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Networking Australia's Future - Chapter 2
Overview
Technology capabilities and costs are changing rapidly. Optical fibre costs continue to fall, new wireless services are being developed, computer memories are expanding, and digital processing techniques continue to reduce the data requirements of many services. It is difficult to predict the nature of the technology environment we will find ourselves in beyond the next few years.
In the Group's view, however, there is a clear path towards development of our communications industry - both infrastructure and services - starting with the existing telecommunications infrastructure, progressing to a digital services platform, and finally moving to interactive broadband networks.
Existing standard telephone connections to homes, with a computer and modem, can support a range of interactive information and communications services, including
e-mail, classified ads, theatre and airline reservations, bookings and payments.
Cooperation between content creators, service providers, network operators and computer companies could rapidly and cheaply establish a significant on-line services industry, using existing telephone lines, in preparation for the migration of video and interactive multimedia services to the broadband network.
Within five years all telephone exchanges in Australia will have been upgraded to support enhanced digital services such as ISDN. ISDN uses existing telephone lines and is relatively cheap to introduce, but offers a higher data rate than standard telephone lines. Services can be transmitted more rapidly and limited video services are possible. Businesses can transfer files and graphics, hold video conferences, work together from separate offices on drawings and designs, and use voice, fax and data services simultaneously.
In around five years' time, with a developed digital communications infrastructure, an established interactive services industry, and five further years of technological progress as a guide, we will be well placed to implement an interactive broadband network and realise its potential.
Communications evolution
The interim report identified three technology developments contributing to the emerging potential of communications and information systems: advances in computer processing capacity; the rapid development of digital video compression capabilities; and the large bandwidth of optical fibre.
But just how the technologies will evolve is still far from clear. There are many possible paths forward, many possibilities as to what sort of infrastructure we will have in the future, and many factors to consider in selecting technologies.
We cannot look at the technical issues in isolation. Consumers are a critical element in the evolutionary process. They will determine which services thrive, which services enhance our lifestyles and afford us greater opportunities. We might have a fair idea of what the technologies will look like, but it is the services they support and the content they carry that will ultimately determine the technologies' futures.
The penetration and affordability of consumer equipment, a population with the necessary skills and training to use the services, a consumer base willing to adopt new means of interaction, and prices competitive with those of existing or alternative ways of doing things will also be influential in a technology's success.
There is a great demand for 'information' services. We all spend much of our lives producing or consuming information - through conversation or watching television or reading a newspaper. But exchanging information is really about communicating, and this is the essence of the changes ahead.
At the heart of the transition towards the communication age will be replacement of the existing broadcasting model of distributive (one-way) information services by a system in which consumers create and have access to information, and exercise choice and control in their communications.
In the communications society, people will be able to send or receive large amounts of information - video, audio, text, graphics or data - anywhere, any time. The next decade will see some quite remarkable applications of these capabilities.
We can expect future networks to:
- support broadband, or high-data-rate services, such as high-quality video;
- allow people to create and distribute their own material;
- support, and interconnect, both fixed and mobile systems through a combination of cable, satellite and local wireless services;
- enable multiple parties to be connected to a broadband or narrowband service, rather than the one-to-one nature of the existing telephone service;
- support interactive and switched (addressable) two-way transmission, as the telephone network does now;
- be global networks.
We have perhaps become accustomed to technological progress and can accept such networks as quite plausible, yet they assume developments that are still many years away. Technologies are still being developed, like global satellite systems, mobile broadband services, international standards for video transmission and broadband switching services - but we need to plan now for their future availability. Among a host of other planning requirements, we need global standards, interconnection between the various technologies, and platforms that support multiple services.
The starting point
Almost every house in Australia now has a telephone connection. We receive radio and television services, and in some places satellite services. A rapidly increasing part of our population has mobile phones, around 30 per cent of homes have personal computers, and a vast majority have video cassette recorders. Most metropolitan centres also have access to ISDN, which supports enhanced digital services over telephone lines.
Australia has one of the world's highest per capita levels of optic fibre, with some 1.5 million kilometres installed, reaching to within 700 metres of about 50 per cent of homes. Against this, there is a very low household use of modems, which enable computers to send and receive data over telephone lines, and the on-line services industry in Australia is very small.
Digital satellite and terrestrial microwave pay television transmissions are expected to commence soon, and the first cable pay television services will be available in limited areas of Sydney, Melbourne and south-east Queensland.
Snappy photos
The days of photo libraries full of bulging folders of transparencies are definitely numbered. A new software package from Telstra called the Visual Service Broker is set to turn access to images into a computer-oriented communication service. The Visual Services Broker will allow users to browse through any number of quality multimedia databases, selecting images to a scrapbook which can then be requested for electronic transfer as digitised photo-quality images. These can then be incorporated into popular desktop publishing packages, running in Macintosh or Windows environments (with appropriate negotiation of usage fees), and then printed. The new software is also capable of vending other media electronically, such as text, video and sound.
The system is currently being trialed with the State Library of New South Wales, which has an extensive repository of digital images. Plans are also under way for an advertising and printed catalogue distributor, Shomega, to utilise the new software for the benefit of its customers. Initially this will involve an on-line catalogue publishing service for major clients. Shomega will establish digitised product image libraries that clients will be able to access, downloading images for use in catalogue production, then electronically returning the desktop published catalogue to Shomega for production and distribution. The process will reduce the possibility of errors in production, say where incorrect images are used, resulting in the need to reprint catalogues. But the major benefit will be the speed and ease of access to materials for production of publications.These examples are forerunners of new applications in media, travel, government, advertising and general publishing, which have the potential to earn export income either from the provision of information content services or exports of technology as a turn-key system.
The existing network: a wealth of interactive services
Many submitters have told us that the existing telecommunications network in Australia is already capable of supporting a large range of interactive services. With a computer and modem and a standard telephone connection the general public can gain access to a large number of information and communications services, including creating and sending computer files, transaction and booking services, and searching databases within the local community, nationally, and even internationally.
Many such services are already available through the Internet and other on-line networks. However, the on-line or dial-up services industry is still relatively undeveloped in Australia. Few local organisations make services available electronically and, with only a few per cent of houses having a modem, the immediate potential market is fairly limited. However, the number of home computers in Australia suggests significant potential for market growth.
In Chapter 1 we said that interactivity will become essential to reaping the benefits of new communications services. Broadband cable networks currently being developed will not offer full interactivity for several years. For this reason, early development of a local on-line services industry based on existing telecommunications networks should be a priority in the communications and information sector. We believe that such an industry can be established at relatively little cost.
Many services could be offered over the existing network, and the scope for creativity by consumers and service providers will ensure a diverse range of services in the near future. On-line interactive services will have a significant commercial place. For instance, retail price lists will enable consumers, using intelligent 'searching agents', to quickly locate the cheapest products, and restaurant choices will be easier with on-line menus.
Almost wherever search and information costs exist, interactive services are capable of quickly and cheaply improving outcomes. We already know a narrowband platform will support:
. e-mail . banking and transaction services . classified advertisements . Yellow Pages . restaurant and theatre bookings . transport timetables and reservations . government services . worldwide discussion groups . retail services . fast food orders
The interim report discussed the 'critical mass' necessary for a self-sustaining industry. Many of the costs of establishing an industry are borne by the early entrants. A coordinated approach by the major players is needed to get things moving. Once the industry is established, the low marginal cost of adding services should rapidly attract new service providers.
The growth of Internet use in Australia suggests a strong demand for on-line services. We now need to work from this demand to create an on-line services industry. Such an industry will provide
- clear economic benefits through the adoption of electronic services
- significant employment opportunities in the service provider sector;
- training and skills development opportunities for employees in the multimedia content industry.
The next step: enhanced digital services
Once the elements of an interactive services industry are in place and a consumer base established, competition between service providers is likely to bring about rapid service innovation and quality improvements.
One impediment to the quality of some services will be the characteristics of the existing telephone network. Although many services can be transmitted over existing lines, the data rate constraints of these lines limit the speed of transmission. There is, however, already a range of enhanced digital services available in most cities.
The ISDN platform still uses existing telephone lines, but it supports a higher data rate than the standard telephone connection. This means that it can be implemented quite cheaply, by installing processing equipment at customer premises. The higher data rate is also sufficient for slow-scan or low-resolution video such as interactive home shopping services, video games between remote players, and videophones.
Within three years Telstra expects all metropolitan telephone exchanges to have been upgraded to support narrowband digital services, and within five years all rural exchanges will be capable of supporting these services. The developing Optus access and switching network is fully digital.
The flexibility and benefits of digital services are beginning to be more widely recognised by businesses. Services such as file transfer and video conferencing allow for efficient communication with regional offices and major clients. Voice, fax and data services can be used simultaneously.
The Group believes that the capacity to support digital services must be translated into widespread availability and adoption of these services. This could be achieved by carriers ensuring that all exchanges offer this facility as soon as practicable.
Encouraging an on-line services industry
Rather than just offering marginal operating efficiency and productivity gains to business and industry, exploitation of new communication and information services will be essential to future business competitiveness and survival.
In the last decade computers have become indispensable tools for information management; in the next decade linking those computers into global networks will be just as critical.
The current communications environment in Australia - universal coverage of the telecommunications network, the significant and growing use of personal computers, and Australia's educated population, with a demonstrated willingness to adopt new technologies and services - presents very favourable circumstances for the immediate development of an on-line services industry.
To develop this industry content creators, service providers, network operators, equipment manufacturers and software companies will need to cooperate. We believe that forming an on-line services industry is an essential step towards developing an interactive broadband services industry. It will also provide new communication and content creation and distribution opportunities to the wider community.
As ISDN services become widely accessible throughout Australia in the coming years, it will be important to move from standard telephone connections towards ISDN's higher data capacity to increase the range and quality of available services. The Group believes that current ISDN pricing does not encourage widespread adoption of these services and that availability of flexible tariffing options would stimulate demand for enhanced digital services, as has happened in the mobile and long-distance sector s.
Ultimately, the migration towards interactive broadband services over the existing network will be constrained by the data capacity of the copper wire pairs used in standard telephone connections. These copper pairs can support the higher data rates of ISDN and additional equipment at each end of the line may enable them to carry some video services through such techniques as ADSL. But the existing network is unlikely to be able to support two-way broadband services at least until these copper pairs are replaced by coaxial copper or fibre-optic cable.
Information at your finger tips
Imagine having access to much of the information contained in the National Library of Australia, and over 2000 libraries in Australia and New Zealand, from a computer in your home or office.
That possibility is about to become a reality as the National Library works on developing a major information service. Called the National Document and Information Service, by late 1996 the collections of all the participating libraries will be both more accessible and more widely used by all sections of the community - rural or remote communities, students, researchers, teachers, lawyers, journalists, consultants and others.
Powerful access tools will make for quick, easy and high quality searches for information. Initially the service will not have a high broadband content. However, the system's underlying architecture has excellent capabilities for broadband service delivery. The architecture is the same as that under development for delivery of digital video services to households. The service will be available through the Internet, which will mean access will be possible from personal computers in offices, places of study and homes. As a result, National Document Information Service is expected to become a major information resource for Australians and New Zealanders. The initial capital cost (estimated at $10 million) will be met in part by government loans, ultimately paid for on a cost recovery basis.
The service will go along way towards overcoming the tyranny of distance - for all users across the region, the library will end up being as far away as the nearest phone.
Developing an interactive Broadband Services Industry
The Group expects a vibrant interactive services industry to develop in Australia in the next five or so years. Within this time, ISDN should be widely available, widely used, and possibly considered a 'basic' communications service. This industry can be established at minimal cost, and will deliver significant economic benefits. A community trained in and comfortable with the use of interactive services will demand new and innovative services.
The current rate of technological progress suggests that within five years, the state of development and costs of various technologies will be very different. In some areas, progress seems to be fairly steady - computing, for example, has simple 'rules' for advances in memory costs and processing speed. In other areas progress has been more rapid than expected, and in yet others it has been slower.
In these circumstances, and given the relatively undeveloped state of the interactive content creation industry, it is difficult to make firm predictions about the best technology for a future broadband services infrastructure.
The technologies
In the interim report we surveyed the technologies that might one day deliver broadband services. We said that optical fibre is capable of supporting far higher data rates than other technologies and is especially superior in the delivery of high bandwidth two-way services. We also said that it was currently more expensive than cable alternatives such as hybrid fibre-coaxial cable (that is, optical fibre cable from the local exchange to a central point in each local community and coaxial copper cable for the connection to each residence).
We noted too that wireless services such as cellular microwave might one day support high-bandwidth personal services such as video-on-demand, and might even support two-way broadband services.
The cable networks currently being implemented, based on hybrid optical fibre-coaxial cable, will provide the only broadband links to residences over the next few years that are likely to become capable of interactivity, and it is quite possible that they will become the two-way broadband networks of the future.
We therefore believe that coverage of the cable networks should be extended over time, such that the range of services delivered by these networks is made more widely available and a substantial base for a future interactive broadband network is in place in preparation for the broadband communications era.
We emphasise, however, that at some stage in the future a more economic means of delivering interactive broadband services might emerge from a rapidly advancing technological environment. Decisions on technologies are most appropriately made by network operators on the basis of their commercial judgments.
But network operators are just one of many industry players. Industry planning - by service providers, equipment manufacturers, content creators and consumers - will be facilitated by a greater awareness of likely infrastructure developments.
The Expert Group recommends that telecommunications carriers and broadband network operators be required to inform government annually of their strategies for upgrading their networks, including the expected level of digitisation of existing network services, and the expected extent of broadband network coverage. This requirement should be reviewed by the year 2000.
Digital satellite transmissions have begun in the United States and will soon be used in Australia for the delivery of pay television. Increasing satellite transponder powers and more efficient transmissions mean that the size of the dishes required to receive the signals is rapidly decreasing.
In the coming years hundreds of new satellites will be launched worldwide, many with footprints covering much of the Asia-Pacific region. Constellations of low-earth-orbit satellites could also offer a variety of global mobile satellite communications and information services.
Australis and other microwave licensees will soon commence analogue microwave transmissions in capital cities and major regional centres. Digital terrestrial television systems expected to be introduced towards the end of this decade will expand the number of channels available from the current six to about twenty.
Narrowband digital mobile services are already available, and in the next few years a range of enhancements and mobile data services will be offered as the mobile network coverage is extended, as it is integrated into the public switched telephone network, and as the intelligence of the network is exploited.
However, for a range of reasons it may not be possible to provide enhanced communications services to all Australians - cable services cannot be economically provided to low population density areas; satellite footprints might not cover all of Australia; and the coverage of terrestrial transmissions such as microwave services is restricted by the local terrain.
Of the range of wireless services, only cellular microwave appears likely to support two-way or fully interactive broadband services in the foreseeable future. Cellular microwave systems use low-powered transmitters located perhaps in each local community. They operate at a much higher frequency (around 30 gigahertz) than conventional microwave. The large amount of spectrum available in this frequency range makes it plausible that each household in a cell could have a dedicated channel over which, say, video-on-demand services could be transmitted. Each household might also be able to transmit its own video or data services back to the local receiver/transmitter, and through it link into the public switched telephone network for two-way broadband services.
Although optical fibre remains the best way of supporting high-bandwidth two-way services, the cost of opto-electronic converters currently constrains the use of optical fibre to deliver services to the home. It is not yet evident that home users need the data capacities made possible by optical fibre.
It might be argued, however, that the history of communications suggests that available bandwidth, memory and processing power are invariably fully utilised. We expect the next five years to provide clearer evidence of the likely level of community demand for information and communications services.
Armed with this knowledge, and a clearer picture of trends in the costs and capabilities of emerging technologies, we will then be well placed to determine an appropriate next step in the development of a broadband communications infrastructure in Australia.
Current developments in cable
During the next few years distributive broadband cable networks will be installed in major metropolitan areas of Australia. These networks will be based on hybrid fibre-coax technology.
The network being constructed by Telstra will initially be separate and operate independently of its existing telephone network; it is likely that a new network such as that proposed by Optus would have one cable per household carrying both subscription television services and telephone traffic. Diagrams 1 and 2 illustrate possible cable network architectures.
The digital technology for these systems is still relatively undeveloped. They are expected to begin with analogue video services, limiting the number of channels to around sixty.
This system operates in much the same way as existing broadcast services: all the channels are transmitted down every cable, but conditional access systems determine who can switch into which channel. The system is relatively simple because services do not need to be 'switched' at the local exchange to be sent to each customer.
The transition to digital transmission will increase the number of channels available. The timing of the transition will depend on demand for the services, and future technology developments affecting the cost of digital video servers and consumer equipment.
Although 60 channels may sound sufficient, hundreds of channels could be used to offer a 'near-video-on-demand' system. Latest release movies will be shown on several channels at staggered starting times, so that no matter when you want to watch the movie you will only have to wait a short time for it to start. A two-hour movie starting at 15-minute intervals would use up eight channels of the service. In a multi-channel environment many 'niche' services might also be available.
The next significant step will be the transition to digital interactive or video-on-demand services. The hundreds of channels effectively become just one - any program you want to watch, any time - with the 'video controls' of pause, fast forward and rewind.
There will be limitations, of course. Only those programs digitised and stored in video servers connected to the network will be available. And currently the cost and time involved in converting old program material to digital is considerable. However high-quality real-time compression is becoming available and its cost is expected to fall considerably over time. Although decreasing rapidly, the cost of memory space is also likely to affect what is accessible.
The network architecture of such a system is complex. It is no longer a broadcast system. Each time a program is ordered, the video server will locate the program in its memory banks, and send it through the switched network of exchanges to the household requesting it. If there are few video servers and programs need to be transmitted between cities, heavy demands will be placed on the communications network. One movie transmitted at normal speed is likely to require the same capacity as about 100 telephone calls.
The costs of digital video servers, of broadband switching and of transmission will have to fall substantially if a video-on-demand service is to be widely available within the next decade. The cost of computer memory and transmission is falling; broadband switches are still being developed. Substantial restructuring of tariffs will also be needed if a video-on-demand service is to compete with video rentals.
Once an interactive digital network is in place it will be possible to combine the separate broadband and telephone services of the Telstra network on a single cable. Bandwidth or data rate limitations of copper wire pairs used for telephone services will be overcome. Most exchanges in the telephone network will by then have been upgraded to allow the telephone network to support enhanced digital communications services, but the replacement of copper pairs with broadband cables will enable much higher data rates to be supported.
The final step in developing an interactive broadband network, the capacity to send high speed data both from and to each 'telephone' connection, requires cable technology that can support high-bandwidth two-way services. Optical fibre offers this capability, but the coaxial cable technology currently being used in the broadband networks has limited return path capability.
The evolution of broadband switching will herald the introduction of interactive business, government, health and education services and provide the means for substantial benefits to be realised by our nation.
Costing new communications networks
A recent study by the Communications Futures Project in the Bureau of Transport and Communications Economics estimated the cost of providing communications links to homes by a range of delivery technologies. The study assumes a 10 to 15 year time frame for the roll-out of each delivery platform. The estimated costs for each technology are based on universal take-up of the services where the technology is available. The study assumed that electronic and opto-electronic component costs will decrease substantially over time. Other costs, such as cable laying, may not fall significantly.The average cost per home in inner urban areas of each delivery platform, excluding program costs, for distributive video services is estimated to be:
- $1260 for a hybrid fibre-coaxial cable service
- $1500 for an ADSL service
- $1000 for a satellite service
- $500 for a microwave (MDS) service.
The study also found that providing an analogue distributive service to every home in Australia by hybrid fibre-coax would cost around $25 billion:
- this could be upgraded to a digital interactive service for an additional $5.4 billion, and further upgraded to a limited communicative service for an additional $11 billion
- thus the total cost of a limited communicative hybrid fibre-coax service by 2005 would be over $40 billion. Almost 60 per cent of this amount is for rural and remote areas, which represent about 30 per cent of households.
- a distributive ADSL service could be provided to one million outer urban households by 1999 for about $1.7 billion. This assumes that ADSL units are produced in large volumes, with consequent rapid decreases in costs. While the cost of a fibre-coax network is directly related to household density, ADSL costs are largely independent of market area characteristics. No additional cabling is required; most of the cost is in consumer equipment. ADSL requires digital set-top units, whereas a hybrid fibre-coax system can initially use cheaper analogue units.
- an estimated 85 per cent of households could receive digital satellite services by 1997 for a cost of $7.4 billion. Most of this cost is in satellite dishes and set-top units. Up to 15 per cent of the population may not receive useable satellite signals.
- about 4 million households (up to 80 per cent of urban and provincial areas and 20 per cent of rural areas) could be provided with an MDS service for a cost of around $2.1 billion. MDS is likely to be economic only in population centres of over 5000. Within these centres, coverage will be restricted to line-of-sight transmission.
Note The findings and qualifications of the estimates are detailed in the Bureau's publication Costing New Residential Communications Networks - work in progress paper No. 5, BTCE, Canberra, September 1994.
Making the big state smaller
Australia's largest State, Western Australia, covers one-third of the continent and, not surprisingly, communications have always played a major role in its development. Now ready access to talk-back television by satellite is reducing the distance between its far-flung communities, if not physically then in helping them to interact more closely.
WESTLINK is a Western Australian Government network that enables many agencies to deliver services to rural and remote communities. The eventual aim is to link all the towns in the State. Currently, satellite receivers have been placed in 80 towns, with the next 20 in planning. Access is provided through 'host institutions' such as schools, hospitals, TAFEs, telecentres and business enterprise centres. However, access is not restricted to those organisations. Although the main use is for educational and training programs by tertiary institutions and TAFEs, the network is available to all levels of government, the private sector and community groups. The health community is another major user, and because WESTLINK uses the same technology as the ABC and commercial television, 3000 isolated communities can also access it.
Testing of the service left no doubt that it would be a success - when the pilot project concluded, there was widespread concern that the service was being withdrawn. In the event, the Western Australian Government continues to subsidise WESTLINK's operations. The reasons for its success are the involvement of end users, focus on services rather than technology, use of a commonly available infrastructure, and the 'soft' financial entry for program originators.
More than anything else, however, the success is due to the system's ability to deliver services to remote areas cost effectively, which also contributes to a reduction of the drain of people from the country to the city. The main drawbacks so far have been the very high cost of satellite time and the possible proliferation of formats when compressed digital video services become available.