Lack of affordable, reliable broadband access is hampering media convergence, writes Angus Kidman

Published in The Australian, July 12 2001

ANYONE who has ever used the internet from home knows it's too slow. Connecting via a standard telephone line is all right for, say, viewing a newspaper article or reading email, but soon collapses if you're trying to watch a live video broadcast or download an MP3 music file. The concept of convergence, where television, the internet and other entertainment media are accessed from a single device, requires higher access speeds.

The solution is high-speed broadband technology, which provides connections at least 10 times faster than a standard phone line.

Since the mid-90s, telecommunications executives have been hyping broadband. "I think Australia is going to be in the position, if people look back in five or 10 years' time, where they'll say 'Wow!' because you're not dealing with infrastructure that's been in the ground for the last 20 years, it's the very latest," current Telstra chairman and former Optus managing director Bob Mansfield predicted in 1996, referring to the rollout of the cable network designed for pay TV and internet access. "Australia has taken a quantum leap in recent years to apply this technology at the leading edge of the world. I think it's a great opportunity."

Five years later, broadband is a long way from taking off in Australia. As recently as this week it was reported the Launceston Broadband Project, introduced to Tasmania in March, had attracted only 180 subscribers of its target of 5000.

According to the Australian Bureau of Statistics, of an estimated 3.9 million internet accounts in December 2000, 97 per cent were still with conventional dial-up providers. The pattern is similar around the world. Why? The short answer: services to date have been late in arriving, restricted in availability, poorly priced and unstable.

There are three big choices for broadband connections in Australian homes: cable modems, satellite and ADSL (asymmetric digital subscriber line). Most countries have deployed only ADSL and cable services. Cable modems use the optical fibre networks rolled out by Telstra and Optus for their pay TV services. Hence, they're only available in selected regions within capital cities (both companies service Sydney, Melbourne and Brisbane, while Telstra has more recently launched cable in Adelaide and Perth).

In total, about 2.5 million households in Australia could potentially receive a cable internet service. Telstra and Optus want to offer cable in more regions, but are effectively blocked by a 1997 deregulation ruling giving local councils the final say on where above-ground cables can be rolled out. Those who can receive a cable modem service can gain connections up to 100 times faster than a standard phone line.

Two issues have slowed the take-up of the cable-based services: access to cable and pricing. Although service within a year was promised by both Telstra and Optus when the pay TV networks were launched in 1995, rollout has been slow. Telstra didn't launch its Big Pond Cable (later rebranded Big Pond Advance) until 1997.

Optus's Optus@Home service (a joint venture with web portal and broadband developer Excite) suffered even more delays, finally surfacing in December 1999.

Pricing is also a problem. Telstra's original plan, which charged users based on the amount of information downloaded, was too expensive for many. Other internet service providers jumped in with packages without download limits, making Telstra appear out of touch with consumers. Optus launched Optus@Home, promoting a package including "unlimited downloads". Many Telstra subscribers switched over and Telstra was forced to alter its pricing plan.

Optus later changed tack, imposing a "rolling limit" on downloads based on average user access patterns. Last month, Telstra imposed a fixed monthly limit (3 gigabytes) on its service, a move Optus says has seen more users defect. "[Telstra's limit] has been great for us," says Caroline Williams, Optus@Home's marketing director.

Both companies maintain the restrictions are designed to stop small groups of users hogging the service. For instance, Telstra claims that 35 per cent of its cable bandwidth is consumed by just 5 per cent of its customers. However, the fixed cap is unpopular with households with more than one user, where the limit can be reached quickly.

Charges for both services range from $70 to $75 a month, with an installation fee varying from $200 to $600. Telstra also charges an extra volume rate for access beyond the 3 gigabyte limit on some plans. While usage metering software is provided, many users complain it's hard to predict how much the service will cost, or to choose the right service in the first place.

There isn't a clear winner in this market war. Optus@Home claimed in April to have 30,000 subscribers; more recently, it has said up to 1000 users are signing up a week. However, that number includes unhappy Telstra users, which means the total market growth may be slower.

Telstra won't reveal subscriber numbers - in part because of a company policy not to distinguish between its different broadband technologies - but analysts believe it is likely to have slightly more subscribers than Optus because it was in the market earlier. Both companies are using bundling deals, where cable internet access is made cheaper if subscribers also sign up for telephony services or pay TV, to drive sales.

For regions beyond cable's reach, satellite was until recently the only other broadband choice for home connections. Like its pay TV counterpart, satellite is mostly used in rural areas, but can be connected anywhere in Australia through resellers.

Despite that widespread availability, satellite service is pricey (installation alone can cost more than $1000), and current satellite services only offer downstream connections. Thus users get speedy access to other people's content, but if they want to send something (even an email), they will need a separate dial-up or other account. Later this year, both Telstra and Optus plan to offer a two-way satellite service. However, users complain about difficulties getting even the existing service to work.

Perhaps the technology with the most promise is ADSL. ADSL allows households to connect using their existing phone line, without missing incoming calls, and at speeds similar to cable. Potentially, ADSL could reach far more Australians than cable or satellite. (Similar technologies such as HDSL are being developed for business users.)

The system is enabled by an upgrade in the local telephone exchange, and for that reason can't be made universally available in one fell swoop. People who live more than 3.5km from their nearest exchange are also unable to get ADSL. Those who can will pay slightly higher rates than cable (about $100 a month) for the service.

Under pressure from the federal Government, Telstra has been extending the availability of ADSL since first making it available last August. The company has committed to making the service available to 90 per cent of Australians in 2002; Telstra estimates that about 70 per cent of Australian exchanges are now equipped for ADSL, but industry whispers suggest there are only about 20,000 customers to date.

Meanwhile, Telstra has come under fire from its rivals for failing to give them wholesale access to ADSL services. In July 1999, the Australian Competition and Consumer Commission "mandated" access to the local loop, a move that required Telstra to allow other companies to sell ADSL and local telephone services. While a number of companies have since begun offering ADSL, a common complaint is that Telstra is stalling access by arguing over technical standards. (Telstra denies this.) Even if the political and pricing issues are resolved, two other challenges remain for broadband providers: reliability and content. Because most broadband services function in an "always on" mode, rather than requiring users to make a manual connection each time they want access, customers are quick to notice when the service isn't working.

Unfortunately for the providers, it seems to be not working a lot.

An analysis by research group www.consult found that from August 1999 to March 2001, Telstra's cable network suffered 27 separate network outages, while Optus's was down on 13 different occasions. ADSL is even worse; in its first two months of tracking, the analysis found that Telstra's service was unavailable for a total of 331 hours.

Consumer advocacy sites such as Whirlpool.net.au feature reports of the latest problems with high-speed connections. Given consumers are charged a premium for the extra speed, many become outraged when the services aren't available. "If they can't maintain a simple static web page with any level of competence, what hope do they have running their nationwide broadband infrastructure?" Whirlpool's founder Simon Wright wrote on his site recently.

Customised content that takes full advantage of the medium is also seen as essential to consumer acceptance. "Australia's broadband market is on the precipice of massive adoption," said analyst Joel Grey from technology research firm IDC in a recent commentary on broadband. "The only thing missing is local content which compels user subscription." To date, the main offering has been video content, with movie trailers and news highlights the most common offerings. Network gaming has also proved popular, but is the only truly "interactive" service offered in most broadband environments.

This is because developing broadband-specific content has a cost base similar to that of TV production and there is a shortage of qualified staff. "It's still a challenge to find broadband content," Optus's Williams says. Telstra recently signed a deal with Beyond Online to acquire three new channels of broadband content.

Broadband content companies also face a delicate problem: without a large audience, production costs can't be justified, but without more compelling content, users are unlikely to sign up. There are already some casualties, such as Australian youth-oriented developer KGrind, whose broadband-only content service collapsed last year.

However industry watchers remain bullish about the future. IDC estimates by 2004, Australia will have 2.4 million DSL subscribers (most using ADSL) and 520,000 cable modem users.