Bringing Down The Sandstone Curtain

By | August 30, 2004 | Feature

Australian telco Optus is expecting its new broadband satellite product to usher in a new dawn for satellite communications in Australia. The operator launched its Optus Broadband Satellite product last week and Warren Hardy, managing director of wholesale and satellite service at Optus, told Satellite News in an exclusive interview that the product takes satellite services into the mass market.

“We are now offering a product that has traditionally been seen as very government- and corporate-focused, and really opening the floodgates and saying that anyone with reasonable means can afford a satellite capability,” Hardy said. “That is a watershed for satellite in this country.”

The HiBIS Connection

The product, which was unveiled by Deputy Prime Minister John Anderson, will bring satellite communications to remote and rural areas of the country. One of the key reasons why Optus officials feel that they can launch a product is the support it is being given by the Australian government. The solution is part of the new Federal Government Higher Bandwidth Incentive Scheme (HiBIS). Being part of this scheme will dramatically reduce costs for customers as they receive a significant subsidy from the government for taking the services. For example, the installation of a 1.2-meter dish would normally cost $2,434. With a HiBIS subsidy, it now will cost just $70.90. A 1.8-meter dish would cost $3,079, but only $88.54 with the subsidy.

The subsidy is critical for the success of the product. Hardy comments, “I think the subsidy will have a huge impact in terms of the people taking up the service. If you take away a $2,148 hurdle, which you have to jump over, you are only really looking at a $53 monthly charge. This is a massive difference. I know from my own experience in going into markets where you have upfront capital costs, it does affect things. If you look at the price of mobile phones, once they dropped below $286.50, consumer demand really took off. So, with this service, there are no upfront capital costs.”

Hardy is full of praise for the government as it aims to bring the benefits of broadband communications to all Australians. He says, “All credit to the government for having the foresight to actually put forward this stuff and implement a great social policy, which will go a long way to making sure every single Australian has access to the same broadband capabilities as anyone else, and not being disadvantaged by where they live.”

The satellite service will also play a key role in reducing the digital divide in Australia, commonly referred to in Australia as ‘The Sandstone Curtain.” Hardy explains, “There are a lot of mountains that run down the East Coast of Australia. Generally, you find the other areas are on the western side of the dividing range, which we call ‘The Sandstone Curtain.’ This historically has been the barrier that stops people accessing broadband because there are terrestrial constraints. Now, with satellite, we can bring broadband to everybody in Australia.”

With the costs of the service now affordable, Hardy believes the offer stacks up when compared with other broadband offers in urban centers in Australia. He comments, “The monthly charge of our lower package is $53 a month. You can equate that to what it would cost you for broadband in cities in parts of Australia where you can buy it for $20.80 a month. This is not a huge gap if the alternative is nothing.”

In terms of the potential take-up of the service, this is more difficult to judge. “I expect the demand will be pretty healthy,” he told us. “We are potentially looking at thousands or tens of thousands of subscribers in the first 12 months. It could be both. It is new, uncharted territory. We don’t have a history of mass-market satellite broadband products here.”

Overcoming Negative Perception

One thing the operator will be looking to overcome is any negative perception of satellite broadband, which has gained a reputation in others parts of the world for being expensive and unreliable. Hardy says of overcoming these issues, “The negative perception comes out of such things as rain fade. Australia is the second driest continent on the face of the Earth, after Antarctica. Interestingly enough, what a lot of people don’t realize is that the chances of having a rainstorm of the intensity that you would require to have a rain- fade problem over satellite is probably less than the chances of you having a terrestrial cable breaking in the building. I think the way you address perception is reality and you actually go out there and educate people about the reality of the situation.”

With a potentially healthy demand for the product, the operator is now keen to bring it into the remote areas of Australia. Hardy believes the country dynamics in Australia mean that this satellite broadband solution could be a strong revenue driver.

“One of the unique characteristics of the Australian market is that we are an extremely large country with a relatively small population,” he said. “So, building terrestrial networks that can actually have the capability to deliver broadband products and services to our whole population is very challenging. Satellite is perfectly placed as an access platform to provide these services to every square inch of this country.”

The product could also help improve efficiencies for a number of industries in remote Australia. “You could have mining, remote telemetry applications, the list is endless. There are farmers in the northern territories who literally get into a light aircraft to check that a bore-head is working,” he said. “With satellite capability, you can put surveillance equipment out there very cheaply, and you can monitor it all remotely, without costly maintenance trips. I think the sky is the limit in terms of applications.”

There is another advantage to the new satellite product: closer competition to incumbent Telstra. “The Australian telecom landscape has been historically dominated by one telco, Telstra, and because of the forbidding economics of terrestrial networks in those sparsely populated areas, it has been difficult to bring true competition to those areas,” he says. “Satellite is the platform to bring competition to regional areas of Australia. The word Optus comes from the Latin word ‘optare,’ which means to choose. The whole notion of competition is in our DNA.”

(Luisa Ford, Optus, e-mail, Luisa. ford@optus.com.au)

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