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Regional Connectivity: how new technologies on the near horizon are set to completely re-shape how we approach the digital divide

CommsDay Summit 2020

Michael Ackland's presentation 27 October 2020

Today I'd like to speak on regional connectivity, and how new technologies on the near horizon are set to completely re-shape how we approach the digital divide.

I'll address this topic from three key points.

First, over the past decade regional Australia has become more connected than ever before — but the digital divide continues to deepen as metropolitan connectivity improves even more.

Second, I'll discuss how the Australian approach has created technology winners and losers — and a tangle of telecoms policies in regional Australia.

And finally, I want to talk about how new technologies are set to solve this regional telecoms tangle — and how fibre connectivity is fundamental to their success.

So I'll start off by reflecting on how far we've come in past decade when it comes to regional connectivity, and how far we still have to go.

The last time I had the pleasure of presenting to a CommsDay audience was 10 years ago. Since then I have been a part of programs rolling out over 20,000km of long-distance optic fibre cable, on land and under the sea. We at Vocus have an intimate understanding of the challenges, risks, business and most importantly customer needs in regional and remote locations.

Looking back on all this technology deployment, it's hard to imagine that it was less than ten years ago that the Government of the day signed a fresh contract with Telstra to continue to deliver the Universal Service Obligation, as part of its Definitive Agreements with NBN C0 12

The USO arrangements would ultimately be worth around $2 billion 3 , and ensure that all Australians would "have reasonable access to a standard telephone service" — meaning voice telephony — which would almost always be delivered over a Telstra copper line.

The contract contained no obligation to provide broadband services — these would be delivered by NBN as part of its fixed wireless and satellite network as part of the national rollout.

And I say that it's hard to imagine because here we are, less than ten years later, and regional telecommunications has progressed considerably in that time — even if the USO contract hasn't. Today, close to 620,000 premises are able to order a service on NBN's Fixed Wireless network, and more than 330,000 premises have connected.

Over 430,000 premises can connect to NBN's Sky Muster Satellites, and more than 100,000 premises have an active connection.

In that same period, five funding rounds of the Mobile Black Spot Program have funded more than 1,200 new mobile base stations — with more than 800 of them now constructed and delivering mobile voice and data services in regional areas today. [1]

So with these all advances in regional connectivity, there's a certain irony that the 'digital divide' between cities and the country is getting deeper. While people living in regional Australia undoubtedly have better connectivity today than they did a decade ago, people living in cities have seen far greater advances in the broadband speeds available to them, as well as a strong competitive environment which provides more options than ever before.

NBN's recently announced fibre to the premise upgrade plan is a boon for 2 million homes in metropolitan areas and suburbs. Combined with upgrades to the HFC network and NBN's existing FTTP and fibre to the kerb footprints, three-quarters of the fixed-line footprint will have access to gigabit speeds by 2023 [2].

It's something that regional users on fixed wireless and satellite can only dream of.

And this is an important point given the ongoing impact of COVID on the economy.

COVID has made Australians more reliant on broadband connectivity than ever before, and NBN should be commended for working constructively with industry to ensure there was sufficient capacity to keep Australia connected throughout the pandemic.

Connectivity has proven to be a critical service during COVID as Australians have shifted to working from home, schooling from home, and accessing streaming entertainment from home. But people in regional areas remain at a disadvantage to their metro counterparts, despite the fact that their connectivity today is better than ever before.

And this brings me to my second point — Australia's approach has created technology winners and losers — and resulted in a tangle of telco policies in regional Australia.

With the recent announcement of NBN's fibre to the premise upgrade program, we can once again debate the merits of a Government-subsidised national network operator "picking winners" when it comes to technology choices.

The announcement of the FTTP upgrade to an additional 2 million premises came within a week of Telstra announcing its 2,000 th 5G site, with its network said to reach more than 40% of the Australian population [3] .

Days later Optus announced that its own 5G network covered some 650,000 premises, providing average download speeds above 200Mbps. [4]

Analyst firm Venture Insights has predicted that Australian mobile operators could attract as many as 1.2 million 5G fixed wireless subscribers by the end of FY 24, expecting them to focus on customers in areas where NBN Co has deployed FTTN — but who are lighter data users.[5]

As a fixed-line operator of course NBN would ultimately seek to deploy a FTTP network as its 'technology winner'. But when the Government-subsidised national network owner picks a winner, that inevitably results in losers.

What does it mean for these multi-billion-dollar 5G upgrades when NBN is also rolling out its own multi-billion-dollar FTTP upgrade, and these rollouts will largely cover the same geographic areas?

The business cases for these 5G investments were signed-off long before NBN's upgrade plan was announced. Billions of dollars were invested in spectrum, contracts were signed with equipment vendors, rollout plans put in place.

As a result, over the next three years we're likely to see the majority of metro and suburban areas have access to gigabit NBN speeds as well as two or even three competitive 5G networks offering speeds in the hundreds of megabits per second.

So while there's technology winners and losers, there are also geographic winners and losers. People living in regional Australia will continue to have access to NBN fixed wireless and satellite, as they do today. If they're lucky, they might also have access to 4G mobile broadband, and in some fortunate cases they may even have access to 5G if the rollouts have progressed beyond lucrative metro markets.

But the digital divide will be wider than ever.

And unless there's a change in direction, regional areas will continue to be served by a piecemeal approach which has created a tangle of telecoms policies - all broadly trying to solve the same problem.

We'll continue to have the USO, which sees Telstra paid around $250 million a year to maintain the

Standard Telephone Service in regional Australia. This is partially a direct Government payment of $100 million a year, and partially via the Telecoms Industry Levy or 'TIL' which collects around $250 million a year for a range of public interest telecoms services including the USO.

Telstra pays the lion's share of the TIL — more than $150 million — effectivity paying itself to deliver the USO. But NBN contributed more than $11 million to the TIL last year — and as NBN's revenues continue to grow in coming years, so will its share of the T IL.

This means NBN will be paying Telstra tens of millions of dollars a year to keep its copper network alive in the same places NBN operates its own Fixed Wireless and Satellite networks.

At the same time, NBN's Fixed Wireless and Satellite networks will be subsidised by commercial operators via the Regional Broadband Scheme, or RBS. The RBS is expected to raise over $741 million in its first year of operation, to offset losses of a staggering $12.9b for the period between 2009 to 2040, with the majority of the RBS paid by NBN to itself, and industry picking up the tab for around 5% of the total annual cost.

As a result, Telstra pays most of the TIL to itself and NBN will pay most of the RBS to itself — and Telstra and NBN are also increasingly paying each other to operate duplicative networks.

Combined, the USO and the RBS will raise around $1 billion annually to subsidise networks serving the same users in the same areas of regional Australia.

On top of this, we've got the Mobile Black Spot Program which subsidises mobile network coverage in many of the same areas that are already subsidised by the USO and RBS, and we've got the Regional Connectivity Program which will subsidise new local telecoms infrastructure in areas which already have NBN Fixed Wireless or Satellite.

Additionally, we have various State-Government programs like NSW Gig State, Victoria's own mobile coverage program, and the WA grain belt fixed wireless program.

To be clear, I'm not saying this as a criticism — these programs have delivered tangible benefits to many regional communities, and the Regional Connectivity Program will do the same. People living and working in regional Australia deserve all this and more.

What I am saying is that these various subsidy programs have created a telecoms tangle in regional areas, and in many cases, they overlap and overbuild one another.

So we have situation where metropolitan residents already have access to superior broadband technologies enjoying multi-billion-dollar upgrades, versus regional residents who have access to fixed wireless, satellite and mobile networks which will forever be dependent on Government subsidy programs.

Unless, of course, a technological breakthrough came along which completely changed the game. And this brings me to my third point: new technologies on the near horizon can untie this telecoms tangle — and all of them will be dependent on more fibre in regional Australia.

There's a famous quote by science fiction writer and futurist Arthur C Clarke that says: "Every revolutionary idea seems to evoke three stages of reaction... (1) It's completely impossible. (2) It's possible, but it's not worth doing. (3) I said it was a good idea all along."

This quote came to my mind as I was considering the new generation of telecommunications technology is being rolled out 'literally' around the world — Low Earth Orbit Satellites.

This technology has moved from the "It's completely impossible" stage (thanks to OneWeb), to the "It's possible, but it's not worth doing" stage thanks to the work of SpaceX. Falcon 9 rockets are bringing the cost of launching a rocket down from US$600 million to, reportedly, US$35 million along with the capability of launching 60 satellites at a time instead of just one.

By this time next year, we'll be at Stage 3 — there will be a lot of people claiming that this was a good idea all along.

This technology has the potential to solve the regional telecoms tangle. Not only could it make all of the funding programs I mentioned earlier redundant, it may even make the technologies being deployed redundant.

A number of global technology giants are racing to deploy global LEO satellite networks which are expected to revolutionise connectivity in both regional and even metro areas.

Google, Amazon, SpaceX and at least half a dozen other companies have announced programs to deploy LEO satellite constellations. Telesat LEO, with 300 satellites, is developed by the Canadian telecommunications company Telesat. Project Kuiper is the brainchild of Amazon CEO Jeff Bezos with 3,236 satellites [6]. Finally, there is Starlink from Elon Musk's space company SpaceX which has long-term plans to launch as many as 42,000 satellites.

Mark Zuckerberg's Facebook has confirmed it is working on its own LEO sat project, Athena, with an unknown number of satellites. Google does not want to be left out, and has announced plans for a Satellite Constellation with "only" a thousand satellites.

And it's not only western technology companies. China does not want to be left behind. Some of their projects include Hongyun (rainbow cloud) with 864 satellites and Hongyan (wild goose) with 320 satellites. The Russian state-owned company for space operations, Roscosmos, is also joining the race. Through the company Gonets (Russian for "messenger"), services are offered for commercial and military purposes. The satellite network now has 18 satellites in two orbits, the total plan is for 36 satellites in six orbits.

On February 24, 2020 a company called Lynk successfully connected a standard, unmodified mobile phone to one of its four 'cell towers in the sky' satellites". Lynk are launching one satellite every six months.

Bloomberg has even reported that Apple has a secret team working on satellite technology that the iPhone maker could use to beam internet services directly to devices, bypassing wireless networks.

The technology is so vastly superior to existing satellites that their performance is more comparable to terrestrial networks. Traditional satellites have always been hampered by the laws of physics which mean round-trip latency of 600ms is unavoidable. In contrast, Real-world tests using low-orbit satellites have demonstrated round-trip latency between 40 to 50ms — comparable to terrestrial networks.

Traditional high-orbit satellites can sit as high as 36,000 kilometres from Earth's surface. LEO Sats sit closer to 550 kilometres above the earth, hence the low latencies. Download speeds above 100Mbps have already been demonstrated on early LEO Sat deployments — comparable to speeds available on residential fibre and 5G networks.

Gartner analysts have said LEO Sats have the "potential for a dramatic social and commercial impact", not only by providing high-speed connectivity to areas currently unserved by fixed or mobile infrastructure, but also for providing a real alternative to 5G.

The applications offered by LEO Sats are likely to be replicate the offerings of LTE and 5G in a number of areas — and likely at much lower cost. Today, railway operators are installing private LTE networks for signalling — LEO satellites could provide this without requiring a single new base station to be built. It's a similar story for data on the trains themselves.

In fact, many of the IOT applications being touted as dependent on 5G may well be more economically served by LEO Sats, such as transport and logistics, autonomous vehicles, and other in-vehicle data applications. Why would Mercedes, when seeking coverage for autonomous cars, sign up 172 agreements with local mobile operators around the world, for patchy, incomplete coverage when they could have one contract with a worldwide provider?

By now you're probably wondering why a speaker from a company that specialises in high-capacity fibre networks is speaking about LEO Sats?

Quite simply, the success of these LEO Sats is as dependent on their ground infrastructure as their space infrastructure. That's where Vocus steps in.

Vocus has no 5G network, and we have no revenues to protect in the 5G market. With our extensive fibre network, particularly in regional areas, we are able to facilitate the entry of this technology into Australia, and we intend to sell it.

With LEO Sats dramatically decreasing round-trip time from earth to space compared to traditional satellites, the speed of the network will be largely dependent on ground-station connectivity.


We can expect to see a proliferation of new ground stations in regional areas to support these new LEO Sat fleets — meaning access to high-capacity, low-latency fibre in very remote areas will be critical to their success.

Vocus is ideally placed to play in this space with our expansive region fibre network and proven reputation as the 'carriers' carrier'.

If LEO Sats deliver on their promise, this could solve the regional telecoms tangle in the next few years. The USO, RBS, MBSP and various state-based funding programs are likely to become redundant.

So, what policy approach should we take to regional telecoms if LEO Sats deliver a better service than the USO or NBN?

The single common element — whether you are talking 5G, LEO Sats, Fixed Wireless, or even Edge Data Centres — is that they will all be dependent on having competitive backhaul in regional areas. Competitive access is different to regulated access. Backhaul networks require cooperative augmentation to connect sites that only competition by willing providers will allow for.

So many of these areas are still stuck with a monopoly provider, and regulated rates which rarely, if ever, reflect real-world commercial prices. But we have a real-world example of how to unlock competition for the benefit of regional users: the Regional Backbone Blackspot Program or RBBP, which Vocus has operated on behalf of the Commonwealth since 2011.

The RBBP was ahead of its time in getting the policy settings right to improve competition in monopoly areas: Open-access wholesale backhaul with equivalence obligations. This means that Vocus as the operator of the network has no commercial advantage over any other wholesale customer — the same price is offered to all customers, and when the price goes down for one customer the price goes down for all customers.

The RBBP introduced competition on monopoly routes, brought down prices and increased the available bandwidth.

A good example of the outcomes this open-access structure provides can be seen when it comes time to upgrade the technology. Under the 'Terabit Territory' contract announced with the NT Government, Vocus' $20 million upgrade to this network will implement 200G per wavelength between Adelaide, Darwin and Brisbane. This is a massive upgrade at no cost to the Commonwealth.

Will this be the case when it comes time to upgrade mobile blackspots towers from 4G to 5G in regional areas?

This same principle of open access wholesale with equivalence provisions can be key to future Government programs in regional areas. Next-generation satellite will be dependent on fibre to connect ground stations, just as 5G will be dependent on fibre to base stations.

Future rounds of programs like the Mobile Black Spot Program and Regional Connectivity Program should mandate that any proposals with a backhaul element must have open-access wholesale with equivalence obligations to ensure public funds work for the benefit of all users — not just the successful proponent.

So I'll conclude by saying that the future is very bright for regional telecommunications.

Over the past decade regional Australia has become more connected than ever before — but currently, the digital divide continues to deepen as metropolitan connectivity improves even more.

Throughout this period, the Australian approach has created technology winners and losers — and a tangle of telecoms policies in regional Australia.

But new technologies, in particular LEO Sats, are set to solve this regional telecoms tangle — and fibre connectivity will ultimately fundamental to their success.

Thank you.