CommsDay magazine Oct/Nov 2010 by Grahame Lynch

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CommsDay

A new periodical

n the year two thousand and ten, why launch a new magazine for an industry that has seen much of its trade press die a protracted 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, politicians, economists, business planners and the private sector. As the recent Australian national election showed, there is an urgent need for more analysis, more reflection and more contemplation of telecommunications, not less. The modern age has seen information flows move to a real time basis. Twitter, blogs, message boards, Facebook and lowly resourced online news websites now all form a major part of the information 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-

tional broadband networks that fibre “decays” after a few years. As a leading publisher of telecom 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 balance the “always on, not always correct” news culture with a longer form, more contemplative periodical 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 experience in IT publishing dating back to the 1980s when he pioneered 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 broadband 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 experience 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 CommsDay editors Petroc Wilton, Miro Sandev and William van Hefner, we believe that CommDay magazine 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 contemplative qualities that define the print medium. CommsDay magazine will initially be published 5 or 6 times a year and aims to complement the thought leadership of our regular conferences in Sydney, Melbourne, Singapore and Auckland. Our next congress occurs in Melbourne on 12 and 13 October and, as always, we boast a strong line-up of the leading lights in Australian and regional telecommunications. Happy reading and hope to see you in Melbourne. Grahame Lynch, CommsDay founder

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 subscription 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

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

Customers

Devic

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.

p Ap

ion t a c

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

CommsDay

INSIDE THIS ISSUE

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

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DAVE BURSTEIN

Reverse auctions yield big savings .. sometimes .

ometimes auctions work. 12 million subscriber Chunghwa in Taiwan was paying $US30 to 50 per port for DSLAMs while Verizon and AT&T were paying $5070 for the same equipment. DSLAM vendors win million line contracts and draw attention from buyers around the world with good bids. For standard equipment available from many sources, auctions nearly always produce lower prices. In 2005, when most carriers were paying over $US100 per customer for VDSL gear, XyZEL successfully 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 Reynolds’ 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 government 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 credible bid that forced Telecom to make concessions. Telecom had refused to spend for 100 meg fiber home, instead opting for 10 meg cabinets. Telecom is now offering a full demerger and a larger investment in fibre. The government may demand more before the scheduled October decision because the Regional Fibre Group could still be chosen. Scott Wallsten, chief economist for the U.S. broadband plan, says

auction results show that competition can reduce the cost of universal subsidies. In one 2005 auction in India, in 38 of the 81 regions many mobile operators bid zero, asking for no subsidy. In 15 regions, 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 wireless companies, in less competitive markets auctions with too few bidders often fail. In 2000, the Australian government set up reverse auctions to distribute universals service subsidies. None of Telstra’s competitors bid to provide service in the pilot regions. In Switzerland in 2006, Swisscom 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 public to be effective. China Telecom buys as many as 10m lines of

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broadband each year, almost a third of the world market. So companies like Alcatel, Huawei and ZTE reduce their margins to win a share. Bids are not formally released, 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 recommended running better auctions for the schools and libraries e-Rate program possible from acting 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 began posting the open bids from many agencies and we became regular bidders. To my amazement, the government received prices far below market because so many companies 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

CommsDay

NEWS ANALYSIS

What now for Telecom NZ’s UFB plan?

elecom NZ’s broadband hopes took two step back when Crown Fibre Holdings announced the start of negotiations with three regional Ultra-Fast Broadband network bidders. Never mind that the three bidders 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 regional companies. The settled bids leave 85% of the project up for grabs. Moreover, the still contestable 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 agreements. CFH is open to either a Telecom, New Zealand Regional Fibre Group solution, or some form of combination for the balance of the UFB project.” It may not be that simple. When CommsDay interviewed CFH Chairman Simon Allen and CEO Graham Mitchell on Thursday, 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-byregion 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 consolation prize was comments by Allen

on how CFH looked favourably on the company’s media statement issued shortly after the UFB announcement. He noted how Telecom 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 Zealand Regional Fibre Group members already in negotiation and those still on the shortlist. If the CFH announcement represents two steps back for Telecom 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 complicated. 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 company reiterated this point and went on to explain Telecom NZ’s proposal of “profound change”

CommsDay

includes structural separation, integration of the UFB with the RFI, legislative change and new industry regulations. All of this is beyond CFH’s remit. 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 Telecom NZ is divided up in order to get this all done. If “profound change” is Telecom 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 Minister 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 negotiate new terms would put the project 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 Zealand will be in the middle of the Rugby World Cup, shortly followed by an election. After watching Australia’s “broadband election” from the sidelines, it’s unlikely any New Zealand politician relishes the thought of heading to the polls with the UFB unresolved. Telecom NZ’s press statement talked of a “challenging timeframe”. How apt. Bill Bennett

CommsDay

NEWS ANALYSIS

Australia’s high speed broadband election

n the final weeks before the Australian federal election, the nation’s telecommunications industry appeared to be facing its Ragnarök: a confrontation whose outcome would irrevocably determine the future shape of the sector. 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 themselves 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 industry 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 August, Quigley released news that the NBN could deliver 1Gbps to end user premises, following up with a speech that systematically addressed the weaknesses of nonfibre access technologies. The timing and content of these forays into the media drew a barrage 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 Quigley’s example in that last frantic fortnight, with the stark contrast between the NBN and the Coalition’s much cheaper, much slower hybrid alternative essentially dividing much of the comms sector along party lines. Organisations like the Internet Industry Association and the Australian Information Industry Association reiter-

ated a very blunt message of support 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 – wellestablished as an NBN critic – blasted Quigley’s Charles Todd speech as “misleading and littered with factual misrepresentations,”

Mike Quigley while the IIA’s messaging prompted Vocus CEO James Spenceley to essay a public warning against its “dangerous assumptions 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 blowout at the consumer premise level, widely perceived as an usually vehement 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 prevailing tenor is one of uncertainty – and few afflictions are as poisonous to investment in the private sector. Ask Telstra; a number of

CommsDay

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 uncertainty centres on the question of overbuild. Labor’s NBN is predicated 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 occasions 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 arrangement. Otherwise, anyone owning existing infrastructure must surely be looking at the extensive 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 Alliance 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

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NEWS ANALYSIS

stranded. Slattery and his colleagues are not the only members of the sector to have been goaded into taking a public position. The way in which NBN Co has consulted with industry before drawing up its plans and concluding its tender processes has sparked anger from various sections of the sector, particularly smaller players in the passive electronics, design and construction areas who feel they’ve been effectively ignored. While most of the industry appeared to be backing the network to the hilt, such voices were understandably 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 alignment misses a key development in the broader landscape. It has taken the threat of a policy and investment vacuum, created by the knife-edge election leadup and the uncertainty of the outcome, to goad a growing portion 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 manifesto – “markets are better managers of capital and technology risk than government.” The prolonged uncertainties of Australia’s telecoms Ragnarök have already wrought this fundamental change in industry mindshift: telco leaders are manifestly less likely than ever to sit back and let a government dictate the design of a national broadband network, and whichever political party emerges victorious must be prepared to deal with the resulting challenges. Petroc Wilton

A chat with Equinix CTO Lane Patterson

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 together regional networks with their global peers, to facilitating those network connections to critical 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 enterprise networking space. Here’s what Lane Patterson, 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 services around the world. We need more functional market places, or hub cities, to do that kind of transaction, because fundamentally, it is about saving money and providing better economics to the end consumer of telecoms services. And you can’t do that if you are backhauling from, say Thailand, to the US, or Thailand to Tokyo to get back to Vietnam. So Singapore is providing an incredible 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

“

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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 everything to do with how people 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.

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NEWS ANALYSIS

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 actually 24 fibre strands on multimode. 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 Multiplexing 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 centre, 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 instead of one, so it is really not giving me the best spectrum efficiency 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.

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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.

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

“

Our customers are using 10G ports like they are going out of style. 3 router, but it’s literally dropped, for a Layer 2 switches, from $5,000 to $6,000 a port just a couple of years ago, now we have vendors out there saying they are selling 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 construction company, have 25,000 subcontractors they work with all the time – they have a sprawling

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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 accessing 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 outsourcing 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

12-13 October 2010: Langham Hotel

COMMSDAY MELBOURNE CONGRESS • • • • • •

MINORITY GOVERNMENT: How it impacts telecoms BROADBAND FUTURES: The business model challenge INTO THE CLOUD: Building & marketing cloud communications DATA CENTRES: Key infrastructure for the gigabit age THE FUTURE BUSINESS USER: Addressing their needs OTHER TOPICS: IPTV, Customer service standards, mobile bb

SPEAKERS INCLUDE Shadow communications minister Malcolm Turnbull Institute for a Broadband Enabled Society exec director Dr Kate Cornick

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GOLD SPONSORS NBN Co chief executive Mike Quigley

Victoria state ICT minister John Lenders

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

Telstra GMD public policy & communications David Quilty

Pacnet Australia NZ CEO Deborah Homewood

Juniper Networks global business leader, cloud computing Dean Sheffield

OTHER TOP SPEAKERS INCLUDE Communications Alliance CEO John Stanton • Pottinger joint CEO Nigel Lake Ovum research director David Kennedy • Professor Reg Coutts Qualcomm SE Asia & Pacific MD John Stefanac • BBY’s Mark McDonnell Nokia Siemens Networks ANZ MD Kalevi Kostiainen • BigAir CEO Jason Ashton Telstra Wholesale executive director for products and marketing Terry Scerri Ericsson Australia NZ MD Sam Saba • Internode’s John Lindsay Shirlaws Consulting partner Ben Ramsden • MFJ’s Barry Lyons CombiTel managing director Eugene Razbash • Kordia’s Peter Robson Gilbert+Tobin partner Cameron Whittfield • eIntellego CEO Skeeve Stevens C-Cor’s Dermot Cox • Goldman Sachs + Partners Aust analyst Christian Guerra Norton Rose partner Nick Abrahams • plus other speakers

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TO REGISTER: Fax this form to 02 9261 5434 (+612 outside Australia) Phone Sally Lloyd at 02 9261 5435 Email Sally at sally@commsdaymail.com http://www.commsday.com/melbourne2010/ Wednesday 13 October 8am: Energise your network breakfast The Nokia Siemens Networks ‘Energise your network’ breakfast is an opportunity for CommsDay Congress attendees to re-energise on the second day of their conference experience. Attendees will be treated to the empowering sounds of a live cultural band over breakfast and have freshly squeezed juices for their enjoyment. Following breakfast, attendees will be given an ‘Energise’ pack from Nokia Siemens Networks that will energise their day further.

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The line-up 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 GOLD SPONSORS 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 Lindsay, telecom analyst Kevin Morgan and Primus regulatory manager John Horan. Moderated by Grahame Lynch 5.10 CLOSE

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COVER STORY

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.

ccording to the Australian fibre optic academic and government expert panelist Professor Rod Tucker, there is a good reason why pervasive 100Mbps enabling fibre access networks are much superior to broadband wireless 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 wireless 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-thehome network.” “To provide ultra-fast broadband in urban areas, wireless towers will be needed to be placed at least every 100 metres on every street.” And with that repudiation of wireless comes an interesting insight into the level of demand that NBN advocates believe pervasive fibre will generate. In the fine print of Tucker’s counter-factual

he assumes an LTE network with every household in its cell range using 100Mbps of capacity simultaneously. Given that most broadband networks today operate at contention ratios of 1-in-20 to 1-in-50 and up to 1-in-100 for discount offerings, it’s clear that FTTHenabled 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 offerings 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 premises will be effectively demarcated between 200 points of intercon-

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nect or 50,000 per POI. To ensure a dedicated 75Mbps of capacity beyond the POI, retail service providers 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 exacerbated by the fact that as a linguistic cousin of larger North American and European markets, well over two-thirds of Australian Internet traffic traverses an undersea cable. According to Vocus CEO James Spenceley, whose company specialises in wholesale transit, a dedicated 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

COVER STORY

of data per month. But under a scenario painted by NBN Co Mike Quigley in an August speech, typical 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 envisaged as the desirable end goal by NBN advocates might cost consumers well over hundreds of dollars per month. That is without dedicated minimum 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 desirable English, Chinese and Indian language content that broadband users consume is served offshore. And this is reflected in pricing 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 impressive 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 international speeds across various wireless, HFC and DSL platforms offered by Singapore carriers today– using the most popular global site

YouTube and its speed test functionality 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

Professor Rod Tucker actual download speeds for US content.” He claimed of Singapore, "7080% of content accessed is International: We spoke with several Singapore telecom operators, and all put the percentage of international content accessed at over 70%. Therefore, a user’s experience 70-80% of the time using their Singapore broadband connection 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 international bandwidth. “Our view is simple…the customer experience in an English speaking market with a preponderance of foreign content like Singa-

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pore is defined by the international 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 services. Markets with a heavy concentration of international content (Singapore, the Philippines, Malaysia to a lesser degree) will see the overall user experience defined by the international link bottleneck. This implies significantly higher expenses on either international links or local caching operations.” Which begs the question: is the push for ubiquitous 100Mbps and even 1Gbps services via fibre access infrastructure simply too much of a good thing if not accompanied by commensurate increases 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 investment? 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 Australia, 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

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CommsDay

COVER STORY

cents in the dollar. We’re using them [now], but there was a massive destruction of wealth,” he told ABC radio. “I am passionately in favour of broadband, I am a notorious internet junkie... and I’m very committed 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 Australian NBN (early Tasmanian trial offers are based on free retail connections and free wholesale tariffs), nor has there been any analysis 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 tariffs for higher speed services might need to exceed $150 for the project to be commercially viable. Ergas was pilloried by the proNBN forces including communications 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 projected $43 billion concluding that today’s tariffs could be grandfathered into the NBN environment. But Ergas could claim vindication as NBN Co’s Mike Quigley, communications minister Stephen Conroy and Rod Tucker subsequently articulated a vision for the NBN as enabling a highly interactive video-based usage profile for the broader population. They talk of video conferencing sessions between doctors and patients, distance education via virtual classrooms to the masses, multiple HDTV streams per household and

the like. NBN Co itself employs the moniker “Endless Entertainment” in its promotions, suggesting a heavy role for capacityhungry video. COSTS BEYOND THE POI This profile creates a need for costly dedicated bandwidth behind the POI and upholds one of Ergas’ assumptions: that a genuine high speed service would require relatively high committed information rates when compared with today. Ergas says his critics often make

Henry Ergas 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 manager with NBN Co. According to Ergas there is a real risk of the same type of market failure which saw the 1999 to 2001 wave of American and European bandwidth projects collapse under weak demand and sold for cents in the dollar to Indian, Singaporean and Chinese buyers.

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“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, however 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 government bond,” Ergas says. NBN advocates say that critics such as Ergas and Turnbull don’t get the indirect benefits—the externalities—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 telehealth, aged care, remote distance learning, social networking for isolated communities, online supply chain management, environmental monitoring and smart metering, and water resource management. The list goes on.” “Overseas studies have shown that large economic and environmental benefits can flow from teleworking for office workers, and substantial greenhouse gas reductions 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 imagination. The NBN will place Australia at the forefront of developments in these areas. It will not only provide the bandwidth needed for a rich variety of applications, it will provide opportunities for entrepreneurs 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

costly for end users and taxpayers. This is one of the central charges of the Alliance for Affordable 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 founding 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 wireless. 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 buildings, so you change the economics of towers?” “And what they’re talking about is some of the infrastructure we now have sitting in building basements 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, presumably to advantage the case for fibre’s efficacy.

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 specified 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 misunderstanding wireless broadband by specifying Ethernet when every commercial system today uses IP. “Ethernet adds network and management overhead and takes a big

AAPT’s Paul Broad chunk out of performance. No one else in the world would contemplate it,” Wallace said, adding that this particularly adds pressure on network performance in physical 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, particularly 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 advocates and lobbyists who instead prefer an over-engineered, futureproof and comparatively expensive monopoly fibre infrastructure, to the detriment of existing access infrastructure and alternate technologies that could do much of the same for considerably cheaper? NBN proponents such as Tucker

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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 WiMAX and other technologies. Notably many of these e-service delivery mechanisms require considerably less than 100Mbps capacities and in some cases are actually advantaged by mobility: smart grids are largely facilitated by telemetry applications that require nothing more than mobile SMS functionalities. Which leads to another question: even if the NBN becomes widely adopted for improved broadband services at the sub25Mbps level, what will policymakers do if 100Mbps uptake fails to eventuate because of the lack of relatively affordable transit and backhaul? What if there is a commensurate lack of productivity or innovation 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 government investment in nationalising and underpricing those services? Or will the national FTTH network simply take the same massive write-downs seen on previous fibre-heavy Australian private investments and end up in the hands of a private owner for cents in the dollar of its build costs? These are all legitimate questions 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 19992001 undersea cable boom and bust

COVER STORY

Why the NBN’s payoff will be slow

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 better off with a great Internet. But the facts are clear: the best independent 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 government money, and were overoptimistic. Common sense has been lost as geeks lusted after fast connections and businesses looked for government favours. Essentially 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 business 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 experience from countries that already have fast connections is that applications 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 plausible reason why 50 meg connections have wildly more economic impact than 3 meg connections. The scholars discovered what every unemployed book seller, newspaper reporter, and record company executive knows: broadband has a downside as well as benefits. In February 2009, Raul

Katz of Columbia University tried to estimate the induced job effect of the U.S. stimulus, and discovered 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 businesses more efficient, they might need fewer workers. What happens 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 radiologists are already taking work away from radiologists in many other countries. Initially, the market 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 economic 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 expansion is also associated with population growth and that both the average wage and the employment rate—the share of working-age adults that is employed—are unaffected by broadband expansion.” Shane Greenstein, the Elinor and Wendell Hobbs Professor Management and Strategy at Northwestern University, calculated 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 projection “a gross overestimate.” He added “There is a great deal of overstatement in most of these

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studies.” Greenstein explained why the earlier studies, even if solid, can’t predict what will happen today. “The experience of Manhattan in 2005 has no relationship to the experience in West Texas” today. If he were Australian, he could have compared Sydney with the outback. Those with the most to gain from broadband are nearly all among the 70% already connected. Reaching everyone is good social policy, but the economic impact 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 financed fiber home builds are uncommon except where competition is fierce. Verizon built FiOS because Cablevision was taking 30% of the voice lines and a majority 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. Australian government bonds yield 46%. 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 conclusively measure. I’d still prefer a 100 meg connection, however, even if the economic payoff is small. Dave Burstein

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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

ut this date in your diary: 4 June 2011. That’s the date that the main Internet body for allocating IP addresses – the Internet Assigned Numbers Authority (IANA) – is predicted to exhaust its pool of unallocated IPv4 addresses. And Sun while you’re at it, put this date in your diary as well: 5 4 February 2012. That’s the date the body for 12 allocating addresses in 19 this region – the Asia 26 Pacific Network Information 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 trigger a few alarm bells for organisations, government agencies and companies that have become accustomed to a continuous supply of IP addresses to fuel their operations. 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-

out a transition plan to the nextgeneration 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 128June 2011 Mon

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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 broadbandenabled dishwashers. STUNNING SILENCE The dates for the exhaustion of IPv4 addresses above come from Geoff Huston, currently chief scientist 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 Internet community and there’s very little disagreement on the timeframe. As Huston states, it's not like we haven’t known this day would come. In fact, it’s been forecast since the early 1990s. “Here we are, with this massive industry supporting a huge amount of wealth and currently expanding by a million new working services every day and we seem

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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 Internet – far from it. There are kludges available that will keep the Fri Sat Internet up, even if 3 4 it will mean patchy 10 11 service and an inability for some new 17 18 services to get off the 24 25 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 conference on the Gold Coast in August, APNIC presented its plans that will free up the trade in IPv4 addresses. Once the remaining addresses 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-

structure, most of the major vendors have been IPv6-ready for quite some time. Tim Nagy, a systems engineer with Juniper Networks, said that IPv6 capability is being demanded on more tenders these days, but its actual use in the network is very much in its infancy, with any deployment typically 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 Juniper thought we'd be at in 2010,” he said, noting that there was momentum 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 providers in upgrading. The users won’t know the difference 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 address 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

Vocus CEO James Spenceley 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 wholesale 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 minimising 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 providing 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 beatup, pointing to a string of media stories in the past about the pending doom that the Internet is run-

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ning out of Internet addresses. And they’ll also point to workarounds 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 migration 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 working of a number of Internet protocols, 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 opportunity for a brokered service that will allow a new type of provider 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 Internet 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 noone 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 meantime, mark your diaries for June next year.

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Richard Chirgwin

The strange case of perishable fibre .

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 temperatures ranging from -17 to +37 Celsius; average annual snowfall of 20 cm; annual flooding; and mudslides. One of those mudslides exposed the cable; the carrier involved decided 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 details, the stress tests included “cable twist, flex, compression and impact, water penetration, cable jacket shrinkage, tensile elongation of the outer jacket, and fiber stripability” – in other words, mistreating 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 physical tests! Their conclusion? The fibre was pretty much iden-

tical to the day it was installed – or, in the more measured terminology used in works like this, “there exists no significant degradation in the optical fibre cable’s performance, which verifies laboratory testing and speaks to the true reliability of optical fibre cable.” (Verification of Optical Fiber Cable Reliability, Houser and Chihanovich, 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 indistinguishable 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 papers, documents, and Google searches, I have come to the conclusion 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 between 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 period over which the fibre owner can reduce the book value of the

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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 maintenance against the asset value, and factors in whether future technologies 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 paying 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 carrier with fibre in the ground would need to build its new network while still depreciating the old one; a state of affairs which would be unacceptable to network owners, investors and governments 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.

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

uthorities in the United Arab Emirates were tense after Hamas leader Mahmoud alMabhouh was assassinated in Dubai in January. One of the theories peddled had Israeli Mossad commandos 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 using the Blackberry Messenger service to plan a protest against the price of petrol. The orchestrator of the rally had only been caught after giving himself away unwittingly by sending his Blackberry PIN out in a bulletin board message. Now the United Arab Emirates has threatened to ban several Blackberry services lest they impede future security efforts. It seems that the governments of some of the world’s developing countries don’t share Westerners’ enthusiasm for the device affectionately 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 webbrowsing services from 11 October. Since then? A cavalcade of bans and proposed bans worldwide including in Saudi Arabia, India and Indonesia. On the back of this worldwide clampdown, RIM stocks fell heavily. The regulatory onslaught prompts the obvious question –

what is it about the device that is making some governments so uneasy? 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 monitoring messages and emails to the level of detail some request. “The Blackberry platform architecture relies on dedicated data centres (NOCs) which handle all Blackberry data traffic over a secure, encrypted connection the NOC and the handset,” Ovum analyst Tim Renowden said. “Some governments are uncomfortable with the solution because they have little or no visibility into Blackberry data traffic, and are concerned that Blackberry handsets may be used for criminal purposes.” The company also boasts that it could never be pressured into providing copies of customer’s encryp-

At no time does RIM or any wireless network operator or any third party ever possess a copy of the key tion keys “since at no time does RIM or any wireless network operator or any third party ever possess a copy of the key,” the company says on its website. “This means that customers of the Blackberry enterprise solution can maintain confidence in the integrity of the security architecture without fear of compromise.”

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What differentiates the Blackberry 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 jurisdictions 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 itself on the basis of having a global secure email system. One of the big sticking points for the adoption of Blackberry services by Australian 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 eventually 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 information will attest. “The difficulty for RIM is that security has been a key selling point for BlackBerry and acquiescing to government demands would significantly undermine its security credentials, particularly with business and public sector customers,” Renowden explains. There are myriad legitimate reasons for wanting data encryption and privacy, and Renowden

senses a perception in the market that if RIM compromises with one government then others will demand 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 customers around the world and it remains unchanged in all of the markets we operate in,” the company said. “RIM cooperates with all governments with a consistent standard and the same degree of respect. Any claims that we provide, or have ever provided, something unique to the government of one country that we have not offered 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 appeased the Saudi authorities as the country’s government has now said it would allow messenger services to continue, but the UAE is standing by its decision to put the kibosh on the messenger, webbrowsing and email services starting 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, particularly India, that in the end they will have to comply with the regulations 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

email. That’s the conundrum they have.” India is the world’s fastestgrowing mobile phone market, with some reports suggesting the sub-continent is adding new subscribers at a rate of 20 million per month. RIM clearly values the market, as evidenced by its decision 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 developing ways to balance customer privacy demands against the authorities’ security requirements. “Finding the right balance to address both regulatory and commercial needs in this matter is an ongoing process and RIM has assured the Government of India of

Crucial to its decision will be whether it can get Google and Skype onside its continued support and respect for India’s legal and national security 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 wireless technology is not unique to the BlackBerry platform. It is unquestionably an industry-wide matter,” RIM said. “Banning such

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strong encryption-based information and communications services would severely limit the effectiveness and productivity of India’s corporations.” Just days ago, Indian authorities announced that they will delay firm bans to the Blackberry messenger services for at least 2 months after the firm agreed to provide “some technical solutions” for local security agencies to monitor its email service. Indian government officials would not be drawn on the details of these solutions but explained that the Department of Telecommunications will begin assessing them immediately and that the government will make a decision in sixty days time as to their adequacy. The government 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 commercial email service it offers or from being denied access to large emerging markets such as India and Indonesia. Crucial to its decision will be whether it can get Google and Skype onside and form a commercial troika that will have greater leverage in negotiations with the authorities. One can bet that all three companies are doing some serious analysis right now.

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.

hose who follow the geopolitics of international telecommunications 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 political objections have taken a moralistic tone that maligns Huawei with accusations based on inaccurate 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 senatorsâ&#x20AC;&#x2122; letter is available as a .pdf file on the Internet for those who want to read the whole thing. That letter demands a response from someone familiar with international and Iraqi telecommunications. Huawei has a good story to tell the American people but this is being lost in the noise of electoral politics. To set the record straight I submit the following highlighted paragraphs from the letter, 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 destroyed the first time in 1991 in the First Gulf War, and two years before the Coalition obliterated

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 responsible for facilitating reconstruction 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

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spread out around the country with minimal security helping the Iraqi national telecommunications company rebuild its national telecommunications grid. Huawei was deeply involved in the planning and reconstruction of Iraqi telecommunications 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 conditions that fostered the insurgency. A functioning national telecommunications system is a pre-requisite for all other economic development. The surge and much consequent stability in Iraq was facilitated by the technical foundation established by Huawei engineers.

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 consequence, Huawei saved American lives. The company should be awarded a medal by the US government instead of being maligned by senior politicians.

Should I be troubled that AT&T is a major provider of telecommunications services to the Pentagon, and that over many years several AT&T executives, in charge of government relations, 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 executives 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 investigated the French, the French have investigated the Americans, the Chinese have investigated the Indians, ad nauseum.

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 outside looks a bit different on the inside. Any experienced telecommunications professional will be skeptical of claims that place China near the top of the cyberwar and cybersecurity – or cyberespionage – league tables. I wouldn’t rank the country in the top 10. But the country produces 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 Chinese foreign policy, and the most important goal of that policy is access to minerals deposits and oil in developing countries. If Chinese policy makers can gain leverage 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 numerous 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 corporate executives made a conscious economic decision to move US manufacturing to China over the last twenty years. This created

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the supply chains and volume efficiencies 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 consider 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 generational” — as it’s becoming fashionable to describe them in some Washington circles. What an inheritance. To ameliorate this prospect it might be worthwhile to include Huawei in discussions of stabilisation and reconstruction, and treat them as potential partners, and dare I say, even allies in helping to improve the economic and political infrastructures in conflicted countries. Huawei is a commercial telecommunications 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 necessary. Huawei should have open access to the United States network equipment market, on the basis of continued access for American companies to markets in China.

Bob Fonow is the Managing Director of Revenue Growth International Ltd, a turnaround consulting firm with offices in Northern Virginia and Beijing. He was the US State Department Senior Consultant to the Minister of Communications in Iraq from 2006-2008.

CHRISTOPHE BUR

The acute importance of customer service .

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 purchasing 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 experience transformation journey without completing it. Where do we come unstuck? Firstly, supplier size is too frequently blamed as the barrier. This is a misnomer. It is customer–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 consistency in customer experience. Though not easy, it is possible to create a direct link between identifying areas for process simplification and taking rapid improvement actions. Vodafone Netherlands undertook a 12 week project to analyse its customer

experience and define, accelerate and deliver 27 quick win initiatives which also, in parallel, yielded considerable experience improvement – and cost savings. Secondly, enhancing the customer 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 definition, areas for eliminating costs which don’t contribute to repurchase. Low-cost airlines have enjoyed much success, not by offering complimentary meals or headsets, but by delivering an expected experience at the right price. TPG – with its crystal clear product proposition 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 anything within a business process that didn’t deliver it. The challenge was to be brutally honest about what value from a customer perspective actually meant. Defining this value proposition can be quicker than you think, and although the implementation jour-

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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 touchpoint in the customers’ experience, 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 customer expects (and wants), will yield targeted results. Encouragingly, there seems to be a critical mass of players which now demonstrate an acute appreciation of the importance of defining and designing the ‘ideal customer experience’. Following the customer thread all the way through from first contact to renewal 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

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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

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 running 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 billion over 8 years to build LightSquared’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 operator 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 demand, technology evolution, as well as the nature of the mobile industry, are approaching or hitting key transition points.

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 network akin to in-the-ground fibre. Lastly, the emergence of network outsourcing and whollymanaged mobile networks from markets such as India now allows LightSquared to really drive down its costs as well as operational complexity. In this area, LightSquared has selected Nokia Siemens Networks to build and operate its entire network. When all these factors are combined, LightSquared already has a

There isn’t an attractive wholesale offer in place for all the companies looking to participate in wireless services pretty compelling proposition. It will have a highly cost-competitive network infrastructure with next generation capabilities, in a market where demand is accelerating. But LightSquared won’t be stopping 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.

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WHY WHOLESALE? According to Frank Boulben, chief marketing officer at LightSquared, limiting the company’s business to wholesale means it can now address a vastly bigger market opportunity. “Given the characteristics of the US market – you have many wireless operators without 4G spectrum, 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 network 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 demand. 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-

casts in the US, the most conservative 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 network. 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 appetite, 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 already announced its first partner – smart grid solutions provider, Airspan, 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 challenges. 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 companies 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

A LightSquared promotional still 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 LightSquared’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 LightSquared’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 devices with built in wireless connectivity, 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 manufactured 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 pricing model. While LightSquared has adopted a simplified pricing

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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 configure and optimise the network to deliver the margins on its eventual pricing, there is no guarantee that the demand will materialise, especially in rural areas. UNIQUE POSITION At the end of the day, it’s not hard to see the potential of LightSquared’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 nationwide 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.

Teleconfidential by William van Hefner

Death by telephone .

ew consumer electronics products over the years have been maligned more than the humble telephone. Whether it be a hardwired landline type or the latest wireless device, a variety of hoaxes, urban legends and half-truths have conspired to make using the telephone a practice regarded as only slightly less dangerous than playing with a loaded handgun. We’ve all heard the classic stories 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 legends, 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 cellphones, for example. Nowhere, have I been able to find a legitimate 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 newspaper 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.

Of course, there are also a truckload of conflicting studies showing that cellphones can cause cancer or brain tumors. The evidence is hardly conclusive 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 typical 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

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held in federal prison, because the prosecutors feared that he had the ability to trigger a nuclear war, simply by whistling varies frequencies into the mouthpiece. Probably 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 consumer 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

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