NBN 101 – Mobility: Friend of Foe?

This article is part of Computerworld Australia's NBN 101 series, in which we take a look at the arguments surrounding the fibre-to-the-home (FTTH) network, and dissect them one by one. The articles are meant to be an overview of the debates central to the National Broadband Network (NBN) to give you a grounding as more and more media outlets and commentators speak out on the project. We encourage people to take the discussion further in the comments section.

In our first article we took a look at how Australia’s NBN plan compares to the rest of the world and the statistics and graphs from the OECD, and then we strapped in for a tour of speeds. We also had a look at wireless technologies versus fibre optic, then we delved into the economic argument for a high-speed national broadband network, and more recently we took a look at how applications and potential service packages may play a role in the NBN.

Now it’s time to address what is often perceived as a potential big threat to the success and take-up of the FTTH-based NBN: Mobility.

Substantiating the critique

Of all the criticisms laid against a FTTH broadband network rollout in Australia, it is the perceived threat posed by our newly discovered love of mobility that holds most water.

While the company responsible for rolling out the FTTH network, NBN Co, and the Labor Federal Government, contend the escalating trend of getting connected to the Internet via mobile devices will be complementary to the NBN, others disagree. Those against argue the strength of mobile broadband uptake and the sales of devices such as smartphones, laptops, netbooks and tablet PCs indicate we won’t want to have a fixed-line Internet connection in future; most of us will want to be mobile.

As a result, the conclusion is drawn that the commercial viability of NBN Co and the NBN in general, which require a strong uptake from both retail service providers and in turn their customers, is questionable, even to the point that it shouldn’t be built.

(See the maps of the first sites on the mainland to get the NBN)

Telsyte analyst Emilie Ditton explains the argument well:

“Fundamentally, mobility threatens the NBN because the NBN requires very high take-up of homes passed to be economically viable and ultimately for the government to sell its investments to private investors (and recoup taxpayers funds),” she says.

“Anything that affects the choice of a household or business passed to connect to the NBN to opt for an alternative to the NBN threatens the NBN. Mobility is a particular threat because mobile broadband has gained strong momentum in Australia, and for those users who are not driven by the desire for very high speeds, and/or are attracted by the flexibility and convenience of mobile broadband anywhere will find mobile broadband to be a very cost effective alternative to services from the NBN. The financial implications come down to a numbers game, the NBN requires high take-up and a propensity to pay for higher value plans.”

It is important to note here that there is a general consensus – as we pointed out in a previous article – that from a technical perspective a fibre optic network provides the best platform to achieve the service level goals set out as part of the NBN and the technology has already been proven to support the kind of applications that run on faster broadband networks than we currently have or in many cases, that wireless technologies can provide.

Yet, not everyone chooses their connection based on the pros and cons of a technology. Indeed, just because fibre offers a better upgrade path and consistency of service, doesn’t mean we won’t prefer the flexibility of a mobile broadband connection in future. After all, with continuing trials of potential fourth-generations mobile broadband technologies and the likes of Long Term Evolution (LTE) surpassimg the 50 megabit per second (Mbps) and even the 100Mbps peak speed mark, mobile broadband presents an interesting case against the technological fortitude of fibre.

So we should really re-think the whole NBN idea, right?

Well, not exactly. A closer look at the data behind the argument reveals while there is some supportive evidence, there are also some pretty big holes where unsubstantiated assumptions and precipitous conclusions are made.

Next up: The mobile device love affair

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Our love for mobile devices

One of the common throw away lines being used to argue against an FTTH network in Australia is that because we love “gadgets like the iPhone” and other mobile devices like netbooks and laptops we won’t want a fixed-line connection at our home or premise.

And the statistics show we do love mobile devices.

According to the Australian Mobile Telecommunications Association (AMTA), which tracks the number of mobile phone handsets sold in Australia, to the end of May this year there had been 3,079,887 3G-enabled devices sold.

Similarly, figures from the world’s biggest IT analyst firm, Gartner, show that at the end of 2009 there were more than 20 million mobile phones in use, with just under 9 million sold in the year alone. That is a steep rise from 2005, when 5.98 million units were sold and a total of 16.34 million mobile phone handsets were in use.

Gartner is forecasting that by 2014 there will be just over 23 million units in use with 11.8 million sold in that year alone with many people refreshing their choice of device.

Just to reinforce the point, another analyst firm, IDC notes that in 2005 just over 1.06 million smartphones – which are more commonly used to access the Internet - were shipped to Australia.

“In Q4 2009 alone, over 1.31 million smartphones were shipped, and in 2009 the total number of Australian smartphone shipments exceeded 4 million, this was the highest annual total on record,” IDC says.

“At the end of Q1 2010, Australian smartphone penetration rose to an all time high of 48.1 per cent of new mobile device shipments, and IDC is now expecting that by the end of this year, smartphones will outpace traditional mobile phones.”

Clearly we have a love in happening with mobile phones, with smartphones soaring in popularity. The trend is similar when it comes to other mobile devices like laptops, notebooks, tablet PCs and netbooks.

( Coming to a wall near you: Meet the NBN ONT.)|

Gartner statistics show that in 2007 consumers and organisations combined bought 1.93 million mobile PC devices. That has since risen to 2.69 million last year and is forecast to rise to 4.64 million by 2014.

But does the explosive rise of mobile devices mean the death of the desktop, and by association fixed line Internet connections? Looking at IDC statistics it is clear desktop sales are marginally declining but are far from disappearing.

In 2005 the total desktop market (both consumer and commercial) was 2.36 million units sold, representing 66 per cent of all computer (mobile PC devices and desktops) sales.

However, IDC says that in 2009 the total desktop market was 1.96 million units and only represented 42 per cent of the total market. The analyst house’s forecast is for the market to be 1.86 million desktops sold in 2014.

Gartner has similar statistics forecasting the desktop to decline from 2.01 million sold last year to an estimated 1.85 million in 2014.

“To a degree mobility computing has impacted the desktop market especially for consumers as it does offer the flexibility of being mobile and it is also the form factor that most consumers prefer. Having said there is still some consumers that would opt for a desktop. For example, power users and gamers,” IDC notes.

“In the commercial market desktop is still the preferred form factor as it reduces the chance of damage and data losses from a missing PC. In a lot of the cases it’s dependent of the role and the business that are purchasing the device.”

The following graph from a recent investor presentation by the world’s biggest chip maker, Intel, articulates the situation: NBN arguments 101: The Need for Speed

However, even though we have established that we are enamoured by mobile devices and are likely to continue buying them in the next few years – added to the marginal decline in desktop sales - doesn’t necessarily mean we don’t want a fixed line Internet connection. Drawing a definitive conclusion that because we like mobile devices we only want mobile broadband connections is unwise.

The first reason for this is none of these statistics tell us how many people own more than one kind of device (both mobile and desk-based). It is very common for consumers and commercial workers alike to own a smartphone, a laptop and then also work on a desktop PC either at the office or at home. Then there's the emerging tablet market – anecdotally, almost all the iPad owners we have encountered in past months are using it as a fourth device, rather than a replacement.

Certainly there will be many variations on ownership and usage trends – the potential combinations are numerous – but the data still indicates a significant need for desktop PCs, which to date have only connected via fixed line services. The ability to use mobile broadband connections through these devices has increased, whether through tethering a mobile phone, using a dongle or acquiring a fixed wireless broadband service like vividwireless. However, there are few statistics to prove this has become prevalent, particularly in Australia; in fact, the demise of Unwired proves otherwise for the urban-based majority of the population.

The second reason you should be sceptical when people use the mobile device popularity argument is that there is no evidence to support the view that mobile devices only connect via mobile broadband connections. On the contrary, it is reasonable to suppose many mobile devices still connect to the Internet and download data via fixed-line services, whether it be:

  • Via a cable plugged directly into the device;
  • Through a docking station on a desk;
  • Across a wireless LAN or Wi-Fi connection enabled by a fixed line connection;
  • Or via connecting a device such as a smartphone or tablet PC to another device such as a notebook or desktop PC to download files and update software; also known as tethering.

In short, yes we do love the mobility trend and the exciting new devices hitting the market but the data shows device preferences are not a killer argument that can be used by those against a fibre optic network. So what of the statistics for the type of connections that we have utilised in recent years?

Next up: Fixed line broadband is still popular

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Fixed line broadband is still popular

Domestically, the best source of empirical evidence for Internet usage is the Australian Bureau of Statistics (ABS), which noted that at the end of December 2009, there were 9.1 million active Internet subscribers.

A look at the ABS Internet Activity Survey, which began in September 2000 and obtains its data directly from ISPs, reveals Australians continue to subscribe to fixed line services such as DSL and cable, while in the last three years have also become increasingly fond of mobile broadband.

(See a slideshow of how Australia stacks up with the rest of the world on broadband speeds)

The ABS survey started showing significant data on mobile broadband via a datacard, dongle or USB modem (excluding connections via mobile phone handsets) in September 2006, when there were 186,000 subscribers out of a total of 6.65 million Internet subscribers.

Since then the number of people subscribing to a mobile broadband Internet connection service has risen sharply to hit 2,838,000 in December last year, to become the fastest growing type of connection.

The trend toward mobile broadband has given some of the publicly listed telcos an important new revenue stream. Optus’ financial results, reported in May, provide another way of expressing the trend, indicating a positive yearly and fourth quarter result driven by continued double digit growth in its mobile services revenue.

In documents lodged with the ASX, Singtel said total mobile services revenue for the quarter had increased 10.1 per cent to $1.39 billion. For the year total mobile revenue grew 12.9 per cent to $5.57 billion. During the March quarter alone, it added 254,000 new mobile and wireless broadband subscribers – the highest quarterly performance in five years.

Other telcos such as Telstra and Vodafone Hutchison Australia have reported similar results.

And the love for mobility seems extraordinary with this next figure - the number of mobile broadband connections globally recently passed the five billion mark, and key telecommunications vendors the likes of Ericsson posit that by 2020 there could be as many as 50 billion individual mobile broadband connections.

So it is clear mobile broadband is a booming market.

But the ABS statistics indicate the trend is not eating into the total number of fixed line Internet connections, particularly the number of DSL and cable broadband subscribers.

(The same cannot be said for fixed line voice connections offered by Telstra and others.)

At the same time the mobile broadband boom has been playing out, DSL connections have risen ever so slightly in a more mature market from 4,176,000 in December 2008 to 4,193,000 in December 2009. Cable connections also rose by some 22,000 subscribers to reach 935,000.

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