Change of the Telstra guard: we interview David Thodey, Andy Penn


Telstra CEO David Thodey has announced his retirement, after effectively transforming the business and doubling its value to over A$80 billion during almost six years at the helm. To replace him, Telstra’s board has tapped current CFO and international group executive Andy Penn, who will take the reins from May this year.

CommsDay group editorial director Petroc Wilton spoke with Thodey about his time in Telstra’s top seat, and with Penn to discuss the road ahead.

Communications Day: When you came into the role, Telstra’s relations with almost every corner of the market were very different from now – almost adversarial with government and wholesale customers, certainly very different with consumers, and at loggerheads with the NBN project. What were your personal thoughts at the time on transitioning away from the Sol Trujillo legacy and, almost six years on, have you achieved what you’d set out to do?

David Thodey: The short answer is yes. We’ve achieved a lot, I think, in normalising relationships with the many stakeholders that we work with. And you’re right; when I took on the role, there was quite a bit of antagonism in a number of the relationships, maybe because there was a very difficult period of policy development and the Labor government had decided to proceed with the building of an NBN in which Telstra’s role was yet to be defined.

So yes, we spent a lot of time trying to understand what was in the best interests of those shareholders, how to work with government and other stakeholders. And I think, over the period, we’ve built a level of trust and understanding of each others’ positions; not to say that we’re always in agreement, but at least we can sit down and have a frank and open discussion about the considerations. And that’s reflected in nearly all the stakeholders we deal with now, all sides of politics – remembering that the job of the CEO of Telstra is… looking after the interests of shareholders, but within the social and national fabric in which we work.

CD: I guess it’s a challenge, when you move towards a more trust-based or more conciliatory role, to not be seen by those shareholders as giving more away. Obviously at this point Telstra’s results have vindicated your approach – but was it initially difficult to get support, whether at board or executive level or from shareholders, for your new tactics?

DT: I would not consider it conciliatory, because that was not what we set out to achieve. What we set out to achieve was an open, frank and transparent dialogue, and to build trust. Because that’s how you get to the best outcome.

Yes, it does require some compromises along the way, but you try to focus on the big issues. And those, for us, were that we were in a regulated industry where the government had the right to change policy, but our job was to represent the best interests of shareholders. And that’s the balance we had to take. It was the combined position of the board and management that we [should think] carefully about these issues – and, very importantly, how we could better serve the customers, and make a difference to them. That helped us in all the negotiations we had to go through.

CD: That’s a very convenient segue, because… perhaps the clearest element of your strategy, from a very early point, was that hugely increased focus on the consumer [which at that point] not a lot of the industry was really talking about. What drove that thinking for you in the first place?

DT: As with all things, it’s a combination of your experience, where you’ve worked and what you’ve seen work. I’ve always had a very strong conviction, both from my time at IBM and when I ran the mobiles division and then… the enterprise division at Telstra, that if you focus on the customer and serving the customer, that makes the organisation look externally; it creates the right culture; and you create value for your customers.

The question, in a company like Telstra, is can you really do that at scale, and really make a difference; can you surprise, can you deliver good, consistent service? And it needs both cultural change and process change; it needs a whole different way of the system working. We had that strong conviction, we started at the job, and we put many different processes in place – segment by segment and product by product.

And it has created value; we also did a lot of financial modelling on it, to say ‘if we were able to do that, what would be the financial implications?’ It [wasn’t] just an altruistic objective, it was about creating shareholder value – and we’re pleased to see that it has made a difference. But we believe it’s a fundamental tenet of our strategy for the company.

CD: Something you’ve emphasised more recently, since perhaps the start of last year, is the importance of embracing innovation – both within Telstra and in the broader economy. Are you confident that initiative will continue within the company – and how do you see Australia, more generally, faring now?

DT: I do strongly believe that innovation is at the heart of good business – and innovation is not just big lightbulb moments, but is in everything you do. How you write a piece in the media, how I write a process, how I create product or serve customers; you can be innovative in everything you do. I believe that human beings are fundamentally creative beings, and if you can tap into that innovation both at a business level, an individual level and a national level, it creates value…. I think it’s critically important for all companies, and for a nation like Australia.

I think we’ve embedded a number of principles in the company around innovation, and we’ve put a number of processes in place to facilitate [it]. It still has a long way to go, but I think the seeds have been planted and we’re starting to get some momentum in that area.

CD: You mentioned that closing the NBN deal – both versions of it – was one of your most significant challenges. With the second iteration of the deal now done… can you share some personal reflections on what that process was like from the inside?

DT: What characterised the NBN deal was its complexity, and the large number of stakeholders that we had to consider through the process. We had to consider the political [elements], the regulatory environment, the role of the Department of Communications and all their responsibilities, our shareholders, the industry, the technology… and NBN Co, a state-owned enterprise. And the Australian Competition and Consumer Commission played a role there, as did the Australian Communications and Media Authority. So trying to pull all that together… and craft a solution that would create value for our shareholders, or at least protect value, as well as meeting all the other stakeholder criteria, was at any one time an incredibly complicated process to go through. [It] resulted in two and a half years of work, and contracts that stood probably a metre high.

There were good moments and bad moments as we went through that; times when we felt we were making progress, and times when we felt there wasn’t a solution, that we had to come back and be creative and innovative in finding ways through it. That’s what made it so satisfying to complete in the end – but also so challenging.

CD: Andy, you’ve said that you’ll be continuing the strategy that David put in place, and prioritising a smooth transition. That’s obviously what you’d expect, especially with a business in very healthy shape, but when might we expect you to start putting your own mark on Telstra?

Andy Penn: As you say, it’s what you’d expect because of how the company’s performing – but also because I’ve been very integrally involved with David and the senior team in developing the strategy over the last three years. So my focus is very much on delivering against that strategy; my mark will come through in the execution and the delivery. The great thing is in taking over from David that he’s left a wonderful legacy, a wonderful platform for growth. I think we have a very clear path forwards.

CD: You also mentioned a passion for Asia, and that’s clearly been identified as a key plank of the Telstra strategy for some time. Now that you’re in the top seat, will that accelerate Telstra’s progress into Asia or change the way it expands there? What are your key short-term priorities there, in what is a very disparate market?

AP: We’ve already stepped up significantly our level of engagement in Asia… we’ve doubled the level of corporate development resources we have in the region, there’s the partnership we have with PT Telkom in Indonesia, we announced the acquisition of Pacnet before Christmas. So I don’t know if [my appointment] means we’ll accelerate from today; we’ve already accelerated!

I think the opportunities in Asia are very interesting, very exciting because I see a sort of confluence of factors. On the one hand, you continue to have young and rapidly growing populations and economies, with a middle class getting larger. On the other hand, you’ve got the evolution of technology, leading to more interesting ways of using connected devices and the penetration of smartphones generally… there’s more technology available, at a time when more people can afford it. Those two things are just going to accelerate the growth in the region, and I think there’s lots of different ways we can participate in that opportunity.

But we’re certainly not going to lose sight of the fact that we’ve got a very significant, successful and important business here in Australia. We have a strong team in Asia as well; I will need to allocate my time accordingly and get the balance right between making sure we continue to grow and focus on the customer here, but also looking for opportunities to grow internationally.

And it’s not just Asia, either; we made a number of acquisitions [elsewhere] recently, really looking to where some of the capabilities are that are going to be relevant for us and the industry in the longer term. Such as the investments we’ve made in intelligent video in America and Europe, and the investments we’ve made in eHealth… the IP that’s relevant to the industry and relevant to our aspirations is globally distributed, and that’s where we need to look.

CD: And what are the key challenges, or areas of focus, that you see in the domestic market?

AP: I think there are really two areas. Firstly, our strategic network differentiation is really important; we believe that what customers want is high-quality, fast, accessible network available where they want it to be available. So that’s been a core platform of our strategy on the mobile side, and increasingly so on the fixed side; the rollout of the Wi-Fi network is instrumental in that regard. So we’ll be continuing to invest very strongly in that level of network differentiation.

The other side: if we think about how customers use the network today, increasingly, it’s more than just voice and SMS. They’re downloading media, watching content on mobile devices. So the more we can actually bundle and provide the services which customers want to experience on our network with the core network performance, that will be really important as well. Triple play on our fixed broadband service, for example… has been very successful last year.

Petroc Wilton

EXCLUSIVE: Megaport goes global, appoints Microsoft exec as CEO

Megaport, the flexible network interconnection specialist founded by Bevan Slattery, has unveiled plans for a massive global expansion blitz just over a year after launching in Australia.

The firm is aiming to hit 25 key markets in the US, Europe and Asia within eighteen months – targeting break-even for each within a year – and has brought on Denver Maddux, a Microsoft and Limelight veteran, to lead the charge as CEO. Slattery himself will remain on board as executive chairman.

Shortly after its mid-2013 launch, Megaport pushed deep into Asia in response to growing demand for scalable cloud interconnectivity services. Singapore and Hong Kong were two of its first expansion areas, with a Japanese deployment also on the cards. But the company has now committed to an accelerated growth plan that will see it service more than two dozen key markets.

“In some of those, we have some services that we’re already working through contracts on… to acquire the appropriate level of commercial services we might need to launch the business; some are tied to partnerships that we’re working on [with] either multinational or regional players,” Maddux told CommsDay.

“Most of the licensing and contracting that we’ve done so far has been focused on the Asian markets, and we’re working on what we need to get done in North America and Europe right now.”

“Those markets will follow a lot of the common internet infrastructure in North America… Seattle, Los Angeles, the Bay Area, Virginia, New York, Atlanta, Chicago, Dallas…and there’s some other secondary markets that are of interest like Phoenix, Arizona, maybe Houston, Texas and so on,” he added. “Markets that are pretty well established in terms of critical infrastructure and locations, where our service would be most useful. But we’re looking for opportunity markets too, and we’re looking for partners in [those] markets that are really interested in helping with location differentiation and footprint expansion.”

“In Europe [we’re targeting] London, Paris, Frankfurt and Amsterdam… we’re also looking at some other markets like Spain, Italy, Sweden and potentially some other countries that don’t have such highly established infrastructure.”

“The cloud services businesses in both of these markets – the likes of Amazon.. and of Microsoft with its Azure ExpressRoute product, and Google Compute which is coming out in the next couple of weeks – they’ve all got some reach challenges with their connectivity products,” continued Maddux. “We’re working with those connectivity partners to make sure that, from a strategic direction, the places we want to build also align with the things they need to help solve.”

While Megaport has built physical fibre infrastructure in some of its early markets, Slattery told CommsDay that wouldn’t be the case for the accelerated global expansion. “We expect to be partnering and acquiring network infrastructure from existing providers in those markets,” he said, adding that in fact Megaport was in the process of splitting out its existing fibre assets into a completely separate business (see next story).

“We’ve always said that Megaport isn’t about Australia – it’s about taking it to the world. What we’ve focused on is making sure that the product is right… [that] we’ve got an understanding of how we approach the sales side when we go to markets through partnerships. I’m really happy with how we’ve got that; the Australian network, operationally, has already broken even… and we’re not seeing competition  [in terms of] anyone delivering a product of similar scale, technology and capability to what we’ve got. So now is the time to expand!”

Slattery expects to spends somewhere around A$10 million on the expansion between capex and opex over the next twelve months. On the revenue side, Megaport isn’t disclosing targets, but Slattery said that “once we roll out a region or a market, we expect that market to break even within the first twelve months of operation.”

CHANGE AT THE TOP: Maddux’s most recent experience will bear directly on his leadership at Megaport. As network technology and architecture VP of global digital content player Limelight Networks he was responsible for engineering – underpinning global expansion plans – plus network and services supply chains and partnership opportunities.

“I really spent a lot of time trying to take what started as a very small regional content distribution network and deploying that in a global fashion,” he said. “I took the network from two sites to over 150 by the time I left the company!”

More recently, Maddux served as senior director of global network services at Microsoft. “[The company] was really wanting to invest heavily into its network strategy in order to propagate its cloud services platform, Azure, globally; I spent a lot of time inside the company bringing in the appropriate staff… and pushing Microsoft into its first foray into dark fibre acquisitions, both terrestrially and submarine, as well as increasing its participation in the internet ecosystem – not just as a network operator but as a network innovator.”

Maddox has known Slattery for years – indeed, he describes the Megaport founder as a “mentor” while he was helping to roll out Limelight in Australia – and was intrigued by Megaport’s model, leaping at the chance to take on the top spot. His first priority is “finding the right people to help us come and execute on the plans we’re laying out here; I will always be recruiting and hunting for the next great person to join the company.”

“The other is making sure our platform gets propagated… there’s a tremendous interest… and I believe it’s revolutionary, so making sure we actually go and attack that distribution plan… on a global basis, as well as finding the appropriate partnerships that want to help enable that,” he added. “And of course we’re going to keep a really strong eye on emerging technologies, to see what else we can do [with] the platform!”

To support Maddux, Megaport has promoted Belinda Flanders to executive VP for APAC and MEA, and appointed Brynn Maddux – also from Microsoft – as EVP for the Americas and Europe.

Slattery, meanwhile, will remain involved at a strategic level as executive chairman. “It’s more like a partnership, I suppose, than anything else. But Denver’s going to lead it; he’s the CEO,” he said.  “We’ve developed the technology, we’ve proven the model… I’ve probably got, at times, pretty good vision and I commit to things, but [there’s a] level of energy and excitement in Denver… [and a] tremendous amount of global credibility.”

“He understands – he’s rolled out a global network… he’s connected it to all these different markets around the world, to Asia and to Europe, the Middle East, Africa, the United States… I really wanted him to be involved, and I really wanted him to lead it!”

Petroc Wilton

COMMENT: NBN scrutiny held captive by one man’s obsessions

It was 1.30pm on Friday, October 3 when four experts involved in reviewing the National Broadband Network were called to address a Senate Select Committee hearing in Canberra. What ensued next got little attention in the media: it was a Friday afternoon before a NSW long weekend which was featuring none other than an NRL Grand Final promising a history-making clash between the Bulldogs and the Rabbitohs. Only a handful of people were in the room to see it.

The questioner was Stephen Conroy, former communications minister and now shadow defence minister but now seemingly resolved to concentrate his public life pursuing what he sees as enemies of his legacy NBN vision.

The four experts? Professor Henry Ergas, member, NBN Cost-Benefit Analysis and Review of Regulation, Panel of Experts; David Pearce, Executive Director, Centre for International Economics; Tony Shaw, member, NBN Cost-Benefit Analysis and Review of Regulation of NBN; and Damien White, Assistant Secretary (Former), Cost Benefit Analysis and Regulation Review, Department of Communication.

What happened over the next 90 minutes served as a disturbing marker of how scrutiny of the NBN by the parliament—an entirely appropriate and necessary calling—has been hijacked by the obsessions of one individual.

Over that 90 minutes, the questioning focused 80% on one man, Conroy’s bête noire Ergas. And Conroy wasted no time unloading on his target. After allowing the other three witnesses to make a perfunctory introduction, he zeroed in on Ergas, first of all bringing up some distantly historical court case where a Justice Goldberg had made critical comments regarding Ergas’ independence when appearing as a expert witness. Ergas batted this away, pointing out he had been involved in 51 other cases where the judge had made no such comments.

Conroy then continued with the assault, lampooning Ergas for having provided, in the past, tax policy advice to Malcolm Turnbull which was apparently never released. Ergas pointed out that it was Turnbull’s decision as to whether he should release or not release advice he had solicited, but this was not enough for Conroy– Turnbull had apparently “dumped” the paper.

Which brought us to the Vertigan panel. Conroy opined “You must be getting used to having Mr Turnbull dump your reviews before they have even been published, given that he said no to almost everything that has been recommended before he actually even released this review.” Indeed, the federal government has yet to formally respond to the recommendations but has suggested a few of them are probably best placed in the too-hard basket for now. There is little doubt that Turnbull is well disposed to the direction of many of the recommendations.

Alas, the targeting of Ergas was not over.

After some period of actually discussing the NBN, Conroy returned to his favourite theme: Ergas, this time “accusing” him of handing out how-to-vote cards for the Liberal Party. Ergas replied: “Like you, Senator Conroy, I participate in the democratic process and having done so I look at evidence with a clear mind and I try to assess it rigorously.”

Conroy replied “It is just a bit of an analysis on the cost of your credibility as an independent witness, if you hand out for the Liberal Party.”

To which Ergas replied, with rapier insight: “So, what is the credibility of members of this review that you are undertaking if you have handed out how-to-vote cards opposing the revised approach to the NBN?”

But the killer exchange came right at the end:

Senator CONROY: You got the committee to hire every single member of your former staff to do your analysis
Prof. Ergas: Oh, Senator!

Senator CONROY: It is actually a coincidence. They were just experts in the field.

Prof. Ergas: My advice on that would be that that is not a particularly fertile ground for this sort of discussion.

Senator CONROY: It is a fact. It is not a question of fertile ground. I can only confirm that Justice Goldberg was right. I do want to thank a few people who have been listening, participating and helping along the way: the great Jarl Aarq-vark; Glen Hope; Mr Mac; Sir Tailgator; Annie Pink; Helpman; Sir Xenocaust; CW; Dazed & Confused; UTC; djos; and the Earl or Conrovia. I have probably missed quite a few of you, but thank you for your help during the course of the day. That is the Whirlpool crowd who have more facts than all five of us combined.

Prof. Ergas: And a clear willingness to let people know who they are.

Senator CONROY: The facts—

Prof. Ergas: They have not provided their own names.

Senator CONROY: The facts that they provide are sourced documents.

CHAIR: I am going to draw these proceedings to a close.

Senator CONROY: Are you trying to hide the fact that you hired every failed member of your failed company to do the work in this review?

Prof. Ergas: Oh, Senator, come on!

Senator CONROY: That is just the truth.

Prof. Ergas: Come on!

CHAIR: I would like to thank our witnesses for appearing today.

Henry Ergas was but one of four panellists on one of what were several reviews of the NBN. The three other witnesses in attendance were effectively ignored. To those who welcome the complete politicisation of network investment decision-making in this country, I can only say you have got what you wished for. The NBN is a $30 billion plus infrastructure that demands proper parliamentary scrutiny on behalf of taxpayers. Clearly the select committee is failing in that task.

Grahame Lynch

Telstra ‘best in test’ for new mobile benchmark

Telstra has been named ‘best in test’ in the inaugural edition of CommsDay’s new annual mobile network benchmark. The 2014 P3 CommsDay Mobile Benchmark also highlights some significant strong points for both Optus and Vodafone and shows that all three of Australia’s mobile networks are well on par with their international counterparts.

Launched today by CommsDay in partnership with international consulting, engineering and testing services company P3 communications, the benchmark is unprecedented in its scope and level of detail. It draws on over 200,000 voice and data test samples taken across metropolitan areas, smaller towns and cities, and connecting roads and highways, accounting for a significant and representative share of the overall Australian population. Test metrics include voice call quality, success rates, file upload and download speeds, website access, SD and HD mobile video performance and more.

Telstra came away with the highest overall score and also took the top spot in each of the three main categories: smartphone voice performance, 3G data and 4G data. It did consistently well throughout metro areas, smaller cities and towns, and the connecting routes.

Optus came in a strong second overall with a solid, sustained performance across voice and data categories. The detailed scoring showed reliability as a particular advantage for Optus, with some very high success ratios in both data and voice. Vodafone’s key strength, meanwhile, was in data speeds particularly for 4G and, despite the carrier’s focus on metro areas, it actually came a close second to Telstra for 3G and 4G performance in smaller cities and on the highways.

“CommsDay congratulates Telstra on taking the top spot in this first year of the Benchmark,” said CommsDay group editorial director Petroc Wilton. “However, results clearly show that Vodafone and Optus have some important advantages of their own as well as highlighting some areas for improvement for all three carriers. Considering the investment they’re all making in their networks right now, and some of the initiatives they’ve already got underway to boost network coverage and performance, I’m looking forward to seeing how the scores improve next year!”

Because P3 communications has been running similar mobile benchmarks in Austria, Germany and Switzerland for several years, it’s also possible to compare the results for Australia’s mobile operators with some of their international counterparts. Vodafone, Optus and Telstra’s scores put them firmly on par with the operators overseas.

New impartial benchmark to compare Australia’s mobile networks

Australia’s daily telecommunications journal CommsDay and international consulting, engineering and testing services company P3 communications announce the launch of a new annual comparative benchmark for Australia’s three mobile networks. The report will objectively evaluate and compare the performance of the Optus, Telstra and Vodafone networks from the user’s perspective, based on an extensive and comprehensive series of tests conducted each year.

The 2014 mobile benchmark will focus on the performance capability of the 3G and 4G networks for voice and data, measured via both drive tests and stationary tests through August and September. The final report will be published in a special edition of CommsDay Magazine, to be released at the CommsDay Melbourne Congress on October 7 & 8 2014.

Test metrics will include voice call quality, success rates, file upload and download speeds, website access, SD and HD mobile video performance and more. Testing locations and routes have been carefully selected in order to cover a significant and representative share of the overall Australian population. Tens of thousands of measurements will be conducted across major metropolitan areas, smaller towns and cities, and connecting roads and highways.

The report will be written and published by CommsDay, while the testing will be conducted by P3 communications. Both partners bring extensive telecoms knowledge and know-how to the project.

P3 communications has a wealth of highly developed expertise in the area of mobile and fixed networks testing. It has been conducting similar mobile benchmarks since 2002 in Germany and in Austria and Switzerland since 2009, the well-known ‘Connect Test’ (see connect network test 2013) and is also launching an annual benchmark in the UK later this year. In 2013 alone, P3 communications compiled about 40,000 measurement hours in 42 countries across five continents, with its test vehicles covering more than 500,000 miles.

Meanwhile, CommsDay has built a reputation for objective and insightful reporting and analysis across every area of the telco market in Australia and beyond over the last two decades. Both partners have collaborated closely through the project, with P3 consulting CommsDay around the details of the Australian mobile telco landscape, and sharing its own experience of scoring and reporting from other European benchmarks.

“For CommsDay, the benchmark provides an opportunity to supply a wealth of detail around mobile network performance that will be of keen interest to many of its readers, as well as to a broader audience,” said CommsDay group editorial director Petroc Wilton. “It also reinforces the publication’s standing as the authoritative source of objective information on telecommunications in Australia.”

“The launch of the benchmark in Australia gives P3 the opportunity to extend its proven leadership in the field into this advanced market and to boost its presence in the wider region,” said P3 communications managing director Marcus Brunner.

The full programme for CommsDay Melbourne Congress 2014

CommsDay Melbourne Congress returns with a two-day event over Tuesday 7 and Wednesday 8 October at the Langham Hotel.

The congress, in its seventh year, features a superior line-up of industry leaders and experts including:

* Ziggy Switkowski, NBN Co chairman
* Telstra GMD, networks Mike Wright
* iiNet CEO, David Buckingham
* Vodafone Australia CTO Benoit Hanssen
* Optus vice president, corporate and regulatory affairs David Epstein
* Equinix country manager Jeremy Deutsch
* eintellego networks MD Skeeve Stevens

As well as views from Australia’s leading telco operators, the Congress will also drill deep into specialised topics:

*The release of EXCLUSIVE research benchmarking the performance of Australia’s mobile networks as well as the findings of a study into Australian consumer attitudes towards mobile apps
* An exclusive case study on what is believed to be the world’s first mobile mesh network, a forerunner of 5G
* The father of DSL and vectoring, Dr John Cioffi, direct by video link from the US
* Expert presentations on software defined networks and network function virtualisation, including a keynote speech from Alcatel-Lucent Nuage Networks principal solutions architect (global) Scott Snedden
* A detailed look at the opportunities for data centres and telcos from 3D printing
* An update from Arris on the latest developments in HFC

Plus the Summit will feature a broad range of perspectives on policy and regulatory issues

* Parliamentary secretary to the communications minister Paul Fletcher
* Shadow communications minister Jason Clare
* Greens senator Scott Ludlam on data retention
* ACMA deputy chair Richard Bean
* Former ACA chair Bob Horton on spectrum policy
* NBN expert panelist Dr Reg Coutts on whether the USO should be revamped
* Former comms minister adviser David Havyatt on how to depoliticise the NBN
* Gilbert+Tobin partner Simon Muys on where telco regulation will be in 2020
* Perspectives from Comms Alliance and AMTA

Join nearly 300 industry colleagues at what will be our best Melbourne event yet!


COMMENT: Sorry Professor Tucker, your NBN “facts” are not what they seem


For sheer cant, almost nothing beats the pro-FTTH and highly political NBN keynote presentation given by Rod Tucker yesterday to the Institute of Electrical and Electronics Engineers’ annual international communications conference currently being held in Sydney.

On credentials alone, Tucker deserves attention. He is a Laureate Professor at the University of Melbourne. He is a director of two telecommunications academic bodies, has held positions at four international universities and four commercial research organisations and has been awarded nationally for his academic achievements.

But if you wanted to write the history of the sorry tale of the NBN—the progression from the cancelled FTTN tender in 2009 to a near-universal FTTH rollout that by this year has demonstrably failed in execution and any form of national benefit commensurate with its cost, then Professor Tucker would certainly feature as one of the lead characters, if not villains.

Tucker was the lead qualified expert panellist who recommended to Stephen Conroy in early 2009 that the Rudd Government should sink $43 billion—some three times the investment previously envisaged—into a national access network extending fibre to 90%, later revised to 93%, of premises. Contrary to the view that this was all dreamed up on a beer coaster on a government jet, quite a lot of thinking and work went into this advice through late 2008 and early 2009.

Of course, the rest is history—the network’s schedule and costs blew out, the government changed and now the NBN has been partially re-booted and is pursuing a more modest technology mix that attempts to make greater use of existing copper and HFC assets.

But Tucker seems determined to ensure he is viewed as righteous, fundamentally correct and misunderstood. Yesterday he railed against media commentators who had spread “misinformation” about telecommunications technologies, guilty of lauding the potential of wireless while failing to appreciate the self-evident benefits of fibre.

He lamented the lack of engineering expertise in the debate and cast himself as an almost singular figure of factuality resisting the rhetorical failings of the politically motivated.

And in doing so he referred back to a series of his own utterances and public statements back in 2009 and 2010, which, unfortunately for him, demonstrated just why it is perilous for the vertical expert to become involved in horizontal policy debates. For if one is to criticise the factual accuracy of one’s opponents one must take special care to ensure one’s own facts are accurate.

Tucker’s greatest criticism yesterday was for those who suggested that developments in wireless technology would overtake those of fibre optic technology, falling back on the correct rule of physics that light spectrum can carry more information than radio spectrum.

Unfortunately no one in this debate has done more to misrepresent the capabilities of wireless than Tucker.

Throughout 2010 his various presentations and powerpoint shows depicted a slide, featured here and adopted by others such as then NBN CEO Mike Quigley, that attempted to “visualise” what a wireless NBN offering 100Mbps to the household would look like. This would be a world of 10 metre tall steel towers pinned in front of every second premise in Australia, rendering the streetscape as the world’s ugliest and obviously requiring ridiculous amounts of civil works. What did Tucker base this assumption on? That a wireless NBN (and by his inference, the nation’s aggregate broadband demand) would only have access to one 20MHz slice of spectrum.

What is the reality? If one adds up all the allocated spectrum available for microwave, cellular, Wi-Fi and other radio spectrum links, there is close to 85 GHz in service of the nation’s communications needs. That includes several hundred MHz for conventional mobile broadband usage, tens of GHz for microwave and, latently, similar resources for unlicensed uses such as Wi-Fi. Increasingly, carrier aggregation techniques allow much more of that spectrum to be collectively harnessed in pursuit of greater end user performance. That spectrum is reusable, down to radii of fractions of kilometres and even scores of metres in a country measuring 7 million square km in size.

Any shortage of spectrum is an artificial constraint caused by the rationing policies of national treasuries. Indeed one of the greatest preoccupations of broadband-friendly governments, such as the administration of President Obama, is to free up hundreds of megahertz of spectrum for ever-improving mobile broadband technologies. Wireless is where the market action is both in terms of the mainstream of industry revenue generation and its role in real universal access and usage. Dismissing its reality out of hand as unfit and by inference, irrelevant to NBN policy and economics on a deception about spectrum constraint is a dangerously misleading tack.

Tucker also defended the FTTH advice given to the government in early 2009 on the grounds that he was not able to predict the emergence of vectoring, and the impact it would have on DSL bandwidth. But in articles published a year later, such as in the Telecommunications Journal of Australia, he was still comparing baseline VDSL to FTTH in advocacy of the latter.

Indeed VDSL2, a distinct advance on VDSL, was first standardised in 2005 and the principles behind vectoring were first given airing in academic journals one year earlier, in 2004. Vectoring was standardised by the ITU in early 2010.

By late 2010, Tucker was still presenting graphics suggesting that FTTN nodes would have to be deployed at a rate of seemingly one per every home or two with loop lengths of mere tens of metres to achieve 100Mbps bandwidth. The “vectoring” sweet spot for 100Mbps bandwidth is now closer to half a kilometre. Indeed the type of network visually depicted by Tucker in his damnation of copper would more likely offer bandwidth of up to 500Mbps or more. But yesterday Tucker suggested that vectored DSL only improved bandwidth performance by a “factor of two.”

If Tucker’s focus on FTTH obscured him to the reality of developments in DSL and wireless, then perhaps he had a better handle on HFC? Sadly not. Yesterday he also invalidated HFC on the grounds that it had difficulties with achieving symmetrical and high upload bandwidth. Bunkum.

The download and upload profiles of HFC DOCSIS technology are a matter of the commercial channel allocation policies of the network operator. One common specification for the latest DOCSIS standards is about 1.25Gbps down and 245Mbps up—a factor of about 5 to 1. FTTH plans for the NBN range from about 5 to 2 at best to 12 to 1 downstream/upstream ratios at worst—hardly a radical point of difference. Indeed, there is a quite a debate currently taking place in international telcos as to whether high speed broadband will see even higher asymmetrical demands as IP video dominates. Incorrectly dismissing a technology because of one’s prejudices about the undesirability of asymmetrical speed is not a good basis for public policy.

Tucker was also at pains to downplay the teething problems experienced by the NBN Co with its cost and speed of FTTH deployment.

In one slide yesterday, he attempted to explain that the delays would only set back an FTTH-centric NBN by a year or less, from 2021 to 2022. But in an accompanying slide, he seriously misrepresented the NBN plan announced in April 2009, the version of the NBN that bore the imprint of his advice and expertise before others took over that task.

On that slide, he said that the “original” NBN plan announced in April 2009 would roll FTTH out to 93% of premises, cost $45.6 billion and be finished by 2021. Not true. The original NBN plan called for 90% FTTH reach, provision of bandwidth “up to” 100Mbps, would cost up to $43 billion and take eight years to build—to 2017 in other words. Indeed the network was to have been sufficiently mature and developed by 2015 to have begun privatisation under this Tucker-advised original announcement. The reality? By mid 2014, after five years and eight billion dollars of spend and with four years of all the political support possible, the network is less than three percent deployed!

Tucker yesterday also opined against the concept of fibre on demand: the idea that those people who want fibre to their home can order it, paying a percentage or all of its real cost, as an extension from the node. Those unlucky people who are “hundreds of metres” away from nodes could be up for “thousands of dollars” to get a connection and this struck against the idea of “equality of access,” Tucker argued.

And this is where Tucker gives the game away in terms of his understanding of markets and politics. Clearly service providers would likely amortise the cost of a fibre on demand connection over a contract, just as they do now with all manner of other telecom service offerings characterised by costly one-off imposts such as smart phones. That is if they thought there was a viable market.

But worse, Tucker is venturing away from dispassionate physics here and into the field of political philosophy.

In much of life, premium products that provide increased private benefits for their purchasers tend not to need public subsidy or cross subsidy from other users of their basic equivalents. Suggesting otherwise for a broadband service is a statement of political values, not technical argument.

Indeed, by privatising that additional connection cost to the minority who want direct fibre and avoiding the civil works of last mile excavations to several million premises who will never want it, significant levels of publicly-raised debt can be avoided, helping to make the overall network more affordable for the average user.

For example, this cost reduction should take some of the heat off that $20 per megabit connectivity virtual circuit charge and some of the other artificial imposts which have nothing to do with true costs and more or less guarantee that a real world NBN FTTH delivered service will be as contended and unsatisfactory for the masses as anything seen today.

Or in another scenario, unaffordable and barely used.

In my opinion, Tucker has done as much to contribute misinformation to the NBN debate as anyone. But unlike a media commentator who can be safely debated and debunked in public space, Tucker’s heavily redacted and unchallenged 2009 advice led to a real world policy costed at $43 billion and eight years deployment, which if it had proceeded unchecked might have cost $78 billion and four or more years longer than envisaged, almost all the cost of which transferred risk to the public at large for mostly private benefits.

Contemporary observation tells us that politics is often prone to capture by the specialist or sectional lobby which conflates its own world view with that of the national interest.

One of the jobs of effective politicians, ideally, is to seek out alternative forms of advice and protect the community from well-disguised pecuniary claims. Thankfully, for the sake of good policy, quite a lot of that advice is due in the next few weeks.

Grahame Lynch

Telstra CEO: Connectivity will remain key focus for company

Telstra CEO David Thodey believes that the provision of basic connectivity will continue to play a major role in the company’s future – despite threats of disruption to the company’s “cash cow” from Google and other global players.

But he has also expanded on Telstra’s future technology roadmap: detailing its focus on robotics, e-health and analytics, and on the important role that partnerships will play in bringing R&D to market.

Delivering a keynote address on innovation to a Committee for Economic Development of Australia in Melbourne, Thodey said he was less bothered by local competitors than about potential global entrants. And he said the company had no choice but to grow and deliver the next generation of innovative technology to countries in the region.

“I don’t think of my local competitors, I think about global competitors and how they are going to disrupt our business model,” he told the CEDA audience. “While we’re having this great debate which is very important about the budget and what is going to be cut and not cut, the world is accelerating past us. The debate we urgently need to have is how are we going to invest in our competitive advantage in a global world.”

Thodey said he’d been in Silicon Valley during the last two weeks hearing from technologists who warned that disruption to the telco business model was inevitable. But while he said all businesses were susceptible to disruption, he also foresaw a continuing role and business model around connectivity.

“People would come in to the room and look at me and say you’re a telco. And I’d say yeah, I’m a telco. And they’d say you generate a lot of cash. Yes, we generate a lot of cash. And they’d say well look, we think your business model is dead. You’re going to be disrupted,” he related. However, the Telstra CEO added that while there were many new entrants thinking about how to create lower cost infrastructure that allowed people to connect – including plans by Google to put up a network of 150 satellites – there was a larger problem around connecting that network to local infrastructure.

“So while there are disruptive technologies, you still need people who operate locally. So I think it will be a mixture of both, it will be innovative technology and good local infrastructure,” Thodey said.

FUTURE BETS: Thodey also provided further thinking around the company’s future technology roadmap and how it plans to innovate to stay ahead of its competitors, particularly around e-health, robotics and data analytics. He noted that Telstra’s own model of bringing R&D to market had changed and would rely on partnerships with other industry players in future.

He told the CEDA audience that the company’s old research facility in Clayton on the outskirts of Melbourne had not been good at getting new technology to commercialisation. However, he said Telstra still needed to “be a part of the eco-system and put ourselves at risk.”

“We’ve really concluded that that model doesn’t work for us, but partnerships are really important. And that’s why we’ve worked really hard in the last nine months to really start to form partnerships with different enterprises, different educational institutions,” he said, pointing to last week’s announcement around partnering with National ICT Australia, Deakin University and others.

“We think that in a truly competitive market you’ve got to start building partnerships, it’s got to be a collaborative environment, and you’ve got to take some bets about where you want to go. So for us, we’ve made some bets – it’s e-health, robotics and data analytics. Those are the three areas that we’re really going to focus in on,” he said.

Thodey also reiterated his desire for Telstra to be a major player in Asia, though he pointed out that the company was committed to making its Asian play from Australia.

“Great companies are able to grow, deliver value to shareholders and innovate at the same time. I don’t subscribe to this thing about saving your way to prosperity, you’ve got to grow, you’ve got to be pushing the limits but in a sensible way.

“So that’s why at Telstra we think we’ve got to expand geographically, we’ve got to be part of Asia. I’ve never committed to getting to a certain number by a certain date, but we are committed to doing it. We want to be a great company in Asia,” he suggested.

Geoff Long

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