1. “Where the rubber hits the road” A presentation prepared for the 2030 Communications Vision Project Warwick Davis February 2015

2. 2 Frontier Economics ●Overview ●International comparisons ●Access ●Price ●Quality ●Outcomes ●Closing remarks

3. 3 Frontier Economics High quality telecoms infrastructure at competitive prices is fundamental to the growth of the digital economy… Mobility, cloud computing, social networking, sensor-nets and big data analytics are some of the most important trends in the digital economy today. Collectively these trends are making possible the future of “smart everything” (i.e. grids, homes, business processes, energy, healthcare, transport and government), as well as empowering businesses, consumers and society at large. These new and future applications rely on the widespread availability of fixed and wireless broadband networks to meet the growing demands of economies and societies with a concomitant rise in the number of devices connected over the Internet. OECD, Measuring the Digital Economy: A New Perspective, 2014 …so, what do we know about Australia?

4. 4 Frontier Economics What dimensions should/can we compare? Price Speed Penetration Quality Quantity Consumer wants Usage Service dimensions Measures Price baskets Availability Network Fixed Mobile Outcomes? Other quality (e.g. latency) Affordability Services Voice Broad- band

5. 5 Frontier Economics Comparisons are hard, but necessary... Are we standing still? ●Moving forward can be standing still, so we must compare progress with that of other countries. ●We consider rankings as well as absolute measures. Data is limited ●Comparisons can be fraught. Easy to measure things that are not that useful. Data sets are often poor / untimely, and definitions are critical. ●There is not much breakdown between user types....the following slides take up this challenge Compare like-with-like ●Australia has some disadvantages (Large land mass, small population, relatively low urban density). ●But some advantages (our skilled workforce). ●As a result, it’s helpful to compare Australia to countries with similar endowments (Sweden, NZ and Canada).

6. 6 Frontier Economics ●Overview ●International Benchmarks ●Quantity ●Price ●Quality ●Outcomes ●Closing remarks

7. 7 Frontier Economics Quantity – availability/access ●Availability of (voice and broadband) services is of significant interest ●But it turns out to be hard to compare systematically across countries... Approximately 9.9 million premises (91 per cent) have access to ADSL. Approximately 3.1 million premises (28 per cent) have access to a high speed broadband platform (FTTP, FFTN, HFC or FW). Approximately 8.8 million premises (81 per cent) have access to 3G mobile broadband services and about 6.4 million premises (59 per cent) have access to 4G services. Dept. Of Communications, Broadband Availability and Quality Report, December 2013

8. 8 Frontier Economics Quantity - penetration Source: OECD Broadband Portal Fixed line voice has long been ubiquitous (+95%), but Australia is falling down the ranks in broadband penetration (13 th to 21 st )...

9. 9 Frontier Economics.... Fixed penetration is just below the OECD average Source: OECD Broadband Portal Quantity - penetration Overall rates show that there is not much variation within the rankings.......but peer comparison suggests this may not be quite as concerning as it appears

10. 10 Frontier Economics OFCOM - The International Communications Market 2014 Quantity - usage Low usage of data for those that have broadband – likely linked to quality and price

11. 11 Frontier Economics Source: OECD Broadband Portal Quantity A different story in mobile?.... Wireless penetration rates are among the highest in the world Rank highly in mobile penetration

12. 12 Frontier Economics Source: OECD Broadband Portal. Quantity Australia is way above the OECD average for wireless penetration Australia has low fixed, high mobile. In other OECD countries there is a positive correlation...

13. 13 Frontier Economics Source – OFCOM - The International Communications Market 2014 Quantity Australians have been rushing to have dedicated mobile broadband connections... These data are also suggestive of fixed- mobile substitution... “Nearly 20% of mobile connections are dedicated broadband data”

14. 14 Frontier Economics Source: OECD Quantity We have been more successful in getting fixed connections to some important areas, like schools…

15. 15 Frontier Economics ●Overview ●International Benchmarks ●Access ●Price ●Quality ●Outcomes ●Closing remarks

16. 16 Frontier Economics Price A comparison of “baskets” of fixed line calls There are 33 countries in the Business data sample. 1 st rank - Cheapest 33 rd rank (for business) – Most expensive 34 th rank (for residential) – Most expensive Source: OECD, Sept 2012 All prices are in PPP terms, which reflect international differences in purchasing power. Fixed voice is expensive Including in relation to peers like Canada

17. 17 Frontier Economics Price A comparison of “baskets” of fixed broadband There are 34 countries in the data sample unless otherwise stated 1 st rank - Cheapest 34 th rank – Most expensive Source: OECD, Sept 2012 Fixed broadband is also expensive Does not fare as badly in comparison to peers, like Sweden

18. 18 Frontier Economics Price – summary on fixed Across (V)oice and (B)roadband, we are some way behind the average Source: OECD

19. 19 Frontier Economics Price A comparison of “baskets” of mobile voice + data prices 1 st rank - Cheapest 34 th rank – Most expensive Source: OECD Mobile prices fare comparatively much better…

20. 20 Frontier Economics Price A comparison of “baskets” of mobile broadband prices 1 st rank - Cheapest 34 th rank – Most expensive Source: OECD.…including mobile broadband

21. 21 Frontier Economics ●Overview ●International Benchmarks ●Access ●Price ●Quality ●Outcomes ●Closing remarks

22. 22 Frontier Economics Country Average Peak Connection Speed Mbps Global Rank Australia3644 New Zealand3250 Sweden5412 Canada43.722 Global Avg24.8- Hong Kong84.61 Country High Broadband connectivity >10Mbps Global Rank Australia14%40 New Zealand14%42 Sweden44%10 Canada33%21 Global Avg23%- South Korea81%1 Source: Akamai – State of the internet – Q3 2014 Quality Fixed broadband quality is behind the pack… Country Average connection speed Mbps Global Rank Australia6.944 New Zealand742 Sweden14.15 Canada10.321 Global Avg4.5- South Korea25.31 Clearly behind many non-OECD countries

23. 23 Frontier Economics Speedy ●According to Ofcom, 20% of total mobile data connections were 4G in 2013 (Source: OFCOM) Source: Akamai – State of the internet – Q3 2014 Quality Mobile broadband quality is less cause for concern.. CountryAvg. MbpsPeak Mbps% Above 4Mbps Australia3.968.925% New Zealand3.32132% Sweden7.336.994% Canada7.928.771%

24. 24 Frontier Economics ●Overview ●International Benchmarks ●Access ●Price ●Quality ●Outcomes ●Closing remarks

25. 25 Frontier Economics Outcome Telecoms revenue as a percentage of GDP is near the OECD average Source: OECD iLibrary We spend a bit more than comparators

26. 26 Frontier Economics Outcome Telecoms employment is higher than OECD average Source: OECD iLibrary Telecoms employment is twice OECD average

27. 27 Frontier Economics Outcome ICT related patents Source: OECD – Measuring the digital economy We are not at the forefront of ICT, and more of our energy is going into other things

28. 28 Frontier Economics Outcome ICT service exports Source: OECD – Measuring the digital economy …and our share of service exports is dropping

29. 29 Frontier Economics ●Overview ●International Benchmarks ●Access ●Price ●Quality ●Outcomes ●Closing remarks

30. 30 Frontier Economics Closing remarks Reinforces the need to “get the NBN right” How do we make sure we build what (all kinds of) consumers want, and price it correctly? Relatively, Australia fares poorly in fixed line comparisons but well in mobile comparisons The causes of this are probably complex, but relative pricing may be a factor

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