Preparing the ground for highfaluting applications

Remember all the talk two or three years ago about how everyone would love broadband? At the time, the industry churned out marketing material gushing about a new technology capable of delivering a whole raft of new and exciting applications that would radically change the way small companies operated.

In many respects broadband has lived up to its promise, but things didn’t quite work out service providers planned.

On the one hand, they actually underestimated small businesses’ appetite for fast Internet. On the other hand, while broadband had changed the way companies operate, they’ve not been as quick to adopt new applications.

Pacific Internet managing director Dennis Muscat says that by July of this year 52 percent or slightly more than half of all Internet-connected companies in Australia had broadband access. Two years ago the number was around 20 percent.

These numbers come from research conducted for Pacific Internet by ACNielsen Consult and published in the company’s Broadband Barometer.

Muscat, who heads the local operation of a regional telecommunications service provider, says many small businesses have purchased residential broadband packages aimed primarily at consumers. This makes sense because many smaller companies operate directly from people’s homes.

Jason Juma-Ross, principal analyst with AMR Interactive says that for small businesses the practical reality of broadband Internet is not that it enables new applications such as video conferencing or voice over IP, but that it allows users to do more of the things they did with dial-up. He says that for many users the always-on nature of broadband is possibly more important than its speed.

Muscat echoes this. He says, “They’re doing much the same as before, but with more intensity.” That means sending and receiving more email, increasing the amount of web browsing for information and doing more with their own web sites. At the same time, companies with broadband links are far more likely to use Internet banking and pay their bills online.

For example, Muscat says people are now sending large complex documents via email that they might have previously couriered or sent via fax. “Broadband increases efficiency and reduces costs. At the end of the day these are what small businesses want from any technology.”

One area that has changed dramatically is remote working. Companies that operate at multiple locations or who employ out-of-town teleworking staff can now give their remote users full, real-time access to internal computer systems.

Muscat says this has had a huge impact on some industries. “In the past if, say, a travel company employee got an out of hours call from a customer who needed to change his itinerary, that employee would have to physically go to the office in order to change the booking. Now they can take the call at home and log on to the travel systems.”

For now, more glamorous broadband applications such as videoconferencing remain well outside the business mainstream. This is despite the increased reluctance for long-distance travel now that airports have additional security procedures.

Likewise, there’s been no rush to voice over IP technology, which allows businesses to cut telephone toll budgets by enabling calls over the Internet. And software companies that have repackaged their applications as pay per use online services are still not getting much traction in the small business sector.

One reason for the slow move to new applications is that companies don’t necessarily see them as relevant. For example, videoconferencing adds little value for many companies, who could just as well get by with ordinary telephone calls.

But there another factor that can be sheeted back to Muscat’s observation about Australian small business using broadband products and services designed for residential customers. These consumer offerings tend to be significantly cheaper, but they are also generally much slower than business services – in most overseas markets anything less than 1.5 Mbps isn’t regarded as true broadband and certainly not adequate for advanced applications involving video or voice.

Moreover, residential broadband doesn’t offer the same service guarantees as commercial products. In other words, it’s not generally as reliable as business-class broadband and that extra consistency is essential for more sophisticate applications.

So what broadband applications are small businesses using? Muscat says that for the moment tools that increase data integrity dominate the market. He says there’s a huge demand for managed firewalls, spam filters, content filtering and other security products and services. “They’re concerned about viruses and hackers and being flooded with spam”.

Muscat says that as they gain experience and confidence with the technology, companies will move beyond what he describes as online hygiene factors and seek a higher grade of data network. “Small businesses know they have to deal with these issues before they can move on to the highfaluting applications.”

First published in The Australian Financial Review 2004