industries in australia - post nbn
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National Broadband Network Update - Dec, 2010 Analysing NBN’s Impact Across Industries
Presenter: Vishal
2
Why NBN
NBN - Moving from One Monopoly to Another
Politics Behind NBN - Government and Opposition at Loggerheads
NBN Business Plan
Impact of NBN on Australian Industries - Retail, Health, Education, Utilities, Software
Post NBN - Fifth Domain Warfare
Government and Telstra Agreement - Meaning & Hurdles
Impact of NBN on Telstra, Telco & Media in Australia
Post NBN - Australian Stock Exchange, Australia Post, David Jones
Agenda
3
Circular Quay 1900
Prosperous Place in Beginning of 20th Century
Industrialisation – Steam Engine(shipping) and Telegraph
Source: NBN - Freeways of The Future
1809 - 1st Australia Post
4
Circular Quay 1920
Few Cars compared to Trams
No one knew how this is going to change the society
Applying the methods of steam driven economy to car economy has failed
Source: NBN - Freeways of The Future
Source: NBN - Freeways of The Future
Harbor Bridge - Over Build
6 Traffic Lanes, where people didn’t own the car
30 yrs later, removed tram lanes
Today, most Australian connection come into Northern Sydney, Growth is Exponential
40 yrs later, plans of duplicating it
Harbor Bridge - Over Build ??
8 Traffic Lanes
7
Application Evolution
Source: NBN Co
8
Bandwidth Demand
Source: NBN Co
9
Only PSTN wholesaler in country
One Seller many Buyer, including retail arm as a Buyer
Monopoly
Telstra Wholesale (Copper)
Optus iiNet Telstra Retail
iPrimus
What I can Pay
What I can Sell for
Agree on this Price
No competitor for seller, hence value is created for seller only
Customers are forced to pay beyond their WTP (premium price)
Law of one price is missing
10
Monopoly - NBN R
etai
l W
ho
lesa
le
Layer 2 Ethernet Access Network -Wholesaler
Layer 3 IP Wholesaler
Layer 2 Tunnel Protocol Wholesaler (Includes Backhaul)
Layer 2 Backhaul
Wholesaler
Retail Service Provider
Retail Service Provider
Retail Service Provider
Retail Service Provider
Source: NBN Co
Until 2020 -2030, it will be a Monopoly, after that it will be sold to pay off debt
11
Telstra & Government Agreement
Telstra and NBN
Infrastructure
Lead In conduits NBN Co. uses fit-for-use conduits which are connected into ducts NBN Co. uses
Backhaul NBN Co. uses dark fiber and managed solutions
Exchanges NBN Co. uses rack space in Telstra exchanges
Ducts & Pits NBN Co. uses fit-for-use infrastructure within NBN network design
Source: ZdNet & NBN Co.
Copper • Progressive
decommission • Traffic migrated to
NBN • NBN Co. pays Telstra
HFC
• Progressive de-activation except Foxtel
• Traffic migrated to NBN • NBN Co. pays Telstra per
disconnection
Decommission
Non - Binding
12
Telstra & Government Agreement
Source: Gartner, 10B Telstra Agreement,2010
Signed a non-binding agreement with Government
In principle assumes structural separation of (Ret. & Wholesale) without enabling legislation being passed
Leases it ducts, pits and exchanges, 20 to 30 years
Migration of its 9 million copper (PSTN) and HFC customers on NBN Co Fiber
Telstra
Reduced CAPEX requirements and relief from funding major parts of its USO. Contract for 10 years - 2022
Multiple Revenue Streams
Written commitment for not to be barred from LTE (4G) Spectrum
Relief from the regulatory burden of local access disputes (local loop), lawyers are out, and marketers are in
Government
Practical agreement for structural separation of Telstra (without legislation being passed)
Regulatory reforms long demanded by the Australian Competition and Consumer Commission (ACCC)
A wholesale open-access network available nationally to RCSPs on equitable access conditions
13
Telstra & Government Agreement
Source: Gartner, 10B Telstra Agreement,2010
NBN Co
Access to Telstra's backhaul network infrastructure for a more rapid FTTP roll-out, revenue starts early
Telstra as its largest retail customer
A wholesale open-access network available nationally to RCSPs on equitable access conditions
Hurdles
Telstra shareholders to approve the agreement by 2011 (1st Quarter)
ACCC to approve it, consultations with NBN Co to finish by Nov, 2010
Telstra Separation with NBN Co Legislation Passed by Senate and Lower House
14
Telstra & Government Agreement - Pre Business Plan
60% Govt. Funded
= 26 Billion
40%
NBN Co. Raised by
Bonds
(not on Govt Bal. Sheet)
= 17 Billion
100% =
43 Billion
(no trail for this no’s since inception)
43 Billion Capex
11B to Telstra
26 Billion
9 Billion
=
Leases Telstra Ducts,
Pits & Exchange
2 Billion
=
USO (Telstra -
2022)
15
76% Govt. Funded
= 27.1 Billion
24%
NBN Co. Raised by
Bonds =
8.6 Billion
100% =
35.7 Billion
35.7 Billion Capex
Telstra & Government Agreement - Post Business Plan
Source: NBN CO Business Plan Summary
13.8B to
Telstra 27.1
Billion
11.3 Billion
=
Leases Telstra Ducts,
Pits & Exchange
2.5 Billion
=
USO (Telstra -
2022)
13.8 Billion by 2020 To Telstra
49.6 Billion 8.6
Billion
16
Telstra & Government Agreement
7 Year Stock Trend
Source: Yahoo 7
P/E ratio below 15 (Avg on ASX) – not a growth stock, only dividend stock
If 28c fully franked dividend cant be maintained stock price will plummet as stock is hold by Superannuation firms and baby boomers (low risk appetite). NBN payments will help in maintaining div.
17
72% Govt. Funded
= 27.1 Billion
28%
NBN Co. Raised by
Bonds =
10.3 Billion
100% =
37.4 Billion
37.4 Billion Capex
Post Business Plan - No Agreement
Source: NBN CO Business Plan Summary
18
Politics on NBN
Opposition
Lost crucial support of two Independents, Tony Windsor and Rob Oakeshott
Wants productivity commission to study the cost benefit analysis, as it suggests to deliver a commercial rate of return, not the low 6-7%, lost the motion in parliament by 73-72
Wants Infrastructure Australia to do the analysis
Source: Gartner, 10B Telstra Agreement,2010, The Australian
Government
Conceded to Greens to let parliament decide privatisation of NBN after it’s completion.
Wants Business Case to be published
19
Politics on NBN
Source: Comm Sec, 2010
Budget & Debt
Vital for Labor Govt. to be in surplus (for historical reasons) to drive Economic Credentials. Liberals are using this as a scare campaign. In comparison to other OECD we are doing quite well
20
Impact of NBN on Industries
NBN
Telecom, Media
&
Entert. Utilities
Healthcare
& Biomedical
Tourism
Education &
Learning Govt.
Retail
Financial Services
Manufact.
&
Logistics
21
Impact of NBN on Telstra
Structural Separation
Functional Separation
Partial Structural Separation
22
Adjusted Structural Separation (Least Initial Cost)
Partial Structural Separation - Likely Approach
Network Services
ITS
Access N/W
Core & Edge N/W
OSS
BSS
Retail Wholesale
Impact
Impact
Impact
The wholesale and retail (including TE&G and TB) continue to function as separate units with minor modifications such that wholesale has NBN as one of the primary customer.
Part of the access (copper and HFC) is decommissioned and customers are migrated to NBN. NBN uses Telstra ducts/pipes and backhaul (spare bandwidth) for a service charge.
The current arrangement could be used as an initial phase towards a complete structural separation in future
ROI dependent on providing access to duct/pipes, use of backhaul and migration of customers
23
Impact on IT
Fulfillment
Assurance
Inventory Operations
\
Fulfillment
Strategy, Infrastructure & Product
Product
Lifecycle
Management
Infrastructure
Lifecycle
Management
Cutomers
Enterprise Management
Shareholders Employees Other Stakeholders
Strategy &
Commit
AssuranceOperations
Support &
Readiness
Billing
Inventory
Impact Impact
Impact
Note: No impact on Billing is perceived
24
Post NBN
Australian Stock Exchange
1.37 Trillion Market Cap.
Source: The Age, The Australian
Information Asymmetry
(Adverse Selection)
1.37 Trillion
2,260 Listed Companies
Impact - 25% of Listed Companies
25
Match Mismatch
Mismatch Match
Post NBN – Retail, David Jones
Co - Creation
Functional Products
Innovative Products
Res
po
nsi
ve
S
up
ply
Ch
ain
E
ffic
ien
t
Su
pp
ly
Ch
ain
Consultations on Skype/Google Voice
Sales Staff and Teller will use smart device like iPad
Virtual Showroom (pre view shopping)
Entire World as Display
Source: HBR - What is the Right Supply Chain For Your Product, PSFK , Future of Retail
26
Post NBN
Source: The Age, The Australian, Auspost
Embraces Digital World, e-Services new biz. unit, focusing on opportunities such as secure, identity-verified, digital communications, e-commerce
Declines in letter offset by the growth in parcels, retail and business-to-business express delivery
“When email was invented, Telstra gained and Australia Post lost. Anything that acts to shift economic activity from the physical to the
digital would automatically benefit communications providers “– Lindsay Tanner
1st Australia Post in 1809 at Circular Quay
Today, 4,000 postal outlets, including 2,500 in rural. Maintain 10,000 street posting boxes.
Superannuation Centres
Parcel Delivery for Online Stores (DJ, Myers, Zara)
27
Melbourne, AUS
California, USA
Post NBN - Seminar or Lecture
Source: The Future Apps of NBN, 2009
28
Post NBN - Software
Source: Source: APIs and Open Platform –Federico Cargnelutti
Turning Products into Open Platforms
Moving from licensing model to Utility and Brokerage (using API’s)
Commodity Software or Business Process will be enabled via Cloud
29
Customer
Allied Health and
Diagnostic Professionals
Private Providers
NGO Sector
Family and Communities
Pharmacists
Clinicians and Nurses
GPs
Jurisdictions
Consumer
E-Health - Building a Wired Health Care System
Objective is to provide the right information to the right person at the right place and time to optimise health care outcomes
Source: Deloitte, National Health Strategy, The Way Forward, 2010
Today
Customer
Allied Health and Diagnostic Professionals GP’s
NGO Sector
Family and Communities
Jurisdictions
Clinicians and
Nurses Private Providers
Personal Health Profile
Pharmacists
Online Informati
on and Communi
ties
Clinician Policy Maker Customer Customer
Consumer
Tomorrow
30
E-Health is Inevitable
Source: Deloitte, National Health Strategy, The Way Forward, 2010, The Australian
Public hospital doctors in Victoria to get iPads in 2011, Victorian Govt.
31
E-Health
Source: The Future Apps of NBN, 2009
Medial Research Collaboration
Education
Multi Scale Bio Medical Imaging
32
Utilities - Smart Grid
Source: IBM Smart Grid Framework, How Stuff Works , Smart Grid Blog
From Supply Driven to Demand Driven: Market forces & convergence of more active customers has created the need to evolve the traditional energy value chain
Towards an industry with multidirectional flows of information
33
Post NBN - Fifth Domain Warfare
Stuxnet is a Windows -specific worm discovered in June 2010
Source: Wikipedia, Symantec, The Economist
Function is to take control of industrial facilities. Searches for very high speed electrical motors, controlled via SCADA systems. These are used to spin gas centrifuges, which is one way uranium can be enriched into fissionable material.
At speed of light, Global in nature, Preparation is less visible
34
Summary
Monopoly of Telstra in PSTN space is removed by Monopoly in Wholesale space (Fiber only)
Telstra & NBN – both need each other for their survival
The 21st century infrastructure project needed for a service economy like us
Lot of industries will be impacted and new services and business model will emerge
NBN has become a political battle
35
Thank you
End of Document
For further information, please contact:
Name: Vishal
Title: Client Services Manager
Address: Infosys Technologies Australia Pty Ltd
Level 5, 818 Bourke St
Melbourne VIC 3000 Australia
LAN: (03) 9860 - 2429
Mobile: 0438 580 349
Email: [email protected]