CDM cover Oct.indd 1 9/18/10 1:19 PM

CommsDay 1

CommsDay 2

tional broadband networks that

fibre “decays” after a few years.

As a leading publisher of tele-

com news and analysis for both

the Australasian market and the

broader international capacity

market for the past 17 years, we

believe we are well placed to bal-

ance the “always on, not always

correct” news culture with a longer

form, more contemplative periodi-

cal such as what you are reading.

CommsDay magazine features

some of the industry’s best writers.

For example, our Auckland based

writer Bill Bennett has deep ex-

perience in IT publishing dating

back to the 1980s when he pio-

neered the idea of magazine cover

mounted discs in the UK.

Our New York City writer Dave

Burstein is regarded as perhaps the

world’s foremost commentator on

the supply and demand chain

flows that influence the broad-

band market.

Our Melbourne writer Geoff

Long has extensive experience

writing about telecommunications

in developing markets, following

lengthy stints at the Bangkok Post

and Tele.com Asia.

And our Hong Kong writer Tony

Chan not only has extensive ex-

perience reporting on the sector

for Telecom Asia and Wireless

Asia, but he has also worked in

the industry itself for Asia Netcom

(later to become Pacnet).

Joined by our regular Comms-

Day editors Petroc Wilton, Miro

Sandev and William van Hefner,

we believe that CommDay maga-

zine boasts world-class reporting.

We do make one concession to

the sensibilities of 2010 media.

CommsDay magazine is not a

print publication, but a magazine

inspired by the promise of the

emerging digital tablet culture.

Whether you choose to read us

as an immersive experience on an

iPad device, as a downloaded PDF

or as a Flash-style magazine online,

we aim to combine the advantages

of digital delivery with the contem-

plative qualities that define the

print medium.

CommsDay magazine will ini-

tially be published 5 or 6 times a

year and aims to complement the

thought leadership of our regular

conferences in Sydney, Mel-

bourne, Singapore and Auckland.

Our next congress occurs in Mel-

bourne on 12 and 13 October

and, as always, we boast a strong

line-up of the leading lights in

Australian and regional telecom-

munications.

Happy reading and hope to see

you in Melbourne.

Grahame Lynch,

CommsDay founder

A new periodical

I n the year two thousand and ten, why launch a new maga-

zine for an industry that has seen

much of its trade press die a pro-

tracted death in recent years?

The reason is simple.

Telecommunications is no

longer just another industry: it has

become an integral part of society

and life. And as such it is now

occupying—and, in some cases,

vexing—public policy officials, poli-

ticians, economists, business plan-

ners and the private sector.

As the recent Australian national

election showed, there is an urgent

need for more analysis, more re-

flection and more contemplation

of telecommunications, not less.

The modern age has seen infor-

mation flows move to a real time

basis. Twitter, blogs, message

boards, Facebook and lowly re-

sourced online news websites now

all form a major part of the infor-

mation ecosystem that fuels how

the telecommunications industry

looks at itself and defines itself to

the broader community.

This is all great.

But as Richard Chirgwin notes

in a column in this issue, this can

lead to serious distortions in

“common wisdom”: for example,

the urban myth now circulating

through online debates about na-

ABOUT COMMSDAY MAGAZINE Mail: PO Box A191 Sydney South NSW 1235 AUSTRALIA. Fax: +612 9261 5434 Internet: www.commsday.com COMPLIMENTARY FOR ALL COMMSDAY READERS AND CUSTOMERS. For special subscrip-tion arrangements, contact Sally Lloyd at sally@commsdaymail.com. Published up to 6 times annually. Editorial inquiries email Petroc Wilton at petroc@commsdaymail.com CONTRIBUTIONS ARE WELCOME WRITERS: Petroc Wilton, Tony Chan, Bill Bennett, Miro Sandev, William van Hefner, Grahame Lynch, Dave Burstein, Richard Chirgwin, Bob Fonow ADVERTISING INQUIRIES: Sally Lloyd at sally@commsdaymail.com EVENT SPONSORSHIP: Veronica Kennedy-Good at veronica@mindsharecomms.com.au ALL CONTENTS OF THIS PUBLICATION ARE COPYRIGHT. ALL RIGHTS RESERVED

CommsDay is published by Decisive Publishing, 4/276 Pitt St, Sydney, Australia 2000 ACN 13 065 084 960

CommsDay 3

Customers, Devices and Applications: Bermuda Triangle for Network Operators?

The Bermuda triangle is famed as being a place where it is possible to disappear without a trace. The triangle between customers, devices and applications could be the Bermuda Triangle for network operators – a place where operators disappear from the customer’s sight. The iPad and Kindle illustrate how operators are slipping off the palm-top and even disappearing. You have to look hard to see the SIM or signal strength of the operator on an iPad, and won’t find them on a Kindle.

These new devices do provide additional opportunities to sell connections, but also illustrate the battle that operators will face to stay relevant to retail customers. How many buttons or icons does the operator have on an iPhone’s up to eleven “home screens”, or on a palm-top? The answer is probably two, related to traditional communications offering, “Phone” and “Messages”. How many do others offer? Perhaps ten or twenty. And how many offer competing call and messaging services?

To maintain relevant customer relationships and grow new revenues, operators must learn to navigate in the triangle – especially given that nowadays the triangle is often filled with the clouds of “cloud computing” that allow any business to deliver services anywhere.

Behind nearly every application icon on modern devices is a service delivered from “a cloud”, and behind that, a business. For example, a frequent flyer can download an application for their device that allows them to book flights from an airline by gaining access through the push of an application icon or button. Applications such as these work just the same whether you are at home, at work, on the road or at an airport. They typically exist and work entirely independent of existing operator networks.

Customers love the simplicity and flexibility of this application model. The world is now being delivered into the palm of their hands. Operators themselves need to embrace application icons for their interactions with customers – it’s more convenient than a web site, closer than a shop and faster than calling a call centre.

Operators have always helped businesses connect with their customers and this is another channel that operators can help make even simpler, more reliable and more secure.

Adapting to this new model requires changes to the way operators interact with the customer. Over time, there will be a greater focus on on-line and on-device interactions rather than in-shop or call centre interactions. IT and network infrastructure will deliver the “cloud” services that power the icons or buttons. New revenues will be grown from the things customers do over networks, for example buying a pizza. This is a lot to ask, but is the alternative for operators to disappear in the Bermuda triangle – all but unseen and unappreciated by retail customers?

Nokia Siemens Networks have the people and solutions that support network operators in dealing with the complexity of current network systems and are then able to translate this into a tangible benefit for customers. Learn more about our experience, solutions and insight at www.nokiasiemensnetworks.com

Customers

Applications

Dev

ices

CommsDay 4

COVER STORY

19 Are NBNs too much of a good thing?

By Grahame Lynch +

24 Why the NBN’s payoff will be slow

By Dave Burstein

NEWS ANALYSIS

09 What now for NZ’s UFB plan?

By Bill Bennett

10 Australia’s high speed broadband election

By Petroc Wilton

12 Equinix CTO Lane Patterson

By Tony Chan

FEATURE ARTICLES

26 The Internet’s date with destiny

By Geoff Long

30 How RIM is fighting back on the Blackberry bans

By Miro Sandev

32 Why the US campaign against Huawei is unfair

By Bob Fonow

26 Behind LightSquared’s wholesale LTE carrier model

By Tony Chan

OPINION COLUMNS

03 A new periodical

By Grahame Lynch

07 Why reverse auctions are good for broadband

By Dave Burstein

29 The strange case of perishable fibre

By Richard Chirgwin

26 The importance of customer service

By Christophe Bur

38 Death by telephone

By William van Hefner

INSIDE THIS ISSUE

CommsDay 5

Promise what we deliver.

Deliver what we promise.

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Success in today's business environment is characterised by convergence, smart technology, thriving digital communities, high customer churn rates and changing regulatory demands. This requires Telecom companies to have flexible business processes and robust infrastructure. TCS offerings include solutions in the areas of Business and Operations Support Systems, Communication and Network Solutions, Pervasive Computing as well as Systems Integration, Application Development and Maintenance as well as Business Process Outsourcing. A partnership with TCS can assist your organization to build and implement innovative strategies and solutions quickly and effectively.

To learn more about TCS please visit www.tcs.com

CommsDay 6

auction results show that competi-

tion can reduce the cost of univer-

sal subsidies. In one 2005 auction

in India, in 38 of the 81 regions

many mobile operators bid zero,

asking for no subsidy. In 15 re-

gions, India's biggest operator,

Bharti Airtel, even offered to pay.

The fund saved nearly $600M

US. The U.S. broadband plan

includes a provision for auctions.

Incumbents are fighting back

hard, knowing that losing in an

auction could bankrupt them.

India has almost a dozen wire-

less companies, in less competitive

markets auctions with too few

bidders often fail.

In 2000, the Australian govern-

ment set up reverse auctions to

distribute universals service subsi-

dies. None of Telstra’s competitors

bid to provide service in the pilot

regions.

In Switzerland in 2006, Swiss-

com faced so little competition for

the universal service tender they

demanded premium pricing of

$US67 for a basic phone line and

600kbps Internet.

Auctions don’t need to be pub-

lic to be effective. China Telecom

buys as many as 10m lines of

S ometimes auctions work. 12

million subscriber Chunghwa

in Taiwan was paying $US30 to 50

per port for DSLAMs while Veri-

zon and AT&T were paying $50-

70 for the same equipment.

DSLAM vendors win million

line contracts and draw attention

from buyers around the world

with good bids.

For standard equipment avail-

able from many sources, auctions

nearly always produce lower prices.

In 2005, when most carriers

were paying over $US100 per cus-

tomer for VDSL gear, XyZEL suc-

cessfully bid $66 to provide gear

for 230K lines at Chunghwa.

New Zealand’s Crown Fibre

network will almost certainly cost

less because it took bids. Paul Rey-

nolds’ Telecom NZ is highly likely

to win, Bill Bennett predicted the

success of Telecom’s “Dirty Harry

approach” in a recent Commsday.

James Watts of InspireNet is

telling Computerworld: “The gov-

ernment has been heading down

the 'hand it all to Telecom‘ path

for quite a while."

Along the way, the Regional

Fibre Group led by the electric

and gas companies made a credi-

ble bid that forced Telecom to

make concessions.

Telecom had refused to spend

for 100 meg fiber home, instead

opting for 10 meg cabinets. Tele-

com is now offering a full

demerger and a larger investment

in fibre. The government may

demand more before the sched-

uled October decision because the

Regional Fibre Group could still

be chosen.

Scott Wallsten, chief economist

for the U.S. broadband plan, says

broadband each year, almost a

third of the world market. So com-

panies like Alcatel, Huawei and

ZTE reduce their margins to win a

share. Bids are not formally re-

leased, but Wei Leiping of China

Telecom recently disclosed they

were paying $US100 a line for

GPON, far lower than the same

vendors charge European and

American customers.

The low margin on Chinese

sales is one reason Huawei and

ZTE are working so hard to sell

abroad.

The U.S. broadband plan rec-

ommended running better auc-

tions for the schools and libraries

e-Rate program possible from act-

ing as a sophisticated buyer. One

suggested step was a central listing

of all open requests, making it

easier for low cost providers to

find opportunities. I discovered

how well this can work years ago

while working for a large printer.

I was excited when the U.S.

Government Printing Office be-

gan posting the open bids from

many agencies and we became

regular bidders.

To my amazement, the govern-

ment received prices far below

market because so many compa-

nies went for the work.

Putting all the contracts—and

the winning bids—on the web

would make it easier to expose the

abuses.

Nothing less than thoughtful

purchasing is good enough for

government work.

Dave Burstein is the New York

City-based editor of Fast Net

News and DSL Prime

Reverse auctions yield big savings .. sometimes

.

DAVE BURSTEIN

CommsDay 7

CommsDay 8

on how CFH looked favourably

on the company’s media statement

issued shortly after the UFB an-

nouncement. He noted how Tele-

com NZ said it would be willing to

work with others.

Again, nothing specific was said,

but listening to the music as well

as the words, it seems CFH would

be happy if Telecom NZ were to

combine forces with the New Zea-

land Regional Fibre Group mem-

bers already in negotiation and

those still on the shortlist.

If the CFH announcement

represents two steps back for Tele-

com NZ, it also represents a step

forward.

Telecom NZ is now the only

national bidder. Axia Netmedia’s

non-compliant bid was dropped.

The Rural Broadband Initiative

(RBI) is looking for a national bid.

With the main course of the UFB

project off the table, Axia is

unlikely to hang around for the

RBI dessert. Other groups may

combine to submit a rival RBI bid,

yet Telecom NZ is well placed for

the project.

At this point things get compli-

cated. Telecom NZ CEO Paul

Reynolds previously said he wants

everything, the entire UFB and

RBI projects or he won’t play.

A press statement from the com-

pany reiterated this point and

went on to explain Telecom NZ’s

proposal of “profound change”

T elecom NZ’s broadband hopes took two step back

when Crown Fibre Holdings an-

nounced the start of negotiations

with three regional Ultra-Fast

Broadband network bidders.

Never mind that the three bid-

ders account for just 15% of the

UFB total. CFH rejected Telecom

NZ’s plan for a centrally-managed

national network embracing towns

and rural New Zealand.

There were two consolation

prizes. First, Telecom NZ is on

CFH’s shortlist along with 14 re-

gional companies. The settled bids

leave 85% of the project up for

grabs. Moreover, the still contest-

able areas include all major cities,

where networks are relatively easy

to build and likely to offer a better

return.

CFH’s official statement said:

“All shortlisted parties remain

important contenders for future

negotiations of binding agree-

ments. CFH is open to either a

Telecom, New Zealand Regional

Fibre Group solution, or some

form of combination for the bal-

ance of the UFB project.”

It may not be that simple.

When CommsDay interviewed

CFH Chairman Simon Allen and

CEO Graham Mitchell on Thurs-

day, we asked if bids for other

regions are likely to be added to

the three already announced in

the near future. Allen said: “There

are some we could add to the list,

but we have quite a lot on our

plate to negotiate with these

three.”

While that doesn’t name names,

the answer implies CFH is still

examining bids on a region-by-

region basis. The words don’t

make it sound as if CFH plans to

offer Telecom NZ “the balance of

the UFB project.” At best they

sound as if Telecom NZ might end

up with some regions.

Telecom NZ’s second consola-

tion prize was comments by Allen

includes structural separation,

integration of the UFB with the

RFI, legislative change and new

industry regulations.

All of this is beyond CFH’s re-

mit. The Crown Fibre Holdings

team’s job is to negotiate the best

deal to get a spanking new, fast

fibre network rolled out to 75% of

New Zealand by 2019. It can’t

negotiate new laws or regulations.

It can’t integrate the UFB with the

RBI. It can’t decide on how Tele-

com NZ is divided up in order to

get this all done.

If “profound change” is Tele-

com NZ’s only proposal to CFH,

then it’s as non-compliant as Axia

Netmedia’s proposal and is likely

to meet the same fate.

Clearly Reynolds is appealing

over the head of CFH to the Min-

ister of Communications, maybe

to the Prime Minister or even to

their employers: the New Zealand

people. Is anyone listening? Steven

Joyce’s bland statement following

CFH’s Thursday announcement

reveals little of his thinking.

Joyce is a political newcomer.

He still needs runs on the board.

Halting the UFB process to negoti-

ate new terms would put the pro-

ject on hold. Telecom NZ expects

“profound change” negotiations to

take a year – structural separation

won’t happen until July 2011.

That creates a whole new set of

problems for the minister.

By this time next year New Zea-

land will be in the middle of the

Rugby World Cup, shortly fol-

lowed by an election. After watch-

ing Australia’s “broadband elec-

tion” from the sidelines, it’s

unlikely any New Zealand politi-

cian relishes the thought of head-

ing to the polls with the UFB un-

resolved.

Telecom NZ’s press statement

talked of a “challenging time-

frame”. How apt.

Bill Bennett

What now for Telecom NZ’s UFB plan?

NEWS ANALYSIS

CommsDay 9

CommsDay 10

ated a very blunt message of sup-

port for the fibre NBN that in

context came across like a direct

appeal to voting preferences.

On the other side of the fence,

Pipe CEO Bevan Slattery – well-

established as an NBN critic –

blasted Quigley’s Charles Todd

speech as “misleading and littered

with factual misrepresentations,”

while the IIA’s messaging

prompted Vocus CEO James

Spenceley to essay a public warn-

ing against its “dangerous assump-

tions and rhetoric,” adding that “a

$43bn [network] with no business

case is a mistake we can't afford to

make.”

Even The Australian came out on

the eve of the election with a piece

predicting massive NBN cost blow-

out at the consumer premise level,

widely perceived as an usually ve-

hement attack on the project.

Appropriately, perhaps, in the

wake of a minority government

and likely changes to the rollout

schedule and funding model to

accommodate independents with

the balance of power, the prevail-

ing tenor is one of uncertainty –

and few afflictions are as poison-

ous to investment in the private

sector. Ask Telstra; a number of

I n the final weeks before the Australian federal election, the

nation’s telecommunications in-

dustry appeared to be facing its

Ragnarök: a confrontation whose

outcome would irrevocably deter-

mine the future shape of the sec-

tor. And just as in that myth, key

figures from the industry came

forth to make their stand on one

side or the other – many of whom

had previously distanced them-

selves quite determinedly from the

political arena.

This was perhaps unsurprising,

as it became apparent that, for the

first time, communications policy

would not just be affected by the

result of the election but would

play a key part in determining it.

One of the first, and certainly the

most well-publicised, of the indus-

try figures to venture into political

territory was NBN Co CEO Mike

Quigley, the man charged by the

Labor government with building

its predominantly FTTP network.

In the two weeks before 21 Au-

gust, Quigley released news that

the NBN could deliver 1Gbps to

end user premises, following up

with a speech that systematically

addressed the weaknesses of non-

fibre access technologies.

The timing and content of these

forays into the media drew a bar-

rage of criticism from observers

who felt he’d crossed the line into

partisanship – and, as head of a

government-owned enterprise,

violated pre-election caretaker

conventions as well.

But other key voices within the

industry quickly followed Quig-

ley’s example in that last frantic

fortnight, with the stark contrast

between the NBN and the Coali-

tion’s much cheaper, much slower

hybrid alternative essentially divid-

ing much of the comms sector

along party lines. Organisations

like the Internet Industry Associa-

tion and the Australian Informa-

tion Industry Association reiter-

analysts and asset management

firms have opined that election

uncertainty, combined with the

telco’s recent set of mixed annual

results and dismal guidance, has

made it hard to recommend the

tumbling Telstra stock.

In particular, a lot of that uncer-

tainty centres on the question of

overbuild. Labor’s NBN is predi-

cated on the assumption that very

little “good” infrastructure exists

and that a lot of what’s out there

now will need to be replaced.

Quigley has said on several occa-

sions that he doesn’t intend to

build where he can buy or rent,

but the still-tentative heads of

agreement with Telstra to lease

their pit and pipe remains the only

clear example of this sort of ar-

rangement. Otherwise, anyone

owning existing infrastructure

must surely be looking at the ex-

tensive NBN coverage maps with a

certain amount of trepidation.

DSLAM players may be okay for

now – the low cost of kit in that

market offers a rapid ROI when

measured against 8-year NBN

timeframes – but smaller regional

wireless players, for example,

might be getting nervous, as might

current backhaul operators.

This general malaise of anxious

uncertainty has already coalesced

into a new industry body: the Alli-

ance for Affordable Broadband,

formed by Slattery and Spenceley

alongside a diverse group of other

sector stakeholders including

BigAir CEO Jason Ashton, firmly

grounded in the fixed wireless

world, and Polyfone CEO Paul

Wallace, whose company operates

a terrestrial microwave network in

Queensland.

The Alliance has put forward its

own idea for a national network,

which heavily emphasises a mix of

public and private investment and,

perhaps unsurprisingly shies away

from the infrastructure overbuild

that could see its members’ assets

Australia’s high speed broadband election

NEWS ANALYSIS

Mike Quigley

CommsDay 11

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CommsDay 12

E quinix has played a pivotal role in the expansion the

Internet. By providing the key

interconnection points for the

global network infrastructure,

Equinix has helped shaped much

of what we know as the Internet

today, from interconnecting to-

gether regional networks with

their global peers, to facilitating

those network connections to criti-

cal content overseas, Equinix has

emerged as the operator of key

hubs that glue together the global

information fabric. Now

the company is leveraging

its experience and business

model to move into the

Carrier Ethernet and en-

terprise networking space.

Here’s what Lane Patter-

son, CTO of Equinix,

thinks, as told to Tony Chan.

Singapore as a hub city

“ Singapore is a great example of what we call our global service

delivery platform, which is really

the concept that we need more

hub cities, both for Internet and

for Carrier Ethernet WAN ser-

vices around the world. We need

more functional market places, or

hub cities, to do that kind of trans-

action, because fundamentally, it

is about saving money and provid-

ing better economics to the end

consumer of telecoms services.

And you can’t do that if you are

backhauling from, say Thai-

land, to the US, or Thailand to

Tokyo to get back to Vietnam. So

Singapore is providing an incredi-

ble economic efficiency for all of

South East Asia, and that’s why it

is growing so fast.

Hong Kong, obviously has been

in that role for a much longer time

stranded.

Slattery and his colleagues are

not the only members of the sec-

tor to have been goaded into tak-

ing a public position.

The way in which NBN Co has

consulted with industry before

drawing up its plans and conclud-

ing its tender processes has

sparked anger from various sec-

tions of the sector, particularly

smaller players in the passive elec-

tronics, design and construction

areas who feel they’ve been effec-

tively ignored.

While most of the industry ap-

peared to be backing the network

to the hilt, such voices were under-

standably muted. Now that the

NBN’s future is fluid, a growing

number of dissidents are making

their opinions heard.

The Coalition has gleefully

seized on the similarities between

its own policy and the Alliance’s

version, but to focus on this align-

ment misses a key development in

the broader landscape.

It has taken the threat of a pol-

icy and investment vacuum, cre-

ated by the knife-edge election

leadup and the uncertainty of the

outcome, to goad a growing por-

tion of the industry into putting

forward its own concrete vision for

a broadband future. Key movers

and shakers in Australian telecoms

are starting to adopt the view that

– to quote the Alliance’s mani-

festo – “markets are better manag-

ers of capital and technology risk

than government.”

The prolonged uncertainties of

Australia’s telecoms Ragnarök

have already wrought this funda-

mental change in industry mind-

shift: telco leaders are manifestly

less likely than ever to sit back and

let a government dictate the de-

sign of a national broadband net-

work, and whichever political

party emerges victorious must be

prepared to deal with the resulting

challenges.

Petroc Wilton

for this region, as well as Tokyo,

not only for the Japan market, but

for the region of Asia and for a lot

of traffic that ends up going to the

US, Tokyo is right on that path.

How VPLS will change enterprise networking

“ We eat our own dog food. In this region, we have moved our

backbone from IP VPN to Carrier

Ethernet and we looked at several

different carriers and there’s a lot

of competitive options. VPLS

seems to be very popular. VPLS is

many-to-many, it’s like IP

VPN. The other way to do

Ethernet is point-to-point

VLANs.

Here’s why people are

going to adopt to VPLS –

it has nothing to do with

the technology, and every-

thing to do with how peo-

ple pay for the bandwidth. With a

private VLAN model, you have to

pay for each private VLAN to each

other city based on the mileage to

that city. With VPLS, you say, ‘I

want to have a port that has, say a

Fast Ethernet port – so a 100Mbps

port, with say a 30Mbps commit.

That 30Mbps can be shared

across any of those cities. If you at

night want to do your backup

from Sydney, and an hour later

when that is done, you turn

backup on in Tokyo, and then

another hour later, you turn the

backup on from Singapore.

You can share that bandwidth

across that whole mesh.

It’s much more flexible and

elastic, whereas when you lock in

with those private VLANs, each of

those has a committed rate that

you are stuck with. VPLS is not

something that people talk about

very much, but that’s really what is

driving Carrier Ethernet.

NEWS ANALYSIS

A chat with Equinix

CTO Lane Patterson

CommsDay 13

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COMMS DAY_v1.indd 1 2/9/10 7:42:20 PM

CommsDay 14

The silver lining of 100G, cheaper 10G ports

“ The nice thing about that is that it further commoditises

the price of 10G as well. The guys

out there solving 100G on

switches and routers, sure, the

100G will be a little bit expensive

for a while, but the 10G ports just

got a heck of a lot cheaper. I’ve

seen 10G price per port – it’s very

different depending on the class of

equipment you are using, whether

it’s a Layer 2 switch verses a Layer

3 router, but it’s literally dropped,

for a Layer 2 switches, from

$5,000 to $6,000 a port just a cou-

ple of years ago, now we have ven-

dors out there saying they are sell-

ing switches for $500 per port.

Enterprise WAN hubs

If you look at just the general

major companies, we’ve had

phenomenal success and some

really interesting case studies with

companies like Bechtel, where

they realised they, as a major con-

struction company, have 25,000

subcontractors they work with all

the time – they have a sprawling

Why 100G won’t arrive in the backhaul for some time

“ If you look at the standard for 100G [100 metre multi mode

fibre] in the data centres, it is not

as innovative as you would think.

The first iteration of 100G is actu-

ally 24 fibre strands on multi-

mode. And they are using 10 x

10G signals, so just compacted 10

x 10G signals into a single optics

package – all it is, is 10 x 10G in

parallel and presented to the user

as if it is a single 100G port.

The second step that I think will

be prevalent is going to be a 10km

single mode standard on 100G.

This one is going to be a little

more innovative. It’s going to be

using Coarse Wave Division Mul-

tiplexing to put either 10 x 10G

waves on a single pair of fibre, or

it will have 4 x 25G waves.

That’s great if you have a piece

of fibre going across you data cen-

tre, connecting a switch to another

switch or router, but the moment

you move that to the backhaul and

plug it into the DWDM gear, you

are still using 4 wavelengths in-

stead of one, so it is really not

giving me the best spectrum effi-

ciency that I want.

And that’s why I say that 100G

is going to take a while to solve

any problems in the long haul.

Why Equinix needs 100G sooner rather than later

If you look at globally, Equinix is

going almost a terabit of traffic on

our Internet Exchanges between

US, Asia and Europe.

Our customers are using 10G

ports like they are going out of

style. We have one customer that

has 16 x 10G ports with us in one

location. And that’s becoming

more and more common.

Their bandwidth is still going

up 70% year over year. If we are

going to still use 10G ports for

that customer next year, they are

going to need 30 some ports. The

physical effort to manage 30 some

10G ports is just not worth it.

global network because they have

jobs going on all over the world –

they realised they could put, what

we called, an enterprise WAN

hub, move it out of their major

office locations and move them

into carrier neutral facilities.

They are eliminating the local

loop costs and then they are ac-

cessing the long haul bandwidth at

more of a wholesale competitive

price, whereas if someone is giving

you your WAN service, you are

locked into a local loop with them.

If you look at a typical Fortune

500 company, their WAN is pretty

complex. We are trying to show

them that when they come to a

carrier neutral place, they have the

freedom to pick the best carrier

within a given region.

You don’t have to one large

carrier and do a global WAN out-

sourcing contract with them –

yeah, they are going to take care of

all those problems for you, but you

are going to pay a pretty high rate.

You have the ability to say, hey

for my Asia headquarters, from

the Equinix data centres, I can

have access to, especially with our

focus on Carrier Ethernet, they

are going to have access to a large

list of choices, just for carriers that

specialised in serving Asia, and

then they can do the same thing in

North America, and they can do

the same thing in Europe.

Tony Chan

NEWS ANALYSIS

Our customers are using

10G ports like they are

going out of style.

CommsDay 15

COMMUNICATIONS DAY 2 August 2010 Page 11

COMMSDAY MELBOURNE CONGRESS

• MINORITY GOVERNMENT: How it impacts telecoms

• BROADBAND FUTURES: The business model challenge

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• OTHER TOPICS: IPTV, Customer service standards, mobile bb

12-13 October 2010: Langham Hotel

Institute for a Broadband Enabled Society exec director Dr Kate Cornick

Pacnet Australia NZ CEO Deborah Homewood

Telstra GMD public policy & communications David Quilty

Optus director, Victoria & corporate affairs, gov’t Maha Krishnapillai

Juniper Networks global business leader, cloud computing Dean Sheffield

NBN Co chief executive Mike Quigley

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CommsDay 17

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TUESDAY OCTOBER 12 Chairperson Anne Hurley 9.00 OFFICIAL OPENING: Victorian ICT Minister John Lenders

9.15 Former NBN expert panellist Reg Coutts: “NBN policy in international context” 9.35am Telstra senior exec TBC 9.55am Institute for a Broadband-enabled Society executive director Kate Cornick: “Enabling a broadband society” 10.20am Juniper Networks Global Business Leader for Cloud Networking Dean Sheffield: “Trusted Cloud Builders: A Winning Infrastructure Strategy” 10.45 Morning tea 11.10 Ericsson Australia NZ MD Sam Saba: “2020: 50 billion connected devices” 11.35 Optus director Victoria and corporate & government affairs Maha Krishnapillai 12.00 Kordia Australia MD Peter Robson 12.25 Qualcomm SE Asia and Pacific president John Stefanac 12.50 Lunch 2 Gilbert+Tobin partner Cameron Whittfield 2.20 Ovum analyst David Kennedy: “Impact of mobile broadband on FTTH networks” 2.40 Oracle Communications senior director Raghu Prasad: “LTE: Beyond the Network Investments” 3.00 Shirlaws Consulting partner Ben Ramsden: “Telco customer service - raising the bar” 3.20 Afternoon tea 3.40 Amdocs regional vice president Ananda Subbiah: “The transformation of the broadband market” 4.00 ACCAN deputy CEO Teresa Corbin 4.20 AARnet e-research director Guido Aben 4.40 PANEL SESSION "The future of the telco business model" with BigAir CEO Jason Ashton, MFJ principal Barry Lyons, eIntellego CEO Skeeve Stevens and Cloud Plus’ Jules Rumsey 5.15 Drinks

WEDNESDAY OCTOBER 13 8am Breakfast 9am Communications Alliance CEO John Stanton “The NBN migration debate” 9.25am NBN Co CEO Mike Quigley 9.50am Nokia Siemens Networks ANZ MD Kalevi Kostiainen: “Reinventing telco for the broadband era” 10.15 Alliance for Affordable Broadband spokesman Bevan Slattery (TBC) 10.40 Morning Tea 11.00 Shadow communications minister Malcolm Turnbull 11.25 Tata Consultancy Services head of communications & network solutions practice, telecoms Vimal Kumar: “Telecoms 2015 and beyond” 11.50 Pottinger joint CEO Nigel Lake: “A financial markets and investor view of the future broadband environment” 12.10 PANEL SESSION “CAPITAL PERSPECTIVE: How markets view telecoms” with Goldman Sachs + Partners Australia analyst Christian Guerra, Pottinger CEO Nigel Lake and BBY telecom analyst Mark McDonnell. Moderated by Grahame Lynch 12.35 Ciena speaker VP & GM Asia Pac Anthony Mclachlan: “Intelligent, Automated, High-Capacity Core Networks – Is There An App For That?” 1.00 Lunch 2.00 Telstra Wholesale Executive Director for Products and Marketing Terry Scerri: “Telstra's Data Evolution Program” 2.25 Norton Rose partner Nick Abrahams: “The A to Z of data centre deals” 2.50 C-Cor director Dermot Cox: “Where to next for our HFC infrastructure” 3.15 Combitel MD Eugene Razbash: “IPTV: Thinking outside the pay TV box” 3.35 Afternoon tea 3.55 Pacnet ANZ CEO Deborah Homewood: “The 2010 broadband barometer” 4.15 Tellabs’s Yee Soon: “Enabling mobile enterprise services” 4.35 PANEL SESSION “INDUSTRY FUTURES & STRUCTURAL CHANGE” with Telstra exec dir David Quilty, Internode carrier relations manager John Lind-say, telecom analyst Kevin Morgan and Primus regulatory manager John Horan. Moderated by Grahame Lynch 5.10 CLOSE

The line-up

CommsDay 18

he assumes an LTE network with

every household in its cell range

using 100Mbps of capacity simul-

taneously.

Given that most broadband

networks today operate at conten-

tion ratios of 1-in-20 to 1-in-50

and up to 1-in-100 for discount

offerings, it’s clear that FTTH-

enabled NBNs involve more than

a mere massive upgrade of the last

mile. To achieve the speed goals

defined by policy makers, they will

also require massive upgrades in

backhaul and transit capacity—

which of course, don’t fall in the

purview of the NBN’s own offer-

ings but must be accommodated

by the gross margins generated by

retailers.

75MBPS DEDICATED

Under the proposed Australian

NBN topology, 32 premises will

share a 2.4Gbits GPON fibre link,

effectively dedicating somewhat

less than 100Mbits per user, more

in the realm of 75. But where it

gets more interesting is in the

backhaul: Australia’s 10m prem-

ises will be effectively demarcated

between 200 points of intercon-

A ccording to the Australian fibre optic academic and

government expert panelist Profes-

sor Rod Tucker, there is a good

reason why pervasive 100Mbps

enabling fibre access networks are

much superior to broadband wire-

less networks. “Wireless spectrum

is already approaching its capacity

in urban areas, and in order to

achieve the required bandwidth, a

proliferation of wireless towers

would be needed,” he says. “A city

such as Melbourne would have

required up to 100,000 new wire-

less towers. Incidentally, every one

of these towers would need to be

connected via fibre and the towers

would consume 200 megawatts

more electricity than a fibre-to-the-

home network.”

“To provide ultra-fast broad-

band in urban areas, wireless tow-

ers will be needed to be placed at

least every 100 metres on every

street.”

And with that repudiation of

wireless comes an interesting in-

sight into the level of demand that

NBN advocates believe pervasive

fibre will generate. In the fine

print of Tucker’s counter-factual

nect or 50,000 per POI. To ensure

a dedicated 75Mbps of capacity

beyond the POI, retail service pro-

viders would have to commission

the equivalent of 750 million

megabits of capacity—750 terabits— of backhaul. Australia’s current

Internet capacity to the entire

world barely reaches 5 terabits: less than 1% of this.

Backhaul and transit services

aren’t cheap in the Australian part

of the world, particularly exacer-

bated by the fact that as a linguis-

tic cousin of larger North Ameri-

can and European markets, well

over two-thirds of Australian Inter-

net traffic traverses an undersea

cable.

According to Vocus CEO James

Spenceley, whose company spe-

cialises in wholesale transit, a dedi-

cated megabit of capacity to the

Internet at large currently costs

around A$100 per month.

This sounds a lot and it is— but

for the fact that Australians are

relatively modest downloaders of

data. Latest Australian Bureau of

Statistics findings suggest that the

typical Australian broadband user

downloads about seven gigabytes

Are NBNs too much

of a good thing? NBN advocates say that $43 billion is a bargain for technology whose benefits will

outweigh the costs. But what if the actual costs and end prices of pervasive

100Mbps service have been massively underestimated? Grahame Lynch reports.

COVER STORY

CommsDay 19

YouTube and its speed test func-

tionality as the “control”.

Across all wireless and fixed

platforms, the actual speed never

exceeded 2Mbps.

FASTER MEANS SLOWER

According to the firm’s Singapore

telecom analyst James Sullivan,

“the surprising conclusion is that

no matter what speed package you

subscribe to, your actual average

download speed for US content

ranged from 1.15-1.94Mbps, and

ironically the faster the package

you signed up for, the slower your

actual download speeds for US

content.”

He claimed of Singapore, "70-

80% of content accessed is Inter-

national: We spoke with several

Singapore telecom operators, and

all put the percentage of interna-

tional content accessed at over

70%. Therefore, a user’s experi-

ence 70-80% of the time using

their Singapore broadband con-

nection is at speeds significantly

lower then advertised package

speed and average of only 8% of

advertised speeds for higher end

packages.”

According to Sullivan, the basic

truth is that NBNs won’t matter to

customers without more interna-

tional bandwidth.

“Our view is simple…the cus-

tomer experience in an English

speaking market with a preponder-

ance of foreign content like Singa-

of data per month. But under a

scenario painted by NBN Co Mike

Quigley in an August speech, typi-

cal data downloads might increase

into the two terabyte range—an

implied data requirement of

nearly a megabyte per second.

At today’s transit costs, when

combined with the implied NBN

wholesale tariff of $60 or more for

highest speed services plus retail

overheads, its clear that the type of

highly utilised connections envis-

aged as the desirable end goal by

NBN advocates might cost con-

sumers well over hundreds of dol-

lars per month.

That is without dedicated mini-

mum speeds.

Early experiences with initial

Singapore NBN prices point to the

transit cost issue.

Singapore, like Australia, is

heavily reliant on international

connections. As a small market of

4m people, much of the most de-

sirable English, Chinese and In-

dian language content that broad-

band users consume is served off-

shore. And this is reflected in pric-

ing plans released as part of its

initial FTTH rollout, expected to

cover around 40% of the nation

by year’s end.

The country’s largest retail telco,

SingTel, offers an entry level

FTTH plan at S$86 (A$70) per

month. This boasts headline

speeds of 150Mbps downstream

and 75Mbps upstream. Truly im-

pressive stuff. But international

downloads—which account for the

vast majority of usage today—are

capped at a mere 15Mbps. Major

rival StarHub is offering a similar

plan, priced to within $2 of the

SingTel offering.

This basic reality of hard speed

limits on anything requiring an

international link can already be

observed today.

JP Morgan Research found an

incredible similarity in interna-

tional speeds across various wire-

less, HFC and DSL platforms of-

fered by Singapore carriers today– using the most popular global site

pore is defined by the interna-

tional link. Government data

shows clearly that at present users

in Singapore are getting 1-2Mbps

service to US websites no matter

what package taken.”

In a conclusion for his clients,

Sullivan wrote: “We believe the

market is under estimating the

potential cost increase involved

with high speed broadband ser-

vices. Markets with a heavy con-

centration of international con-

tent (Singapore, the Philippines,

Malaysia to a lesser degree) will see

the overall user experience defined

by the international link bottle-

neck. This implies significantly

higher expenses on either interna-

tional links or local caching opera-

tions.”

Which begs the question: is the

push for ubiquitous 100Mbps and

even 1Gbps services via fibre ac-

cess infrastructure simply too

much of a good thing if not ac-

companied by commensurate in-

creases in transit, backhaul and

international capacity? And given

the experiences of 2001—when

major undersea cable operators

went bust and sold for cents in the

dollar—because they over-estimated

demand and the preparedness to

pay for increased capacity, is the

same mistake repeating itself with

last mile infrastructure invest-

ment? That it simply moves the

bottleneck to another point at the

network, while adding much

greater cost into the system for a

less than commensurate payoff in

terms of user speed and capacity. The newly appointed shadow

communications minister in Aus-

tralia, Malcolm Turnbull, certainly

makes the comparison.

“In the late nineties, there were

tens of billions of dollars, possibly

hundreds of billions of dollars,

spent on subsea cable, broadband

capacity if you like, around the

world. It was a classic case of

’build it and they will come’ – the

result was a massive destruction of

shareholder value, and all of those

assets ended up getting sold for

COVER STORY

Professor Rod Tucker

CommsDay 20

AUSTRALIA

INDIA

PAKISTAN

PHILIPPINES

INDONESIA

NEW ZEALAND

VIETNAMTHAILAND

MYANMAR

MALAYSIA

PAPUA NEW GUINEA

NEPAL

CHINA

OMAN

IRAN

SAUDI ARABIA

LAOS

CommsDay 21

the like. NBN Co itself employs

the moniker “Endless Entertain-

ment” in its promotions, suggest-

ing a heavy role for capacity-

hungry video.

COSTS BEYOND THE POI

This profile creates a need for

costly dedicated bandwidth be-

hind the POI and upholds one of

Ergas’ assumptions: that a genuine

high speed service would require

relatively high committed informa-

tion rates when compared with

today.

Ergas says his critics often make

the mistake of counting only the

$43b capex cost of the NBN when figuring out retail pricing, while

neglecting the expense of all the

backhaul, transit and overseas

capacity required to condition a

raw last mile NBN offer into a

complete Internet and telephony

access retail package.

He notes that his methodology

isn’t that alien to the actual NBN

itself: after all, his original costings

were partly compiled by Dieter

Schacdt who is now a pricing man-

ager with NBN Co.

According to Ergas there is a

real risk of the same type of mar-

ket failure which saw the 1999 to2001 wave of American and Euro-

pean bandwidth projects collapse

under weak demand and sold for

cents in the dollar to Indian, Sin-

gaporean and Chinese buyers.

cents in the dollar. We’re using

them [now], but there was a mas-

sive destruction of wealth,” he told

ABC radio.

“I am passionately in favour of

broadband, I am a notorious inter-

net junkie... and I’m very commit-

ted to the amazing things that we

can do with technology. But I’m

also committed to not wasting tens

of billions of dollars of taxpayers’

money... if the government says

I’m wrong, and they do, where is

the financial analysis, where is the

business plan, where is any of the

evidence that would justify this

investment?”

Turnbull has a point: there is

yet to be any detailed modelling of

real wholesale prices for the Aus-

tralian NBN (early Tasmanian trial

offers are based on free retail con-

nections and free wholesale tar-

iffs), nor has there been any analy-

sis of direct and indirect costs and

benefits for the project.

This rankles economist and

academic Henry Ergas whose early

modelling of NBN costings and

demand found that end user tar-

iffs for higher speed services might need to exceed $150 for the pro-

ject to be commercially viable.

Ergas was pilloried by the pro-

NBN forces including communi-cations minister Stephen Conroy and FTTH consultant Stephen

Davies, who came out with his

own range of estimates pricing the

NBN at half or less of the pro-

jected $43 billion concluding that

today’s tariffs could be grand-

fathered into the NBN environ-

ment.

But Ergas could claim vindica-

tion as NBN Co’s Mike Quigley,

communications minister Stephen

Conroy and Rod Tucker subse-

quently articulated a vision for the

NBN as enabling a highly interac-

tive video-based usage profile for

the broader population. They talk

of video conferencing sessions

between doctors and patients,

distance education via virtual class-

rooms to the masses, multiple

HDTV streams per household and

“But there is, to my mind, a very

substantial difference, which is

that this time, taxpayers can be

forced to cover the bill, so it

won’t be equity holders who, how-

ever misguided, chose to put their

funds at risk who will cop the loss,

but Australian mums and dads,

who have been given no choice

and less product disclosure than

securities regulators would require

if you tried to on-sell a govern-

ment bond,” Ergas says.

NBN advocates say that critics

such as Ergas and Turnbull don’t

get the indirect benefits—the exter-

nalities—which can be generated

by high-speed broadband.

These will more than pay for the

actual costs of the NBN in ways

that can’t be easily quantified or

measured.

Making this point, Rod Tucker

explains: “There are enormous

opportunities in areas such as tele-

health, aged care, remote distance

learning, social networking for

isolated communities, online sup-

ply chain management, environ-

mental monitoring and smart me-

tering, and water resource manage-

ment. The list goes on.”

“Overseas studies have shown

that large economic and environ-

mental benefits can flow from tele-

working for office workers, and

substantial greenhouse gas reduc-

tions can be achieved by replacing

business travel with high-quality

video conferencing.”

“The opportunities afforded by

ubiquitous high-speed broadband

are limited only by one’s imagina-

tion. The NBN will place Australia

at the forefront of developments

in these areas. It will not only pro-

vide the bandwidth needed for a

rich variety of applications, it will

provide opportunities for entrepre-

neurs to develop new technologies

and services and bring these to

market.”

But critics of the NBN concept

charge that pervasive fibre-based

high speed services will not deliver

the wider social benefits claimed

for them if they are simply too

COVER STORY

Henry Ergas

CommsDay 22

NBN Co’s plans call for a 4G

LTE-type service covering around

half a million or so Australian

households outside the fibre print

in sparsely populated regions, but

Wallace questions why it is speci-

fied as a fixed wireless service

capped at 12Mbps only, when

current LTE technologies are

ramping up to 100Mbps-1Gbits

peak speeds with full mobility. He

also accuses NBN Co of misunder-

standing wireless broadband by

specifying Ethernet when every

commercial system today uses IP.

“Ethernet adds network and man-

agement overhead and takes a big

chunk out of performance. No

one else in the world would con-

template it,” Wallace said, adding

that this particularly adds pressure

on network performance in physi-

cal locations where backhaul is

also a major cost issue.

CAPTURED BY FTTH LOBBY?

Which raises another question in

the mind of NBN critics. The

original goal of the Australian

government and minister Stephen

Conroy was to promote affordable

and accessible broadband, particu-

larly for those who don’t have it or

had a slow version of it. Has this

original vision been captured by

fibre-to-the-home industry advo-

cates and lobbyists who instead

prefer an over-engineered, future-

proof and comparatively expensive

monopoly fibre infrastructure, to

the detriment of existing access

infrastructure and alternate tech-

nologies that could do much of

the same for considerably cheaper?

NBN proponents such as Tucker

costly for end users and taxpayers.

This is one of the central

charges of the Alliance for Afford-

able Broadband— a group of nine

fibre, transit, DSL and wireless

operators—who believe that an

affordable ‘safety net’ broadband

network could be offered using

LTE or a similar platform for less

than 10% the cost of national

FTTH. The Alliance was formed

hurriedly in late August in direct

response to a speech by NBN

CEO Mike Quigley which found-

ing CEOs felt contained many

misrepresentations regarding the

viability and claimed superiority of

fibre.

WORLD GOES WIRELESS

AAPT CEO and Alliance member

Paul Broad thinks the fibre-bias in

NBN policy is misguided when

compared to global developments.

“You go into China and what

they’re focused on is the third

world. And the third world isn’t

talking fibre, they’re talking wire-

less. And they’re talking about

efficiency of spectrum, so how do

you deliver up speed efficiently

within the spectrum range we

have? And how do you optimise

that? And how do you actually run

out these smaller devices where

you basically hang off the side of a

building and plug in to the power

outlets that are already in build-

ings, so you change the economics

of towers?”

“And what they’re talking about

is some of the infrastructure we

now have sitting in building base-

ments where you think you’re ...

different cars that allow you to

deliver up different products in a

seamless way. I mean, you and I

know, I’m completely wireless in

this building, completely wireless.”

Another Alliance member, Paul

Wallace of south Queensland

wireless operator Polyfone, goes

further, accusing the NBN forces

of deliberately “hobbling” their

own planned wireless service, pre-

sumably to advantage the case for

fibre’s efficacy.

and Conroy repeatedly promote

the need for an NBN to facilitate

such things are remote video,

smart grids and distance learning

even when in the here and now,

the same government is funding

smart grid and e-health initiatives

that will make use of existing Wi-

MAX and other technologies.

Notably many of these e-service

delivery mechanisms require con-

siderably less than 100Mbps ca-

pacities and in some cases are actu-

ally advantaged by mobility: smart

grids are largely facilitated by te-

lemetry applications that require

nothing more than mobile SMS

functionalities.

Which leads to another ques-

tion: even if the NBN becomes

widely adopted for improved

broadband services at the sub-

25Mbps level, what will policymak-

ers do if 100Mbps uptake fails to

eventuate because of the lack of

relatively affordable transit and

backhaul?

What if there is a commensu-

rate lack of productivity or innova-

tion benefits for Australia on the

basis that broadband usage has

only incrementally increased off a

far greater cost base than was the

case in pre-NBN times?

Will this be deemed another

market failure leading to billions

of dollars of even more govern-

ment investment in nationalising

and underpricing those services?

Or will the national FTTH net-

work simply take the same massive

write-downs seen on previous fi-

bre-heavy Australian private invest-

ments and end up in the hands of

a private owner for cents in the

dollar of its build costs?

These are all legitimate ques-

tions that sincere NBN advocates

could do well to address.

Grahame Lynch

Grahame Lynch is the founder of

CommsDay. He was the editorial

director of America’s Network in

Los Angeles throughout the 1999-

2001 undersea cable boom and

bust

COVER STORY

AAPT’s Paul Broad

CommsDay 23

Katz of Columbia University tried

to estimate the induced job effect

of the U.S. stimulus, and discov-

ered it might well be negative.

Because the data was uncertain,

he offered different scenarios with

both positive and negative net job

impact, with a positive midrange.

If broadband makes local busi-

nesses more efficient, they might

need fewer workers. What hap-

pens to local educators if distance

learning becomes more popular.

Four million Americans are taking

university classes remotely already.

Local doctors could lose patients

to far away specialists. Indian radi-

ologists are already taking work

away from radiologists in many

other countries. Initially, the mar-

ket was U.S. hospitals on the night

shift when no radiologist wanted

to work. Now, the competition is

for daytime work as well.

LIMITED BENEFITS

Jed Kolko of the Public Policy

Institute of California did the

most thoughtful paper on the eco-

nomic benefits of broadband I've

read. He looked at broadband

availability in many areas and time

periods. Some of his results were

positive, but he also found

“economic benefits to residents

appear to be limited. Our analysis

indicates that broadband expan-

sion is also associated with popula-

tion growth and that both the

average wage and the employment

rate—the share of working-age

adults that is employed—are unaf-

fected by broadband expansion.”

Shane Greenstein, the Elinor

and Wendell Hobbs Professor

Management and Strategy at

Northwestern University, calcu-

lated impacts likely 70-90% less

than paid advocates in D.C.

Bob Crandall, who led the first

studies that found a major impact,

by 2009 called the typical job pro-

jection “a gross overestimate.” He

added “There is a great deal of

overstatement in most of these

W hen Bob Katter lined up behind Tony Abbott, I

started writing the obituary for the

Australian NBN. It would have

been sad, but nothing like the

economic and job disaster some

predicted. I’m glad Oakeshott and

Windsor went the other way; in

the long run Australia will be bet-

ter off with a great Internet. But

the facts are clear: the best inde-

pendent scholars find expanding

broadband has, at most, a very

modest income or job effect.

Nearly all the “studies" that found

enormous benefits were paid for

by carriers or those seeking govern-

ment money, and were over-

optimistic. Common sense has

been lost as geeks lusted after fast

connections and businesses looked

for government favours. Essen-

tially everyone in countries like

Australia and the US can connect

at megabit speeds today at a price

in reach of just about any business

or middle class family. Fewer than

10% have really slow connections,

including satellite. Even satellite is

perfectly functional for most busi-

ness purposes, including applying

to jobs, managing a web site or

looking up information.

The NBN will be 10 or 100

times faster than what most of us

have today, a pleasure. But experi-

ence from countries that already

have fast connections is that appli-

cations used change little. Tens of

millions have fibre and DOCSIS

connections at 50 meg or faster

today. They are great, especially if

you want to watch multiple HD

videos. But faster connections

change very, very few people’s

lives. No one has suggested a plau-

sible reason why 50 meg connec-

tions have wildly more economic

impact than 3 meg connections.

The scholars discovered what

every unemployed book seller,

newspaper reporter, and record

company executive knows: broad-

band has a downside as well as

benefits. In February 2009, Raul

studies.” Greenstein explained

why the earlier studies, even if

solid, can’t predict what will hap-

pen today. “The experience of

Manhattan in 2005 has no rela-

tionship to the experience in West

Texas” today. If he were Austra-

lian, he could have compared Syd-

ney with the outback.

Those with the most to gain from

broadband are nearly all among

the 70% already connected.

Reaching everyone is good so-

cial policy, but the economic im-

pact will be different. There will

be a return, but it’s more likely to

be in the 5-15% range. Private

companies aren’t interested in that

rate of return unless competition

drives them to it, so privately fi-

nanced fiber home builds are un-

common except where competi-

tion is fierce. Verizon built FiOS

because Cablevision was taking

30% of the voice lines and a ma-

jority of broadband. Bell Alliant in

eastern Canada is doing fibre to

the home because Eastlink Cable

is clobbering them.

Governments, on the other

hand, can take the long view. Aus-

tralian government bonds yield 4-

6%. If the project is efficiently

run, the net impact should be

positive. Quigley's a good manager

but his spending estimates worry

me. Builds like Verizon have been

done for less, and the cost of fibre

gear has dropped to $US100/

home in China. I expect him to

get the job done for less than

$43b, especially if the details of

the Telstra deal prove out.

If the NBN has a net return

after borrowing costs of 5% on a

$40b investment, that's about $2b,

or a quarter of 1% of Australia’s

GDP. With 8-10 years required for

much of the impact, that’s so

small it would be hard to conclu-

sively measure.

I’d still prefer a 100 meg con-

nection, however, even if the eco-

nomic payoff is small.

Dave Burstein

COVER STORY

Why the NBN’s payoff will be slow

CommsDay 24

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CommsDay 25

out a transition plan to the next-

generation of Internet Protocol,

IPv6? After all, the well-tested IPv6

has been around for well over a

decade already and would solve

the issue emphatically – the 128-

bit IPv6 space, while not infinite,

would have enough addresses for

every man, woman, child and pet

and still plenty left over for

Stephen Conroy’s broadband-

enabled dishwashers.

STUNNING SILENCE

The dates for the exhaustion of

IPv4 addresses above come from

Geoff Huston, currently chief sci-

entist at APNIC but also one of

the pioneers behind the Internet

in Australia from his early days

with AARNet. They’re also fairly

close to other dates that have been

nutted out by people in the Inter-

net community and there’s very

little disagreement on the time-

frame. As Huston states, it's not

like we haven’t known this day

would come. In fact, it’s been fore-

cast since the early 1990s.

“Here we are, with this massive

industry supporting a huge

amount of wealth and currently

expanding by a million new work-

ing services every day and we seem

P ut this date in your diary: 4 June 2011. That’s the date

that the main Internet body for

allocating IP addresses – the Inter-

net Assigned Numbers Authority

(IANA) – is predicted to exhaust

its pool of unallocated

IPv4 addresses. And

while you’re at it, put this

date in your diary as well:

4 February 2012. That’s

the date the body for

allocating addresses in

this region – the Asia

Pacific Network Informa-

tion Centre (APNIC) –

will have doled out the last of its

unallocated IPv4 addresses. Once

that happens, there simply won't

be any more IPv4 addresses to give

out.

That news will most likely trig-

ger a few alarm bells for organisa-

tions, government agencies and

companies that have become ac-

customed to a continuous supply

of IP addresses to fuel their opera-

tions. So should we be scared?

And how come more alarm bells

haven’t been sounded? After all,

an IP address is the lifeblood of a

huge amount of global trade, of a

wealth of new Internet services

that are created every day, and of

the future stable operation of our

carriers and ISPs. Yet we’re down

to the last 5 percent of unallocated

IPv4 addresses, exhaustion in less

than a year and no-one seems to

be too bothered.

So to cut to the chase, yes, you

should be afraid. Be very afraid.

The more interesting question is

how could it get to this point with-

to be doing nothing. From where I

sit the silence has been stunning,”

Huston said.

Not that he thinks that the sky

is about to fall down on the Inter-

net – far from it. There are

kludges available

that will keep the

Internet up, even if

it will mean patchy

service and an inabil-

ity for some new

services to get off the

ground. And it

won’t even mean

that businesses can’t

get their hands on any more IPv4

addresses. It will be just a matter

of how much they’re willing to

pay.

“There is no such thing as no

more addresses – it's all about

price,” Huston points out. “It's

pretty obvious to all of us that the

folk who are most desperate for

IPv4 addresses will have to pay.”

At its most recent annual confer-

ence on the Gold Coast in August,

APNIC presented its plans that

will free up the trade in IPv4 ad-

dresses. Once the remaining ad-

dresses are gone, it's a question of

waiting to see how much people

are willing to pay to acquire one.

We’ll have gone from a scenario

where an IP address is the least

significant part of any new service

to one where it is a key factor.

Of course the other option is

that Internet world will see sense

and move to IPv6.

TRANSITION TIME

In terms of core Internet infra-

The Internet’s date with destiny It’s been forecast for nearly 15 years but the time for the exhaustion

of IPv4 numbers is nigh. Geoff Long examines what will likely happen

June 2011

Sun Mon Tue Wed Thu Fri Sat

1 2 3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 18

19 20 21 22 23 24 25

26 27 28 29 30

CommsDay 26

most core network infrastructure

on the market is IPv6-ready, a lot

of the gear in consumer homes

and small offices is not.

Home gateways, mobile phones

and PCs, VoIP gear are just some

of the items that will likely not

work and need to be replaced.

James Spenceley, CEO of whole-

sale carrier Vocus and an APNIC

executive council member, is even

less optimistic about the prospects

for a smooth transition to IPv6,

arguing that the time has now

passed for an orderly migration

and it is now a question of mini-

mising the impact.

“It's definitely too late now. The

end of the world is here – how are

we going to deal with it? We need

to work out ways to lessen the

impact when we do run out.”

“When you're looking at pro-

viding services to end-users, in

reality most of the end-user CPE,

your wireless modem router etc,

has to go . . . that's a massive

amount of inertia,” he said. “And

you can’t just convert them over,

you need to have both [protocols]

running. And then you need to

slowly migrate every web site, every

BitTorrent client, every mail server

on the Internet . . .and then you

can turn off IPv4. That's 10 years!”

THE NAT ARGUMENT

There are those who continue to

say that the whole issue is a beat-

up, pointing to a string of media

stories in the past about the pend-

ing doom that the Internet is run-

structure, most of the major ven-

dors have been IPv6-ready for

quite some time. Tim Nagy, a sys-

tems engineer with Juniper Net-

works, said that IPv6 capability is

being demanded on more tenders

these days, but its actual use in the

network is very much in its in-

fancy, with any deployment typi-

cally using a IPv4/IPv6 dual stack

solution. And while Juniper could

introduce IPv6 in service provider

networks “fairly quick”, Nagy said

that the demand hasn't eventuated

yet, much to his and many other's

surprise.

“We aren’t at the stage that Ju-

niper thought we'd be at in 2010,”

he said, noting that there was mo-

mentum for IPv6 a few years ago

when the US Federal government

mandated it as a requirement for

all future network builds, but

since then he said momentum had

actually slowed. And according to

research from Huston and others

in the Internet community, today

only a very small percent of end

points, perhaps 2-3 percent, can

now run IPv6.

In the commercial world, the

main problem is that there is no

financial benefit to service provid-

ers in upgrading.

The users won’t know the differ-

ence in any case, so it's simply an

extra expense that the company

has to add for no return. However,

Nagy expects there will be a lot

more migration activity once IPv4

depletion does hit. And that's

when the fun might start.

One thing that most people are

fairly sure of is that there will be

some disruption once we hit ad-

dress depletion and start to move

to IPv6, the only issue is how

much. Nagy expects that new users

might have to put up with delays

in getting their new services, while

some services won’t get deployed

and others won’t work as well as

they do today.

He also thinks that there will be

a two-tier Internet – some services

on IPv4, others on IPv6 – for as

long as a decade or two. And while

ning out of Internet addresses.

And they’ll also point to work-

arounds such as Network Address

Translation (NAT) that will allow

carriers and large companies to

offers services to many people

from just a few IP addresses.

Juniper is one of the vendors

that offers so-called “carrier-grade

NAT,” but according to Nagy it is

typically only seen as an interim

solution that can mitigate some of

the problems before a full migra-

tion to IPv6. He says that among

the services providers, most see

NAT as a short-term necessity at

best but it’s not the ideal solution.

He claims that ultimately users are

unlikely to put up with NAT-based

services, which can affect the work-

ing of a number of Internet proto-

cols, most notably VoIP, and don't

allow for end-to-end connectivity.

However, there’s also a more

concerning issue with the use of

NAT. As APNIC’s Geoff Huston

explains, once IPv4 addresses are

depleted, it could open up an op-

portunity for a brokered service

that will allow a new type of pro-

vider to offer connections – for a

fee, of course.

For example, technologies such

as IMS coupled with NAT could

be used to create a virtual Internet.

“In a world of sparse addresses,

those providers get a new lease of

control,” he suggests. “The Inter-

net stops being innovative and

becomes hideously controlled. Not

everyone sees it in their interest to

have the same abundant supply of

addresses. Some see constraint as a

means of control.”

While the control scenario is at

one end of the extremes of what

might happen, the thing that can't

be disputed is that we are running

out of IPv4 addresses. Rapidly.

And that's a scenario which no-

one has faced before. Lets hope

that the issue passes with as little

disruption as possible, because as

Huston says, the Internet is “too

valuable to trash.” In the mean-

time, mark your diaries for June

next year.

Vocus CEO James Spenceley

CommsDay 27

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CommsDay 28

tical to the day it was installed –

or, in the more measured termi-

nology used in works like this,

“there exists no significant degra-

dation in the optical fibre cable’s

performance, which verifies labo-

ratory testing and speaks to the

true reliability of optical fibre ca-

ble.” (Verification of Optical Fiber

Cable Reliability, Houser and Chi-

hanovich, 1999).

The watch took a licking, but it

kept on ticking.

Fibres in a cable now 23 years

old and suffering extremes of heat,

cold and mistreatment was indis-

tinguishable from a new fibre –

and there are people who think

today’s fibre has a lifetime of just

fifteen years? How can this be?

After trawling around other pa-

pers, documents, and Google

searches, I have come to the con-

clusion that some people, at least,

are mistaking the depreciation life

of a fibre (be it 10, 15 or 25 years)

for its physical endurability.

A hint is in the divergence be-

tween peoples’ belief about the

lifetime: they’re getting data from

the same source, depreciation

models published by Technology

Futures Inc, one dating from 2003

(10 to 15 years), the other from

2008 (20 to 25 years).

The TFI model is an actuarial

exercise – it sets a reasonable pe-

riod over which the fibre owner

can reduce the book value of the

L ooking at website comments,

it seems that there’s a bit of

confusion out there: is the life of a

fibre 15 years, or 25 years?

Since this gives me a chance to

indulge myself – telling a factual

story instead of grubbing around

in politics – I decided to do some

reading, and I came across a gem.

Well, it’s a geeky kind of gem: a

technical paper that I’ll crib for

you here.

In 1999, a couple of researchers

decided to test a field-aged optical

fibre, and the one they picked was

a beauty. Installed in Oregon in

1987, the cable experienced tem-

peratures ranging from -17 to +37

Celsius; average annual snowfall of

20 cm; annual flooding; and mud-

slides.

One of those mudslides exposed

the cable; the carrier involved de-

cided to replace (and reroute) it,

Kevin Houser of Corning and

Shirley Chahanovich of Pirelli

decided to test it.

The battery of tests included

microscopic examination, stress

tests, and optical tests (to measure

the effect of inks and coatings on

the integrity of the glass over more

than ten years).

For those who like the gory de-

tails, the stress tests included

“cable twist, flex, compression and

impact, water penetration, cable

jacket shrinkage, tensile elonga-

tion of the outer jacket, and fiber

stripability” – in other words, mis-

treating both the fibres and the

other cable components – and the

authors’ regret was that with only

about 26 metres of cable available,

they couldn’t run any other physi-

cal tests!

Their conclusion?

The fibre was pretty much iden-

asset (and claim the relevant tax

deductions) towards zero.

It does not define the physical

life of the cable, although this is

factored into the model. It also

sets costs like repair and mainte-

nance against the asset value, and

factors in whether future technolo-

gies are likely to render the fibre

obsolete (it’s so hard to find good

candidates that TFI even includes

BPL in the list).

The reason that commenters

and commentators seem confused

about whether the life of a fibre is

15 or 25 years is, I suspect, down

to Google: it’s easier to find the

2003 data (15 years) than the 2008

data (25 years), unless you’re pay-

ing attention.

What people don’t understand

is that the “25 year depreciation

cycle” assumes that most of the

network will still be functioning at

the end of that period.

If it were otherwise, then a car-

rier with fibre in the ground

would need to build its new net-

work while still depreciating the

old one; a state of affairs which

would be unacceptable to network

owners, investors and govern-

ments alike.

And when someone on a news

site trots out “ten to fifteen years”

as the life cycle of the fibre you

can safely ignore them.

The strange case of perishable fibre

.

Richard Chirgwin

CommsDay 29

what is it about the device that is

making some governments so un-

easy? Put simply, RIM’s sin has

been to offer a securely encrypted

device that prevents the company

or any other third party, including

government agencies, from moni-

toring messages and emails to the

level of detail some request. “The

Blackberry platform architecture

relies on dedicated data centres

(NOCs) which handle all Black-

berry data traffic over a secure,

encrypted connection the NOC

and the handset,” Ovum analyst

Tim Renowden said.

“Some governments are uncom-

fortable with the solution because

they have little or no visibility into

Blackberry data traffic, and are

concerned that Blackberry hand-

sets may be used for criminal pur-

poses.”

The company also boasts that it

could never be pressured into pro-

viding copies of customer’s encryp-

tion keys “since at no time does

RIM or any wireless network op-

erator or any third party ever pos-

sess a copy of the key,” the com-

pany says on its website. “This

means that customers of the Black-

berry enterprise solution can main-

tain confidence in the integrity of

the security architecture without

fear of compromise.”

A uthorities in the United Arab Emirates were tense

after Hamas leader Mahmoud al-

Mabhouh was assassinated in Du-

bai in January. One of the theories

peddled had Israeli Mossad com-

mandos carrying out the hit with

the use of their Blackberry devices.

The tension was recently

unleashed in a wave of arrests,

which saw authorities also detain

protesters who were allegedly us-

ing the Blackberry Messenger ser-

vice to plan a protest against the

price of petrol.

The orchestrator of the rally had

only been caught after giving him-

self away unwittingly by sending

his Blackberry PIN out in a bulle-

tin board message.

Now the United Arab Emirates

has threatened to ban several

Blackberry services lest they im-

pede future security efforts.

It seems that the governments of

some of the world’s developing

countries don’t share Westerners’

enthusiasm for the device affec-

tionately termed the ‘Crackberry’,

because of its potent addictive

qualities. On 2 August the UAE

Telecommunications Regulatory

Authority issued a statement that

it proposed to suspend Blackberry

messenger, email, and web-

browsing services from 11 Octo-

ber. Since then? A cavalcade of

bans and proposed bans world-

wide including in Saudi Arabia,

India and Indonesia.

On the back of this worldwide

clampdown, RIM stocks fell heav-

ily. The regulatory onslaught

prompts the obvious question –

What differentiates the Black-

berry system is the fact that the

data from communications is

stored in the Blackberry enterprise

server in Canada, rendering it

outside of the ambit of jurisdic-

tions that may seek to impose

harsh surveillance laws. According

to Dr Steve Hodgkinson, public

sector IT research director at

Ovum, other device operators

have located their servers outside

of the country of origin. “I believe

that is more the standard pattern,”

he told CommsDay. “Blackberry

has attempted to differentiate it-

self on the basis of having a global

secure email system. One of the

big sticking points for the adop-

tion of Blackberry services by Aus-

tralian government departments

and corporations in Australia

when it was first introduced was

that the emails were hosted in

Canada. People had their security

staff vet the whole thing and even-

tually came to be comfortable with

the security.”

This closed network is one of

Blackberry’s main advantages as

business executives, politicians,

journalists and others who prize

the inscrutability of their informa-

tion will attest. “The difficulty for

RIM is that security has been a key

selling point for BlackBerry and

acquiescing to government de-

mands would significantly under-

mine its security credentials, par-

ticularly with business and public

sector customers,” Renowden ex-

plains. There are myriad legitimate

reasons for wanting data encryp-

tion and privacy, and Renowden

How RIM is fighting back against

the Blackberry bans Research in Motion faces a dilemma in its effort to overturn bans on the Blackberry—

acquiescence to governments harms its reputation. Miro Sandev reports

At no time does RIM or any

wireless network operator or

any third party ever possess

a copy of the key

CommsDay 30

email. That’s the conundrum they

have.”

India is the world’s fastest-

growing mobile phone market,

with some reports suggesting the

sub-continent is adding new sub-

scribers at a rate of 20 million per

month. RIM clearly values the

market, as evidenced by its deci-

sion to give Indian authorities

limited access to its messenger

service starting from 1 September.

The company has also agreed to

lead an industry forum in develop-

ing ways to balance customer pri-

vacy demands against the authori-

ties’ security requirements.

“Finding the right balance to

address both regulatory and com-

mercial needs in this matter is an

ongoing process and RIM has as-

sured the Government of India of

its continued support and respect

for India’s legal and national secu-

rity requirements,” the company

said in a statement. RIM did not

point to any other technology or

communications companies that

could join the forum but refused

to be singled out as the only firm

to use resilient encryption. “The

use of strong encryption in wire-

less technology is not unique to

the BlackBerry platform. It is un-

questionably an industry-wide

matter,” RIM said. “Banning such

senses a perception in the market

that if RIM compromises with one

government then others will de-

mand the same level of access.

RIM has been adamant that it

will not yield to government

threats and customise its services

in some countries, vowing in a

statement in August that it will

not compromise the integrity and

security of the BlackBerry. “There

is only one BlackBerry enterprise

solution available to our custom-

ers around the world and it re-

mains unchanged in all of the

markets we operate in,” the com-

pany said. “RIM cooperates with

all governments with a consistent

standard and the same degree of

respect. Any claims that we pro-

vide, or have ever provided, some-

thing unique to the government of

one country that we have not of-

fered to the governments of all

countries, are unfounded.”

However, Hodgkinson is not

convinced RIM will stay true to its

word and warns that this could

have disastrous implications for its

reputation. “They appear already

to have [struck a compromise] in

the UAE and Saudi Arabia and

discussions seem to be coming to

some kind of conclusion in India,”

he said. RIM seems to have ap-

peased the Saudi authorities as the

country’s government has now

said it would allow messenger ser-

vices to continue, but the UAE is

standing by its decision to put the

kibosh on the messenger, web-

browsing and email services start-

ing from 1 October. Hodgkinson

believes there is a slippery slope

that could run between RIM’s

compromise in one jurisdiction

and a significant puncturing of

user confidence world-wide.

“The problem for RIM is that

those markets are so big, particu-

larly India, that in the end they

will have to comply with the regu-

lations of the country, whether

they would like to or not,” argues

Hodgkinson. “And that will have

consequences for their positioning

as a global provider of secure

strong encryption-based informa-

tion and communications services

would severely limit the effective-

ness and productivity of India’s

corporations.”

Just days ago, Indian authorities

announced that they will delay

firm bans to the Blackberry mes-

senger services for at least 2

months after the firm agreed to

provide “some technical solutions”

for local security agencies to moni-

tor its email service. Indian gov-

ernment officials would not be

drawn on the details of these solu-

tions but explained that the De-

partment of Telecommunications

will begin assessing them immedi-

ately and that the government will

make a decision in sixty days time

as to their adequacy. The govern-

ment has now also demanded

access to data that flows across

Google and Skype servers.

The question for Blackberry

ultimately will be whether it stands

to lose more customers from the

devaluation of the secure commer-

cial email service it offers or from

being denied access to large emerg-

ing markets such as India and

Indonesia.

Crucial to its decision will be

whether it can get Google and

Skype onside and form a commer-

cial troika that will have greater

leverage in negotiations with the

authorities.

One can bet that all three com-

panies are doing some serious

analysis right now.

Crucial to its decision will

be whether it can get Google

and Skype onside

CommsDay 31

the civilian infrastructure in

March 2003, leaving the US Army

and State Department in control

of a country without any civilian

communications for their own use

or for reconstruction.

The evidence for this paragraph

is at least seven years out of date.

Since 2003, the international

telecommunications company

most re-

sponsible

for facilitat-

ing recon-

struction in

Iraq is Huawei, not an American,

European or Japanese company,

though each country contributed.

Many western companies would

not send engineers to Iraq for

security reasons. Huawei has 200

engineers and support personnel

T hose who follow the geopoli-tics of international telecom-

munications will be aware of the

obstacles confronted by Huawei in

gaining access to large network

contracts in the United States. No

doubt Huawei can take care of its

own interests, but lately the politi-

cal objections have taken a moral-

istic tone that maligns Huawei

with accusations based on inaccu-

rate evidence and hearsay.

The most dramatic attack came

in August in a letter from a group

of conservative US senators sent to

high Administration officials.

The senators’ letter is available

as a .pdf file on the Internet for

those who want to read the whole

thing. That letter demands a re-

sponse from someone familiar

with international and Iraqi tele-

communications.

Huawei has a good

story to tell the American

people but this is being

lost in the noise of elec-

toral politics. To set the

record straight I submit

the following highlighted

paragraphs from the let-

ter, followed by my responses. As a

disclaimer, I currently reside in

Beijing, but have had no contact

with Huawei since May 2008.

The above refers to an article in

2001. That is ten years after the

Iraqi telecom system, as far as one

existed in the country, was de-

stroyed the first time in 1991 in

the First Gulf War, and two years

before the Coalition obliterated

spread out around the country

with minimal security helping the

Iraqi national telecommunications

company rebuild its national tele-

communications grid.

Huawei was deeply involved in

the planning

and reconstruc-

tion of Iraqi

telecommunica-

tions including

discussing their

plans with the

US Embassy on

more than one occasion from

2006. Had the US military and

State Department engaged Huawei

earlier, especially in the period

2003-2005, reconstruction would

have occurred much faster in Iraq,

perhaps limiting some of the con-

ditions that fostered the insur-

gency. A functioning national

telecommunications system is a

pre-requisite for all other eco-

nomic development.

The surge and much conse-

quent stability in Iraq was facili-

tated by the technical foundation

established by Huawei engineers.

Why the campaign against Huawei

Technologies is unfair & wrong A recent letter by US senators casting aspersions on Huawei Technologies shows a lack of

knowledge of the positive role it has played in Iraq reconstruction, argues Bob Fonow.

CommsDay 32

In many countries around the

world, the Internet has outpaced

the ability to control the services

on it and the people who use it.

Like many things in China, what

is shiny and space age on the out-

side looks a bit different on the

inside. Any experienced telecom-

munications professional will be

skeptical of claims that place

China near the top of the cyber-

war and cyberse-

curity – or cy-

berespionage –

league tables. I

wouldn’t rank

the country in

the top 10. But the country pro-

duces so many mathematicians

and engineer that this will change.

The first sentence may be true. I

have often thought — though I

have no evidence — that Huawei

operates as an instrument of Chi-

nese foreign policy, and the most

important goal of that policy is

access to minerals deposits and oil

in developing countries. If Chi-

nese policy makers can gain lever-

age with a free or cheap Huawei

network, that’s on the negotiating

table, and one supposes this is

subsidised in some way. If the

senators are really concerned there

are several trade treaties and nu-

merous bi-ateral discussions to

deal with questionable practices.

However, if Huawei or any

other foreign company becomes

critical to the supply chain of the

US military, law enforcement and

private sector it’s because there are

very few US telecoms and IT

equipment suppliers left. Perhaps

the senators can remember that

US politicians, financiers and cor-

porate executives made a con-

scious economic decision to move

US manufacturing to China over

the last twenty years. This created

One does not have to peel too

many layers from the onion to

figure that out.

The reconstructed telecoms

network was one of the key factors

in stabilising Iraq. As a conse-

quence, Huawei saved American

lives. The company should be

awarded a medal by the US gov-

ernment instead of being ma-

ligned by senior politicians.

Should I be troubled that

AT&T is a major provider of tele-

communications services to the

Pentagon, and that over many

years several AT&T

executives, in charge

of government rela-

tions, were former

senior officers in the

US military? This is

also true of Sprint and most major

telecommunications companies in

the United States.

In Iraq, it was common to find

reserve majors and colonels on

active duty who were also execu-

tives in US telecom companies,

which suggests that AT&T, Sprint

and Verizon employees have direct

ties to the US military. It may even

be possible that some of these

American companies collaborate

with the Pentagon on research &

development. Could this happen

in the USA, like in China?

It’s a fact that certain parts of

every national telecommunications

infrastructure are more closely

related to national security than

others. And it is the job of highly

skilled electronics intelligence

experts to deal with this, and in

my experience, they do so very

effectively.

I will go out on a limb here and

say that the British have also inves-

tigated the French, the French

have investigated the Americans,

the Chinese have investigated the

Indians, ad nauseum.

the supply chains and volume effi-

ciencies in southern China that

enabled Huawei to become a

global supplier of equipment so

quickly. It is the same supply chain

that is used by Apple, HP, Cisco

and Dell.

The senators should also con-

sider that Huawei engineers will

remain in Iraq and Afghanistan

when the United States departs,

whether that is next year, or if

these conflicts become “multi gen-

erational” — as it’s becoming fash-

ionable to describe them in some

Washington circles. What an in-

heritance. To ameliorate this pros-

pect it might be worthwhile to

include Huawei in discussions of

stabilisation and reconstruction,

and treat them as potential part-

ners, and dare I

say, even allies

in helping to

improve the

economic and

political infra-

structures in conflicted countries.

Huawei is a commercial tele-

communications company with

connections to the PLA. It would

be more surprising if it didn’t.

This makes Huawei no different

than other technology companies

in the United States, Asia and

Europe that supply their national

defense communications systems.

International safeguards are long

established where security is neces-

sary. Huawei should have open

access to the United States net-

work equipment market, on the

basis of continued access for

American companies to markets

in China.

Bob Fonow is the Managing Di-

rector of Revenue Growth Inter-

national Ltd, a turnaround con-

sulting firm with offices in North-

ern Virginia and Beijing. He was

the US State Department Senior

Consultant to the Minister of

Communications in Iraq from

2006-2008.

CommsDay 33

experience and define, accelerate

and deliver 27 quick win initia-

tives which also, in parallel,

yielded considerable experience

improvement – and cost savings.

Secondly, enhancing the cus-

tomer experience does not need to

be expensive; in fact the opposite

is true. Mapping the customer

journey gives us a much better

understanding of what is truly

valued by consumers and, by defi-

nition, areas for eliminating costs

which don’t contribute to repur-

chase.

Low-cost airlines have enjoyed

much success, not by offering com-

plimentary meals or headsets, but

by delivering an expected experi-

ence at the right price. TPG – with

its crystal clear product proposi-

tion and price point – is a stellar

example of a company doing this

well in our industry.

In another example, a major

European carrier approached this

by defining value in the eyes of the

customer and then removing any-

thing within a business process

that didn’t deliver it. The chal-

lenge was to be brutally honest

about what value from a customer

perspective actually meant. Defin-

ing this value proposition can be

quicker than you think, and al-

though the implementation jour-

L ike millions of others around

the world, I am an Apple fan

who knowingly and happily pays a

premium for my iPhone.

The user interface is fun and I

get outstanding support. When it

broke just last week, I took my

iPhone to the Apple store and got

it fixed on the spot.

This kind of enjoyable customer

experience, which not only gives

me what I expect but delights me

by giving more, is the Holy Grail

for our industry; yet we all know

that engineering (or harder still,

re-engineering) the business and

technology processes to support its

delivery, is incredibly complex.

Recent research by RightNow

supports this, claiming 59 per cent

of Australians have had a poor

customer experience when pur-

chasing from a telco, while 44 per

cent have had the same dispiriting

time with an ISP.

There are too many instances

where we start the customer ex-

perience transformation journey

without completing it. Where do

we come unstuck?

Firstly, supplier size is too fre-

quently blamed as the barrier.

This is a misnomer. It is cus-

tomer–facing complexity which we

need to reduce; in the business

processes charged with enabling

the vision.

This is the most direct route to

achieve organisation-wide consis-

tency in customer experience.

Though not easy, it is possible

to create a direct link between

identifying areas for process sim-

plification and taking rapid im-

provement actions. Vodafone

Netherlands undertook a 12 week

project to analyse its customer

ney may be longer, it is worth the

investment; in this case an A$

150m+ uplift in EBITDA over

three years.

Finally, incrementally improving

vertical technology systems is often

identified as a silver bullet. While

fixing the provisioning or billing

system will improve one touch-

point in the customers’ experi-

ence, it does not fundamentally

change how they interact with it.

Only an end-to-end approach

that considers the entire process

from the consumers’ perspective,

and remains true to a consistent

value proposition which the cus-

tomer expects (and wants), will

yield targeted results.

Encouragingly, there seems to

be a critical mass of players which

now demonstrate an acute appre-

ciation of the importance of defin-

ing and designing the ‘ideal cus-

tomer experience’. Following the

customer thread all the way

through from first contact to re-

newal is now well understood as a

valuable defence against structural

commoditisation of our industry

and lingering GFC pressures.

Christophe Bur is the VP of

Telecommunications and Media

at Capgemini Australia

The acute importance of customer service

.

CHRISTOPHE BUR

CommsDay 34

CommsDay 35

First, traffic on mobile network

is growing exponentially due to

the success of smartphones and

new applications [and business

models] like the Amazon Kindle.

Secondly, LTE, with its flat IP

architecture, is enabling a cost

effective, high performance net-

work akin to in-the-ground fibre.

Lastly, the emergence of net-

work outsourcing and wholly-

managed mobile networks from

markets such as India now allows

LightSquared to really drive down

its costs as well as operational com-

plexity. In this area, LightSquared

has selected Nokia Siemens Net-

works to build and operate its

entire network.

When all these factors are com-

bined, LightSquared already has a

pretty compelling proposition. It

will have a highly cost-competitive

network infrastructure with next

generation capabilities, in a mar-

ket where demand is accelerating.

But LightSquared won’t be stop-

ping there.

Instead of going to market and

competing with established players

in the market, the company

elected to push forward with one

final innovation in the mobile

space – pure wholesale.

L ightSquared is now well on its way to rolling out the world’s

first wholesale LTE network. While wholesaling capacity on

wireless networks isn’t exactly a

new concept, given MVNOs have

existed for many years now, the

concept of just building and run-

ning a wireless network purely to

sell to other operators has so far

never been attempted.

Given the tremendous capital

requirement in building a mobile

network – estimated at US$7 bil-

lion over 8 years to build Light-

Squared’s ambitious nationwide

LTE network that will cover 92%

of the US population by 2015,

what is the rationale behind the

business model?

To understand LightSquared’s

vision, it is important to take into

account where the company is

coming from.

Basically, it was a satellite opera-

tor that had access to a chunk of

nationwide spectrum - 59MHz in

the 1400MHz band across the

whole of the US. From there, it

successfully convinced the FCC to

allow it to use that spectrum for

next generation mobile broadband

– LTE— giving it the enviable

position of being able to roll out a

nationwide 4G infrastructure.

The timing of LightSquared is

also very important. It is getting

off the ground when market de-

mand, technology evolution, as

well as the nature of the mobile

industry, are approaching or hit-

ting key transition points.

WHY WHOLESALE?

According to Frank Boulben, chief

marketing officer at LightSquared,

limiting the company’s business to

wholesale means it can now ad-

dress a vastly bigger market oppor-

tunity.

“Given the characteristics of the

US market – you have many wire-

less operators without 4G spec-

trum, or without 4G spectrum

nationwide, you have wireline

operators and cable operators who

have introduced wireless services,

and you have other players in the

retail area, device manufacturers,

also beginning to offer wireless

services, so it looks like there was

an untapped opportunity for an

attractive wholesale offering in the

market,” Boulben said.

In so doing, LightSquared can

supplement the coverage of other

wireless carriers either by offering

high capacity spot coverage, or

extended coverage into rural areas.

It can also serve the wireless net-

work requirements of new players,

such as fixed and cable operators,

or retailers such as Amazon.

“There is really a demand for

our model. First, there is spectrum

scarcity in the US market, so our

capacity will be needed overall in

the market place to satisfy de-

mand. Secondly, there isn’t an

attractive wholesale offer in place

for all the companies looking to

participate in wireless services.

Those two things combined create

a lot of traction for us,” Boulben

said. “If you look at analyst fore-

The business case behind the

world’s first wholesale-only cellco US start-up LTE operator LightSquared plans an unprecedented wholesale-only

business model. Tony Chan examines its rationale

There isn’t an attractive

wholesale offer in place for all

the companies looking to

participate in wireless services

CommsDay 36

just getting devices that support its

network.

At least part of its business

model is to wholesale capacity to

other wireless operators, which

would mean that these operators

will have to support Light-

Squared’s devices, as well as to

convince their customers to take

on those devices, which might be

more expensive – due to the need

to support an extra radio band,

and offer less choice – since Light-

Squared’s platform will be starting

off from scratch.

On a positive note, there will be

a whole generation of new devices,

such as e-Readers, digital cameras,

smart meters, and other such de-

vices with built in wireless connec-

tivity, that won’t be impacted by

the handset ecosystem.

As these are custom-built to the

specifications of a service provider

or retailer, they can be manufac-

tured to work with LightSquared’s

network – although they will

probably still suffer from some

economy-of-scale disadvantages

due to the initial volume of

1400MHz chipsets.

The other uncertainty is its pric-

ing model. While LightSquared

has adopted a simplified pricing

casts in the US, the most conserva-

tive predict a 40-fold increase over

the next five years, so exponential

growth.”

SIX MONTHS AHEAD

The business model seems to be

working so well that Boulben says

LightSquared is some six months

ahead of its original business plan.

“We are now in discussion with

more than now 35 companies in

the last few months. We are now

in advanced negotiations with 8 of

them, so we see the demand for

capacity growing much faster than

we anticipated,” he said.

“Now it is all about execution

and getting customers on the net-

work. On that front, we have had

very good surprises. As we started

to engage companies about our

situation a few months ago, we

were not expecting so much appe-

tite, and we are now in a situation

where we are now finalizing with

some companies already – we had

expected to be in that stage in the

first half of next year.”

In fact, LightSquared has al-

ready announced its first partner –

smart grid solutions provider, Air-

span, who has entered a deal

where it will “exclusively market

LightSquared’s 1.4 GHz wireless

spectrum,” to the utilities industry.

CHALLENGES

That’s not to say LightSquared’s

business plan is without chal-

lenges. As the first and so far,

only, operator on the 1400MHz

band, LightSquared will have to

convince a lot of people to join its

ecosystem.

The good news, according to

Boulben, is that the company has

already taken a number of compa-

nies onboard, including three

chipset manufacturers, five device

manufacturers, as well as two Tier

1 and three Tier 2 OEMs.

The official announcement for

those agreements will come later

this fall, he added.

Yet, the success of LightSquared

will depend on much more than

model of charging per Gigabyte of

usage – with discounts on large

volume – to its customers, it has

basically committed to building a

network consisting of some 40,000

base stations without a concrete

idea of actual demand.

No doubt LightSquared will

work closely with NSN to config-

ure and optimise the network to

deliver the margins on its eventual

pricing, there is no guarantee that

the demand will materialise, espe-

cially in rural areas.

UNIQUE POSITION

At the end of the day, it’s not hard

to see the potential of Light-

Squared’s business model given

the continual growth of mobile

data. On the other hand, it is also

plainly clear that the company has

an unique position in an unique

market.

Not many companies hold the

distinct advantage of having na-

tionwide spectrum where many of

its peers don’t. And not many

markets are like the US, where the

addressable demand is big enough,

where the playing field is diverse

enough – both geographically and

commercially, to support a pure

wholesale play.

A LightSquared promotional still

CommsDay 37

Of course, there are also a truck-

load of conflicting studies showing

that cellphones can cause cancer

or brain tumors.

The evidence is hardly conclu-

sive though, and the risk of using

a product that transmits using

only a fraction of a Watt hardly

compares to the levels of radio

frequency emissions we are all

invisibly exposed to on a daily

basis from broadcast television,

radio stations, shortwave and

household wireless devices. A typi-

cal TV or radio station transmits

using tens or even hundreds of

thousands of Watts.

Shortwave stations can use well

in excess of a million Watts. U.S.

Military Scientists in Alaska are

broadcasting radio frequencies

into the atmosphere using what

probably amounts to many billions

of Watts. Closer to home, your

next door neighbor is allowed to

transmit using up to 1,500 Watts

if he is a licensed amateur radio

operator. Yet, the public seems

intent on blaming devices that

typically only transmit using

around .3 Watts.

In the United States, notorious

hacker and phone phreaker Kevin

Mitnick was not allowed to make

any phone calls while he was being

F ew consumer electronics prod-ucts over the years have been

maligned more than the humble

telephone. Whether it be a hard-

wired landline type or the latest

wireless device, a variety of hoaxes,

urban legends and half-truths have

conspired to make using the tele-

phone a practice regarded as only

slightly less dangerous than play-

ing with a loaded handgun.

We’ve all heard the classic sto-

ries of people being electrocuted

while talking on the phone during

a lightening storm. While this

might be technically possible, the

odds of it actually happening are

slimmer than... well, your odds of

being hit by lightening.

Advances in technology and

safety practices have unfortunately

done nothing to lessen the danger

of telephone use in the public's

mind. In fact, the advent of the

wireless phone only seems to have

launched phone paranoia into

overdrive. Like most urban leg-

ends, there is often a kernel of

truth behind the myths, but some

are so ridiculous that it's difficult

to see how anyone could take

them seriously.

Let’s take exploding cell-

phones, for example. Nowhere,

have I been able to find a legiti-

mate case of anyone being killed

by any exploding cellphone (or its

battery). Although there have been

several cases of cheap, aftermarket

batteries bursting into flames, only

a few minor injuries have resulted,

despite a large South Korean news-

paper reporting that a man died

when a cellphone in his chest

pocket exploded and killed him

instantly. It wasn’t true, and the

paper had to retract the story.

held in federal prison, because the

prosecutors feared that he had the

ability to trigger a nuclear war,

simply by whistling varies frequen-

cies into the mouthpiece. Proba-

bly one of the most ridiculous

wireless phone hoaxes to ever

come to my attention happened

earlier this week in Kenya. It

seems that someone was sending

out hundreds of SMS messages,

which informed the caller that if

they accepted a call from a certain

number, it would trigger a brain

hemorrhage and they would die,

instantly.

Yes, I know it sounds insane,

but it caused a small panic in the

African country and had to be

addressed in the local newspapers

by members of both the phone

companies and the government in

order to reassure the population

that their heads wouldn't suddenly

explode if they picked up the

wrong phone call.

The article noted that the hoax

SMS has now started spreading

throughout Asia.

It’s a mystery to me how we

never seem to hear stories of DVD

players, TVs, remote controls,

light bulbs or most other con-

sumer electronics items suddenly

killing their respective owners, but

scary stories about telephones

never seem to die. What has the

telephone done to deserve this

reputation as a killing machine?

We will probably never know.

William van Hefner is the editor

of CommsXpress.com and the

former editor of The Digest for

the US Long Distance Industry

Death by telephone

.

Teleconfidential by William van Hefner

CommsDay 38

Australia’s top telecommunications

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