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Chapter 5 - Strategic Coordination

5.1 Demand Aggregation

Some regional areas have not yet had broadband services other than satellite made available because of insufficient demand to support a commercial investment in new infrastructure. Where a business case for investment is marginal, uncertainty about consumer, business and public service demand is a dampener on commercial initiatives.

Research and consultations undertaken by the Broadband Advisory Group in the health and education sectors suggest that impediments such as cost, availability and scepticism about practical benefits prevent the take-up of broadband despite considerable potential demand in these sectors.

Demand aggregation strategies - where customers pool demand to achieve cheaper pricing - would enable regional communities, and health and education sectors particularly, to benefit from economies of scale and secure access to improved bandwidth. This suggestion is supported by the Estens Regional Telecommunications Inquiry, which found that the education and health sectors have a critical need for high quality internet access in regional, rural and remote areas.[1] The Inquiry recommended that the Government should provide further support to communities to undertake demand aggregation strategies.[2] End users will benefit by means of the shift of power from suppliers to customers.

The following principles are critical to long-term sustainable demand aggregation:

• Demand aggregation strategies should seek to balance the competing requirements of initiatives for particular sectors (such as health, education and general government) across a state or region , as opposed to area-based strategies aggregating demand from multiple sectors and consumers within that local area
• There should be a flow-on effect to the wider community from any sectoral demand aggregation in regional and remote areas
• Strategies should promote competitive market outcomes rather than reinforce the market position of major players.

Demand aggregation strategies can, if misapplied, reduce competition in particular marketplaces by reducing the number of companies that are able to tender for contracts (by making contracts too large, too geographically dispersed or encompassing too wide a range of services). It is important that any demand aggregation strategies promote competition. Ensuring that there are good communication flows between potential purchasers as well as ensuring that contract conditions are publicly disclosed can help to reduce the market power of dominant suppliers and deliver the best outcomes for the whole community.

Given the high costs and risks associated with private sector development of broadband infrastructure in regional areas, demand aggregation measures are required to leverage public sector demand as a catalyst for wider deployment of broadband services to regions. Governments could use existing public sector infrastructure in regional areas more effectively by extending cross-sectoral infrastructure-sharing arrangements. Coordinated, strategic investment by funding programs and public sector agencies might improve outcomes in regional areas, helping to maximise the economic and social gains from investment.

Bandwidth brokers should work with relevant organisations to assist with demand aggregation. These brokers would be an extension of existing sectoral, regional and local organisations and would act in the public interest to bring together potential user organisations and information about their planned procurements. They would identify sources of supply and assess whether there is potential for group purchasing that would be more effective than if members sought individual solutions. They would also disseminate information to organisations about improving broadband price and performance.

Appendix 5 expands on demand aggregation and brokering principles and approaches.

5.2 Education

All schools and educational institutions should be connected to broadband to achieve enhanced educational outcomes through improved research, interactive learning and innovative curriculum content. Although most of the operational decision-making for these sectors rests with states and territories, the Commonwealth should support a framework to enable all levels of government and education communities to work together to provide access to broadband technologies. As part of Recommendation 4, a key role for the National Broadband Strategy Implementation Group will be to work with the relevant government and industry bodies in education to establish appropriate targets for the education sector.

Given adequate technical support and professional development, educational institutions are eager to maximise the benefits of broadband. There are already many good broadband applications available. Improvements in the price, availability and take-up of broadband will stimulate application developers to create even more compelling content. Even institutions that have lower levels of Internet access recognise the considerable benefits that use of the Internet for student research through email and web browsing can bring; it allows increased student participation, broader access to information sources for research projects, improved scholastic achievement and the ability to deliver high quality education to remote students.

Snapshot

The South Australian School of the Air[3] provides an example of innovative broadband application use. The school has used $325,000 from the Networking the Nation program to pilot a virtual classroom[4] to service 20 of the most isolated families in the state. The School of the Air uses laptop computers connected via satellite to allow students to interact and work collaboratively on projects through features including a virtual whiteboard and virtual 'breakout rooms' for smaller group work.

This project provides students with a quality of service not previously possible using two-way radio and allows the teachers to engage the students as a group. The feedback to date indicates that simply being able to hear each other properly has enormously improved interaction and increased the feeling of a real classroom. The service has also had flow-on benefits to the community. Parents have become Internet literate while helping their children with schoolwork and have been able to interact with others in their geographically dispersed community through the Internet.

Source: Broadband in Education: Availability, Initiatives and Issues - A paper prepared by NOIE for the Broadband Advisory Group 2002.

Timely access to affordable broadband communications is the critical element for the continuing growth in the use of ICT in education. It is central to development strategies in all sectors of education, in all jurisdictions. Failure to address this issue will prove a major impediment to continuing successful growth in the use of ICT in education. It is anticipated that the lack of affordable broadband will have a flow-on impact to both the development of a strong education system relevant to the information economy and the capacity of the education system to provide a strong base for building future skills in ICT for Australia. Some states and territories are attempting to address these problems by aggregating demand across their own jurisdictions.

Although groups representing higher education, Vocational Education and Training (VET) and schools are addressing these issues identified, significant infrastructure issues remain that may prove to be beyond the capacity of individual institutions or sectors to resolve.

The cost of downloading content is a potentially significant inhibitor to the effective use of broadband in education. To reduce this impediment, the formation of a nationwide intranet for content and curriculum interaction is recommended.

A nationwide content intranet among schools, training institutions, media and cultural institutions would comprise a series of regional, state and territory networks (including Virtual Private Networks) connected to form a national network. Individual components of the network would be sufficiently discrete to be able to be tendered for on a competitive basis, encouraging competition and promoting investment in infrastructure to meet the growing bandwidth needs of educational institutions. These individual networks would peer to provide data to each other at minimal cost. Key cultural and media institutions such as the ABC and SBS, state and national libraries and galleries could connect to the network to increase the availability and to reduce the cost of their content to educational institutions.

The implementation of this network could be overseen by the National Broadband Strategy Implementation Group (See Appendix 4), with an implementation board largely drawn from the education sector responsible for its progress. This board would coordinate the strategic allocation of funds from Commonwealth, state and territory governments to particular projects.

The content intranet would also benefit from a 'broker' to coordinate demand and interconnect state education networks, as discussed in Section 5.1. This approach has been used effectively in the higher education sector through the Australian Academic and Research Network (AARNet) and a similar approach might lead to improvements in competition, pricing and availability for the schools and VET sectors.

Snapshot

The Virtual Schooling Service (VSS) offered by Education Queensland is an example of the innovative use of broadband applications. The service offers upper secondary courses to students enrolled in state schools, where the provision of comprehensive subject options has traditionally been problematic.[5] In some instances, the students are in schools outside the metropolitan area. In other cases, the students are in metropolitan schools, with small populations wanting to do particular academic units. Classroom components of the service use a telephone hook-up in concert with Microsoft Netmeeting on the PC.

The VSS has the capacity to deliver a broad curriculum across Queensland regardless of school size or location, but even in its current form it requires considerable bandwidth to operate effectively. Increased bandwidth would allow significant improvements to the educational outcomes this service can provide. In consultations with NOIE, VSS staff stated that they would prefer to use video-conferencing technology to make the service more like a traditional classroom but that the schools it services cannot currently access the bandwidth this would require.

Source: Broadband in Education: Availability, Initiatives and Issues - A paper prepared by NOIE for the Broadband Advisory Group 2002.

5.3 Research

Australia has a reputation for excellence in innovative science and engineering. To maintain this position it needs to be a part of the global research community, which is increasingly relying on advanced network connections to work collaboratively both within countries and around the world.

To advance these objectives, the Higher Education Bandwidth Advisory Committee (HEBAC) has examined the short to medium term bandwidth requirements of universities and research institutions that are disadvantaged by their current level of access to affordable bandwidth. HEBAC has recommended that an Australian Research and Education Network (AREN) be established as a collaborative venture between the Commonwealth, state and territory governments and the higher education sector. AREN would be collaboratively funded by those stakeholders. The report identifies regional Queensland, the Northern Territory, north eastern New South Wales and Tasmania as high priority areas needing improved bandwidth. If the Government accepts HEBAC's recommendation there should be a strong link between AREN and the National Broadband Strategy Implementation Group.

The Government has made an important contribution towards the provision of advanced network infrastructure for high-end research and development in Australia through the Advanced Networks Program (ANP). The Centre for Networking Technologies for the Information Economy (CeNTIE) and the GRid And Next GEneration Network (GrangeNet) will provide Australia with intercapital research capacity comparable with the US and Europe (up to 10 gigabits per second).

It is important that the Government build on the successful projects supported through the ANP. AREN could extend this network to include regional universities.

The need to advance Australia's participation in global research and learning networks is very important. It is essential to Australia's continued reputation and involvement in international science and engineering. At present Australia's international research capacity is limited (currently 0.31 gigabits per second) when compared to the capacity enjoyed by researchers in North America and Europe, where international capacity is at similar levels to national backbone capacity (approaching 10 gigabits per second).

Australia will not be able to participate competitively in certain areas of research without adequate international connectivity to support collaborative research. High capacity international links are necessary for Australian scientists and researchers to effectively access expensive or unique research facilities located in other countries, where there is no prospect of such specialised facilities being built in Australia (for example in high-energy physics).

Australia will need to assess whether its current international research connectivity is sufficient for its scientific and research community to effectively collaborate with their international counterparts and look at ways to increase this capacity should the current levels be deemed inadequate.

Implementation of initiatives in relation to research should be designed to reflect the following priorities:

• High capacity international research network connectivity to major international centres, equivalent to northern hemisphere publicly funded initiatives to interconnect national research backbones such as Internet2 Abilene, CANARIE CA*net and GEANT
• Internationally coherent grid architecture and applications to support international and multidisciplinary research and engineering
• New international networks to promote competitive pricing on overseas routes, particularly in the Asia-Pacific to provide competition to US networks
• Continued diplomatic efforts to address asymmetrical international pricing associated with tier 1 peering arrangements
• The development of applications to provide for advanced networks within the Australian Economy (including the health and education sectors), as well as software to provide strategic applications such as visualisation and 3-D mining data.

In addition to enabling Australia's growing involvement in international research, improved international capacity would augment the redundancy of Australia's critical cyberinfrastructure, enhance Australia's tourism and education export markets, reduce the impact of unfair international traffic pricing with the US and improve the international competitiveness of Australian digital content industries.

5.4 Health

BAG consultations with stakeholders in the health sector demonstrated that compelling content and applications already exist and that there is considerable potential demand for broadband services. There are three main drivers of broadband take-up in health: clinical applications, education and professional development, and electronic transfer and management of patient records. There are over 600 sites[6] across the nation currently delivering technology-enabled health services, although few are using broadband. 

Transformational benefits are possible in the health sector through a networked system with infrastructure capability across the full range of clinical, educational, professional development and administrative applications. One of the Government's recently announced four research priorities is promoting and maintaining good health[7], which will be enhanced by national broadband connectivity.

Commonwealth, state and territory governments are discussing the formation of a national coordinating body with responsibility for mapping and implementing a long-term strategy for connectivity in the health sector. It will be essential for any such coordinating body to have strong connections to the National Broadband Strategy Implementation Group whose proposed role will be to oversee the national strategy and infrastructure planning mechanism.

Continued investment in improved networks would help health institutions to improve service delivery, particularly in regional areas, and would enable them to deliver health services more efficiently. The brokers discussed in Section 5.1 and implementation teams could be used to support demand aggregation in health and to advance priority projects that demonstrate the benefits of connectivity.

The connectivity strategy should include the entire health sector: hospitals; general practitioners; pharmacies; allied health professionals; community and rural health care centres; home and community care services and health laboratories. The coordinating body could also assist in aggregating demand beyond health services by facilitating e-procurement and supply chain reform in health.

The formation of a health coordinating body that would devise and implement a strategic plan for connectivity in the health sector is supported. Given the complexity of the health sector full connectivity is a long-term proposition, but it is an essential step to develop a strategic implementation plan for the health sector.

Snapshot

It is possible to generate significant savings within the health sector from integrated carriage of voice and data while at the same time delivering improved health services and outcomes. The network established by the SouthWest Alliance of Rural Hospitals (SWARH) in Victoria is a good example.

SWARH built its own microwave-based network with a wireless or fibre optic local loop providing the last mile solution. Services include: internet, email, IP based videoconferencing and the replacement of nine hospital telephone systems with a single IP telephony system located at the hub of the network. The network has generated significant savings for the hospitals and other health sites connected to the network in the region (33 sites in all). Practitioners can also record patient information on a hand held device at the bedside and the record can be accessed anywhere in the network. The network costs for videoconferencing between the sites is minimal. There have also been considerable benefits for patients, including trials of remote visiting via videoconference.

SWARH has now moved from a hospitals only solution to an 'all of Health' model which includes local government. The success of this model will make the SWARH network sustainable by the agencies without additional Government supports.

Source: Broadband in Health: Drivers, Impediments and Benefits - A paper prepared by NOIE for the Broadband Advisory Group 2002.

5.5 SMEs

SMEs collectively are the largest employer in Australia and therefore growth in that sector has direct benefits to the economy through an increase in available jobs and productivity. There may be scope for industry associations to ensure that their member organisations fully appreciate the potential benefits of broadband.

One of the difficulties lies in owners/managers of SMEs not having access to the best information about the value proposition for broadband. Migrating existing services, in particular voice, from discrete narrowband links to a broadband environment, is likely to result in both telecommunications and operational cost savings of around 30 per cent.[8] At the same time as supporting existing applications, the broadband solution provides high speed access to the internet and other data services. However SMEs are often suspicious of inflated vendor marketing claims, and there is a strong need for targeted independent information about the business case for broadband to be made available via industry associations and trusted intermediaries, particularly on a sectoral or regional basis.

In addition, in many sectors of the economy productivity growth and industry e-business initiatives depend on connecting SMEs more effectively into business networks and supply chains, but the immediate payoffs from SME connectivity are harvested by the wider industry, and individual SMEs making the investment experience the returns indirectly and over a longer time-frame. There is therefore an additional public interest benefit in promoting more rapid adjustment of SMEs to the broadband e-business environment.

The graph below shows the potential economic gains from increased broadband connectivity in the SME sector. Examples of savings accrued to SMEs and improved productivity based on case studies are included below.

The graph below shows that broadband enabled SMEs earn on average almost double the revenue per employee compared with narrowband.

Source: 'Built for Business II: Beyond Basic Connectivity, The Allen Consulting Group, Sept 2002.

Snapshots

Gemenix sells retail workwear and achieved cost savings of $40 217 in 2001 through migrating to broadband. This was largely due to reduced staff time in handling telephone inquiries and in automatic distribution of purchase orders. The ongoing operating costs were $3 355 resulting in an operating benefit of $36 862. The establishment costs for e-commerce were $7 300.

Grosvenor Pirie Management provides superannuation and investment management services and achieved cost savings of $122 500 in 2001 through migrating to broadband. This was largely due to the increased use of email which saved staff time. Grosvenor Pirie also generated $30 000 in additional revenue through clients contacting the company as a result of the website. The operating benefit from e-commerce was $64 080 taking into account the ongoing e-commerce costs of $68 420 and the additional profit from increased sales. The establishment costs were $99 680.

Techbooks stocks specialised and unique books, on subject categories such as automotive, computers, engineering, aviation, electronics, business and military. In 2001 through migrating to broadband it achieved cost savings of $43 740 largely through no longer printing brochures and by banking online. Significantly, the website has generated an additional revenue stream with online sales totalling $120 000. Taking into account the ongoing e-commerce costs of $24 438 and the additional sales, the  operating benefit was $64 902. The establishment costs were $18 072.

So Design provides creative product development and design to marketing managers involved in the production of fast moving consumer goods. Cost savings from changing to broadband amounted to $72 880 in 2001 through use of the compositor for the approval and submission of work, reduction in courier costs and physical storage savings. The total ongoing e-commerce costs were $10 738 therefore the operating benefit from e-commerce was $62 142. The total establishment costs were $17 993.

Source: Advancing eCommerce Case Studies, NOIE
 

While personal computers have been available for decades, it is the transforming power of the internet and increased capabilities of software and broadband to transfer information that have allowed small business to use technology productively. This has allowed value chains to function more efficiently as firms transform their business operations from paper-based to electronic systems. More readily available eBusiness tools have allowed firms to integrate orders with their back-office processing, fulfilment and invoicing so there is seamless integration between front-office functions and back-office systems. This is all about improving business operations and proving real business value by removing unnecessary costs out of the value chain. As an SME's customer base grows, eBusiness tools typically require greater communications and computing capacity. Broadband communication can remove bottlenecks to business efficiency, boosting microeconomic growth in the SME sector's profitability and employment.

Broadband also supports SMEs' growth through international competitiveness. As more of the developed world joins the knowledge economy, the ability of the internet to eliminate the tyranny of distance becomes a double-edged sword. Our export-capable SMEs can reach customers across the nation and much of the world. However, many will also be competing with overseas businesses in the same industry sectors that are also keen to use the internet to reach the same customers. Broadband communication when empowered by relevant software becomes a powerful tool in the vendor's toolkit, as it can provide a more compelling 'look and feel' in sampling the vendor's products. This can be a video tour of an apartment to rent or a whole leisure resort; a sample tutorial on an e-learning course; a preview of a range of fashion garments; or a PC-enabled video link with a personal consultant. Broadband has raised the bar for e-Commerce, and Australia cannot afford to be left behind.

NOIE is conducting a study to identify impediments, drivers and trends in SME uptake of broadband and will use this as a key tool in its e-business strategy. This study is welcomed, as information on this sector's uptake of broadband is generally inadequate. Preliminary results point clearly to the need for ongoing monitoring and reporting - not only about the number of SMEs taking up broadband but also usage data, for example applications used and benefits achieved. This links directly with the national vision that it is essential to be a leader in the effective use of broadband, and not simply take-up. It will require a collaborative approach calling on Government-held information (for example, the ACCC and the ABS) as well as industry data collection mechanisms (for example, the SPAN BroadbandXchange).

The work that industry associations and NOIE are doing to gather data and spread awareness will become more important in 2003 as the focus moves to working with particular industry and occupational groups and their associations to maximise the benefits of broadband applications. There will be a need for ongoing public/private partnerships.

5.6 Information Economy Environment

e-Security and Critical Infrastructure Protection

The Global Advisers highlighted the relevance of improved e-security in the broadband environment, particularly in terms of consumer confidence and national security in the light of recent world events.

The Government recently announced initiatives[1] aimed at protecting Australia's critical infrastructure in response to recommendations of the Business-Government Taskforce on Critical Infrastructure Protection[2]. These include the:

• Establishment of a new communications network or 'one stop shop' through which governments will share security information with the private sector on critical infrastructure protection
• Establishment of a Critical Infrastructure Advisory Council of state and territory and business representatives to oversee the network and report to the Attorney General on critical infrastructure.  

The new network will allow the owners and operators of critical infrastructure to share information on important issues such as business continuity, consequence management, information systems attacks and vulnerabilities, e-crime and protection of key sites from a range of risks. It will involve a number of advisory groups for different business sectors.

A link should be established between the Critical Infrastructure Advisory Council advisory groups and the National Broadband Strategy Implementation Group.

Standards and protocols to promote Interoperability

Common standards and protocols are an essential component of a nationally coordinated approach to broadband. Any to any connectivity would facilitate multidisciplinary and international collaboration, particularly in e-science and engineering. Appropriate standards would also help to develop an integrated network in the health sector, where issues such as unique patient signifiers are required to address security concerns. It is also important to develop appropriate digital rights management systems that are interoperable. The National Broadband Strategy Implementation Group could have a coordinating role in the area of interoperability.

Input should be sought from industry representatives and leaders from key sectors such as media and banking to coordinate and develop standards and protocols. It will be important to monitor international initiatives in these areas. This would build on work already underway in the Australian Communications Industry Forum and the Investment and Financial Services Association.

Home Users and Small Businesses

Education and training for SMEs and home users about information security issues and strategies is necessary to create a culture of confidence in the information economy. Poor security practices of SMEs and home users can lead to vulnerabilities in the national information infrastructure, particularly through distributed denial of service attacks. In the absence of corrective action, increasing rates of broadband connectivity in this sector will increase vulnerabilities. The Government should encourage Internet Service Providers (ISPs) to inform their customers about better information security management tools and practices.

The Internet Industry Association is developing a range of initiatives on information security issues, and the Attorney-General's Department is working with the Australian Computer Emergency response Team (AusCERT) to ensure wider dissemination of information y on threats and protective measures.

[1] Williams, Daryl (Attorney-General) and Alston, Richard (Minister for Communications, Information Technology and the Arts), Protecting Australia's Critical Infrastructure Joint News Release 29 November 2002 http://www.ag.gov.au/www/attorneygeneralHome.nsf/Web+Pages/E078BAC9BA04FEBCCA256C800012C461?OpenDocument
[2] Business-Government Task Force on Critical Infrastructure Report May 2002 http://www.ag.gov.au/www/CriptHome.nsf/HeadingPagesDisplay/Meeting+Report?OpenDocument