network

The access network or local loop has long been regarded as a natural monopoly for the incumbent telecommunication company like Telstra. The unique thing about Telstra’s access network strategy, and worth bearing in mind is that, unlike other incumbents around the world (who may have a copper plant that constitutes an access network), Telstra also owns a second access network, namely its HFC (Hybrid Fibre Coax) cable network that it also uses to deliver broadband services.

Unbundling the Local Loop (ULL) refers to the process of allowing new entrants to gain access to either the twisted copper pairs, a portion of the digital bitstream, or a portion of the frequency spectrum in a telephone local loop installed and owned by the incumbent (i.e. Telstra). ULL enables potential new entrants to test the market first before they build their own network, and competition in the local loop was expected to stimulate broadband penetration and the development of e-commerce. Since Telstra controls the majority of telephone lines into homes and DSL only requires a modem at each end of the copper wire to operate, unbundling this local loop was a way to encourage competition in the last mile, and accelerate the broadband rollout. But is it the case?

It comes as no coincidence that the more competitive markets are those in which competitors have built their own networks, rather than just reselling capacity on Telstra lines. For example, corporate and business customers have benefited to a much greater extent than residential customers by virtue of infrastructure rollout by new players. Similarly, the development of competing mobile networks has created a structure for more sustainable competition in this area of telecommunications.

The fact remains however that today the telecom sector in Australia is dominated by one player -Telstra - by virtue of it being the sole provider of the local access network connecting virtually every home and business in this country. Telstra not only owns the local loop, it is the dominant mobile operator and the largest ISP in the country. Telstra’s control of the wholesale inputs for the entire telecommunications market coupled with the fact it then competes in retail markets makes it a formidable force and creates many regulatory challenges. Telstra’s structure gives it the incentive and means to discriminate against those seeking access to its essential, bottleneck infrastructure.

This monopoly means that even in the more competitive markets, those seeking to compete with Telstra often must continue to rely on Telstra for some of form of access to its network. This leaves those seeking to compete with Telstra with just two alternatives - either reselling its services or infrastructure; or bypassing some of, or its entire network by investing in competing infrastructure assets.

Building your own wireline Broadband Access network

In general, the analyses from various research conducted in this area confirm the cost of increased bandwidth in the access network for interactive broadband delivery is high, independent of the operator’s existing network situation, area type and broadband technology choice. Civil works still account for the major costs in rolling out a wireline infrastructure and remains the major impediment to the delivery of broadband services to the home.

Comparing the rental case and the own network build, one of the main differences is the timing of the investments. When building his own network the new entrant operator will have heavy investments in the first years before any customers are connected. In the rental case the investments in the first years are much less, but the rental cost will be a continuous burden to the business of the new operator. So what are the technology options?

Fibre to the Home (FTTH)

Fibre technology is the predominant technology in the backbone of the telecom network and into the metropolitan area to wire up the enterprise and is slowly snaking its way to the access network.

FTTH is the ultimate technology "end game", providing more bandwidth than one could ever dream of and the most "future-proof" solution. However, the capital investment of introducing and all-fibre solution is significant and network operators are not prepared to commit billions of dollars for an uncertain return.

Therefore, most fibre builds tend to be new builds (new industrial or residential complexes), not overbuilds. If you’re already supplying most of the communications with copper, pulling out that copper and replacing it with fibre costs a lot of money. For instance, if we were to re-wire Australia with fibre it would take 50 years!

In terms of FTTH deployment, it is assumed this includes digging trenches in asphalt pavings/tarmac roads, digging trenches in areas with tarmac-free surfaces and the suspension of aerial cables along cable poles, with the latter being less expensive. By far the largest potential cost saving is in relation to being able to deploy overhead (aerial) networks, rather than being forced on environmental grounds into underground deployment.

Typically, the average civil works costs per metre are based on the assumed deployment of cables in the respective areas, and the cost ranges between $100-350 per metre in civil works; whereas the actual fibre cable cost itself is negligible. In some localities, such as Lane Cove in Sydney, civil works costs can rise to $1800 per metre.

A general rule of thumb is that, 90% of the costs of fibre optic deployment are in the civil works, with the remaining 10% in the equipment.

Once you install the fibre, you then have to illuminate it and turn it into usable bandwidth. For every $1 used to dig up a street and install fibre, it costs another $2 to actually make that fibre usable. Despite the huge investments in telecom infrastructure over the years, only 5% of the world’s optical fibres are actually lit while the remainder lay in ducts as dark fibre.

Operators first have to successfully navigate the maze of conduits and wall cavities that exist within the home and pull the fragile fibre through to its final destination. One this costly exercise is completed; it requires termination by an Optical-electronic Networking Unit (ONU). The costly ONU (optical modem if you like) contain the lasers and opto-electrical conversion devices required at each home to translate optical signals transported down the fibre into electrical signals that our computers and set top boxes can understand. The economic viability of this scenario might improve as soon as there is scale and cost reductions in opto-electronic components, and when the replacement of the copper infrastructure is warranted.

There are FTTH (sometimes referred to as Fibre-to-the-Premises) deployments around the world using a variety of low cost architectures, such as Passive Optical Networks (PON), which use inexpensive passive optical components to reduce equipment and deployment costs. But the harsh reality is that it is the civil works costs which impede the widespread deployment of FTTH.

One needs to be careful when comparing FTTH deployments one reads about in other countries to the unique demographic and technical considerations for deployment in Australia. It is obvious that areas with different density of living units have significantly different cost structures to ours.

FastWeb, an often-cited, alternative carrier with Europe’s largest FTTH network, is mainly deployed in Milan, where 90% of people live in apartment buildings. FastWeb is owned by e.Biscom, who in turn owns 33% of Metroweb; a dark fibre provider with over 600 km of installed fibre cables in ducts around Milan and surrounding areas. The fibre network leverages existing Rights of Way (ROW), and underground ducts of municipal utility AEM, to dramatically reduce the rollout costs by 60%. Pirelli was commissioned to provide the fibre optic cable and to build a cheap ONU (at a set price point) to terminate the fibre at the users’ premises. Even so, it recently adopted a DSL strategy to achieve its 2006 goal of reaching all cities in Italy with 40 000 - 50 000 residents.

A similar situation exists in Seoul, Korea, where most of the 10 million inhabitants live in apartments. The result of this situation has been the willingness on the part of operators to invest in infrastructure and to be innovative, providing the basis for a booming telecommunications market. In many cases Fibre is installed in the basement of the building and terminated by an ONU, the cost of which is shared amongst the various tenancies. The service is then reticulated as DSL throughout the building using existing copper-based cables.

FTTB (Fibre to the Building) architectures are a compromise solution that pushes the fibre frontier as close as possible to the end user, whilst making best use of the existing copper infrastructure. Moreover, they require significantly less capital than any of the other options. In Sweden, most apartment buildings provide broadband access as a service along with electricity, gas water and heating. Over the past six years, Bredbandsbolaget has signed exclusive agreements with housing corporations to deploy Ethernet-based FTTB networks.

In general, the analyses from research confirm that the cost of increased bandwidth in the access network for interactive broadband delivery is high independent of the operator’s existing network situation, area type and broadband technology choice. Both Telecom operators such as (Telstra), cable operators (such as Optus) and new entrant operators are likely to face broadband upgrade investment levels (per connected user) similar to, or higher than, the overall costs of establishing the existing customer access network. The reason for this is simply because of the lack of duct availability and high costs of civil works to trench and lay cables.

It will only be through local and regional government participation and by leveraging the extensive rights of way of our national assets (ducts, sewers, poles, railway lines, etc) that the dream of deploying FTTH networks will ever be realised. So, it is generally accepted that it will be a hybrid fibre/copper based broadband infrastructure for some time.

Aerial Deployment significantly reduces rollout costs

If we can move the fibre frontier through leveraging Rights of Way (ROW) (Poles, Ducts, sewers, etc) to, say, within 500 metres or so of the customer premises, then a range of metallic wireline technology options can be used for the drop (the last few hundred metres) segment between the pole and the home or office. Two such metallic wireline technologies that leverage overhead electricity poles to reduce the costs of deployment are HFC cable and Powerline communications.

Coaxial cable has several different benefits over DSL that have allowed it to flourish in economies with developed cable television networks. Cable networks were originally designed for one-way video transmission. The US, for instance, has had unidirectional CableTV networks for 30 years. If you convert this plant into a bi-directional one you have a broadband access network.

Hybrid Fibre Coax (HFC) refers to any configuration of Fibre Optic and Coaxial cable that is used to distribute local broadband communications such as Video, Data and Voice. Provided the cable plant already exists, HFC is one of the most cost effective, flexible distribution technologies available today for handling broadband information requirements.

Currently, the HFC networks in Australia carry the video signals in analogue format on both the fibre and coaxial portions of the network. However, there is nothing inherent in the design of the network that prevents signals from being carried in a digital format. The capacity of the cable system will increase enormously if digital signals are transmitted instead of analogue ones. Moreover, digital signals are immune to noise and more easily managed. There is still a lot of unused bandwidth available in the cable, so when upstream capacity becomes a bottleneck more channels can be readily added.

Studies show that HFC offers slightly cheaper infrastructure costs at high levels of penetration but the investment level of cable operator upgrades is high in the initial year, mainly due to basic service and cable infrastructure costs. At high penetration levels it becomes cheaper than all the other wire-line alternatives, provided the cable plant was there in the first place.

Broadband Power Line Communications (BPL)

Electrical utility networks are designed in such a way as to provide distribution of electricity to a maximum number of customer premises with the least cost of equipment. The networks were initially laid out as a "star" configuration with all paths leading away from the electricity generation point. Redundancy is built into the network by cross-connecting the pathways to form a "grid".

The premise on which Powerline communications is based, namely to leverage the infrastructure used to deliver electrical power to the home for broadband telecommunications services, seems plausible. The basic principle of PowerLine Communications (PLC) is relatively straightforward. It involves installing modems on low-voltage electricity distribution networks and creating a data path for signals that is separate from the electricity power supply. This allows both electricity and data services to be transmitted down the power cable using a digital medium. In principle it is similar to DSL type technologies. The physical topology is dictated by the physical design of the electricity network and directly influences the nature of the data network that must be overlaid on this infrastructure and implemented using PLC.

The fibre transmission network is brought (usually using aerial deployment) to a terminal point, which is typically located at the zone (secondary or intermediate) substation. Signals are carried along the medium-voltage segments of the network to couplers and modems connected at the local transformer. Couplers are used to bypass the local transformer and carry the PLC signal from the medium-voltage to the low-voltage part of the network. Depending on the distance and network configuration, modems may be used to regenerate signals in association with couplers.

The problem with PLC has always been the small spectral window that exists in which to modulate data signals without being severely attenuated. Various modulation techniques have been used with disappointing data rates and performance and the technology has had numerous false starts, with a number of network operators deploying it only to fail due to poor take-up and performance.

Recent advances in the research, development and application of digital signal processing (DSP) has enabled PLC technology to be revitalised and improved. This new form of PLC known as BPL (Broadband Power line Communications) is capable of delivering much larger bandwidths.

This newer architectural configuration requires deploying fibre (via aerial deployment) deeper and deeper towards the customer, thus reducing the distance that the PLC signal is carried on the electrical copper power cables. By reducing the distance to the target homes to less than 500m broadband speeds of 50Mbps (30 Mbps downstream and 20 Mbps upstream) can be shared amongst households.

Aurora Energy recently announced trials of a BPL service to be rolled out in selected suburbs in Hobart. Aurora’s subsidiary, TasTel, will be using equipment supplied by Mitsubishi Electric and will be offering product packages with speeds up to 12Mbps/4Mbps including integrated VoIP services. Ironically, this network is a by-product of the decision to upgrade Aurora’s Supervisory Control and Data Acquisition (SCADA) system, thereby enabling smart monitoring and management of the power grid.

Building your own wireless Broadband Access network

Australia is the approximate size of the United States, yet Australia has less than one-tenth of the population. Australia is also the least densely populated continent (except Antarctica), and is also the most urbanized--80% of its population resides in the narrow coastal strip from Brisbane to Adelaide. Australia’s geography infers that not everybody will be able to obtain a wireline broadband connection and that some form of "wireless" access will play a prominent role in this country’s broadband landscape.

Until recently, wireless technologies could not match the combination of cost, performance, quality and reliability characterized by wireline networks. The global success of the mobile phone, and the recent evolution and successful deployment of Wi-Fi® worldwide, has fuelled the need for Broadband Wireless Access systems that go beyond the coverage footprint of a few hundred metres, to provide last mile broadband access directly into homes.

Wireless systems are desirable because, by their very nature, they can be designed quickly, are much cheaper than wireline technologies to install and operate and can be up and running in a fraction of the time. The relatively low capital intensity of wireless communications makes it ideally suited to connect chronically underserved, rural communities in Australia.

Wireline technologies such as copper or fibre require individual rights-of-way to each building, as well as the physical placement of the transport media. If the physical cable or fibre is not already in the ground, then large civil works costs ensue. Wireless systems can be deployed rapidly with minimal disruption to the community and the environment. Indeed, wireless technology has been called the "dark horse" of the broadband access race.

Historically, Broadband wireless radio signals have been used in clear, unobstructed line-of-sight scenarios with high confidence for many years (commonly called "microwave bearers"). Engineered properly, these links can achieve wireline-like quality and reliability.

Today, a new range of Non Line of Sight (NLOS) Broadband wireless access systems are emerging as a cost-effective alternative to broadband access that offers many deployment advantages over wireline. NLOS operation allows the propagated radio link to retain a high degree of performance and reliability, even though the visual path is partially blocked. It is one of the technological breakthroughs which set it apart from previous broadband wireless systems.

WiMAX, the marketing name for a suite of metro-wide NLOS broadband wireless air-interface standards that hope to provide broadband connectivity for the last mile, has emerged as the frontrunner. Backed by a host of equipment vendors including Nokia and chip maker Intel, it promises to deliver wireline equivalent broadband services in fixed, portable and mobile environments.

But as with any technology, WiMAX is not a foregone conclusion. It will have to prove itself as a more cost-effective, more robust, seamlessly interoperable, and generally better alternative to technologies already in the market - 3G,WiFi, EVDO, IPWireless, Mobile-Fi and iburst to name but a few.

Broadband Wireless access systems are already available today in Australia. Unwired Group Limited (ASX:UNW) was launched onto the Australian marketplace trumpeting the benefits of broadband wireless access to serve those individuals who live in areas outside the footprint of wireline DSL services. Unwired offers nomadic broadband internet access that allows users the freedom to use their wireless modem attached to any notebook computer anywhere within the coverage area -- within the home, at the office, or at the local café.

Other Broadband Wireless companies include Australian Private Networks, Big Air, Personal Broadband Australia and SkyNet Global (now owned by Telstra) to name a few.

The appeal of wireless is Mobility

If you think in terms of history and how we, as a society, communicate, for the most part it has been tethered (at the end of a pair of copper wires). One of the main appeals of wireless communications is mobility. Mobility makes it easier for people to communicate for business or pleasure without being tethered to a wall, a terminal, or even a specific geographic location. Hunters of the killer application in telecommunications perhaps fail to see that mobility itself is the killer app.

Mobile wireless communications has evolved from a niche business in the last decade to emerge as one of the largest and most important industries in the world. To appreciate the growth in mobile communications, it is worth noting that in 1990 there were only 10 million mobile subscribers worldwide. Today the number of mobile devices is 1.8 billion and is expected to reach 2.3 billion by the end of this decade.

In 1995 Australia had the 4th highest rate of cellular mobile phone penetration among OECD countries (as measured by mobile phone subscribers per unit of population) with only Sweden, Norway and Finland showing higher rates of penetration. According to the Australian Mobile Telecommunications Association (AMTA) there are a now an estimated 16.5 million mobile phone subscribers (approximately 85 percent penetration rate) in Australia, which exceeds the average mobile penetration rate (83 percent) of Europe.

Perhaps, the relatively underdeveloped nature of Australia’s wireline network (outside capital cities) and the relative youthfulness of the Australian population profile may be contributing factors to why Australians have taken to mobile telephony with such enthusiasm. Or perhaps it’s simply the ability to allow people to originate and receive calls and access subscribed telecommunications services on a pocket-sized mobile phone in any location that has had such a profound impact.

The Internet, too, has emerged as one of the technical and business success stories of the 20th century, and a major driving force behind new developments in the area of telecommunications networks. As such, it is becoming the preferred medium for the delivery of new media content and services.

The world is evolving from one in which almost all access to the Internet comes via the PC to one in which small mobile computing/communications devices (notebooks, smartphones, PDAs, etc) are expected to make up a growing share of the end-user equipment. It therefore seems almost inevitable that the ubiquitous access point to the telecom network, and the Internet for that matter, may not be the PC but some form of wireless appliance.

However, delivering high bandwidths with wireless communications is more difficult to implement than wired communication, mainly because of the interaction with the surrounding environment and its effect on the message signal. Problems caused by the environment include blocked signal paths, echoes and noise. Also, as mobile users change location they will use different network access points and addresses. Hence, mobile wireless connections typically have much lower bandwidths because they are trying to address the issue of mobility. Such is the nature of wireless that there will inevitably be a trade-off between bandwidth and mobility.

To address the unique demands posed by broadband mobility and to bring about further increases in range and throughput as well as meet user demands for flexibility, new air interfaces, modulation techniques, smart antenna systems, and digital signal processing devices had to be designed. A number of local operators have approached the challenge of providing connectivity to the mobile internet user, whose appetites are for much higher data rates, in unique and varied ways.

In March 2004, Personal Broadband Australia launched a commercial long-range wireless broadband service in Sydney using proprietary technology developed by Arraycomm, called iBurst. Arraycomm is headed by Martin Cooper, the father of mobile telephony, so he knows something about the vagaries of wireless.

When wireless signals travel from one location to another, they are subjected to impairments, reflections, noise, and multiple paths between transmitter and receiver. One of the unique features of iBurst is the use of Arraycomm’s proprietary "smart" antennas that excel at extracting faint wireless signals from a cacophony of noise, reflections and ground clutter, offering the system significant advantages in spectral efficiency and performance.

iBurst is designed from the outset with the nomadic, mobile internet user in mind, supporting peak data rates of (1 Mbps downlink and 345 kbps uplink) and making it comparable to that of DSL. The iBurst service is re-sold by a number of local companies including Chili, Big Air, and Pacific Internet. Recently Optus announced it had entered into a partnership with Personal Broadband Australia to provide mobile broadband internet access using iBurst to corporate customers.

Another local company IQ Networks in Townsville, Queensland, has seized upon the opportunity presented by a relatively new wireless technology based on the 3G evolution of the GSM network. This technology is sold under the name of "IP Wireless" and is being offered to both private users and SMEs who wish to gain fixed, mobile, and/or vehicular high speed access to the internet.

The services available are quite competitive; the company provides the retail customer with plans of maximum data transfer speeds up to 768Kbps whilst stationary, at a range of up to 6 kms. Of course, these speeds slow down if one requires mobility. The technology is capable of delivering data at rates of up to 16 Mbps (wholesale contract) and may also be used for "backhaul" of local signals (such as say a WiFi "hotspot").

The company is also considering enhancing the technology by implementing HSDPA (High Speed Downlink Packet Access), a higher speed radio-air-interface which promises to raise the downlink speed to 3 Mbps.

By way of answering to its would-be competitors, the recent re-launch of Telstra’s BigPond Wireless Broadband service is an interesting event. It comes at a time when the sale of Telstra is again on the minds, and lips, of our politicians. It could be inferred that this is an opportunistic play by Telstra to convince the government, and the rural electorate, that Telstra can provide "Broadband to the Bush" whilst fulfilling its Universal Services Obligation.

The product being offered by Telstra is based on an extension and overlay to its existing CDMA (Code Division Multiple Access) mobile telephony network and is known as 1xEV-DO (EV-DO or Evolution Data Only). EVDO is a wireless broadband data protocol being adopted by many CDMA mobile operators in countries such as Brazil, Japan, Korea, Israel, the United States, Australia and Canada as part of the cdma2000 standard. Compared to networks employing GSM, 1xEV-DO can be significantly faster, providing download speeds of up to 2.4 Mbit/s.

Telstra’s Wireless Broadband (1xEV-DO) coverage is available in selected areas of Canberra, Sydney, Darwin, Adelaide, Hobart, Perth, Brisbane and Melbourne and some regional areas. Its product offering has capped the download speeds to a "broadband" speed of up to 512kbps. Of course actual user speeds will reflect the many vagaries of wireless connectivity and internet network loading. Unfortunately if you are outside the major coverage zones, the network drops you down to the CDMA1x speeds of 80-100kbps, with bursting up to 144kbps.

However, it’s also worth bearing in mind that Telstra announced recently it plans to replace the CDMA mobile network with a national 3G network based on W-CDMA. The reason cited by Telstra is to eliminate the ongoing complications of managing multiple mobile networks. Accordingly, the 900,000 users presently on the CDMA network, including those on EVDO, will have to replace their handsets !

The race to connect the broadband home

Broadband, in some form, will eventually be adopted by most households as websites become increasingly designed for broadband, e-mail attachments (e.g. image and music) grow large and new multimedia applications such as VoIP and IPTV become widely adopted. It’s an obvious market that will clearly happen.

The future broadband connected home will generate its own unique form of broadband demand through the development of "data intensive" home networks. It doesn’t matter how we connect the home; we’ll see some type of residential gateway in the home much like today’s office that has a broadband router connected to the Internet. The connected environment doesn’t necessarily have to be wired with localised wireless networking technologies playing a significant role, including new higher bit rate variants of WiFi® and emerging Ultra Wideband (UWB) wireless systems supporting imaging and multimedia.

Residential broadband users will soon demand higher data rates than currently provided by ADSL, probably in the range of 8-12 Mb/s. They will also reflect the demand for specific services such as IPTV that require more bandwidth.

Ironically, the first killer broadband application may be voice.

The Internet, as a creature of the computer and networking industry, grows as a function of applications enabled by the connectivity. What makes the Internet most attractive is that all future innovations are simply plugged in at the edge of the network. Some applications require more capacity and performance than others, but the beauty of the situation is that no one pays as a function of time and or geographical location. One of those new applications is voice, as VoIP.

VoIP is the two-way transmission of audio signals over a broadband IP network. When used in a private intranet or WAN, it is generally known as "Voice over IP," or "VoIP." When the transport is the public Internet or the Internet backbone from a major carrier, it is generally called "IP telephony" or "Internet telephony." However, the terms IP telephony, Internet telephony and VoIP are used interchangeably.

VoIP is the fastest growing telecommunications product in the market, with the capacity to replace the home and business fixed telephone lines. The appeal of VoIP is obvious and compelling, especially when it can be combined in a broadband package.

"It’s [VoIP] probably the most significant paradigm shift in the entire history of modern communications, since the invention of the telephone" said FCC Chairman Michael Powell at the World Economic Forum in Davos, Switzerland, in 2004

VoIP is a global phenomenon reaching maturity and being applied widely throughout the enterprise and on the verge of going mainstream. It can be "gate-wayed" or bridged into the Globally Switched Telephone Network in any country reached by the Internet.

Consider Skype, the Luxembourg-based, self-described global Internet telephony company which hit a milestone recently. In 12 months the number of people who have downloaded the company’s software - which lets users talk to other Skype users over the Internet for free - mushroomed from 13 million to 102 million, and the number of minutes served jumped from 2 billion to 7.6 billion. (If the download counter on the company’s Web site is to be believed, more than 21,000 people download the software every hour.)

Skype also enables users to call PSTN telephone subscribers in more than a hundred countries for .012 Euros per minute, or about 1.5 cents through a feature called SkypeOut. SkypeOut also shows how quickly a company can innovate when it leverages the open Internet data platform.

At the time of writing eBay Inc. (Nasdaq: EBAY) has acquired Skype Technologies SA, for approximately US$2.6 billion in a combination of up-front cash, eBay stock, plus potential performance-based considerations. Skype generated approximately US$7 million in revenue in 2004, and the company anticipates that it will generate an estimated US$60 million in revenue in 2005 and more than US$200 million in 2006.

In Australia, Engin Limited, (ASX:ENG) provides a retail broadband VoIP service offering whereby any telephone can be plugged into an engin box, which allows users to make high quality calls nationally and internationally over any broadband network. The beauty of the engine system is that you don’t have to switch on your PC to make or receive calls. This is identical to the approach of US based broadband phone system Vonage (of Vonage Holdings Corp., NJ, USA) which has been like the proverbial cat amongst the traditional RBOC (Regional Bell Operating Company) pigeons, boasting some 500,000 customers and growing at a rate of 60,000 customers per month.

Similarly, Freshtel Holdings Ltd (ASX:FRE) is another local company that develops and markets (VoIP) telephony products and allows telephone calls to be made simply and cost-effectively from a desk-top or Notebook computer connected to a broadband connection. Freshtel Holdings Ltd recently listed on the Australian Stock Exchange at a 25 per cent premium to its initial public offer price.

VoIP is the killer deployment that signals the start of the converged, next-generation networks that will completely transform the telecommunications landscape as we have known it.

In the past, telecommunications, information technology (IT) and broadcasting all operated independently in terms of the technology used, the information transmitted and the networks employed. Television, radio, telephones and computers were used for discrete purposes and the services provided were regulated via separate laws, usually by different regulators, and with no obvious need for coherence between these separate laws and regulators.

Technological convergence enables traditionally distinct voice and data transmissions to be transported over the same network and to use integrated consumer devices for purposes such as telephony, television or personal computing. The much touted "Triple Play" refers to the combined offering of Internet broadband access, voice telephony and television.

A key driver of triple play has been the mounting pressure on wireline telecom service providers to launch new revenue generating services in response to the increasing erosion in core fixed line voice business. We have seen this assertively confirmed by Telstra’s recent profit warning. The launch of triple-play services (integrated broadband, voice and video) has become a holy grail for the industry.

IPTV (Internet Protocol Television) refers to the delivery of content-rich services such as music, games, TV-related video, VOD and pay-TV services over the broadband connection using the same basic protocols that support the Internet. Important technology enhancements such as ADSL 2+ and MPEG-4 will allow marketers to move away from the mass market model and enable broadband networks to become the conduit for the delivery of highly targeted programming of broadcast quality video.

IPTV raises interactive television to a new level; it gives the viewer access not just to an event, but to the information related to it. The delivery of video content within an IP framework is what really separates IPTV from broadcast TV systems. In broadcast the "head end" transmits all content into one broadband pipe and the receiver selects from the available channels. By contrast, IPTV moves the content selection function upstream (to the server) where each receiver can select one content channel (stream) at a time, thus enabling almost an unlimited amount of content to be offered.

IPTV coupled with PVRs (Personal Video Recorder) to store video content will give consumers more control over the way they watch and interact with their television. The increasing usage of PVR’s seems to demonstrate a willingness by consumers to move towards an on-demand model for watching television.

Broadband is not a fad but becoming an essential means of communications

Broadband access is the first innings of a long term deployment game which creates tremendous new value for network operators, network subscribers and equipment, software, service and content providers.

But, building Broadband access infrastructure is a double edge sword, with the potential for tremendous opportunities and new revenue streams on the one hand and significantly more increases in capital expenditures on the other.

The broadband access marketplace is awash with different access technologies and product solutions. If money were not a consideration, we would simply lay fibre all the way to the home (or customer premises) and be done with it. But the capital investment of replacing the existing network and introducing an all fibre network in the near term is far too high.

Wireline technologies that leverage the existing copper plant will be the preferred and most cost-effective means of providing broadband access to most of the population. Higher speed DSL variants such as ADSL2+ will service providers to roll out enhanced higher-speed services while gradually upgrading their legacy infrastructure.

It seems unlikely that wireline technologies will be able to provide access to all the population. Many users will either be unable to obtain broadband services via conventional wireline technologies, because their location is outside the footprint, or other service alternatives will be cost prohibitive. Others will simply choose the freedom offered by mobile wireless to provide broadband access and deliver the expectations of the internet - now and wherever they want it. Which technology option will win? It doesn’t matter!

In the end, Broadband-over-whatever technology is the key enabler allowing the Internet to become a better medium for delivering new media content and services, and in so doing, change the way we work, live and play.