The world is undergoing a digitalrevolution.$12 billion opportunity.Is Australia ready?Bill MorrowCEO Vodafone Hutchison Australia
The world is mobileMobiles are the new essential device.As the world reaches 100% market penetration, the developed world is already over 120%.Worldwide subscriptions Worldwide mobile penetration 8.0#8.0# 7.0$ 6.8$ 7.0#7.0# Fixed$line$$ 6.1$ 6.0# 6.8$6.0# Mobile$5.0# 5.0#4.0# 4.0#3.0# 3.0# Popula.on$2.0# 2.0# Mobiles$ 1.0$ 1.2$ 0.7$1.0# 1.0# 0.7$ 0.0#0.0# 2000# 2001# 2002# 2003# 2004# 2005# 2006# 2007# 2008# 2009# 2010# 2011# 2012# 2013# 2000# 2001# 2002# 2003# 2004# 2005# 2006# 2007# 2008# 2009# 2010# 2011# 2012# 2013# Source: ITU&UN (2012/13 are projections) Source: ITU (2012/13 are projections)
Global implications Japan Earthquake 2011: Twitter interaction 2:30pm. Before Earthquake. 2:46pm. After Earthquake. Yellow lines indicate tweets coming out of Japan. Pink lines indicate tweets coming into Japan.Source: KPCB and http://blog.twitter.com/2011/06/global-pulse.html
Australia has the chance to leadthe mobile data revolution• Mobile broadband is now the most common Australia leads the world in smartphone take-up way for consumers to access the internet. 60% 52% 51%• Australian smartphone users: 44% 45% 37% 30% 31% 29% 2011 • Average of 27 apps 30% 18% 20% 2012 • 78% access social media 15% 6% 0% Source: • 65% access video content Google Our Australia UK USA Germany Japan • 28% have bought a product via their Mobile Planet 2012 mobile phone (2012 Google) Mobile share of Australia’s internet• From 2011-2025 Mobile technologies will traffic has doubled each of the last four deliver a productivity beneﬁt of $11.8 billion years 15% 13% (2012 AMTA /Access Economics). 11% 8%• Game changing opportunities occurring: 8% 4% • Machine to Machine 4% 1% 2% • M-Commerce via NFC 0% Source: Stat 2009 2010 2011 2012 2013 • NBN Counter Global Vodafone company conﬁdential Stats
Does our current ecosystemenable us to capitalise on the$12 billion productivityopportunity?
Can we generate enoughdemand to attract innovation?Can the entire nationparticipate in the digitalrevolution?
Do we have adequate adequateinfrastructure to providenation-wide competitiveaccess?
Industry leadership intimes of changeTelco’s need to meet a ...deliver a wider range of ... build converged networksbroader range of consumer converged devices... to more places. Common coreCommunication & Common network core network Cloud & Internet Internet Cloud &Commerce & Advertising Integrated ﬁxed and wireless Access: & Access: Fixed Fixed &News & Sport wirelessInformation & EducationDuring the digital revolution, the telco industry mustanticipate consumer needs and technology change.
Vodafone is embracingchangeNetwork Worry Free Local Service• One third the dropped call • Simpliﬁed plans • Consistent service at all rates touch points - store, • Per KB Data charging• 3G+ delivering double the • My Vodafone online, call centre speed• Vodafone 4G will deliver the • Usage alerts • First-call resolution fastest 4G speeds yet • Network Guarantee • Australian call centre experienced in Australia• Adding approximately 2000 additional coverage sites
Competition is important Effective competition delivers the best results Lower prices and lower for consumers and the Australian economy. costs Greatereconomic Increaseddynamism quality Effective competition Quality Speed InnovationCost to the customer Innovation & More choice The problems of market dominance continue to productivity hold Australia back.
Australia lacks competitionLack of competition has resulted in the Proﬁt concentration undermines investmenthighest ﬁxed line prices in the OECD. and consumer choice.Medium residential ﬁxed-line user Proﬁt share70 65.08 100 15% Industry 57.91 Telstra 51.93 41%53 75 41.63 35.40 35.77 37.00 37.4835 50 85% 59%18 25 0 0 Germany USA France OCED av. UK NZ JapanAustralia Fixed MobileSource: OECD Communications Outlook 2011. Source: VHA estimates based on industry 2012 ﬁnancial reports.
Protection fromcompetition Example: WA’s ‘RegionalGovernment subsidies have Mobiles Communications’distorted competition ProjectSince 1998 the incumbent has received: • State Govt. subsidy will increase Telstra’s coverage by 525,000km2• Over $450 million in direct taxpayer • No ‘open access’ obligation so many subsidies for infrastructure build with consumers cannot access the network. ineffective open access measures.• Over $880 million in industry subsidies via Universal Service Obligation (USO). Other Future funding should focus of players are unable to receive this funding. promoting coverage and choice.
Build economics makeduplicate infrastructureConsumers want both coverage and choice. But the economics of duplicating infrastructure isgetting increasingly difficult. In many areas of Australia it does not make economic sense to buildmultiple telecommunications networks. Impediments to duplicating mobile coverage in regional AustraliaBuild economics of incumbent Build economics of new entrantBuild base station where already have ﬁxed line Build base station in a new market, low branddominance (+Govt funding) recognitionUse own backhaul at (depreciated) incremental Pay high prices for incumbent backhaulcost100% market share and high prices = monopoly Limited market share, slow payback =proﬁts uneconomic rate of returnVodafone and Optus have established a joint venture to improve the economics of regional coverageexpansion.
Call to action: An ongoingpro-competition policy1. Telco industry reviewStrategic review of the state-of-competition as we move to a NBN world.Examine how to facilitate more infrastructure collaboration to promote retail competition andconsumer choice in regional Australia.2. Regional Backhaul PricingThe ACCC should reconsider their backhaul determination as a matter of urgency .3. Utilise NBN for Backhaul:As a quick win for regional Australia, the NBN should also provide backhaul services. This will notrequire a network redesign.4. Pro competition government fundingIf taxpayer funds are going to be made available, develop policies that promote rather than hinderretail competition in regional Australia.
ConclusionThe new paradigm The ongoing challenges• The digital revolution is transforming • The industry must upgrade its ﬁxed and mobile everything. network, modernise its systems and improve customer service.• The world is going mobile (but ﬁxed has an important role). • There is more to be done to overcome the serious structural ﬂaws in the Australian• Convergence is blurring the ﬁxed/wireless market. distinction. • Industry and governments need to work• The telco industry must change. together to deliver coverage, competition and choice for all Australians.