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Australia: Australia Communication Profile 2012

2012/05/12

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Australia Communication Profile 2012

 

 

  Australian telecoms worth $40 billion

The overall telecoms services revenue passed the $40 billion mark in 2011, reflecting the mildness of the downturn in Australia compared with other countries. However, as has been the case in 2011, growth is likely to remain very subdued in 2012. This is attributable to the continued decline in the fixed-line markets and levelling off of mobile subscriptions, along with reduced pricing from operators attempting to attract increased market share.

Overall fixed line revenues across all operators fell to around $10.5 billion in 2011.

Telstra, Optus and Vodafone

Telstra still dominates the overall Australian telecoms market, although it received just under a 60% market share of overall revenues in 2011, well down from the 80% market share it held in the early 2000s.

Optus’s share of service revenues continues to stagnate between 20%-22%. However its wholesale business had a market shift in 2011 and its growth suggests that, even with a subdued market, Optus’s overall share could surpass 23% by 2013.

The merger of Vodafone and Hutchison, and the subsequent network issues, have contributed to its market share dropping slightly, and the increasing network expansion could see Vodafone return to its previous share of total industry revenue.

2nd tier market

The second-tier market is making gains in broadband and they are gearing up for IPTV, which will then be bundled into their other product offerings. Although the bundled market often sees overall revenues fall it generally maintains a higher ARPU. Further consolidation is also expected in 2012.

The fixed-voice market revenue is declining in the second-tier market, but so too are mobile and broadband revenues. Falling revenue reflects increased bundle value, as well as consumers moving away from fixed-voice services; however it may also be a symptom of increased reliance on VoIP-based and naked DSL platforms in the second-tier market. Nevertheless overall revenues in second-tier mobile services and data services (including internet access) continue to show growth.

The second-tier telcos’ share of revenue has continued to grow since 2009, being just over 9% of total revenues by mid-2011. It is expected to increase slightly by 2013, to around 12%..

Broadband market

The fixed broadband market in 2011 is still growing and in that year the %age increase was higher than in the last couple of years. The increase in numbers appears to be coming from the continued drop-off in dial-up customers as they move to a faster and often cheaper service, plus the uptake by newer customers.

Some key factors that have been contributing to the slow growth of this segment – the hardware in Telstra’s exchange limitations – will be removed during 2012 with Telstra’s ‘Top Hat’ program.

Continued strong adoption of services such as Ethernet and private IP in the business data market segment saw revenue growth of around 15% in 2011.

Mobile market

The mobile market, now worth more than $17.5 billion, continues to expand – up 8% in 2011. As well as growth in overall SIOs, mobile broadband grows strongly, reflecting the high adoption rate of mobile broadband data cards, as well as new devices such as the iPad, Android phone

 

s and tablets, and new iPhone devices.

Declines in the fixed market limited overall telecommunications market growth in 2010 to just 2.7%, and, with the expectation of further fixed market falls, subdued broadband growth, and the likelihood of intense competition in the mobile market (which will limit ARPU growth), BuddeComm expects overall market growth to be limited to around 1%-1.5% in 2011 and 2012.

Regulatory environment

Telecommunications regulatory reform will continue to feature into 2012 as the Telecommunications Consumer Protection (TCP) Code will see increased pricing and usage monitoring. This will make it easier for consumers to manage their telecommunications costs; if this last attempt also fails service providers will face further regulations.

The other major feature will be the new regulations governing the transitional period between now and the arrival of the NBN. Subsequently other smaller and niche market operators will look for opportunities to capture a greater market share of the telecommunications revenue streams to shore up their returns.

Market Highlights:

  • A massive mobile broadba
     

    nd revolution is taking place with more than 5 million people now regularly using mobile to access broadband applications.

  • Rapid growth continues in wireless in 2011 as asymmetrical digital subscriber line (ADSL) growth slows down further. However it should be noted that BuddeComm estimates that approximately 90% of all wireless broadband subscribers have more than one broadband plan.
  • For the 12 months to end-2010 the annual growth in digital subscriber line (DSL) slowed down to approximately 10%, by which time the market would have reached around 9.7 million broadband subscribers. A further 17% growth is projected for 2010/11 to take the total market to 10.4 million subscribers. The majority of the growth by this time will be coming from the mobile wireless broadband market.
  • BuddeComm esti
     

    mates that in early 2011 there were around 450 provider services, ranging from dial-up through to digital subscriber line, fibre and wireless solutions. Some internet service providers only service small numbers of fewer than 100 users.

  • The business market in Australia was quick to embrace broadband, and by 2009 the vast majority of this sector had made the transition. A major reason businesses moved to broadband was for faster speed, yet, according to some studies in 2011, they still suffer from slow speeds.
  • In the 2011 financial year Telstra’s total mobile revenue passed $7 billion, with Optus around $6 billion. Vodafone revenue was close to $4.5 billion.
  • Total mobile services revenue earned by the major mobile operators in the 2010/11 financial years continues
     

    to grow, but at a slower rate than the growth seen in the last years of the previous decade.

  • Mobile services now represent considerably more than 50% of overall industry revenues in Australia.
  • There are around six million more mobile subscribers than people in Australia. Growth is likely to continue in the foreseeable future as smartphone uptake increases, even though subscriber penetration rates are about 125% of the population. Into 2011/12 the rate of g
     

    rowth may drop below 5%.

  • The changing environment of the NBN linked to the digital economy will help the industry double its size to around $80 billion by 2020.
 
 

Australia - Telecoms Industry 2010

 
Australia is among the leading countries whose government is actively investigating the social and economic benefits that can be achieved through the deployment of a mainly fibre-based telecoms infrastructure. Services that depend on high quality broadband infrastructure include tele-health, e-education, e-business, digital media, e-government, smart meters etc. In countries where the national telco is lagging behind we see that local governments have no choice other than to take a leadership role, as they have done with similar infrastructure over the last 100 years.
 
In December 2009 the OECD published its report on these issues and indicated that governments could justify the costs of fast broadband by using them to cut cost in sectors such as healthcare, education, transport and energy. On average, a cost saving of between 0.5% and 1.5% in each of these four sectors over a ten year period could justify the cost of building the NBN.
 
Governments are now starting querying whether this basic infrastructure should not be financed in the same way as other infrastructure, by making it a national right paid for through consolidated revenue, government bonds or, as the OECD indicated, government savings.
The decision from the Australian government to launch a $43 billion national FttH broadband network is a clear indication that they believe broadband is essential infrastructure. It fulfils a national purpose as its trans-sector multiplier effect delivers massive social and economic benefits in healthcare, education, energy and the environment. A digital economy requires an open broadband infrastructure, and for that to work it can only be built by a utility (NBN Co). While there certainly are questions regarding the business model and the investment plan, there is widespread support for the visionary plan. During 2010 the business model needs to be developed, which will take into account the socio-economic benefits the infrastructure can deliver to the country.
 

Statistical Overview and Forecast

Broadband statistics provided relate to the number of subscribers and market shares of major providers as well as additional data relating to DSL, cable and other broadband technologies. The total number of broadband subscribers crossed the 7.5 million mark in 2010, a 17% increase during 2009. Growth in recent years has been driven by further strong uptake of DSL subscribers, although recent growth has not as strong as the previous two years as the majority of the market has now made the transition from dial-up to broadband. In the longer term the development of a fibre optic network operated by a National Broadband operator is likely to have a significant impact on the take up of DSL or cable based services.
 
Segmentation is provided by dial-up/broadband and include statistics on website usage. An overview of the ISP market, including number of ISPs and market trends is also included. The business market has been quick to embrace broadband and by 2009 the vast majority of the business sector had made the transition. Further growth is continuing in 2010. As business users gradually move to faster broadband access via ADSL2+ and, when it’s built, services from the fibre-based NBN, they are increasingly embracing new broadband applications. This report provides a detailed overview of the key drivers and trends behind broadband adoption in the Australian business market. New data for 2010 has been included. A number of market surveys are also included across a wide range of topics including e-business, broadband usage, IT and consumer satisfaction, and the farming sector.
 
A range of topics are covered in relation to the usage of internet and broadband services in the residential sector. It also provides overall statistics of the residential telecoms market. It includes BuddeComm estimates of the market in 2010 and data from a number of market surveys covering consumer usage and behavioural patterns, as well as internet and broadband usage statistics. It provides an analysis of the drivers behind internet adoption among Australian households. Surveys covered include a statistical overview from the ABS regarding computer and internet usage among Australian households, which includes a breakdown analysis of residential computer and internet usage by a wide range of criteria. The figures used here are the latest available but some statistics are not due for update until late 2010 or 2011.
 
Though there are roughly 200 ISPs in Australia the retail broadband market is dominated in Australia by a small number of firms. Telstra provides nearly 45% of services and has roughly four times as many retail subscribers as the second largest player Optus with around 11% of the market. iiNet and TPG and Primus are other major players and each has around a 5% share. The remaining 30% of the market is shared between around 180 small and medium sized providers. Consolidation in the retail ISP market has occurred with a number of mergers in the last two years. The most notable of these deals was between iiNet and Westnet and between TPG, Soul and Chariot Internet. Of critical importance to ISPs is whether to further invest in DSLAM infrastructure as the fibre optic based national broadband network is built. Further investment will enable ISPs to directly connect subscribers to their network rather than relying on purchasing wholesale services. However in the longer term the NBN may render this investment obsolete as subscribers are migrated to the fibre network.
While the resale of DSL based services using Telstra’s Unbundled Local Loop service was economically unviable for voice services, it did enable platform based competition to provide broadband services. Many firms have installed their own DSLAM infrastructure enabling them to provide fairly high speed Internet services via ADSL2+. This regulatory framework related to ULL has encouraged investment and the number of broadband users with access to services has increased. However a key concern moving forward is the impact on investment in DSLAM infrastructure may become obsolete once Fibre to the Premises networks are built. The Governments proposal to build a National Broadband Network may invoke changes in the regulatory environment relating to DSL based broadband services. As such the existing regulatory regime will need to be balanced against the emerging regime relating to the fibre network.

HFC cable networks Hybrid Fibre Coax networks are communications networks that use a combination of optical fibres and coaxial cable. HFC networks support voice, data, and TV services. Network operators are upgrading their networks to stay competitive in the broadband market by offering very high bandwidth data services. There are two HFC network operators in Australia, Telstra and Optus, both serving customers in the large major metropolitan centres.
The phasing out of dial-up internet connections in Australia has continued with nearly 90% of internet connections now being non-dial-up. At the end of 2009 there were 935,000 cable broadband subscribers, a penetration rate of around 15% of the total broadband market in Australia. Telstra has indicated it will seek to expand the number of services it provides over its HFC network to compete with fibre-based services provided on a wholesale basis by a NBN operator. At the end of 2009 Telstra launched very high-speed internet services in Melbourne. However, if the price of fibre-based services provided by the NBN operator is attractive to Telstra relative to the cost of servicing subscribers through an upgraded HFC network, then we may see Telstra abandon a strategy to upgrade the HFC in other major centres.
 

Greenfield FttH

Australia is seeing a dramatic rise in the number of FttH operators. The deployment of FttH in greenfield estates is a dramatically growing industry; but while the design of a fibre solution can be seen as a rather simple task, having it designed correctly and then operated effectively and with long term success is quite a different matter. Currently in Australia and New Zealand there are fifteen different FttH operators with various levels of experience and capability. In March 2010 new legislation was introduced in Parliament that will see all new housing sites to be either be supplied with FttH networks or being made ready (pit and pipe) for easy deployment of that infrastructure.
 

2nd-tier Telcos

The second-tier market is on the verge of massive changes which will occur over the next few years. The critical factors are what changes to the regulatory environment will occur, and even more importantly, how the National Broadband Network develops. Second-tier companies are likely to have to reposition themselves. Second-tier firms in Australia are usually virtual service providers to the mass market which purchase services on a wholesale basis from network operators. A number of second-tier firms are infrastructure operators of networks serving niche markets. Several second-tier firms offer a range of telephony services such as mobile and landlines, as well as internet access.

A second group consists of firms which offer only one type of telephony service such as Vodafone or 3 with mobile voice and data services. Four of the second-tier players: AAPT, Commander, Vodafone and Hutchison now have annual revenues exceeding the $1 billion mark. This report provides an analysis of the current outlook for the major second-tier firms as well as statistics relating to revenues and market shares. The second-tier segment is very interesting in terms of mergers and acquisitions in Australia. In 2009 Vodafone and Hutchison (3) in Australia, the third and fourth largest mobile network operators merged their operations. M2 acquired People Telecom in mid-2009 to create the largest firm without significant infrastructure assets, and further consolidation is expected over the period to 2011.
 

Telecommunications

Telstra has been successful in maintaining its grip on the fixed market; it still reaps 75% of its profitable revenues from access and voice services. However, voice has become a commodity service and is now under threat from resale competition, VoIP and mobile substitution. In reaction to that Telstra has been rebalancing its services and has significantly increased its line rentals, causing a 15% increase in residential charges. Price caps, bundling and soon triple play are having a massive effect on the pricing of new telecoms services.
 

Broadband - DSL Market Overview

While the resale of DSL based services using Telstra's Unbundled Local Loop (ULL) service was economically unviable for voice services, it did enable platform based competition to provide broadband services. Many firms have installed their own DSLAM infrastructure enabling them to provide fairly high speed Internet services via ADSL2+.

This regulatory framework related to ULL has encouraged investment and the number of broadband users with access to services has increased. However a key concern moving forward is the impact on investment in DSLAM infrastructure may become obsolete once Fibre to the Premises (FttP) networks are built.

The Governments proposal to build a National Broadband Network (NBN) may invoke changes in the regulatory environment relating to DSL based broadband services. As such the existing regulatory regime will need to be balanced against the emerging regime relating to the fibre network.

Broadband - DSL Market, Overview

hough there are more than 600 Internet Service Providers in Australia, the retail fixed broadband market is dominated by a small number of firms. Telstra provides nearly 43% of services and has more than four times as many retail subscribers as the second largest player, Optus, with around 11% of the market. iiNet and TPG each holds around 8% of the market, and Primus holds an estimated 6%.

The remaining 24% of the market is shared between the remaining 600-plus small and medium-sized providers. Consolidation in the retail ISP market has occurred with a number of mergers in the last two years. The most notable of these deals was between iiNet and Westnet, between TPG, Soul and Chariot Internet along with TPG and Pipe Networks and, in early 2010, iiNet also acquired Melbourne-based ISP Netspace.

Of critical importance to ISPs is whether to further invest in DSLAM infrastructure as the fibre optic-based national broadband network is built. A flattening of the investments started to occur in late 2009, early 2010. In the longer term, the NBN may render this investment obsolete as subscribers are migrated to the fibre network.
 

Broadband - HFC Cable Networks


Hybrid Fibre Coax networks are communications networks that use a combination of optical fibres and coaxial cable. HFC networks support voice, data, and TV services. Network operators are upgrading their networks to stay competitive in the broadband market by offering very high bandwidth data services.

There are two HFC network operators in Australia, Telstra and Optus, both serving customers in the large major metropolitan centres. The phasing out of dial-up internet connections in Australia has continued with nearly 90% of internet connections now being non dial-up. At the end of 2009 there were 935,000 cable broadband subscribers, a penetration rate of around 15% of the total broadband market in Australia.

Telstra has indicated it will seek to expand the number of services it provides over its HFC network to compete with fibre-based services provided on a wholesale basis by a National Broadband Network operator. At the end of 2009 Telstra launched very high-speed Internet services in Melbourne. However, if the price of fibre-based services provided by the NBN operator is attractive to Telstra relative to the cost of servicing subscribers through an upgraded HFC network, then we may see Telstra abandon a strategy to upgrade the HFC in other major centres.

 

 

Internet country code: 

.Au

Communications note: