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Two years ago the Australian and New Zealand communications ministers agreed to investigate trans-Tasman roaming. At the time Stephen Joyce and Senator Stephen Conroy suggested they might regulate.

Although that regulation moment appears closer, don’t hold your breath. Governments rarely move fast on these matters.

Yesterday the Ministry of Business, Innovation and Employment published submissions responding to a list of suggested options.

Tuanz: scrap roaming charges

Tuanz – the New Zealand telecommunications users group – wants to scrap roaming charges between the two countries.

While this sounds radical and will no doubt worry telcos it isn’t extreme. Europe is heading in the same direction. In theory the Australia and New Zealand economies are almost as closely tied as the European ones.

InternetNZ wants link roaming to the planned spectrum auctions – making spectrum licences conditional on better  behaviour or, like Tuanz, scrapping roaming charges.

Market failure

A key test for any government intervention is “has the market failed?”. Economists might question whether trans-Tasman roaming is a failed market in an abstract, academic sense. Others prefer a common sense approach. Business people will notice the dampening effect roaming rates have on trade between the two nations.

Something must be wrong if the first thing we have to do on landing is buy or refresh a local pre-paid Sim card, then divert calls to the new number. That can get tricky if device settings need changing at the same time.

Telcos: What market failure?

Telecommunications companies on both sides of the Tasman argue competition is enough to push down roaming prices. They say regulation is unnecessary. In Australia Optus says the problem is a lack of consumer information – that’s a startling, arrogant claim.

True, prices have fallen in recent years – as much as 90 percent. Cynics might argue that’s less about competition and more about heading off government regulation. Meanwhile, the Commerce Commission also regulates roaming inside New Zealand.

Southern Cross Cable

How does New Zealand get another submarine cable project off the ground in the wake of Pacific Fibre’s fund-raising failure?

Ryan Ashton posed the question at a technology industry networking event last night. Ashton wants to trigger a debate and people at the event joined in. At least one had worked for Pacific Fibre.

Ashton’s idea for a new cable amounts to crowd-funding. He says the three or four hundred million dollars required could be spread over, say, a million New Zealanders. The same logic could be used to argue for government funding.

An informal after work event held in a bar isn’t the best place for this discussion, yet this is a necessary debate. There are many issues to consider.

First we have to decide if an alternative to the existing Southern Cross Cable Network is necessary. And if it is, does that imply there’s something broken that government can fix by regulation or means other than building a fresh cable?

Replacing Southern Cross

Southern Cross will need replacing at some point and we don’t want to leave it to the last-minute. On the other hand, money is tight, perhaps it could be better spent elsewhere now and the problem revisited later.

Security is an issue. Southern Cross is a loop with two lines in and out of the country, that’s better than a single point of failure. A new cable will make us more secure. What would be the optimum number of cables for a country with a population of less than five million?

Does a new submarine cable need to stretch right across the Pacific when a simple drop across the Tasman could offer a quicker and cheaper alternative?

Is this something best left to market forces or is there a case for government involvement. How do we square China’s enthusiasm to take part when the US and Australian governments are hostile towards firms like Huawei?

Media coverage of a report from IDC Research says sales of Wi-Fi only tablets have passed sales of 3G models in Australia and New Zealand.

IDC’s analyst explained the shift away from mobile networks to Wi-Fi in terms of product offerings. This misses the point: for most people 3G doesn’t make sense on a tablet.

3G option is costly

Adding 3G, and now with the new iPad, 4G to an Apple tablet adds NZ$200 to the price. For the 16GB iPad, that’s a hefty 27 percent premium. For that kind of money, you need to know you’ll use that tablet while on the move.

To use mobile data you also need a Micro-Sim card and a mobile data account with a carrier. Make that an extra Sim card and account unless you don’t have a mobile phone.

3G is troublesome

When I bought my iPad 2 I decided this would be too much trouble. I might only need to use 3G with my iPad once or twice a month and I didn’t want to deal with extra Sim cards and mobile accounts.

Instead, if I need a 3G iPad connection while I’m on the move I use my mobile phone as a Wi-Fi hub. That way my phone account picks up the data cost.

I’m not likely to travel anywhere with my iPad and not take my phone as well.

Phone Wi-Fi hub fast enough

I haven’t benchmarked speeds on my iPad and phone combination against a 3G iPad alternative because the comparison is not important. My set up is more than fast enough for my everyday needs, the only drawback is using my phone as a Wi-Fi hub drains the batteries faster than normal use.

This approach means less administration and it consolidates all my data buying in a single account which means economies of scale.

If you’re always on the run and need plenty of data a 3G tablet might make more sense, for most users it doesn’t.

From the Australian Financial Review 11 April 2001
From the Australian Financial Review 11 April 2001

Web hosting operations in Australia and other western countries face a nasty double whammy in coming months. Not only are the various Internet markets in these countries heading towards saturation, but at the same time, many of the national economies are facing a slowdown. Asia on the other hand is, in Internet terms, so massively underdeveloped that any economic hiccups are unlikely to hinder regional web hosting growth prospects.

According to Forrester Research, by 2004 some 99.7% of US small businesses and 83% of America’s medium-sized companies will have some kind of web presence. Australia lags behind the US – but not by much. Although there’s still a long way to go before the saturation point is reached, web hosting operations can see an end to the rapid growth in customers and sites that has characterised their industry until now.

As far as Australian hosts are concerned, there are three likely drivers for further growth. First, there’s the option to sell a broader range of products and services to existing customers. Although there is plenty of scope for offering value-added services, this strategy largely depends on the still unproven ASP business model.

A second option is to expand by acquisition. In global terms the web hosting market could certainly do with a round of industry consolidation. There are currently more than 1000 hosting operations selling to international markets and while the intense competition has delivered low prices and spurred innovation there’s doubt about the long-term viability of many players.

The third option is to expand existing hosting operations into new geographic markets. Given that Europe and North America already have mature web hosting operations, for most Australian companies this means looking north to the Asian market.

Leading the charge is WebCentral. The company is Australia’s leading hosting business with 700 servers and around 40% of the local hosting market.

There’s certainly a strong business case for selling to Asia. According to a report by eMarketer and Dataquest, the Asian Internet market is still in its rapid growth phase. In 2000 there were some 49 million users in the region, by 2004 this will swell to 174 million users – that’s a compound annual growth rate of 38%. During the same period, Asian users will go from being 21% of the global online community to around 27%. More importantly e-commerce revenues are forecast to climb from US$39.4 billion to more than US$338 billion.

This is all very promising, but behind these numbers are even more compelling statistics for would-be Asian hosting operations. By world standards Asia has very low levels of business-to-consumer eCommerce – an area of great interest to web hosting companies. During the four years to 2004 this is set to rise twelve-fold. And according to Ovuum, a European-based research company, only 7% of Asian companies use web-hosting services compared with 37% of European companies.

Australian hosting companies will find the Asian Internet landscape is vastly different from the local scene. For example, compared with Australia, most of Asia has considerably less access to fixed line telephone systems. This means that for many consumers their only practical route to the web is through the wireless telephone networks. And the online experience for wireless users is considerably different to that for users with personal computers, modems and fixed telephone lines.

Another problem for local web hosting companies planning to expand into the region is that, while there is not a strong indigenous hosting industry throughout the region there are pockets of strength. For example, India already has a well-developed hosting market.

What’s more, many of the world’s largest telecommunications and Internet players already have their eyes on the yet to blossom Asian market. For example, last year Japan’s Nippon Telegraph and Telephone announced its intention to dominate the Asian hosting market when it acquired the US-based Verio hosting operation.

In December, France Telecom subsidiary Global One opened a major regional hosting operation in Singapore. This January saw Exodus Communications buy the GlobalCenter web hosting subsidiary from Global Crossing. The two companies formed a joint venture to supply web hosting services to Asia – a business which is expected to generate some US$4 to 5 billion in revenues over the next ten years.

From the Australian Financial Review 11 April 2001

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