John Linton I have been asked this question on an increasing number of occasions since Exetel has made no 'moves' to offer ADSL2 via the Telstra network as some other ISPs have done as the two issues appeared to be linked in some of our customer's minds. The decision not to attempt to negotiate an extension of Exetel's current Telstra Wholesale contract for the supply of ADSL1 customer connectivity to supply ADSL2 had nothing to do with our views on the likely future of HSPA - the two 'decisions' were entirely separate.
We decided not to provide ADSL2 via Telstra because we didn't see where we could add any value to that service and it would therefore breach our base reason to be in business to produce a 'me too' offering that was no different to those already offered by BigPond and the 'independent' ISPs that had signed extensions of their ADSL1 contracts. With 5 (or whatever the exact number of companies it actually is) all offering the Telstra service from the same exchanges what possible value could there be in adding a sixth or seventh or however many will eventually provide that service?
Now you may, quite rightly, point out that Exetel already offer ADSL1 based on Telstra's network so that/those statement(s) is/are contradictory. True enough - but when we started providing ADSL1 services some five years ago the 'rules' were very different and it was, relatively, easy for us to see that we, as a start up company, could buy at Telstra's ridiculously high prices and still differentiate the end service over time sufficiently to make a relatively clear cut set of service advantages. We were in fact able to do that over the first two years but then progressively lost that ability as Telstra Wholesale firstly changed its top management and then 'elasticised' its pricing parameters to the companies with which we competed.
If I had known then what subsequently became the case I would never have signed the original ADSL1 contract and would have approached the communications marketplaces very differently and with very different services and products. However they are mistakes of the past that I made with the knowledge (or as it subsequently turned out - the lack of knowledge) I had at that time and that mistake can just be added to a long list of mistakes I have made throughout my career.
So, Exetel's decision not to sell Telstra's ADSL2 was based on the information we had at the time, a few months ago, and our desire not to further entangle ourselves with a supplier whose CEO's publicly expressed view is that "wholesale customers are parasites". Not a lot of dignity in metaphorically 'tugging your forelock' and kow-towing to people who regard you with such overt contempt and disgust while taking huge amounts of money from you - pretty demeaning when you think about it.
Will HSPA replace ADSL2 as the broadband of choice throughout Australia?
Almost certainly not at the 'higher end' user level.
Almost certainly at the 'lower end' user level........with a couple of, perhaps three, provisos.
Currently, Optus HSPA network delivers an average of around 1.5 mbps down in many areas of Australia and Optus continues to increase the coverage continuously. Over the next 'little while' it will become pretty safe to say that 'most' areas of Australia will get 2 mbps plus down and somewhere close to 1 mbps up as Optus increases the overall base technology to 7.2/1.1. (at our North Sydney office we can currently get better than 4 mbps down and 1.1 mbps up).
Far more than 60% of Exetel's regional and rural users have ADSL1 at speeds of 1500/256 or less and they average using less than 2 gb of data downloads a month. Now it's certainly true that Telstra targeted these customers over the past two years offering them ADSL2 at heavily discounted prices via their never ending succession of "special promotions" and we have certainly lost a fair number of customers to those approaches. It's almost certainly going to be true as more ISPs sign up to re-sell Telstra's ADSL2 that we will lose some more - those that believe that "ADSL2 speeds" are of benefit to them.
We would believe that, if we could find a way of providing an HSPA modem at "no charge" (one of the provisos) then the majority of these current customers that have already rejected Telstra's targeting for over twelve months would be almost certain to accept an offer from Exetel of higher speed broad band at lower monthly charges while keeping all of their current Exetel broad band add-ons.
If those same customers could bring themselves to 'trust' VoIP and get rid of their current telephone number (the other proviso) then they could add the compelling additional benefit of eliminating the current cost of their telephone land line and the undoubtedly rip off telephone call charges that go with it.
Currently Exetel pay far too much for HSPA data to allow this scenario to be put into effect for services above 10 gb per month. We would expect that, over the coming 6 or so months that HSPA data costs will fall but we can't begin to estimate by how much. The only reason that we expect them to fall is that we have firm pricing for HSPA data in the EU which is about one third of what we currently pay to Optus and that was before the current recession hit Germany and the UK which has prompted fresh contact from our UK friends saying they can now offer better pricing than they did last August.
If Optus, or some other carrier prepared to offer Layer 2 HSPA, continues to develop the speeds and sensible capacities of HSPA beyond 7.2 mbps and continues to reduce the data costs (the third proviso) then the HSPA replacement of wire line broad band becomes ever more compelling and 'reaches further up' the layers of the current ADSL1 user base. HSPA never has to reach the theoretical "20 mbps" speed of ADSL2 because in regional and rural areas that will never be achieved but HSPA may well, in the not too distant future, actually deliver download speeds greater than those actually achieved by ADSL2. In the mean time speeds sufficient for streaming video are already 'nearly there' and will be a reality before mid 2009 in all probability.
I really do think that HSPA will replace wire line broad band for users of less than 10 gb a month everywhere in Australia over the next 17 months (given the 'provisos' I stated).