Category: telcos

One street, five networks – the madness of rethinking the NBN

One suburban street shows the madness of changing the NBN fibre to the premises policy.

In Technology Spectator today I write about how Australia is risking repeating the mistakes the colonies made with railway gauges on much more grand scale with telecommunications technologies.

With talk of re scoping the National Broadband Network project, despite being four years into a ten year undertaking, it’s important to understand just how foolish this would be an what a mess it will create.

To illustrate this, I’ve gone for a walk along a Sydney street on the Lower North Shore. This suburb is less than 5km from the city’s central business district.

The pillar at the end of the street

At the end of this typical suburban street is a little gray, well guarded but battered pillar. This box is important as it contains the connections to the local telephone network and its replacement will house the distribution equipment for a fibre network regardless of what type is installed.

 

Interestingly, just the presence of the pillar and the associated manholes nearby indicates there is already fibre in the neighbourhood, one aspect in the NBN debate that’s overlooked is that optical fibre is standard for telco backhaul and distribution networks.

The only reason fibre hasn’t already been rolled out to homes and businesses is the sunk cost of the copper cables. When it’s necessary to replace an entire copper system as in New York after Hurricane Sandy or in South Brisbane after the local phone exchange was sold, then fibre is what telcos will install as its cheaper to maintain.

Plain old telephone lines

Walking down the street we find the first example are those who are going to be stuck with the old copper network under a fibre to the node solution.

an old telephone pole shows the poor standard of Aussie comms

What’s notable about that pole is its shocking state – in itself it illustrates just how Australia’s telecommunications networks have been allowed to run down with the underinvestment of the last twenty years.

There’s a very chance the householders connected to those phone lines won’t be able to sustain a reliable  ADSL or FTTN connection because of the state of the wires.

Remember, this pole isn’t in some remote part of rural Australia, should you be brave enough to climb it you’d have a wonderful view of the Sydney Harbour Bridge, North Sydney and the city. Its state illustrates that underinvestment is just as much a problem in the suburbs as it is in the bush.

Using the Pay-TV network

One the alternatives being touted is using the Pay TV network cables – know as Hybre Fiber Coaxial, or HFC – to carry the broadband signal.

poor quality HFC Pay TV cable connection

Here’s an example of the Foxtel installations and the poor work quality stands out immediately. The connection on the left is notable for its rain catching properties which doesn’t bode well for what’s happening to the coax cables in the duct lurking beneath the footpath.

As an aside, the sort of poor quality workmanship found in the cable rollout is another risk to the NBN as it appears NBNCo is repeating Foxtel’s mistake of screwing the installation contractors into the ground on their rates. The result is really low quality work which won’t stand the test of time.

Making HFC even less useful is the fact that most Australian properties can’t connect to it.

In one of the best of examples of the drooling incompetence of Australia’s political ‘elite’, the 1990s Keating government managed to engineer a situation where the two cable companies rolled out their networks to the same places – 30% of the country got two networks while the rest received nothing.

The real problem though with the HFC network is that most Australians who can get it haven’t bothered – take up rates in the areas cable is available struggle to hit 50%. So an Abbot government would actually have to pay to connect households to a service they’ve never wanted.

Probably the cruellest part of all with the HFC proposal is the coax network itself is approaching the end of its life and most will be replaced with fibre within a decade. So we’re not saving a cent, just kicking costs down the road.

Apartment living

Even if you lived in that thirty percent of the country that did get pay-TV cable along their street, you were out of luck if you lived in an apartment or townhouse as few strata committees were interested in paying Foxtel install cables and Optus was never interested in MDUs – Multi Dwelling Units in telco-speak.

townhouses-connected-to-telco

A little way down the street from the houses photographed above are a group of town houses. Under the current NBN plans, this complex will get fibre. Under the coalition’s it will be stuck with copper.

The worst case scenario is a “fibre to the basement” solution where the fibre is run into the building’s distribution frame and then it’s up to the owners to make the connection using the existing copper phone lines.

In many cases it will never happen as strata managers and committees would keep putting it off, or they’d choose the lowest cost option which would exacerbate the poor work of the overworked NBN contractors.

Tower living

Next door to those townhouses is an eight story apartment block. These people risk being the biggest losers in the new telco environment.

apartment-tower

The problem for tower block dwellers is the low quality of the buildings and the lack of space for fibre telco risers. Under the fibre to the premises proposal some of these blocks are going to pose serious challenges to NBNCo.

Should the fibre to the basement proposal go ahead, many of the notoriously penny pinching owners corporations won’t complete the installation.

It’s highly likely that many Australian apartment dwellers are going to find themselves on wireless or LTE (mobile phone) connections for the foreseeable future as both the telco policies and poor building standards are going to deny them access to high speed fibre. This is going to have financial consequences for many landlords.

The risk for businesses

Most Australian businesses which occupy office buildings or industrial estates and they are going to be affected in the same way as apartment dwellers. The solution proposed by the coalition is that they should pay for their own fibre connections. Some will, many won’t and we’ll end up with another set of connections in our commercial districts.

One street, five networks

So just on one suburban street we could have people connecting through the old copper network, the HFC pay TV network, fibre to the basement, wireless and direct fibre for those who can afford it.

This is madness.

What’s even greater madness is that we’re four years into the National Broadband Network project and we’re talking about changing the scope for what’s been billed as one of the biggest infrastructure projects in Australian history.

Praying the luck continues

The Technology Spectator starts off with a comparison to the railway gauge madness of the 1850s. There’s an interesting parallel today.

Two weeks ago, the Australian Financial Review reported that millions had been spent on lawyers and consultant fees on Sydney’s North Western railway yet no work has been done.

On the same day, Business Insider published a story on the extensions to New York’s Long Island Railroad.

Around the world governments from New York to Nairobi are getting on with building infrastructure. In the meantime Australia struggles with building tram lines.

When we do decide to build a major project we get four years into it and decide to change our minds.

The nation dodged a bullet despite having made bad choices with roads and railways in the nineteenth and twentieth Centuries. Australia prospered despite those poor decisions.

If we can’t get telecommunications right then we better hope the luck continues through the 21st Century.

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ABC Nightlife February 2013

For February’s ABC Nightlife segment Tony Delroy and I are looking at software prices, the new breed of smartphones for seniors and the future of the telco industry

Paul Wallbank joins Tony Delroy on ABC Nightife across Australia to discuss how technology affects your business and life. For February 2013 we’ll be looking at the software rip-off, smartphones for seniors and Telstra’s roadmap for the mobile economy.

The show will be available on all ABC Local stations and streamed online through the Nightlife website.

Some of the topics we’ll discuss include the following;

We’d love to hear your views so join the conversation with your on-air questions, ideas or comments; phone in on the night on 1300 800 222 within Australia or +61 2 8333 1000 from outside Australia.

Tune in on your local ABC radio station or listen online at www.abc.net.au/nightlife.

You can SMS Nightlife’s talkback on 19922702, or through twitter to @paulwallbank using the #abcnightlife hashtag or visit the Nightlife Facebook page.

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2013 – the year of the incumbents

Deloitte consulting’s technology, media and telecommunications predictions for 2013 sees smartphones, tablet computers and televisions causing a data crunch.

Bigger, quicker and more congested are the predictions from consulting firm Deloitte’s 2013 Technology, Media and Telecommunications survey.

In Sydney last Friday, the Australian aspects of the report were discussed by Clare Harding and Stuart Johnston, both partners in Deloitte’s Technology, Media and Telecommunications practice.

Most of the predictions tie into global trends, with the main exception being the National Broadband network which Stuart sees as addressing some of the bandwidth problems that telecommunication companies are going to struggle with in 2013.

Technology predictions

For the technology industry, Deloitte sees 2013 as being a consolidation of existing trends with the trend away from passwords continuing, crowdfunding  growing, conflict over BYOD policies and enterprise social networks finding their niches.

Some technologies are not dead; Deloitte sees the the PC retaining its place in the home and office, with over 80% of internet traffic and 70% of time still being consumed on desktop and laptop computers.

Deloitte also sees gesture based interfaces struggling as users stick with the mouse, keyboard and touchscreen.

Media predictions

Like 3D TV two years ago, the push from vendors is now onto smart TVs and high definition 4K televisions. As with 3DTV, much of the market share of smart and hard definition TVs is going to be because television manufacturers will include these features in base models.

Deloitte’s consultants see 2013 as one where “over the top” services (OTT) like Fetch TV and those provided by incumbents delivered start to get traction on smart TVs with 2% of industry revenues coming from these platforms.

Catch up TV is the main driver of the over the top services with 75% of traffic being around viewers watching previously broadcast content. This will see OTT services firmly become part of the incumbent broadcasters’ suite of services.

The bad news for some incumbents is the increase in ‘cord cutters’ as consumers move from pay-TV services to internet based content.

Smartphone and tablet computer adoption which is expected to treble will be a driver of OTT adoption as viewers move to ‘dual screen’ consumption, the connections required to deliver these services will put further load on already strained telco infrastructure which is going to see prices rise as providers respond to shortages.

Telecommunications predictions

The telecommunications industry is probably seeing the greatest disruption in 2013. With smartphones dominating the market world wide as price points collapse.

One of the big product lines pushed at this year’s CES was the “phablet” – while the Deloitte consultants find it interesting hey don’t seem convinced that the bigger form factors will displace the standard 5″ screen size during 2013.

As a consequence of the smartphone explosion is that apps will become more pervasive and telcos will try and build in their own walled gardens with All You Can App to lock customers onto their services.

With smartphones moving down market, largely because of the cost benefits for manufacturers, Deloitte also predicts many new users won’t access data plans given they’ll use the devices as sophisticated ‘feature phones’.

Data usage will continue to grow, particularly with the adoption of LTE/4G networks, although much of the growth will still be on the older 2 and 3G networks as lower income users choose plans which don’t require high speed data.

The looming data crunch

There is a cost to booming data usage and that’s the looming shortage of bandwidth, Deloitte sees this as getting far worse before it gets better.

With bandwidth becoming crowded, prices are expected to rise. In the United States, the “all you can eat” nature of internet plans is being replaced with “pay as you go” while in Australia data plans are becoming stingier and per unit costs are rising.

The London Olympics were cited as an example of how the shortages are appearing – while the Olympic site itself was fine, outside events like the long distance cycle races strained infrastructure along the route. We can expect this to become common as smartphones push base station capacity.

Where to in 2013

Deloitte’s view of where the telecom, technology and media industries are heading in 2013 is that incumbents will take advantage of their market positions as technology runs ahead of available bandwidth.

In Australia, governments might be disappointed as telcos internationally aren’t interested in bidding huge amounts for bandwidth. As Stuart Johnston says “globally what we’re seeing is that carriers are not as willing to spend. It’s not the cash cow that governments are expecting.”

For government and consumers, we’re going to get squeezed a little bit harder.

While things do look slightly better for telcos, broadcasters and other incumbents there’s always the unexpected which eludes all but the most outrageous pundits, it’s hard to see what the disruptive technologies of 2013 will be but we can be sure they are there.

The main takeaway from the 2013 Deloitte report is that smart TVs, 4K broadcasting, tablet computers and smartphones are going to be the biggest drivers for the technology, media and telecommunications industry for this year. There’s some opportunities for some canny entrepreneurs.

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Twenty years of text messages

A BBC interview with the inventor of the SMS service illustrates how fast technology changes.

When the mobile phone arrived we thought that text, particularly those clumsy pagers people used, would be dead.

Little did we know that an overlooked part of the newer digital cellphone technology would see short messaging become a key part of the phone system and a major income generator for telephone companies.

Short Messaging Services – or SMS – was an add on to the digital Global System for Mobile communications (GSM) standard which became the second generation (2G) of mobile phones.

While intended as a control feature on the phone networks, SMS took off as a popular medium in the mid 1990s and soon became a major profit centre for mobile carriers.

The Twentieth anniversary of the first SMS being sent passed last week and the BBC has a great interview, conducted by text message, with Matti Makkonen who came up with idea.

One of the notable things in the interview is Matti’s humility – he doesn’t like being called the inventor or founder of text messaging as he explains,

I did not consider SMS as personal achievement but as result of joint effort to collect ideas and write the specifications of the services based on them.

We can only imagine what would happen if the idea of SMS messaging was invented today, there’d be an unseemly struggle over patents while hot young Silicon Valley entrepreneurs would pitch venture capital firms with plans for niche services that will make a billion dollars when sold to Yahoo! or HP.

As it was, SMS services were insanely profitable for the telcos. In the early days, text messages were being charged at over a dollar each – for a service that cost the carrier almost nothing.

Over time those handsome profits have been eroded as SMS became bundled into all-you-can-eat packages and then the internet introduced new mediums to send short messages.

While SMS isn’t going away while mobile phones are an important part of our business and personal lives; the service isn’t going to be as critical, or as profitable as it was over the last twenty years.

Short Messaging Services are a great example of how individual technologies rise, evolve and fade with time. They are also a good lesson on how quickly a premium, highly profitable service can become commodified.

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How do communications networks stand up to real times of disruption?

We often say modern communications are disrupting society – but what happens when they themselves are disrupted?

One of the big problems during and after Hurricane Sandy was how the cell phone network fell over.

As the Wall Street Journal describes, many parts of New York and New Jersey still didn’t have mobile phone services several days after the storm.

Yang Yeng, a shopkeeper selling batteries, candles, and flashlights on the street in front of his still darkened shop in the East Village, said his T-Mobile phone was useless in the area. The situation, he said, reminded him of the occasional cellphone-service outages where he used to live, on the outskirts of a small city in southern China.

What’s often overlooked is that mobile networks are different products from a different era to the traditional landlines most of us grew up with.

The older landline phone systems used their own power and the batteries in most telephone exchanges had enough juice to supply the Plain Old Telephone Service (POTS). So in the event of a blackout most services kept running.

Of course POTS services could still be disrupted – a car could hit a pole on your street, those poles could burn down in a fire, your local exchange could be struck by lighting or a blackout could last longer than the telephone company’s batteries.

Most importantly, in times of major emergencies those exchanges would get overwhelmed by frantic callers trying to contact the authorities or their families.

All of the above would have happened during Hurricane Sandy, so it is somewhat unfair to single out the mobile networks for their ‘unreliability’.

There are some differences though with modern mobile and fibre based networks that shouldn’t be overlooked when understanding the reliability of these systems in times of crisis or disaster.

A hunger for power

Modern communications networks need far more power than the POTS network. Fiber repeaters, cell towers and the handsets themselves can’t be sustained in the way low powered rotary phones and mechanical telephone exchanges were.

The cost of providing and maintaining reliable batteries to these devices is a serious item for telcos and it’s no surprise they lobbied against laws mandating the use of them in cell phone towers.

Even if they were installed, the fibre connections to the towers are also subject to the same problem of needing power to connect them to the rest of the network.

Of course the problem of keeping power to your handset then kicks in. Many smartphones or cordless landline handsets struggle to keep a charge for 24 hours, further reducing their effectiveness during any outage that lasts more than a day.

Bandwidth Blues

Even if your cellphone does keep its charge and the local tower remains running and connected to the backbone, there’s no guarantee you can get a line out.

In this respect, the modern systems suffer the same problem as the old phone networks – there’s a limit to the traffic you can stuff down the pipe.

This isn’t news if you’ve tried to make a call on your mobile at half time at a sporting event or at the end of a big concert. If there’s too much traffic, then the system starts rationing bandwidth; some people get a line out while others don’t.

Prioritising traffic

Another way of managing demand during high traffic times is to ‘prioritize’ what passes over the network – voice comes first, SMS second and data a distant last.

This is why on New Year’s Eve you might be able to call your mum, but you can’t post a Facebook update from your smartphone and all your text messages come through at 5am the following morning.

During emergencies it’s fair to assume that if the mobile network stays up, social networks won’t be the priority of the operators and this is something not understood by those advocating reliance of social networks during disasters.

No best efforts

Probably most important to understand is the difference between the utility culture of the POTS operators and the ‘best effort’ services offered by ISPs and many mobile phone companies.

Under the ‘utility model’, the telco was run the same way as the power company and water board – largely run by Engineers with a focus on ensuring the network stays up for 99.99% of the time.

That four or ‘five nines’ reliability is expensive and the step between each decimal point means an exponential increase in costs and spare capacity.

Over the last three decades the utilities themselves have seen a reduction of reliability as the costs of maintaining a network that has a 24 hour outage once every three years (99.9%)* over three times a year (99%) interfere with a company’s ability to pay management bonuses.

ISPs and most cell phone networks never really had this problem as their services are based upon ‘best effort’. If you read your contract, user agreement or condition of sale you’ll find the provider doesn’t really guarantee anything except to do their best in getting you a service – if they fail, tough luck.

As we become more connected, we have to understand the limitations of our communications networks. The assumptions those systems will be around when we need them could bring us unstuck.

*the definition of uptime and what constitutes an outage varies, the definition I’ve used is a 24 hour blackout or suspension of supply in any given area.

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Signing off voicemail

Voicemail’s decline is a symptom of the telecommunication industry’s shrivelling profits.

A survey by US phone company Vonage reports cellphone users are ditching voicemail and moving to alternatives.

Messages left on user accounts in July fell 8% while retrievals fell 14% compared to last year.

While those figures may have something to do with the billing practices of US carriers, it shows a much bigger trend in the telecommunications sector away from products which have been very profitable over the last two decades.

Voicemail, like SMS text messaging, has been a lucrative earner for telcos since the arrival of mobile phones.

Users get billed for calling a number then for leaving a message – often with a few delaying menu items to make sure callers get hit with a couple of billing units. In turn the receiver is charged for being notified they have a message, billed again for retrieving it and then pays a monthly fee for the privilege for all of this.

Five bites of the cherry for one phone call – nice work if you can get it.

This entire revenue stream is now dwindling as customers start using Internet based services to send messages. While the telcos charge extortionate rates for mobile data it is still far cheaper per message than the alternatives.

In many ways the profits from voicemail and SMS were a classic transition effect – a profitable window of opportunity opened for a short period when a new technology was introduced. Now those windows are closing.

For telcos, they have to find some profitable new channels. Even if they achieve their dreams of becoming media distributors or even content creators they’ll find both of those fields are far less lucrative than the mobile phone networks of a decade ago.

While telephone companies aren’t going to grow broke soon, today’s data networks aren’t the golden goose many people expect from telcos.

The smart telcos will adapt and survive, the ones who think the good times of a decade ago are coming back soon are in for a miserable future.

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A world of criminal sheep

Are we are all criminally inclined sheep that need to fleeced and controlled?

Notorious unpaid blogger Michael Arrington recently described his battle with a bank over direct debit charges.

To overcome a fraudulent recurring charge on his credit card, Arrington cancelled his account only to find the bank moved the recurring charges to the new card, a ‘service’ designed to avoid fraud and save customers the hassle of re-establishing legitimate direct debits after a new card is issued.

Both of those are noble reasons but the core of this philosophy lies in a contempt for customers which can be summarised in two principles.

A customer is;

  1. A sheep to shorn of any available cash through sneaky fees and shady business practices
  2. A criminal

In the 1980s business school view of the world, customers are criminally inclined sheep who have to be regularly shorn to enhance profits and controlled so they don’t go anywhere else.

Only businesses operating in protected environments can get away with this today and the two obvious sectors are banking and telecommunications.

The telco industry long soiled its nest with consumers with dodgy charges and a contempt for customers which reached a peak (nadir?) with the ring tone scams where kids had their phone credits pillaged by fees they never knew they had signed up for.

While those dodgy charges paid the handsome bonuses of telco executives, it proved to another generation of consumers that these companies see their customers as sheep to fleeced on a regular basis.

Ironically it’s that lack of trust that dooms the telcos in the battle to control the online payment markets – their practices of the 1980s, 90s and early 2000s mean few merchants or consumers will trust them as payment gateways.

One of the strengths banks bring to that market is trust. Like cheques, credit cards succeeded as a payment mechanism because people could trust them.

In screwing customers over direct debit authorisations, the banks are damaging that trust as Arrington says “I really don’t think I’m going to be giving out my credit card so freely in the future.”

That’s a problem for businesses as direct debiting customers have been a good way to ensure cash flow and reduce bad debts but when clients perceive there is a high risk of being ripped off they will stop using them.

Businesses that insist on direct debits will be perceived as potentially dodgy operators who rely on locking customers into unfair contracts rather than providing a decent service for a fair price.

So the banks’ position of legal power works in their short term interest and against them – and the merchants using their services – in the longer term.

While bank and telco executives with safe, government guaranteed market positions will continue to treat customers like criminal sheep it’s something the rest of us can’t get away with.

The winners in the new economy are those who deserve to be trusted by their customers and users, if you’re abusing your market and legal powers then you better hope politicians and judges can protect your management bonuses.

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