Network Insight Institute

James O'Farrell

James O'Farrell, Senior Manager, Implementation & Strategy Development, eGovernment Networks, Multimedia Victoria

I want to first connect with some of the comments that had some resonance earlier in the seminar.  Phil Sykes made the comment that in looking at the market, we have a fairly complex issue to sort out.  That is certainly the way we at Multimedia Victoria see it too. We are not dealing with a single market; in anything we do we are actually addressing several markets, each with their different challenges and each at certain stages of development in terms of availability and/or adoption and/or sustainability of the provision of broadband to that particular market. 

One other comment that was made earlier in the seminar was that there is a point of inflection where the adoption of broadband is going to take off. I know a lot of players in the industry will be relying on that. It is more the question of how steep the growth curve will be and for state governments the gradient of that curve is very important.  We want to bring forward adoption of broadband and I will explain why in a moment.

Another comment that was made earlier in the seminar was that it is going to be horses for courses in terms of technology.  Again we are not seeing one technology being the solution that solves all problems.  Perhaps there are emerging technologies now or some are still not here that may solve problems in certain areas.

We believe that we are in the early stages of accelerating uptake. As was said earlier, we are late starters.  It took some time for ADSL to get going but it is happening now and we are looking forward to increased adoption of broadband. AC Nielson figures tell us that 32% of SMEs in Victoria are using broadband now.  I know there is an issue with figures, but still it shows that there is some utilisation amongst the SMEs of broadband.  More importantly, it shows that there are still a lot of SMEs that are not using broadband. This is the issue for us.  The market is starting to move, and not only Telstra but the other players too.

In our view the State Government's role is quite different of course to that of the Federal Government. The Federal Government clearly has the primary responsibility for telecommunication services in the country, mainly because it has its hands on the legislation lever, the most powerful lever that there is. They also have the authority to decide what services are going to be incorporated into the universal service obligation.  Broadband is not there.  But be that as it may, with the deregulation of the market over the last 15 years or so, we have more of a free market operating, albeit still subject to regulation.  Therefore, a player like the State Government or a buyer like the State Government can do things in context to promote the development of broadband in the State. 

The Productivity Commission tells us that there are clear linkages between the utilisation of ICT in corporate life and also in SMEs. There are clear links between ICT and economic benefit.  The Commission tells us that 0.2% of 1.8% annual growth in multi-factor productivity in the 1990s is attributed to ICT.  ICT is not broadband, but ICT we believe is going to need broadband going forward. 

So what are the issues for a state government? Firstly, in terms of availability, broadband is available to large parts of the community but there is a gap in which it is not available. There is also an issue of affordability.  Certainly for the residential sector we believe that there are affordability issues. On the supply side we clearly see that there are sustainability issues particularly in the contentious markets where there may not be a business case for a company to roll out a service.

The Labour Government in Victoria is committed to developing a broadband framework to ensure that the Victorian Government meets its broadband requirements in a strategic manner.  It also promised to facilitate the delivery of enhanced telecommunications infrastructure, greater take-up, more competition and lower prices for business and the community.  From the State Government's perspective, these are clearly our objectives.   

So the State can take some strategic initiatives to effect market development both on the supply side and on the demand side.  Looking at the supply side, we can do things like fund innovative use of the technology or we can fund applications or service delivery where a new business model is being utilised. Of course, we can also encourage demand aggregation in the communities.  For example, the State Government has given funding to the City of Greater Shepparton for GM and community codes to implement multi-channel, multi-point distribution services.  That broadband technology can provide services for up to 540 concurrent clients over a 35 kilometre radius.  The lessons arising from that pilot will be shared with the whole community, and it may well be that there is a sustainable business model there. The other thing that funding of these pilots allows us to demonstrate is how a reasonable community responds to the availability of broadband services.

Another opportunity we have is as a large buyer. Something that probably has not been mentioned until now is that in terms of utilisation of broadband, the cost profile for a user like government or a large corporate is not just about the dollars we will spend on the broadband service per se.  It is also about the dollars that are invested inside the corporation in terms of new skills and new business processes that follow once you have the enterprise or industry specific applications that can sit on a broadband platform.  This will mean using new applications and new processes inside government. 

All of the state governments are at present major customers of data networks.  Government of Victoria spends forty million dollars per annum just on data network services  and conservatively that demand is expected to increase several times over leading up to 2010.  The Victorian Government's current telecoms spend is up to two hundred million per annum, and just over half of that spend occurs in inner budget departments.

So what are we doing on the ground in procurement.? We are rolling out the Telecommunications Purchasing and Management Strategy.

Click here to download James O'Farrell's powerpoint presentation.

You can see from that diagram what we have three types of businesses that will go to market. The first one actually went to market several weeks ago and tenders are closing today.  Over the coming months the Victorian Government will seek tenders for major parcels of business in voice, mobile and data network services.  Using our aggregated buying power, we will obtain maximum value for money we spend in telecommunications services in a way that delivers the benefits of a competitive telecommunications market.

In conclusion, the Federal Government clearly has the primary responsibility for telecommunication services in the country, mainly because it has its hands on the legislation lever, the most powerful lever that there is.  Be that as it may, the State can take some strategic initiatives to effect market development both on the supply side and on the demand side. 

On the supply side, Victoria is investing in new technology and business model pilots and in discovery of demand information for potential service providers.  On the demand side, as a major user of telecommunications services, we hope to approach the market in such a way as to obtain value for money in buying telecommunications services for government as well as deliver benefits to the community of a competitive telecommunications marketplace and improved access to and affordability of broadband service. 

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