The launch of a new internet service by Kerry Stokes raises intriguing questions about the strategy.
WHEN Ryan Stokes claimed to be launching Australia’s first 4G communications network at a function of 550 business people two weeks ago it was an easy sell.
This was not a particularly technologically literate audience.
The event was stacked with people who were there for networking and, most likely, keen to see how Kerry Stokes’ son performed on a major outing before the home crowd.
Run by The West Australian, the breakfast function was really just a product launch for vividwireless, a broadband internet start-up owned by Seven Network, which holds about 20 per cent of the newspaper’s publisher. Kerry Stokes chairs both companies.
Ryan Stokes spoke at length about the opportunities Perth presented, about the speeds internet users of the future will receive, and how vividwireless will fill black spots in Perth where people can’t get broadband at decent prices.
Most of what Mr Stokes said that morning had been stated previously at vividwireless’s launch six months ago. The scion of a media and mining services empire had few technical questions to answer from a crowd that was probably happy to hear Perth was to play host to the first vividwireless roll-out, with infrastructure to challenge the big boys of broadband, including a $50 million spend on base stations and a call centre in Joondalup.
It is, therefore, intriguing to ponder exactly what their strategy is.
Unlike many consumer markets in Australia, there is no doubt that broadband internet is well-served in terms of competition. While land-based players piggyback off the infrastructure of their arch-rival, Telstra, the major player in the market, their access is regulated and competition remains fierce.
Most have their own equipment – known as DSLAMs – placed in Telstra’s exchanges, using the old copper network for the final few kilometres to the consumer. Companies such as iiNet (run locally by Michael Malone), Amnet and Optus have employed this technology to give themselves some control of the wholesale space. Other, smaller players, just pay to join a network.
Foxtel, part-owned by Telstra, has a network which also traverses Perth. It offers cable internet access to a big part of the city.
A privileged few in the CBD or special industrial areas also have access to fibre networks operated by the likes of Leighton’s Nextgen and Perth-based Amcom, which is run by Clive Stein, though their customers are generally business users with huge data needs.
Amcom also has a retail brand, Amnet.
And then there are the mobile networks, the consumer growth area of recent times. Telstra is the biggest player. It has something like 300 base stations in Perth. Rival Optus is probably next, while Vodafone also offers service in Western Australia.
Each of these services has strengths and weaknesses.
Due to the limitations of copper wire, land-based or fixed connections have gaps between physical exchanges. They also, obviously, lack mobility.
Mobile services have capacity thresholds and are considered expensive for anything beyond the most basic internet usage such as email, web searches and some applications. Downloading movies, it seems, is for the fixed service.
For all these players, the $43 billion National Broadband Network looms as the other elephant in the room that could disrupt the dominance of Telstra, the existing Australian telco pachyderm.
Into this field, vividwireless has launched its great expedition with much fanfare, offering something of a hybrid between fixed and mobile services. Operating on the 2.3Ghz bandwidth the Seven enterprise has, in the past, made dramatic claims about increasing speeds for consumers with its so-called 4G network.
“Consumer services with peak speeds in excess of 20 mega bits per second and average speeds of at least 4Mbps were expected to be available from March 2010,” it was reported in September by itwire.com and, in similar fashion, by other news sites.
These numbers are intriguing, mainly because they don’t appear to offer anything new in the market. There’s no doubt that Telstra has been offering 21Mbps on its 3G mobile network for some years, although it will admit this is a peak speed. The average speed the customer receives is much lower than this, based on a number of factors, including the distance from the base stations and the number of other users.
Seven’s vividwireless is no different, even though customers’ mobility will be different from people who use Telstra, Optus or Vodafone via their mobile phones. Its customers will face the same challenges for their home-based or laptop USB modems, not to mention other issues such as the placement of the receiver within a building or the undulation of the terrain due to the operating frequency of its service.
In recent times, vividwireless has spoken less about speeds.
On its website it now says this: “We don’t believe in misleading customers about speed so we’ve decided we won’t talk ‘peak’, ‘theoretical’ or ‘up to’ speeds. We will only ever talk about the actual speeds our customers are experiencing on our network.
“Our network is brand new and we don’t yet have enough data to be able to publish the actual speeds our customers are experiencing.”
In the blogosphere, there is still much debate about the approach vividwireless has taken. It will be employing WiMAX technology, which is much less popular than the more mainstream mobile HSDPA, which dominates the Australian landscape.
Its critics believe WiMAX has proved to be little more than a niche product, best used for regional areas rather than urban centres. But those resident in relatively sparsely populated Perth’s fixed broadband black spots, and there are a few, might well mimic the needs of regional customers in other markets.
The strategy unveiled by vividwireless is to aim for universities and airports, where it believes there is a ready market for its form of wireless broadband, especially on the price-based offer it proposes.
There are, however, views that WiMAX is better for transmitting data, the growth area of mobile telephony, while its big rival has the advantage in voice. This claim is made by vividwireless itself.
While vividwireless’s previous views on the speed it will offer fall short of what many consider will be real 4G – 100Mbps – some in the industry also suggest that WiMAX technology is scalable to allow it to reach much higher speeds in the future.
Competitors are cautious in the way they greet the new entrant, which has probably garnered more respect than the average ISP start-up due to the close link to Seven and Kerry Stokes.
While acknowledging that vividwireless’s entry into the market showed competition was working, Telstra Country Wide executive director West Region, Peter Fairclough, said consumers had to be careful to understand what they were getting when they signed up to any service provider.
Mr Fairclough said, superficially, different technologies might seem the same, but they had their own strengths and weaknesses.
“Make sure you are comparing like with like,” he said.
While Telstra’s corporate body language might suggest it is dismissive of WiMAX, the telecommunications giant has this week launched trials of its new technology it expects to be the successor to its existing 3G service.
Known as Long Term Evolution, Telstra says it will be working with mobile phone giants like Nokia and Ericsson to test the new technology and understand its attributes.
An Optus spokesman said the telco welcomed competition as a benefit to consumers.
“We view developments such as the WIMAX network that’s being rolled-out in Perth as being complementary, rather than a substitute for wireless,” he said.
“Overall the history of the last five years in Australia shows that the more investment there is by the industry in bringing new technologies to market, the more the overall pie has grown and therefore the better off we all are.”
Telecommunications commentator and analyst Paul Budde is one who cautiously welcomes the competition in the market.
“It is fantastic to have competition and a new player investing in the market,” Mr Budde said.
“The reality is that what we have seen with WiMAX around the world is not metropolitan deployment.”
Mr Budde is also convinced that much of the market is price-based.
He believes that WiMAX has challenges operating in urban environments, which often increase the cost of taking on a new uses. Geography and built form can hamper the signals significantly.
Of course, Perth is flatter and has less high-rise construction than centres such as Sydney, where WiMAX is understood to have had a patchy history with early attempts at its usage.
In WiMAX’s favour is the fact that growing numbers of retail technology producers have started making equipment such as handsets and modems that can work in such a network.
Mr Budde is also dismissive of Seven’s talk of attracting broadband customers by way of content from the television network. He claims it has all been tried before.
“The reality is that none of those (previous) portals is overly successful,” he said. “How many people are interested in that specific information that Seven are providing?”
Nevertheless, other ISPs are offering content. Telstra’s Bigpond has a significant offering while Perth-based iiNet, the nation’s third biggest, provides ABC iView as a free service to its customers.
The advent of IPTV, broadcasting over the internet, is viewed by many as a big development, with ISPs competing with free-to-air and pay television for viewers as the bandwidth rises to make this accessible.
The niggling question, though, is what is Seven’s real objective?
When Seven took over Unwired, the predecessor to vividwireless, it had something like 160Mhz of appropriate spectrum on average in every capital city. The 2.3Ghz licences, which it bought from Austar in 2005, are believed to expire in 2015.
According to the last annual report of Unwired before it was taken over, among its assets was spectrum for regional WA. If Seven still owns that, it suggests it may have more incentive to start its service in WA where it has room to grow beyond the capital city.
With the market clearly moving towards mobile, Seven may have recognised the opportunity to put this asset to good use, especially with the promotional clout of Seven and The West Australian on offer, as exemplified by the launch event.
With free-to-air television under assault, maybe Seven wants to use its existing content as leverage to enter a new broadcasting field.
There is also the unique relationship between the Stokes family and Perth. Kerry Stokes has become something of a prodigal son in the past few years.
Could the launch of vividwireless in Perth also be part of a strategy to capitalise on this parochial strength and endear Kerry Stokes even more to the local populace?
Does it allow son, Ryan, the opportunity to chance his arm in business, away from more hostile markets in the east?
The launch hype may have a fair amount of bluster and bravado, but taking on the big boys of broadband, iiNet excluded, would appeal to many who enjoy a defiant sneer back across the Nullarbor.