Why FTTH? NBN Co and its CEO set a good example

Tuesday 29 June 2010 | 14:37 CET | Market Commentary
Construction of the Australian National Broadband Network (NBN) has started, while participation by incumbent Telsta in the project and migration of its customers to the new network still needs to be finalised (see our commentary 'Telstra profits from reduced uncertainty'). It's clear a new FTTH network is on the way - that is unless the opposition wins the next elections in October. NBN Co, the owner of the network, has announced trials of new services on the network.

In Parkbridge Estate in New South Wales, the trial will see 40 households test four services over the existing FTTH network:
• Smart metering: a new meter will allow residents to track their actual usage and adjust energy use.
• Touch screen communication: an intuitive device developed especially for children and older people will make it easy for these groups to initiate (video) calls.
• Virtual world learning: a new teaching method based on virtual worlds developed online.
• HD Internet TV: offering internet content in HD quality.

These are all applications that can grow to full service areas such as smart grid, e-health, e-learning and hybrid TV. Telework is the only major application missing.

Furthermore the CEO of the NBN Co, Mike Quigley, has donated his entire first year of salary (AUD 2 million, or EUR 1.4 million) to another experiment. Neuroscience Research Australia, where Quigley is a board member, is delivering over the NBN rehabilitation therapy to stroke victims, via remote monitoring and Ninetendo Wii consoles. Initially targeting 50 people in the first areas covered by the NBN, the service has a potential market of around 60,000 stroke victims per year in Australia.

These are important developments for the NBN. Given the prevalence of existing networks (DSL, cable, 3.5G), it can be difficult to justify construction of a whole new FTTH network. A number of regular arguments in support of FTTH include its future-proof nature (maximum symettrical bandwidth), the environmental benefits (FTTH is much 'greener' than other networks), and the network's openness. However a problem arises when there are no desirable new services to offer over the fibre networks and/or the mentioned benefits are not reflected in a (low) monthly tariff. In other words, a standard triple-play for a price reflecting the high deployment costs is not a good way to sell FTTH to the consumer. The NBN Co has not announced any tariffs (it's still working on a trial basis), but the Australian NBN Co is clearly setting a good example, strengthened by a clear message from the CEO himself.

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