Australia is set to leapfrog over the United States and Canada, declaring its intent to deliver fiber broadband service to the vast majority of its citizens within eight years.  The country embarked on a National Broadband Plan more than a year before the United States, declaring the current state of usage-limited, slow, expensive, and incomplete broadband coverage to be unacceptable.

Australia discarded an earlier plan to work with private providers to build the network when government officials faced opposition from private providers who did not want to lose control of the broadband market.  In a surprising decision last September, Prime Minister Kevin Rudd announced the government would commence construction of a fiber to the home network itself, excluding private providers from participation.

NBN Company, a government-owned entity, will construct the $43 billion network over eight years, delivering 100Mbps speeds on a fiber network.  The infrastructure will be designed for an easy upgrade to 1 Gigabit service as bandwidth demand intensifies.

A separate deal concluded today with Telstra, Australia’s largest telecommunications company, will retire the nation’s copper wire landline network and cable systems, to be replaced by NBN fiber.

Up to 37,000 jobs will be created to build the network across the country, supplemented with wireless broadband for Australia’s most rural areas.

But some are complaining the network is too extravagant and expensive, adding their displeasure with the Rudd government’s strong-arming of Telstra to give up its network.

Opposition finance spokesman Andrew Robb said taxpayers would be on the hook for the project.

“It’ll come with a multi-billion dollar taxpayer debt that will have to be paid off over decades,” Robb said, adding if elected, the opposition promises to scrap the plan.

[flv width=”424″ height=”260″]http://www.phillipdampier.com/video/Nine Network New National Broadband Plan 4-6-09.flv[/flv]

Prime Minister Kevin Rudd originally introduced his nationwide fiber network proposal in April 2009.  Channel Nine provides this roundup of the original announcement, media reaction, and a few insults from the opposition.  Just a day after the plan was introduced, Communications Minister Stephen Conroy warned Telstra to “back off,” referring to the company’s immediate lobbying effort to block the proposal.  (11 minutes)

Prime Minister Rudd announcing the deal between Telstra and the federal government.

Australia has taken the first step towards 100Mbps unlimited broadband service this weekend as an agreement was reached to decommission the country’s copper wire phone network, replacing it with fiber connections to 90 percent of Australian homes.

After months of heated negotiations between Telstra and the federal government, Telstra CEO David Thodey this morning joined Prime Minister Kevin Rudd at the podium to announce the $11 billion deal.  Telstra will agree to scrap its copper-wire phone system and make way for the federal government’s new fiber network.

Rudd claimed the deal would benefit everyone because it would permanently retire an obsolete network with easily-upgradable fiber, connected right to the home.  Under Rudd’s previously announced National Broadband Plan, the government would finance the construction of the fiber network and lease access to any provider, including Telstra, at wholesale pricing.

In addition to an $11 billion offer, Telstra is expected to keep the estimated $580 million the company could earn from recycling more than 70 million kilometers of copper phone wiring no longer needed.  Another $1 billion will be earned from real estate sales.  At least 3,000 telephone exchange offices are expected to be declared redundant after switching to the fiber network, bringing Telstra plenty of additional earnings as those properties are sold off.

“I can’t stress enough just how complex this certain negotiation has been, because we’ve had to look at commercial issues, what the future of the business would be, what the structure of the industry would be, but we have got to this position and we are pleased to have done so, because it does give us clarity, and that’s what this company needs,” Thodey said. “Firstly we’ve got to grow our share of the market, we’ve got to simplify this business to take the unnecessary complexity [out], and we are going to continue now to build and invest in building new products and services to work in an NBN world.”

The agreement gives NBN Company, the government-owned entity building the fiber network, access to Telstra’s outdoor facilities to house the fiber network, saving the government billions in construction costs.  Telstra has also agreed to purchase wholesale access to the new network and will also decommission its coaxial cable-based systems, moving customers to the new fiber facilities as built.

Telstra will continue to operate its wireless mobile network and satellite TV business independent of the government broadband project.  For Telstra, in return for giving up control of broadband, the company is also freed from its universal phone service obligations which required it to provide service to any Australian that asked.

Telstra shareholders liked what they saw as the stock soared in value earlier this morning, but Thodey urged some caution.

“We believe that this is an important milestone towards getting [the deal done], but I want to stress it’s only a milestone, because it’s a non-binding financial heads of agreement that sets us on a road to get to a definitive agreement over the next period,” Thodey said.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/Network 10 Aus Broadband Deal 6-21-10.flv[/flv]

Network 10 covered the deal between Telstra and the federal government in its weekend news report.  (4 minutes)

AT&T: 'If you don't do what we say, we're taking U-verse away!'

AT&T is threatening to pick up its toys and go home if the Federal Communications Commission tries to bring back its oversight powers over broadband.

CEO Randall Stephenson threw a major hissyfit in the pages of the Wall Street Journal, annoyed the company doesn’t have free rein to do whatever it wants.

“I’m a 3-2 vote away from the next guy coming in and [trying to regulate us], [and] I take it away,” Stephenson said, referring to it’s U-verse IPTV service.

AT&T has threatened to cut spending on U-verse deployment if AT&T faces regulations like Net Neutrality in its broadband business.

“If this Title 2 regulation looks imminent, we have to re-evaluate whether we put shovels in the ground,” Stephenson said, claiming the company planned to spend a “couple billion” dollars a year on the service… until now.

But AT&T has already cut spending on U-verse, slashing $2 billion in U-verse investments in 2009 alone — news trumpeted to shareholders.  Additionally, AT&T has laid off thousands of employees.  In short, the threats the company made this week have already come to pass… more than a year ago.

Many analysts claim AT&T is bluffing.  Like most landline providers, AT&T is losing traditional phone customers who are disconnecting their wired phone lines.  Its wireless division has been pummeled for inadequate 3G coverage, poor customer service, and lousy reception in many areas.  AT&T can’t afford -not- to upgrade their services if they wish to retain customers.

The cable television industry certainly hopes AT&T isn’t bluffing.  They are enjoying AT&T’s disconnect business as customers dump inadequate DSL service and overpriced phone lines for cable-provided alternatives.

Unitel is one of five Maine telephone companies facing competition from Time Warner Cable's "digital phone" service

The Maine Public Utilities Commission has denied a request by Time Warner Cable to launch “digital phone” competition in rural Maine unless and until the cable operator agrees to completely wire every home that wants service in the affected communities.  The decision may carry national implications because it signals utility commissions have the power to stop unfair competition from companies that don’t agree to provide their service on a universal basis.

Five rural phone companies faced the prospect of trying to compete with Time Warner Cable’s “digital phone” service under requirements they provide universal service to every customer in their service area while the cable operator could cherry-pick where to provide service.

Unitel, Lincolnville Networks, Tidewater Telecom, Oxford Telephone Company and Oxford West Telephone Company told the PUC Time Warner Cable’s competitive threat was not fair because the cable company only provided service in choice neighborhoods, typically those with multiple residences adjacent to one another.  Only wiring significant population areas reduces costs for the cable operator while the rural landline providers are required to extend service to every resident in their communities, regardless of where they live.

A review by the PUC found Time Warner Cable’s request would create an undue economic burden on the rural telephone companies, reducing their value and increasing the risk of their long term survival, which would discourage investment and increase risk to creditors.

Reishus

PUC Chair Sharon Reishus: “Our decision…is taking place in a changing landscape for telephone regulation at the federal level with pending congressional and FCC actions, in the marketplace and in wireless technology. Our decision came down to an analysis of the current financial ability of the rural companies to withstand market competition if the exemption were lifted.”

“Customers in these rural areas must be assured a telephone service provider of last resort and access to lifeline services. Although the commission has a long history of recognizing the value of competition in the telecommunications market, in this instance, where Time Warner is not proposing to expand the availability of its service throughout the entire service territory of the rural companies, selective competition would undercut the ability of the rural companies to fulfill their ‘provider of last resort’ obligations.”

For years large telephone companies like AT&T and Verizon have argued that cable’s entry into the telephone business was unfair because cable companies never were required to serve every potential customer.  But instead of maintaining demands that cable match their universal service obligations, large phone companies have instead tried to free themselves from having to provide service to every possible customer.  AT&T, for example, has heavily lobbied for repeal of universal service requirements that mandate they provide telephone service to residents who live in the most rural service areas.

The Maine PUC has adopted a different standard — demanding that would-be cable competitors get busy wiring their entire communities for cable if they want permission to compete with area phone companies.  If they are not willing to do so, they cannot provide phone service to anyone in those communities.

Time Warner Cable had been seeking permission to provide phone service in rural Maine since 2008.

[flv width=”560″ height=”340″]http://www.phillipdampier.com/video/Oxford Networks.mp4[/flv]

A promotional video from Oxford Networks (d/b/a Oxford/Oxford West Telephone Company) explaining the company’s history and their investment in fiber optics.  (3 minutes)

Despite claims that broadband is not eroding Time Warner Cable’s cable television business, the nation’s second largest cable operator has begun a “TV Everywhere” trial to expand broadband viewing options for “authenticated cable subscribers” and plans IPTV tests by the end of this year.

A “small number” of subscribers are now participating in the TV Everywhere trial in the New York City area, accessing premium channel content online, if they also subscribe to the channel.

James Manchester, regional president of network operations and engineering in the company’s New York City system told Broadcasting & Cable that the tests will verify whether the authentication process functions properly.

Manchester expressed urgency that unless Time Warner Cable moves to manage video content online, the company will continue to lose subscribers.

He told B&C cable’s erosion of video subscribers, at a time when digital voice and broadband subscriptions continue to grow, makes it essential to move to more of an IPTV environment.

“It’s no secret that we’re losing video subscribers as an industry,” he said. “We can’t afford to wait.”

Time Warner Cable sees challenges from several potential competitive threats:

• Online video: Services like Hulu and Netflix, and time-shifting services that allow viewers access to on-demand programming online represent a real threat to the traditional cable-TV model.  Customers can cut the cable cord and watch everything online for free or for around $10 a month.
• IPTV: Niche and ethnic programming delivered over IPTV networks allows third parties to create mini broadband-based cable systems using hardware that mimics a cable box, delivering potentially dozens of channels to subscribers without giving a cut to the cable company.

[flv]http://www.phillipdampier.com/video/Skyangel IPTV.flv[/flv]

SkyAngel used to deliver its lineup of Christian television channels over satellite, but switched to an IPTV platform in 2007.  This video explains how the service works.  (3 minutes)

TV Everywhere allows Time Warner Cable to control who has access to cable programming, restricting it only to those who haven’t cut cable’s cord.

Time Warner Cable’s solution for IPTV competition is to bring those services under TWC’s own menu of offerings.

One example in KyLin TV, a multi-channel Chinese language IPTV service.  Today, customers pay KyLin TV for service they watch over Road Runner’s network.  But Time Warner Cable could potentially get a piece of the action if it moved KyLin TV into its own IPTV package.

Manchester says TWC would like to be able to make such IPTV programming services an extension of the TWC offering.

Despite some earlier assertions made by company officials that DOCSIS 3 upgrades were designed to improve broadband service for Time Warner Cable customers, it turns out DOCSIS 3 is the foundation for the cable company’s future IPTV and “big pipe” platform.  Manchester says DOCSIS 3 will enable the company to service the wired home of the future.  It will deliver content to an edge device (such as an advanced router) with a hard drive and caching capacity that will link to home computers, MP3 players, or any other device on which consumers want to view content.