Published in The Australian, June 27 2002

JUST how badly does Telstra want to encourage more subscribers onto its broadband internet services? Badly enough to give away up to $25 million to anyone who can come up with content or ideas to make broadband more appealing.

Last week, the telco outlined details of its broadband fund. Despite complaints that pricing is still the biggest barrier to broadband takeup, Telstra seems convinced it's all a matter of what you do with your high-speed connection rather than what it costs. "We still believe we need to stimulate the development of content and applications," said Telstra retail managing group director Ted Pretty at the fund's launch.

To that end, Telstra is offering $10 million to help aspiring broadband content developers allocated by a seven-member board. The telco is also dangling an additional $15 million in dollar-for-dollar matching if other businesses with an interest in broadband market development contribute to the project, as well as free bandwidth allocation for successful applicants.

So would a proposal for pay-per-view midget wrestling or a continuous live Jeannie Little webcam be considered? Apart from a ban on the development of conventional narrowband sites, it seems nothing is out of bounds. "This is about the things we haven't thought of," says fund chair and Telstra chief technology officer Hugh Bradlow.

Despite the vagueness of its guidelines, Telstra isn't likely to be short of applicants since the fund is one of the few vehicles for financing new media content and platforms in Australia.

The biggest complication is the requirement that projects are, in Bradlow's words, "both pioneering and commercially viable". Many of the original pioneers in developing broadband applications have gone broke because of the relatively small market.

Convincing users to pay for broadband content has always been difficult, mainly because most broadband services charge on a volume basis. Consumers who go over a pre-defined limit each month must pay for every megabyte of data accessed. Telstra has always followed this model with its broadband packages, while Optus switched to volume charging earlier this year.

Just paying excess bandwidth fees has proven unpopular with many subscribers, making it unlikely they'll also pay specific fees for individual content. Paying by volume also minimises the possibility of an advertiser-supported model, since consumers must pay for the bandwidth associated with viewing advertisements if they exceed their limit.

Pretty acknowledges the problem. "The content owners have yet to realise an effective business model," he says. The same could be said of broadband in general. Figures from the ACCC suggest there are around 251,000 active broadband connections in Australia. In contrast, Telstra alone has 1.4 million customers on its narrowband dialup service.

The fund is far from the first attempt by Telstra at spruiking exclusive content to promote its broadband offerings. When Telstra relaunched its fledgling cable internet service in 1999, a major selling point was a web radio station fronted by Doug Mulray. At the time, Telstra executive David Stokes McKeon said: "If you've got the right applications and content, then people will come." Three years later, Telstra is still waiting.