A lack of technical innovations is causing a slump in the demand for better quality broadband, writes Paul Budde.
*Also listen to the audio version of this article on Spotify HERE.
THERE IS AN argument going on between the Australian Competition and Consumer Commission (ACCC) and NBN Co in relation to the broadband requirements of Australian consumers.
ACCC research indicates that by 2028, the median household speed requirement will be only 29 Mbps and 95% of households will not require speeds of 58 Mbps or more.
On the other side, NBN Co, in the submission we discussed earlier, states:
As of April 2022, 45% of all NBN 25 Mbps services in operation reach their maximum possible utilisation at least twice a month, suggesting that these services are being used at the limit of their bandwidth capacity.
Across all speed tiers, 29% of NBN services in operation achieve their plan’s maximum utilisation threshold at least twice a month.
Median fixed download speeds in Australia have already reached 51.90 Mbps as of May 2022, almost double the household speed requirements predicted by BCAR for 2028.
So, who is right? Perhaps both, but most likely along different lines than the facts and predictions underlying their arguments.
First of all, if high-speed broadband becomes more available, people will be using it more and therefore the requirements for more bandwidth are going up. So, to a certain extent, NBN Co has this growth in its own hands if it lowers the price and its prediction towards increases will indeed be true.
Now, the question is how much more bandwidth will actually be needed to satisfy the demand in the market. That is, of course, the issue the ACCC is discussing. I would like to make some interesting observations here.
What has driven broadband demand over the last decade is, on the one hand, simply more use of rather basic applications such as emails, searches and cloud computing. However, these applications don’t use a lot of bandwidth. With millions of people increasing their use of the internet, the demand for capacity (speed) grows.
But what has really driven the growth is the growth in the more complicated applications such as video, games and images. Between 2000 and 2015, we have seen an enormous amount of innovation in this area, driven by companies such as Netflix, Amazon, Google, Zoom, Facebook, Apple and others. However, in recent years, very few new innovations have been added to the list of bandwidth-hungry applications.
What will drive the next growth in broadband? It doesn’t look like this will be hyped-up innovations such as Meta, Blockchain, Web3, virtual reality, artificial intelligence (AI), self-driving cars and delivery apps anytime soon. None of these new promises is eventuating on any scale and is certainly not leading to an increased need for bandwidth.
As a matter of fact, the financial market has gone cold on the companies operating in these fields. The market capitalisation of Facebook, Netflix, Uber, Lyft and the many smaller players in AI and Blockchain/Bitcoin has gone down, some by as much as 70%. This is a bad omen for the immediate future of new innovative applications. The fact that less investment money is now available for innovations also sounds alarm bells for developments in the near future.
As an example, in this context, in a previous analysis, I indicated the problems that Blockchain and Bitcoin are facing. I also questioned Facebook’s Metaverse a few months ago.
Some economists are arguing that the current state of technology can be earmarked as innovation for the sake of innovation, which they say is a sign that we have arrived at the period of late capitalism.
On top of this, with cybercriminals, hackers, privacy issues and state-based internet surveillance, there is also the question of increased mistrust in technology by the broader society and economy. There is an increased demand by governments and the people that technology will need to start addressing fundamental solutions for our current economic and social problems. So, perhaps we first need a step back before we progress.
Not only does this mean that investment money is becoming scarce for research and development, but traditional companies such as IBM, Telstra and Bell Labs have decreased their research and development. Many of these companies have moved large parts of their operations away from Western markets as it was cheaper to operate from Asia, which has led to less R and D in Western countries.
While the universities have stepped up their work in this sector, this is in general not linked to applied science and R and D. Universities are very bureaucratic and risk-averse, and therefore can’t compensate for the loss in research in the industry.
So, coming back to the arguments between the ACCC and NBN Co, it is unlikely that we will continue to see a linear growth in the demand for broadband as very few new innovations will be driving that growth. When finally ready, many of these innovations – those that will survive – will require high-speed networks for their delivery, computation and transactions.
As many of the hyped-up innovations are not yet ready for further development, let alone deployment, it could well take a decade or more before we might be seeing new innovations that have a similar impact on broadband network development as the ones that were developed between 2000 and 2015.
In the meantime, the growth in the demand for higher-speed broadband will be incremental rather than explosive.
*This article is also available on audio here:
Paul Budde is an Independent Australia columnist and managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.
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