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Regional Australia secures own digital success despite Coalition's woeful NBN

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Cartoon by Mark David / @MDavidCartoons

Australia's regional towns are securing their own digital economic and social futures while the Morrison Government sits idle over sub-standard NBN, writes Paul Budde.

BACK IN THE early 1990s, I was a founding board member of Service Providers Action Network (SPAN), which later became part of Communications Alliance.

The key aim of this organisation was the promotion of new value-added services that could be provided over the telecommunications network. At this time there was no public internet and we used its online predecessor — a technology called videotex. Telecom Australia (Telstra) had a national public service that was branded Viatel.

My role in SPAN was very much to promote the development of value-added services – what we would now call internet services – by telecommunications service providers. There was a large influx of new startups in the industry after the government opened the telecoms market for competition. At that stage, however, the competition had to rely on reselling services from Telstra and could change fees and conditions at the stroke of a pen.

To be honest, I was not very successful in my missionary work, as most service providers simply did stick to reselling voice services. That required very little creativity and innovation and because of initially lucrative margins, they were not interested in doing the hard work to differentiate themselves through new services.

What changed? The fact that the digital economy basically bypassed the telcos – apart from the infrastructure business – is a clear sign that they missed a big chance. Google, Apple, Amazon, Facebook and millions of smaller companies filled the gap left wide open by the telcos.

Digital life continued and as Telstra started to change fees and conditions, most of the resellers' industry died as profit margins simply became too thin. These companies hadn’t built up any differentiation in their business model — they all provided the same vanilla voice products.

As the telecoms industry stubbornly concentrated on basic telecoms service, I started to change my message to value-added network services, as that seemed to be closer to its core business. Why? Because by the early 2000s, it had become clear that telecoms and IT had started to merge into a more complex technology environment. This became known as information and communication technologies (ICT).

Macquarie Telecom became one of the first to embrace this concept. It successfully operated in the medium-size business market, as there was a clear need there for a more integrated technology approach. The stock market's reaction was not good — their share price got hammered for a while. It took some time before the market understood that Macquarie Telecom had made a brilliant move, as slowly but surely their approach started to pay off.

However, there was still a lot of reluctance among telcos to accept the value-added network business model. Other companies stepped in and started to build big data centres — these companies are currently dominating the market. Because of the importance of IT in their business, digital economy companies had to build their own data centres and over time also opened them up as a service. Amazon, Google and Microsoft are now among the leaders in this field. Telcos belatedly joined this trend and most now do have their own data centres as part of their value-added network offerings.

Based on the importance of integrated ICT infrastructure – both for economic development, as well as for a range of social services like telehealth, online education and smart energy – I also advocated the development of data centres in regional towns. I argued that we should look at the distributed nature of the old telecoms network, with about 500 interchanges around the country.

In my opinion, all these sites should be looked at for regional data centre opportunities. Unfortunately, towns and cities at that time did not quite understand the importance of this and there was little demand from regional centres to forge policies and strategies around the concept of developing data centres.

One of the early telcos who started to look beyond big capital city data centres and explore the second-tier market was Vocus. Their earliest business model was built around data centres outside big cities.

Now – at least a decade after Vocus’ earliest development in regional markets – we are seeing a more widespread understanding of the need for these technologies for regional towns and cities to remain socially and economically viable.

Under the banner of smart cities, local councils now realise the need for digital infrastructure in order to attract and retain businesses. And they need it also for their residents – especially young people – in order for them to be able to get good quality jobs and receive good quality social e-services.

Over the 25 years since we first started to talk about value-added networks, technology has significantly changed. There are basically three key ingredients that have merged to form this concept: 

  • Traditional data centres (server farms);
  • telecoms infrastructure has moved into broadband (fibre optic infrastructure is essential for these centres),
  • and the new element of cloud computing (computing as a hosted service) has been added.

Further developments happening as we speak include the collection of big data, the analyses of that data and the job of turning it into real-time services. All of this revolves around data centres. They have now become essential infrastructure for any community, town or city. This concept is now being picked up beyond those involved in technology. I have already mentioned smart cities — globally, over the last ten years, leading cities have seen the importance of this infrastructure.

Smart cities will require large IoT networks (internet of things) which use sensors and devices to collect data important for the running of their cities. This concept is now also better understood in regional Australia, as shown in a previous IA article about the initiative of the NSW Government to build gigabit cities.

Hot on the heels of this, it's pleasing to see the announcement of edgeDC to develop 20 regional data centres. This company is backed by Washington H. Soul Pattinson. It has been investing in the telecoms industry for at least the last 20 years and has great insight into business opportunities. The first five of these data centres – Albury, Wagga Wagga, Parkes, Dubbo and Coffs Harbour – are planned to go live by May 2021. Please note the interesting overlap with some of the gigacities announced by the NSW Government.

These are all very exciting developments and will most certainly spur other regional towns into action. This will result in them getting a better understanding of the need for such infrastructure, but it will also prompt them into looking for better broadband as the current NBN is not up to scratch to facilitate such developments.

So far, neither the Morrison Government nor NBN Co has announced plans of what the future of NBN is. There are no plans for a large-scale next stage of the program and despite many requests to come up with such a plan, both the Government and NBN Co are silent on that issue.

Communities are not going to sit and wait for what might or might not happen and regional towns know that they will not be first to get better broadband from NBN Co. Consequently, more and more cities will start developing their own plans in collaboration with their own state governments.

Unfortunately, this will mean overbuilding and wasting money, but with the Morrison Government – purely for party political reasons – stubbornly refusing to talk about fibre optic network, it is clear that many towns in Australia are not going to wait for the Federal Government to take a lead here. The economic and social future of their communities is simply too important to wait for politicians to finally get their act together on these issues.

Paul Budde is managing director of Paul Budde Consulting, an independent telecommunications research and consultancy organisation. You can follow Paul on Twitter @PaulBudde.

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