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					              COMMONWEALTH OF AUSTRALIA


   Official Committee Hansard

        HOUSE OF
    REPRESENTATIVES
STANDING COMMITTEE ON INFRASTRUCTURE AND
            COMMUNICATIONS




   Role and potential of the National Broadband Network



               FRIDAY, 29 APRIL 2011


                              SYDNEY




            BY AUTHORITY OF THE HOUSE OF REPRESENTATIVES
                         INTERNET

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                               HOUSE OF REPRESENTATIVES
               STANDING COMMITTEE ON INFRASTRUCTURE AND COMMUNICATIONS
                                   Friday, 29 April 2011
Members in attendance: Ms Bird, Mr Fletcher, Mr Stephen Jones, Mrs Prentice and Mr Symon.

Terms of reference for the inquiry:

  To inquire into and report on:
The capacity of the National Broadband Network to contribute to:
a) the delivery of government services and programs;
b) achieving health outcomes;
c) improving the educational resources and training available for teachers and students;
d) the management of Australia's built and natural resources and environmental sustainability;
e) impacting regional economic growth and employment opportunities;
f) impacting business efficiencies and revenues, particularly for small and medium business, and Australia's export market;
g) interaction with research and development and related innovation investments;
h) facilitating community and social benefits; and
i) the optimal capacity and technological requirements of a network to deliver these outcomes.
                                                                             WITNESSES

BALLANTYNE, Mr Gary, Account Director NBN, Huawei............................................................................. 10
ECONOMOU, Dr Dean, Technology Strategist, National ICT Australia ........................................................ 52
JAKUBOWSKI, Ms Elizabeth (Liz), Director, Government Relations, National ICT Australia .................. 52
KRISHNAPILLAI, Mr Maha, Director of Government and Corporate Affairs, Optus ................................ 21
MARGELIS, Dr George, General Manager Australia, Intel-GE Care Innovations ....................................... 44
MITCHELL, Mr Jeremy, Director of Corporate and Public Affairs, Huawei ................................................ 10
PERCIVAL, Dr Terence Michael Paul, Director, Broadband and the Digital Economy, National ICT
  Australia ............................................................................................................................................................. 52
QUIGLEY, Mr Mike, Chief Executive Officer, NBN Co. .................................................................................... 1
SINCLAIR, Ms Rosemary Anne, Managing Director, Australian Telecommunications Users Group ......... 36
STANTON, Mr John Leslie, Chief Executive Officer, Communications Alliance .......................................... 30
WILLIAMS, Dr Tim, Consultant to Huawei ...................................................................................................... 10
Friday, 29 April 2011                        House of Representatives                                         Page 1



QUIGLEY, Mr Mike, Chief Executive Officer, NBN Co.


Committee met at 09:00
    CHAIR (Ms S Bird): I declare open this public hearing of the House Standing Committee on Infrastructure
and Communications in Sydney. The inquiry was referred by Minister Albanese on 16 November last year. To
date we have received around 227 submissions, of which more have been from New South Wales organisations—
than from any other state.
    This inquiry has a different focus from NBN inquiries that have occurred in the past, that are underway
presently or that will commence shortly. Whilst those inquiries have focused primarily on technical matters either
to do with the design of the NBN or the corporate plan and governance of NBN Co., this inquiry is focused on
how the NBN will be utilised across Australia.
    As is evidenced from the inquiry's terms of reference, the committee has a broad range of areas to investigate,
including the capacity of the NBN to contribute to health, education, business efficiencies and regional
development. While the inquiry is less technically focused than others, (i) in the terms of reference requires the
committee to consider the optimal capacity and technological requirements for the NBN to deliver the benefits in
the other areas of focus. Before asking witnesses to introduce themselves, I will remind members of the media
who may be present—and I notice there seems to be a good deal of interest today—or listening on the web of the
need to fairly and accurately report the proceedings of the committee.
    The committee does not require you to give evidence under oath. However, I should advise you the hearing is a
legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses.
We do not have a written submission from you, but I understand you are here to answer questions of interest to
the committee and we appreciate that opportunity.
    As you would be aware, we have been to most states now—we are in Western Australia next week—talking to
communities, both geographic communities and communities within industry sectors, if you like, health,
education and so forth, about the potential of the NBN as it rolls out for new models and levels of service
delivery, new business programs and so forth. In particular, I think there has been a lot of interest in communities
preparing themselves, particularly across organisations such as business chambers, regional development bodies,
health services, divisions of GPs and so forth, for how they can best utilise the rollout when it comes through their
area.
    One of the things that has been raised with us is perhaps that those communications and preparations were not
optimal; that lessons can be learned from that to do it better as we go around different regions. Some of the debate
amongst organisations has been about who should be responsible for that, whether it is the infrastructure provider,
the government or retail service providers. Where would that sit comfortably? Could you perhaps bring us up to
date on NBN Co.'s view of that part of its function and any other developments that may have occurred since the
trial started rolling out?
    Mr Quigley: You are absolutely correct. As we have rolled out the network—and we are starting the pre-
release in Tasmania—we have certainly been learning lessons along the way, one of which is how to most
effectively interface with the local community. We have engaged in quite a bit of activity in terms of letter drops
and local school hall talks. We have done that in the first release sites. We did that in the pre-release sites in
Tasmania. There is no doubt there is some confusion, which we are trying hard to dispel. There is even the most
basic confusion as to the fact that we are a wholesale company. In other words, we do not provide the service, be
it telephony service or internet service. We provide the underlying infrastructure. Surprising as it may seem, there
are still a lot of people in the community who assume we are going to be the replacement for the retail service
provider. It takes a fair bit of effort to overcome that misconception to start with and to then point people towards
a retail service provider who is going to provide them with a service.
    We have certainly learnt that we need to increase our efforts in that communication, which we are doing. Also,
one of the issues we struggle with is that people often want to know more information than we are able to provide
at this point in time. For example, people would like to have the map for the next 10 years of where we will be
rolling out—
    CHAIR: We have certainly heard that too.
    Mr Quigley: We are simply not at a position where we can provide that information. It is not known in the
company at this point in time. We can only plan for a certain period ahead and then we release those plans. I think
there is also a misconception to be overcome that, because this is a very large infrastructure project, if people


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know a bridge is going to be built, they know foundations have to be laid, structure put up and concrete poured,
and they know it is going to take quite some years, with a project such as this you announce the site, and people
have an anticipation that a service is going to be there within a day or two. I would emphasise to the committee
that it is a very large infrastructure project. There is a lot of planning, engineering, design and product issues, a lot
of regulatory issues to be resolved and, of course, there is the very large deal we are negotiating with the
incumbent, Telstra. We believe that is in the best interests of the project overall but it takes some time.
   CHAIR: We have heard evidence presented of some fact sheets and so forth that the company has developed
around some of the utilisation. We heard from a chemist from Tasmania who is looking at the new options
available to him in his business. Can you give us an update on that side of the work program and what you have in
mind there?
   Mr Quigley: We are continuing to increase the number of people inside the company who are focused on
those types of applications. One could argue that an infrastructure company such as ourselves, a wholesale
company, should not be involved in such things because they are related to applications. Nevertheless, I think
there is an expectation from the community and an expectation from our shareholder that we involve ourselves
with a certain level of information dissemination around applications. We are doing that. We are gearing up to
have more people working on that side of things and to facilitate the transfer of information to application
developers, but keeping in mind that we have to respect the relationship that we have with retail service providers
and we do not have a relationship with end users.
   CHAIR: What about more broadly in terms of the government's role on the promotional side and on the
educational side? How does that work between you and various government departments? For example, if we
look at health, we are dealing with a different department and different applications from, say, the education
applications. Could you give us some insight into that?
   Mr Quigley: We are trying to interface and assist various departments as much as we possibly can. But I
would also say that the company is growing. It is trying to do many things and it is very difficult to keep up with
the demand for information from the company. We are doing our very best to work very closely with various
government departments both at the state and federal levels. We get approaches from many people in the local
councils who would like information and would really like us to come and roll out into their areas very soon. We
try to keep up with that, but we are certainly trying to make sure that people have enough information so that they
can plan application development and know where we are going. We are seeing that particularly in education and
health.
   CHAIR: It is interesting that you raise local government. We had a panel of three councils at yesterday's
hearing in Wollongong—Kiama, which is one of the test sites, and Shellharbour and Wollongong as well. I would
have to say they were very positive about their experience with NBN Co., but their interest is obviously in having
engagement so they can prepare around their planning instruments and their processes for future roll out while
also managing expectations. That time frame issue is a challenge for them. As a company, rather than having to
have individual relationships with every council around the country as they require it, are you looking at perhaps
having some sort of standard model package or something that is available to councils? What is happening there?
   Mr Quigley: Yes, we are trying to develop that, both in written and electronic form. We are trying to make
our website increasingly efficient for people to gain information that they need, and we will be putting more and
more effort into that as the months go by. In the early days of the company we obviously had to spend a lot of
time on the basic engineering. There was not much point putting a lot of information if you have not done the
basic engineering. You cannot answer most of the questions that people ask. But the company is now at the stage
where a lot of the engineering, development and planning work has been done, so we will be moving into the next
phase, which is really more on execution. The company will go through a transition over the next months as it
moves out of the planning and design phase into the execution phase. That will involve putting more work
obviously into providing information to the community.
   CHAIR: How do you describe for yourself the balance between that wholesale role as an infrastructure
provider and the application and services promotion? One of the things we heard, for example, was that to some
extent people will not respond to contact from the company when they are rolling through an area because if they
do not understand what the infrastructure is going to mean to them they do not always engage. In delivering the
infrastructure to some extent there is a role for promoting it. As a company how do you see the line between that
appropriate promotion for you to do and what should be done by other players?
   Mr Quigley: It is a fine balance in the sense that, as I said, we have to be very careful. There is some
sensitivity from retail service providers and other wholesale service providers that we do not overstep the line.
You have probably seen debates in the press about us expanding outside our remit. We try to be very careful that

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we do not do that. There is a balance between supplying information that people are demanding and yet not taking
the place of a retail service provider. We see our job as enabling our potential customers, retail service providers,
to the greatest extent possible and trying to help them to promote applications to end users. It is a fine balance. I
think it would be a mistake for us to try to intercede on the part of retail service providers. Our job is to get
information on our website so that people can look at it and also to try to enable application development by retail
service providers and also make it easy for them to actually manage their services on our network. That is a very
important part, by the way, of the development. It is not just about the network itself, the electronic equipment. It
is also about the systems you can provision and activate. They are quite complex systems. It is very important we
get good, simple, straightforward interfaces of those systems with the systems of our potential customers. That is
a very big job.
   CHAIR: In line with that, we had some evidence too from Queensland from smaller providers about their—I
suppose it would be fair to say—concern with engaging with the company given the number of large providers
there are that might take up love and attention. Do you have a particular program or approach to ensure that those
smaller providers are able to engage?
   Mr Quigley: Yes, we have tried to do that. Of course, we are not going to satisfy everybody's need all at once.
There is also, to some extent, a misconception that people expect us to provide information which simply is not
available at this point in time. We have tried to think very carefully about the smaller players and how you would
ensure that the network will be usable for them. But we also thought early on that quite a number of the smaller
players would want to utilise intermediaries, people who are wholesalers in their own right. We had discussions
with some of the people who would be interested in undertaking that type of activity. Obviously we are trying to
make sure that they can do what they need to do as well so that the various levels in the value chain are all looked
after. But it is a challenge. No pun intended, the company does have a finite bandwidth at the moment. We are
just simply trying to prioritise the things we do. As our workforce grows we will be able to satisfy an increasing
number of these requests.
   Mrs PRENTICE: What do you personally believe is the main driver for demands for increased bandwidth
and speed?
   Mr Quigley: There are a lot of drivers, but overwhelmingly it is video. The world is simply becoming more
video oriented. I guess each of us is using that. I have a daughter who is living in the US. We Skype with her
every week at least. Interestingly, she asked me just the other day, when I was on a wireless connection, 'Why is
Skype so bad today?' I explained to her what was going on. We are using an increasing amount of video and it is
not just about entertainment. It is about videoconferencing. It is about medical imaging. It is about education and
remote education. We are seeing the level of resolution of screens increasing. The screen sizes are going up.
These are multiplier effects, which all have an impact on the bandwidth that is required. Unlike a normal voice
call where you can transmit high-fidelity voice on relatively low bandwidths, you simply cannot do that with
video. It is directly proportional to screen sizes and resolution. They are simply increasing regularly.
   We are seeing no slowing down at all of bandwidth requirements. In fact, the latest ABS data is showing that
they are just continuing to grow. Interestingly, while on the latest ABS data there are more mobile subscribers in
Australia, the speeds of data downloads on the fixed line network are growing at a much greater rate than on the
mobile network.
   Mrs PRENTICE: On that issue, a previous presenter expressed concern that the fibre, the pipes, into
Australia are not big enough to cope with what we are about to do and was very concerned about backhaul and
also that we needed more than just Sydney as the first point.
   Mr Quigley: I think as we see more content being used, particularly video content, there is no doubt that those
overseas links are going to have to be increased in size. There are various parts of the backhaul. There is where
we hand off the traffic at the point of interconnect and then back to points of presence in capital cities. There is
that backhaul component, but there is also the overseas backhaul component. In fact, I used to work for a
company that had some 45 per cent share of the undersea submarine optical system. I can tell you for certain the
prices of those systems have plummeted in the last decade or so. Compared with the overall cost of delivering
high-speed broadband to end users, the costs of the overseas links are not great. You can upgrade capacities on
overseas links relatively cheaply compared with rolling out a high-speed access network.
   Mrs PRENTICE: Is that some we leave to private enterprise to do?
   Mr Quigley: Yes, it is certainly not something that is in the remit of NBN Co.
   Mrs PRENTICE: In recent times there have been concerns about privacy. Will NBN Co. put in place
guidelines or requirements of its retailers in some way to protect people's privacy and private details?


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    Mr Quigley: No, that is not our intention. We will ensure that the network that we built is secure, but we are
running what is called a layer 2 Ethernet network. We in fact do not know what the traffic is that is travelling over
our infrastructure. The questions of security and privacy in layers above us, either at the IP layer or the
application layers above that, are unknown to us. We make sure that we keep our network secure. As you would
expect, we have had discussions with government agencies around some of those issues, but we are not putting
any rules, guidelines or requirements on retail service providers. It really would not be our place to do that.
    Mrs PRENTICE: You mentioned that the deal with Telstra is yet to be finalised. We have had some
presentations from areas—I think Tasmania was one—where they were concerned about one of the existing
carriers signing people up to two-year deals, which restricted them from joining up with NBN Co.
    CHAIR: They were quite aggressively marketing into pre-trial site areas to sign people up for two years so
that when the new retail product comes through and is switched on they are not able to take it up.
    Mrs PRENTICE: Is that something you could address in your negotiations with Telstra—without mentioning
any names?
    Mr Quigley: We have many issues we need to negotiate. I will certainly take that one on board.
    Mrs PRENTICE: I understand it is happening in Brisbane and other places.
    CHAIR: There was certainly frustration expressed by people when they realised what was available in the
new retail product that they were not able to access it for another 22 months because two months ago they had
signed a two-year deal. There was some feedback on that.
    Mr SYMON: I would like to ask about the NBN and its interaction with rural and regional communities
where the cable, the fibre itself, passes close by to those communities but many have had indicated to them or
have come to understand that they may not be directly connected to that. Is there any policy in place that those
communities will be connected to a close-by fibre or is that something you could expand on for the committee? I
think we have had this question at many of the hearings we have done so far.
    Mr Quigley: If I can draw a distinction between the fibre that is the access fibre that goes out to every premise
and the fibre that is the backhaul, which has aggregated literally thousands of traffic streams onto it. It is possible
that people will see a fibre going past which is the backhaul fibre. If I can draw an analogy, it is a bit like a high-
speed train rail link. If you have the TGV running past your home, you will say, 'What isn't stopping?' The reason
it is not stopping is it is going 200 kilometres an hour. We have that same issue where you cannot just break out to
drop something off. You can actually break it out, but you need a whole exchange to break it out and connect it
up.
    Mr SYMON: It is the point of interconnection.
    Mr Quigley: Yes, exactly. I know it is frustrating for people. They see a fibre. They say, 'There it is. It is only
over there. Why can't they just drop it in to me?' It is for that very reason; you just cannot do that in an
engineering sense. We are trying to make sure people understand that. But in laying out the network to get to 93
per cent of premises with fibre, we have tried to make sure that we have picked up every town in the country with
1,000 or more premises; we will fibre it. If a town is on one of the backhaul routes and it has more than 500
premises, we will fibre it. We know that we are getting people who are saying, 'We would like to get the fibre
also.' In fact, in the seven Tasmanian towns that were announced yesterday we are going to be trialling what we
call a network extension process. An individual or a group of people might say, 'We are not inside the fibre
footprint, but we would like to get the fibre anyway. What is the process for doing that?' We have had approaches
from some councils who have said, 'We are prepared to fund the difference between what that 93rd percentile
would be, if we were in the 96th, for example.' But I should also say if you see a graph of costs per connection per
percentile, from the first percentile through it is relatively flat and then there is a knee. It goes up very rapidly
after the 93rd percentile, which means that from 95 to 97 it is very expensive per subscriber to provide a fibre
connection.
    I would also like to put on the record what we have developed for the remaining seven per cent. In fixed
wireless—and it is not a mobile service—four per cent; and a satellite service, three per cent. These are radically
improved services over what people would be getting today. For example, on the satellite we anticipate launching
two large Ka-band satellites—these are six-and-a-half ton satellites each—which will provide 12 megs down, one
meg up with what are called average busy-hour throughputs. In other words, how much people can download
effectively without congestion of very high dimensioning, much greater than what is available today. People in
the bush in the seven per cent will get services that are at least equivalent to what they can typically get in cities
on ADSL2-plus today.
    Mr SYMON: With respect to satellites, there will be far less congestion than on the existing service?

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   Mr Quigley: On the ABG service?
   Mr SYMON: Yes.
   Mr Quigley: Yes.
   Mr SYMON: What is the capacity in terms of that? If it is servicing a rural community that has only got
satellite and everyone wants to use it at once, are there going to be issues with the design of that or has it got
plenty of future capacity for the satellite link?
   Mr Quigley: We are designing it to have a lot of capacity. On today's ADSL2-plus services, different
operators dimension things at different levels, but you could say it is somewhere around what we call the average
busy-hour throughput. In other words, that is how you dimension the thing. It is not speeds, it is average video
throughput. Normally ADSL is dimensioned somewhere around 35 up to 70 kilobits per second. We are
dimensioning the satellite at 300 kilobits per second and the fixed wireless at 500 kilobits per second. That is the
capacity we are building in. If everybody tried to stream high definition video it could not be done. But will they
get a very good service? I think the answer is, yes.
   One point I also need to make is that the satellites are in geostationary orbits, which means they are 36,000
kilometres above the earth. There is nothing we can do about the speed of light. Even with $43 billion we cannot
change that. We have a latency issue, which is why we do not try to offer, for example, a voice service on a
satellite; the double-hop issues would make the service not so good.
   Mr SYMON: In relation to fixed wireless, I understand what is going to be available. Is there going to be an
upgrade path in the future for that? Is that something that needs to be thought of at this stage of the project or is
that something that comes later down the track when one day someone says, 'Well, 12 megs a second is the
equivalent of dial-up'? I am sure in the future that will come.
   Mr Quigley: What we are using for our fixed wireless is a technology called LTE. That is exactly the same
technology that people are talking about in mobile networks for 4G. Throughout Australia today we have 3G
networks. People are trialling 4G. We intend using LTE, which is a different type of technology from 3G today.
We will keep up with the latest technology developments as they take place, and with the potential vendors for
that technology we have already had discussions about what is the evolution path for higher speeds. I would also
make the point that you will hear some very large numbers about wireless—the mobile space—say, that LTE can
do 100 megabits per second. It is true. From the centre of a cell with only one person on it, even if you turn off the
error correcting coding that goes on you can get high throughputs, but that is not what the engineering is about.
The engineering is about what you can provide to everybody at the edge of cells. That is why we have taken a
very conservative engineering approach to dimension for 12 megabits per second at the edge of a cell, not in the
centre. As I said, we are dimensioning it for 500 kilobits per second of average busy-hour throughput. As the
technology improves we will take advantage of that and continue to try to increase speeds, but we need to do it in
a way such that if we are going to provide the next tier up in speeds we need to be able to do that for all of the
subscribers in the cell.
   CHAIR: To link all of this back directly to the terms of reference, is NBN Co. also working with some of the
research based new applications and services that we have seen through, for example, CSIRO? Is there some
work being done to find ways that those more high demand services and products can be delivered into the fixed
wireless and satellite area? I am conscious that there are some capacities that enable programs to be reconfigured
in a way that enables them to be delivered over those.
   Mr Quigley: Yes, certainly. We are conscious that there are going to be some very high-end services that will
be difficult to provide on either due to latency issues—
   CHAIR: Particularly if you are talking about health services to remote areas.
   Mr Quigley: Yes, health and remote education. But we also have to be realistic about what is possible. We are
also looking at prioritisation mechanisms within the streams so that you could in fact upgrade things in certain
areas. We are just starting that work now. As I said, we are obviously talking to our potential vendors in that area
to see what is possible.
   Mr FLETCHER: You talked about the experiences you were having with the trial sites, connections and so
on. Are you able to update the committee on each of the sites as to the connection rates to the physical network
and the percentage of premises that have a service in operation?
   Mr Quigley: We can certainly provide that for the pre-release in Tasmania. We have only just connected the
first customers in Armidale—in the last week or so—so those numbers are obviously very low. In terms of the
connections into the homes, in other words, who decided they wanted to have a connection, yes, we can certainly


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get you those numbers. I do not have them off the top of my head. I believe overall in our five first release sites
we were running at a consent rate of about 70 per cent to 75 per cent.
    Mr FLETCHER: You talked also about the negotiations with Telstra. What is your latest expectation as to
when there will be a deal signed with Telstra?
    Mr Quigley: This is a good question. I have assiduously avoided making a prediction, because this is a very
complex negotiation. What I would be prepared to say is that we are getting towards the final stages of it now. As
you know, there are two parts to it and it has a lot of complexity to it and it is also interrelated with regulatory
changes. If it were just a straight commercial negotiation it probably would have been over by now. But the fact is
it is linked into all the regulatory and legislative changes that are going on so it makes it doubly complex. But
having said that, we are in the final stages now.
    Mr FLETCHER: How are you going with the special access undertaking? I think your corporate plan said
you assumed you would lodge that by 31 March this year and that you expected to have it finalised by the last
quarter of this year.
    Mr Quigley: We are in discussions with the ACCC and we are preparing a special access undertaking. But
once again, that was also caught up in the legislation, because the actual rules changed about how you would
lodge it. We are still working hard on it and working very closely with the ACCC to make sure that when they get
our special access undertaking there will be no surprises in it.
    Mr FLETCHER: As of right now it has not formally been lodged?
    Mr Quigley: It has not formally been lodged, no.
    Mr FLETCHER: You talked during the election about upgrading the network to one gigabit per second.
    Mr Quigley: Yes.
    Mr FLETCHER: When will that be in operation?
    Mr Quigley: As to the reason we announced the one gigabit, you might remember the government said we
had to provide at least 100 megs. At the time, Google made an announcement that they were providing one
gigabit per second in the US and suddenly we went from a situation we were facing in the media of saying, 'What
on earth does anybody need 100 megs for?', to saying, 'This is already redundant. It is already out of date. You
cannot do one gig.' So we went down immediately with a press release that said, 'In fact, we can do one gig. We
were planning to do one gig. We had not spoken about it yet, but here it is. This technology can do one gig. It will
come in a later product release.' I cannot remember the date of that. But everything we are doing in the network is
planned for one gig. It is on one of the product releases, so it will be either within six months or 12 months from
the first product release.
    Mr STEPHEN JONES: The predominant terms of reference of this committee are about the economic
benefits. I would like to bring us back to some of those issues. In relation to flagging productivity in Australia
overall, I am interested in your views based on your experience in the industry and the contacts you have had with
service providers and end users on how you believe NBN's fast, ubiquitous broadband can assist in lifting our
national productivity rates.
    Mr Quigley: If you look at what historically have been the drivers of productivity, and certainly recently, IT
and telecommunications has been one of the drivers. I think we have an opportunity for that to recur with high
speed and ubiquitous broadband. It is very interesting to use that word 'ubiquitous', because I think the fact that
this is one platform right across the nation with one set of processes, one set of systems interfacing the same way
is often overlooked. I believe there are enormous gains to be had from that in areas such as healthcare and
education. A federal government may want to roll out a service across the nation, not having to deal with a
patchwork of disparate systems. It is not just about the equipment. It is about the systems; these operational and
business support systems, and about how you interface on to those.
    The other important factor is that the device that we are putting into the premise, the network terminating unit,
has four ports on it. The government could decide to use one of those ports, and you could have services from
normal retail service providers on the others. They could actually have a port into every premise that has the
service, and they could run a health service, an education service or whatever. There absolutely is the potential for
real productivity benefits. I think the gains that could be had in savings in healthcare and education are very great.
I happen to be a director of a neuroscience research institute, and the researchers there are very interested in
looking at the cost reductions that can take place in aged healthcare due to fall reduction. It does not sound very
exciting, but there is a huge cost to our community with older people falling. As we know, the demographic trend
is for there to be more elderly people in the future. If they fall, they end up in hospital, and a large percentage end


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up in nursing homes after that. If you can keep them in their homes and avoid them falling you can save a lot of
money. This network can actually facilitate a reduction in elderly people falling by having them remotely in their
homes doing exercise. It is hard to get them to do exercise unless it is somewhat fun. They have actually
developed a way of using video gaming technologies as a health application.
   If you have that ubiquitously across the place it means it is much easier for health services to roll that out. That
is just one application. There are the same things in education. There is videoconferencing. We now have in our
facilities in Sydney, Melbourne and Canberra high definition, low latency videoconferencing, which needs large
bandwidth. That saves us getting on planes. It saves us travel time. We also expect to have more of our people
doing tele-working from home. That will keep people off the roads, which means that less money needs to go into
normal infrastructure, if you manage to get people working from where they like to work.
   Also, certainly in the work that I did in the US, where we had a rather large number of software developers, we
did a controlled trial and found the productivity of software developers went up when they were working from
home, which was quite a surprise to us. I think there is an enormous scope for productivity improvement, but it is
not just about speeds. It is the very word you used, ubiquity.
   Mr STEPHEN JONES: On that issue of ubiquity, is this also relevant to the issue of scalability? We have
had some questions this morning about scalability with regard to moving to one gig, for example, and upgrading
services. If we do not have a ubiquitous broadband rollout is that going to limit our capacity to alter, change or
upgrade the system in the future?
   Mr Quigley: I think that certainly would be the case. If you draw an analogy, it is similar to a rail system. If
you have a patchwork of rail systems it clearly does not work as efficiently. I was in private enterprise for 36
years, so I am a firm believer in markets. I am not suggesting that the entire telecom network should be one
standardised ubiquitous network. But I believe there is an argument for having the lowest level, what is called
layer 1 and layer 2, standardised across the fixed line network in the country and then having free and open
competition above that. We just will not get two private enterprises building a new fixed line infrastructure. I do
not think it will ever happen.
   I think for certain there are real benefits in having that ubiquity, standardisation and scalability not just in
speeds but also scalability in the processes. These big operational and business support systems, OSS and BSS,
are very difficult to scale. You can get people offering fibre-to-the-prem services in a little area, but what you
very quickly find is that they cannot scale. Their systems cannot scale. To do this across the nation is a big
engineering job.
   Mr STEPHEN JONES: Are you suggesting that having a single standard—using the term 'ubiquitous'—is
actually going to enhance retail competition?
   Mr Quigley: Yes, I believe it will.
   Mr STEPHEN JONES: If so, why?
   Mr Quigley: For example, if you had underlying multiple wholesale platforms, an operator who wanted to
supply services over here would have to interface to that wholesaler. If they wanted to provide services in another
part of the country they would have a different set of interfaces to reach customers over there. With one national
network at the wholesale level they would just have one set of interfaces to do testing with and make sure their
systems can cope with it. This is not an easy job. It is about aligning the two systems together so that they can talk
to each other seamlessly, which is what we are aiming to do, such that a retail supplier, for example, iiNet, will
from their terminal be able to see our network as if it were their own. In other words, they can test the
performance of end-to-end connections without having to ask us. They can do it automatically.
   Mr STEPHEN JONES: Is it the twenty-first century equivalent of a standard rail gauge?
   Mr Quigley: It is a little more complicated than that, but that is exactly it, yes.
   Mr STEPHEN JONES: Of course. We grasp for analogies.
   CHAIR: Or indeed standardised electricity connections, which can be a great frustration for people as well.
   Mrs PRENTICE: We have discussed the rapid increase in demand and new technologies. Are you therefore
looking at ways to reduce the projected rollout from I think it is 19 years we are now saying before it is all
finished, which is going to leave a lot of people behind? Can we reduce that to, say, five or six years?
   Mr Quigley: No, nine-and-a-half years is what we have put in our latest corporate plan. This is just a massive
undertaking. If you fly over Australia and look down and you have to connect each one of those premises, it is a
huge undertaking. I think we will go as fast as we can. Clearly, while the Telstra negotiations have taken quite
some time, it will in the end speed up the rollout, which is why it is worth doing this. At the same time as we are


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doing those negotiations, we are also of course building our OSS and BSS systems, which are also on the critical
path.
   Mrs PRENTICE: So, 2020?
   Mr Quigley: It would be hard to see how we could do it earlier. We will obviously be doing in parallel the
fibre rollout, the fixed wireless rollout and launching satellites. Before we launch the big satellites we will be
improving the existing satellite services with an interim satellite solution.
   Mr SYMON: How will the NBN integrate with existing private fibre networks, for instance, AARNet that the
universities are connected to? In some cases, businesses or even local councils have gone out and already installed
fibre. Is that going to be parallel with the NBN or will in cases it be part of the NBN?
   Mr Quigley: No, in many cases it will be parallel. For example, AARNet has a network that connects
universities together. We certainly would not try to overbuild that. That is one of the things the government has
said. We have an obligation to connect a premise unless it is adequately served. I would imagine that places will
obviously be adequate served, particularly if you have CBD buildings that already have multiple fibre
connectivity in them from various suppliers. It would make no sense for the NBN to come along to add another
one.
   In most cases we will not be trying to duplicate infrastructure there. But if there happens to be a facility in there
that is not wholesale—is not offered on a wholesale level and there is only one of them and it is retail—then we
may get a request to serve that, in which case we would have to serve it.
   Mr FLETCHER: You talked about overbuild. Could you give us an estimate of the capex savings if you had
a design rule that said you would not build to any premise that was served by the HFC networks?
   Mr Quigley: Yes, I certainly could give you an estimate of that, but not off the top of my head. I would have
to think about it carefully. I think there are roughly two million premises in total, but quite a number of those
premises are not actually connected. In fact, they are even too far to have lead-ins, as you probably know. They
are not even offered a service within that footprint. We will have to do that calculation carefully.
   CHAIR: Particularly in the regional visits we have done people have put an argument about why there should
be early rollout. That will not come as a surprise to you, I am sure. Obviously the trial sites were picked for the
particular engineering challenges and so forth. But one of the issues that has been put to us, particularly in the
regions, is that there is a very high level of demand that is not being met, and that is becoming a constraint on
regional development. You gave the example of tele-working. We have heard from a lot of regions—in the
Illawarra yesterday, in Townsville and in South Australia—about a drive for a lifestyle, whether it is seaside or
tree-changing, and that this can be facilitated by connectivity; that professionals, creative industries and so forth
can revitalise our regions. From the company's perspective, what is your view on some of the criticism: why don't
you roll out in the big cities first where the demand already exists as opposed to tapping into the potentials? One
of the dangers of potential areas is that if people do not take it up then you will be criticised that the take-up is
low. Can you give us a perspective from a national, economic, productivity, regional development and
participation point of view?
   Mr Quigley: NBN Co. does not operate as a normal commercial enterprise would operate. As I said, I came
from 36 years in private enterprise.
   CHAIR: We have had lots of evidence as to how private enterprise has worked for some of the regions to
date, I have to say.
   Mr Quigley: I lived in the US for eight years. If you lived in the big cities you had lots of options. If you lived
outside of big cities you were lucky to get any service at all. That was just the way it was. We do not operate as a
normal commercial enterprise. In other words, when we decide on what the rollout should look like what we do
not take into account is how we maximise the income and profit of the company. That is not what we have been
set up to do. What we are trying to do is balance and be obviously guided by our shareholder in terms of where
we think the greatest economic benefit is. In the early trial sites what we were looking at was engineering issues.
In other words, what types of topographies, densities and demographics would we need. Go into Kiama because it
is solid rock and pretty tough going; go into Brunswick, which is an inner-Melbourne city where the council is
particularly stringent about what they will and will not allow to happen or go into Townsville, which is different
again. We approached that one from an engineering point of view.
   When we announced the second release sites, it was then a blend of extending the first release sites but also
trying to pick up some areas in which there were some frustrations, for example Gungahlin, where they were
served by RIMs and simply could not get DSL off those RIMs. What will happen in the next phase, which we
have not announced yet, where we start to look at the volume roll out, is that there will be a number of factors.

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Obviously, once again, we seek the shareholders' guidance of where they think the priorities are in terms of
regional development or whatever, together with the availability of infrastructure, that is ducts, pits and pipes, but
particularly exchanges and backhaul because we cannot roll out an access network unless we have the point of
interconnect, the FAN site and the intervening transit backhaul. To some extent that is going to—I will not say
dictate—have to be taken into account as we do the next phase of planning, so it is quite complex. We will try to
get that balance right, but it will not necessarily be driven from the same angle as a normal commercial enterprise
would. With a normal commercial enterprise the fibre in the city is first and, frankly, we would not put these
satellites up and we would not put fixed wireless up, we would simply focus on the areas where the take-up would
be expected to be highest.
   CHAIR: Thank you for your attendance here today. You have undertaken to provide some additional
information, so you can get that through to the secretary subsequent to the hearing.
   Mr Quigley: I will.
   CHAIR: You will be sent a copy of the transcript of your evidence to which you can make corrections of
grammar and fact. Once again, that has been very useful information for the committee and we appreciate your
time today.
   Mr Quigley: It is a pleasure.




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BALLANTYNE, Mr Gary, Account Director NBN, Huawei


MITCHELL, Mr Jeremy, Director of Corporate and Public Affairs, Huawei


WILLIAMS, Dr Tim, Consultant to Huawei


[09:52]
   CHAIR: I now welcome representatives of Huawei to today's hearing. Although the committee does not
require you to give evidence under oath I should advise you that the hearing is a legal proceeding of the
Parliament and therefore has the same standing as proceedings of the respective houses. We have an extensive
written submission and I think some of the members were able to attend a presentation luncheon in Canberra as
well to hear Dr Williams. We are very keen to have the evidence put on the record and to be able to question you,
so thank you for your participation. We have people listening to the broadcast so would you like to make some
opening comments, perhaps 10 minutes maximum, and then we will go to questions and answers?
   Mr Mitchell: Firstly, I would like to thank the committee for the opportunity to talk to you today on behalf of
Huawei. For many people it is the first time they know how to pronounce our name correctly. We are the second-
largest telecom equipment provider globally. We operate in over 140 countries around the world and have over
110,000 employees worldwide. In Australia Huawei partners with every major telco operator, including
Vodafone, Optus, Telstra, TPG and Vivid Wireless. We employ close to 500 staff, 80 per cent of whom are local,
and we have recently announced that we are setting up an Australian board. We will shortly name three prominent
independent board members, one of whom will take the chair position. This is a global first for Huawei and shows
and highlights our long-term commitment in Australia.
   We have also established R&D partnerships with Australian universities, including next generation technology
training programs with RMIT University, and we are working with the University of Melbourne's Institute for a
Broadband Enabled Society by providing Huawei technology to create the NBN test bed environment. I
understand the committee visited that and got to see that equipment first hand.
   Huawei is the world leader in delivering fixed fibre networks. Currently Huawei is building the NBN
equivalents in the United Kingdom, Singapore, Malaysia, the UAE and Brunei. There are only two other countries
that are building wholesale fibre networks like Australia in the world, the United Kingdom and Singapore, and
Huawei is the major provider to both of these networks. Huawei is the only company with developed, tested and
commercially operational equipment delivering open access, wholesale broadband.
   For the past five years Huawei has been the sole provider of the fibre access equipment for the UK NBN-
equivalent, 'BT 21st Century Network'. The network was created to ensure that all rival operators have equality of
access to BT's local network, namely to provide open access to all service providers in the UK. Huawei is
supplying GPON and aggregation systems to the network build and late last year we were awarded a £1 billion
contract to extend these technologies.
   It is our work in the UK that motivated Huawei Australia to commission the white paper titled 'Connecting
Communities', but before I introduce the author of that report I wish to put on the record that Huawei supports the
development of high-speed broadband. Huawei is not only the global leader in fixed broadband networks, but we
are also the global leader in next generation wireless broadband networks. Huawei was the first company in the
world to develop a commercial LTE network. As a company with technology and leadership in both wireless and
fixed broadband areas, Huawei fully supports a fibre based National Broadband Network for Australia. Fibre and
wireless, in our view, are complementary rather than substitutes.
   We also believe that the commitment to an NBN should be above politics, supported by both major political
parties. There always will be and there always should be debate about implementation; in fact, of the five NBNs
Huawei is building globally, no two are the same, but we believe there should be an agreed set of guidelines for
Australia's NBN: quality of service, investment in the best technology and that we build not just a network, but a
network nation where no-one gets left behind. There are moments in a country's history where choices are made
that lay the foundation for decades of social development and economic prosperity, and we are reminded that they
are often decisions that help build and vitalise nations. The railway and interstate highway networks in the United
States are two such visionary choices for the 19th and 20th centuries. The 21st century is the Asia-Pacific century.
Singapore, Malaysia and China are heavily investing in fibre networks. Korea and Japan have already invested. If


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Australia is to take full advantage of this opportunity we need to make sure that we are not the poor digital
cousins in the neighbourhood.
   From our experience in the UK, Huawei felt there was a gap in the broadband debate in Australia. Too much
was being concentrated on the process rather than the end result. We commissioned Dr Tim Williams to conduct a
review of the impact broadband has had on communities in the United Kingdom over the past five years and what
implications there may be for Australia. I invite Dr Williams to make a few remarks firstly on his background and
then obviously the findings of the report.
   CHAIR: Thank you. Dr Williams.
   Dr Williams: I thank the committee for the invitation to contribute to your deliberations. If you have read the
report you will know it is militantly a non-techy report for non-techies because I believe that high-speed
broadband is too important to leave to engineers and geeks. I realise that is not a dig at Mr Quigley.
Fundamentally the proposition is that there has been a lot of emphasis—we have heard it this morning—about
pipes in the ground and the really exciting bit here is about end users' applications and the transformations which
feed back into justifications for the NBN. I was pleased to try to raise that debate in the report which you have
seen and I will talk a bit about some of the findings.
   As you can tell from my accent I come from the same part of the world as your Prime Minister, that is Wales,
and I just want to say a bit of a vignette about Wales because it is in the report, but it is really important to
understand this. Wales, which has not been known as a byword for innovation in anything recently has got all of
its local government, central government, public agencies and emergency agencies on one fibre optic broadband
enabled platform, that is 300,000 public sector workers and 2,000 schools. The emergency services can talk to
each other in HD video in real time rather than confusing each other by not talking to each other at all, but here is
a proposition. Here is where it really kicks in. It costs $50 to make a paper transaction to a local authority in
Wales, but it costs 50c to do it by email, it costs 5c to do it by Skype and when HD television comes in and it is
ubiquitous in people's homes and in the offices it will be virtually free and will transform the relationship between
the citizen and public services. That is the most exciting thing in this whole business and that is what the report is
fundamentally about. My background to this, by the way, is that I was an adviser to the UK government, largely
on things like regional and community development. I knew next to nothing about broadband and I have been
quite interested by what I have discovered and the report is about that. The report is about the UK where by 2014
two-thirds of the population will have 50 megabits plus. It is about something that has already happened and is
happening, so there are implications for the future.
   What I learned, fundamentally, and I think it is important and really plays to your terms of reference, is that
broadband is not simply a computer thing. It is not an end in itself. It is a means of furthering national objectives
in the economy, education, health, environment, transport and regional vitality. The report is very strong that it is
a tool in the armoury of the recovery of regional areas, and I can talk to that.
   I also learned that in a country when 90 per cent of public services are online and going digital by default, 10
million people are still not accessing the internet, so a key objective is not just to build a national network, but a
network nation where no-one is left behind. The dangers of adding digital to socioeconomic and geographic
exclusion are real and the report calls for a new emphasis in Australia on getting everybody online. I think that is
important. The mirror image of that threat of exclusion is the benefits and efficiencies available when all in the
nation are in the network and a number of the economic analyses missed the ubiquitous point of what Australia is
trying to do. These are what they call the network effects and the externalities which kick in, and this is a big if, if
the effort to put pipes in the ground is matched by coordinated cross-government effort—central and local
government—about maximising broadband applications, innovation, interesting uses in all public services.
Collaboration is also required. This is not said enough. The reason why Korea is making fantastic strides with
broadband is the collaboration between the private sector and the public sector over end uses. It has absolutely
thrown out the relationship between central government and the private sector around end uses in public services
and what that means for business. It is quite interesting.
   The real value proposition behind fast broadband does not reside in the construction of the digital highway in
itself, it resides in the applications enabled by it, catalysing its potential and transforming public and private
sector business models. It just needs to be said to be understood. That impact has a direct economic implication
and most studies stress the benefits of that.
   My report is more interested in how this broader potential has been catalysed in the UK and what it might
mean here. The report calls for such impacts—and I think this is a new thing which I did not say clearly enough—
to be objectively measured and for a pre-NBN baseline established so as to be able to really identify benefits,
transformations and indeed pitfalls. Australia could really lead the way on that. It is vital.

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   A bit on the economics of this because there has been some talk about value for money. I am sure that an
economic case was made against the harbour bridge back in the 1930s and I know there was one made against the
internet. I think economists tend not to agree. Rather, there are those who are positive and they have different
assumptions from those who are negative. I am not sure that is conclusive. I think that sceptical economists also
do not consider in any detail the societal benefits and externalities. In the Australian case they missed the point
about the ubiquitous nature. A truly national network of fibre to the home has a transformational consequence in
comparison with a country which has only 17 per cent take-up—70 versus 17 per cent is a different world.
   Just some comments on four or five headlines from the terms of reference that you would obviously like to
have a conversation about. You asked: delivery of government services and programs. This will be where the
NBN can be most radical, have most impact and most savings—the delivery of government services—but it does
not happen automatically. Just as an example, in the US the Congress has mandated that America's NBN include a
plan for the use of broadband improving public services. One-third of the American plan is about that, not about
the pipes in the ground. Achieving health outcomes—there is stuff in the report about pilots of tele-health in
Scotland and Yorkshire already savings lives through remote diagnosis and pathology now. Broadband enabled
social care in 1.7 billion homes in the UK now, allowing older and more vulnerable people to stay and live
independently. These bring massive savings to society and it is more important in the UK at the moment than ever
because they need to save money whilst technology improves.
   There is quite a lot in the report regarding education. There was a big audited study about the impact of
broadband technologies on grade enhancement, but also reaching remote schools with teachers, if you like,
remotely and resources.
   You asked about environmental impacts. There is a bit in the report about that, but just the figure that I have
derived from the world economic forum. If you add the stuff in the report around remote work in tele-presence
and smart transport and energy grids, the estimate is that it will save four per cent of carbon emissions in the
developed economies, so these are serious numbers.
   The last two things are around regional growth and impact. I have stressed in the report—I have done a lot of
work on regional economies in Wales and Cornwall—a prioritised high-speed broadband rolled out in Cornwall is
transforming the image of the place. It is bringing lifestyle entrepreneurs to live in the area and it is part of the
recovery program of a rather depressed place. People want to live in these beautiful areas, but they need modern
connectivity. I think that is pretty critical. Despite Australia's scale being hugely different, some of that plays to
some of your places, which I think is important.
   We have heard a bit about business efficiencies. I just want to say on that subject that SMEs are particularly
benefited by the broadband connectivity. It creates virtual clustering for them which they lack in any other
context. It is particularly important, but again Korea shows how you bring the real benefits of economic
exploitation of that by a strong link between central government and the private sector. In facilitating community
and social benefits the report is entirely about that, so we can talk about that.
   The last thing I wish to say is something about technology because it has been raised. There is a spectrum in
the report. Some of the achievements are available at one megabit and others are at 150. The trend, though, is
towards greater bandwidth, use of video rather than text, and the ingenuity requires bandwidth going forward and
the benefits are greater as bandwidth grows. Internationally, fibre seems to be the core of a network, but wireless
and mobile is where many of the more exciting applications take place that should be complementary. I do not
think they are substitutes. The last point is about some of the issues around wireless and mobile. While innovation
proceeds apace, next generation wireless technology is going to challenge us, as we have heard. I think it is fair to
say that the report comes down on the view that wireless service continues to be more interrupted than wire
technologies, especially when congestion arises, and that will inhibit its use in health care.
   Critically, this is the last point. The extent to which mobile wireless service will substitute for wireline service
will depend on how demand evolves. If it shifts more to high-bandwidth, low-latency applications like the HD
video uses that will become conventional in relationships with the public sector and consumers rather than to
mobile applications, which seems to be happening, the two services should be viewed as complementary and not
substitutes, and that is what the report says.
   CHAIR: Thank you very much. There is a tremendous amount of information in what you have presented so I
will try to keep all of us to about three questions each. I would particularly like to go to one of the issues around a
lot of the evidence in both Huawei's documentation and Dr Williams's report. Firstly, we have had a lot of
evidence about the benefits that can flow in those areas of the terms of reference and to some extent we have had
to tease out to try to find the factors that ensure uptake and utilisation, and perhaps what you have presented to us
is one of the few occasions where I would say the whole focus has really been on that side of it, so that is why it is

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particularly valuable to us. I would like you to comment to us: if you wanted to say, at this point, to government,
'Here's three things that you really have to get right if you don't want to increase the digital divide, if you want to
ensure uptake, participation and innovation. Here's three things I would say to you that you really want to have a
close look at', what would they be both from a company perspective and from your research in existing systems?
    Dr Williams: There are two clear ones and I will bluff the third.
    CHAIR: If you want to give us two then that is fine.
    Dr Williams: What comes through the report is what I got a sense of. It is easy being an outsider and coming
into this discussion to say, 'You've missed the obvious.' That is my job as a consultant, in a sense, but it is true.
What I think I have brought is a kind of innocent enthusiasm back to it to say, 'This is really great and you can do
lots of things here.'
    The first thing is around reigniting some of the enthusiasm about why this was going to be done in the first
place. A discussion needs to be led about what the vision was. It seems to me that we have lost a bit of the vision
about what this can do for society, for the economy and for the nation. It is a very easy thing to say and do, but it
is true that it has got lost a bit in the plumbing along the way. First things first. There is a detail behind that. One
of the things that has been useful in the UK is around having a digital champion in Martha Lane Fox, who is from
the sector. I cannot think of a non-sexist way of saying it is very funky. It is just a very ordinary part of the
general scene, rather than a politician, who is raised and dressed in getting online with what this can do. Her job is
to act in the public interest. So I think firstly, reactivate public interest and the private sector about what this thing
can do. I think it would help to have digital champions. I know that there has been some talk about this. The other
plea I make is that it is not an NBN champion that is required, it is a digital champion, to sell the broader deal.
    The second thing that is very much in the report is that a lot of this is not automatically going to happen as a
consequence of just providing a highway. It is really about trying to make sure that at least what is under public
control, either at central or local government, really understands what this can do to services that they deliver. I
am guessing that part of the problem is that below that 'let's get to the end and work back about what kind of place
we want to create with this technology or what services we want to do; how we want to liaise with people and
customers' has been delayed a bit as people are not entirely sure that this thing is going to happen because of the
politics around delivery, it seems to me. Normally you would be planning your business plan at this point in time.
I think there is a really important message that it is going to happen in a fundamental form and it will change your
business plan, so start thinking about it now. That is a message to all managers of public services from the top,
middle and down.
    The last thing is a lot of the innovation in this thing is actually coming from below anyway. I read one of the
reports from an economist, Robert Kenny, who had a go at the cost of all of this. The assumption I think he makes
is that Australians are going to be happy with ADSL level service because Americans are, but actually Koreans
are not. Koreans get 15 times the speed of America and Korea is sailing away. What is partly driving that is that
once people get into it and can use it, it blows their imagination.
    There are three things. One is vision plus digital inclusion work. We need champions to go out and sell what
this culture is going to produce, not just the tool as it were. The second thing is around public service
transformation. It is not just because I come from a public services background, but the private sector needs to
have a very practical dialogue over the next few years because it will produce some of these applications. I think
the link between private and public around that is pretty critical. The third thing is that it is not just about what the
government does; it is about what the third sector, voluntary sector and people, are doing. It seems to me that they
are driving the demand upwards.
    CHAIR: Mr Mitchell, would you like to make some comments?
    Mr Mitchell: There are three things. Firstly, for us, it is universal access. We need to make sure that there is
no digital divide. The one thing that we have learnt from the United Kingdom is that 30 per cent of the population
missed out and their new government is actually trying to rectify that. That is an advantage that Australia would
be able to have.
    Secondly, it is fibre based, but that does not rule out wireless. In fact, two of our biggest customers in wireless
are Vivid Wireless and Vodafone. Both have come out supporting a fibre base because fibre is the backbone of
that.
    Thirdly, especially to government, is to not underestimate the ability of private sector to help to deliver
government services as well. This is an area where applications and innovation are happening at a rate that
government just cannot keep up with. If there is a mentality that only government can do it and government is
best at doing it, the services will fall behind. I think that when policy implementation is happening at a


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departmental level of how their services are going to go online, there should be real thought in allowing the
private sector to be part of that because they will be the ones that will be delivering those new innovations and
will be able to do the cutting edge sort of stuff that will be needed to get the take-up rates wanted by government.
   Mr Ballantyne: Very briefly, I want to reinforce the ubiquity of access. The NBN plans are going to provide
the capability across the nation for people to connect. The key thing is that everyone is able to connect.
   There was a very good example a couple of years ago where all the schools in France were closed for about
three weeks because of a swine flu epidemic. The government there was very keen to find some way to continue
the education of the French students during that period while the schools were closed and they were looking for
some ubiquitous network that would enable them to be able to reach the vast majority of kids. They just did not
have it and ended up doing some classes over cable TV.
   A network like the NBN, which has not only got ubiquitous coverage but also ubiquitous participation, would
enable that kind of situation to be very effectively dealt with where the kids do not miss out on three weeks of
classes and are able to continue their education remotely via the NBN facility. I think that the ubiquity of
participation is the key thing.
   CHAIR: The flipside of that which sometimes comes to us in evidence is that a bad experience or a raised
expectation not met can set these sorts of things back significantly. For example, one of the later submissions
from today talks about our online Centrelink services and yet, by and large, you still have to turn up at the
Centrelink office, so for young people in particular thinking they can engage online and then discovering that has
very significant limitations, to some extent a transition process would not surprise us, but it can cause a level of
frustration about government services. I am wondering if you had some observations on how best government
service delivery in this process can set realistic expectations and manage those?
   Dr Williams: There is a good example from the UK. There is a massive amount, probably more than here, of
people that would be regarded as socially excluded in the UK, but there is social exclusion in Australia. One thing
that is interesting in Britain is the role of third sector voluntary organisations, social enterprise organisations and
housing associations, where they meet people on a regular basis and they have very good cultural links to help
them explore in a rather incremental way what they can do with this technology. It is particularly important with
older people. I think there are ways for the public services to interact and third sector voluntary agencies
interacting with their clients can help develop this agenda. We are going to promote a conference in August about
digital inclusion led by the voluntary sector to reignite interest in that.
   CHAIR: We certainly saw a good example of that in some evidence around the Broadband for Seniors
program where community sector organisations set up kiosks, and I know in my own area elderly Italians who
had never turned a computer on have discovered that they can read the home town newspaper the day it is put out
and things like that, so they are now completely engaged. Is that the sort of thing that you were talking about, Dr
Williams, that works best where they work with a community sector organisation?
   Dr Williams: Yes, very much so. In Wales it is interesting. I am not obsessed with Wales, but it just happened
to us. It is interesting that with the old former mining communities—I did quite a lot of work in the report about
this—where you have ex-miners who think that this has nothing to do with them and so on, there is a cultural way
of developing an interest in this. One of the programs had 30,000 people that passed the qualification level and
they are all from unqualified backgrounds, so there is a way of doing it, but it is very much more about getting
some of the community to help other members of the community to develop an interest. Once they do there is a
pace—
   CHAIR: So you see the government's role in facilitating those community based grassroots organisations to
do that?
   Dr Williams: Yes. Also, where a grant is being handed over from the central government or a government
anywhere, this should now be part of the discussion about what you are doing about empowering your clients in
this new world. I think that is important. It is also the message of asking some of the voluntary and third sector
people about what they are doing about this agenda, because a lot of them are doing things. I mentioned in the
report the Smith Family. They have a fantastic record of developing digital inclusion amongst disadvantaged
families in Australia, so there is a model.
   CHAIR: Thank you. Mr Fletcher.
   Mr FLETCHER: Dr Williams or Mr Mitchell, can you describe in a bit more detail the NBN equivalent in
the UK? Can you tell us who owns it, how it is funded and what technologies it is using?
   Dr Williams: The UK position is that by 2014 two-thirds of the UK residents will receive fibre to the
premises. There is a caveat, which is that half that is currently copper for the last mile, as it were, but will be

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replaced incrementally. That is by largely BT-private sector—which is a privatised utility from 25 years ago—and
other private sector deliverers working there, so two-thirds is effectively a private sector result. The final third is
where the problem is in most parts of the world, it seems to me, and that is now requiring special attention by the
central government who are putting in, at the moment, half a billion dollars to try to incentivise deals between the
local communities and the private sector to try to make that happen. It is largely fibre based that they are going
for, except with the final third the government has said that it will be technologically neutral, that is, that it will
support fibre to a community centre, as it were, through the BT route and then, beyond that, whatever can be
achieved in a mix of technologies and they will put some incentive money into that. That is more or less what it
has said. Mr Ballantyne, would you like to add to that?
   Mr Ballantyne: I think that has covered it. They use what is called fibre to the kerb technology initially in the
roll out. They have obviously also used a lot of DSLAMS, which is ADSL equipment, but they have now
progressed on to fibre to the home or fibre to the premises, so the rollout has moved.
   Mr FLETCHER: The example of Cornwall that you gave was interesting. You said that was a mix of
funding from BT and from the EU.
   Dr Williams: Yes, it is.
   Mr FLETCHER: Is that one of the relatively expensive areas on a per premises or per population basis?
   Dr Williams: Yes. In Australian terms it is not remote, of course. It is 6½ hours from London travelling to
450,000 people. It is in a very rural setting. It is expensive to provide fibre to the home there, but a lot of home
working is taking place now. In order to make it happen the BT offer gets you so far and then a bid was put
together to get what they call European regeneration funding, so it is a mixture of public and private funding. I
think the government's vision for the final third is that some cocktails will be put together, which are public and
private funding, to try to make that happen in other parts of the country.
   Mr FLETCHER: I was interested, when doing a quick calculation, in the numbers you quoted. On my
calculations, if I have it right, it would equate to about A$406 per person for Cornwall, taking £132 million and
500,000 people, and the NBN here is costing $1,680 per person, if you do the same calculations, which is an
interesting comparison, so it is very helpful to hear of those examples.
   I have a question for Mr Mitchell or Dr Williams. From Huawei's experience around the world what are the
sorts of mix of technologies you are seeing used for fixed broadband delivery?
   Mr Ballantyne: It is predominantly fibre to the home technology. There are a couple of different standards. In
Japan and Korea they have used an EPON standard rather than the GPON, but the GPON standard has
predominated now and even in Japan they have started swapping from the EPON standard. It is just a definition of
the way the fibre system works.
   Mr FLETCHER: If I take the US as an example, would the majority of premises in the US be connected to
fibre to the home?
   Mr Ballantyne: Not yet, but there is a very extensive fibre to the home rollout by Verizon over a large part of
the US.
   Mr FLETCHER: What about AT&T? Which one are they?
   Mr Ballantyne: AT&T are also doing fibre to the home rollouts, but they are less extensive compared to
Verizon.
   CHAIR: How standardised are they? One of the things that I heard from companies when I was in the US was
the rollouts by private companies are often structured in ways that their retail has to be bought wherever the
whole infrastructure is rolled out. Is that still the case? Are you aware that there are some issues around having
the platforms compatible with services and products?
   Mr Ballantyne: The base standard that they have used in the US is GPON, the same as is being used here in
Australia and which has become the predominant technology around the world, replacing the EPON standard. In
the US it is what we call a vertically integrated approach, so it is not an open access wholesale. People like
Verizon build the infrastructure and then they sell the retail service. It is a complete package.
   Mr FLETCHER: Dr Williams, I would like to ask a bit more about a couple of your examples. They are
enormously interesting and valuable; it is terrific work. You talk about the image exchange portal on page six of
your submission. Am I right in thinking that runs between hospitals, clinics and so on?
   Dr Williams: Yes. The cost saving is one of the issues because it used to have to be burnt onto a disk.
Frankly, it is a remarkable saving, so the answer is yes to that.


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   Mr FLETCHER: You have talked about the benefits of broadband in education and again I presume that is
based upon connections to schools.
   Dr Williams: Yes.
   Mr FLETCHER: Is there a design rule in the network, for example, that all schools and all hospitals have to
have fibre?
   Dr Williams: No, there is not. It is interesting that a typical British compromise is that a lot of people have
invented things and pilots themselves rather than being told to do so. That is why Wales is connected. Nobody
told them to do that. What is interesting is that there is now a movement underway, partly driven by cost, to try to
see whether agglomerating these things will actually save quite a lot of money. Schools are getting together all
over the country now in regional alignments.
   Mr FLETCHER: What is your perspective on the way that the networks and their benefits might be assessed
for public policy purposes? You have given us some very interesting, tangible examples of cost savings. Do you
believe that it is possible to construct an economic case that is based upon those kinds of savings or other
benefits?
   Dr Williams: Yes. There are some established principles around doing that. It is interesting in the UK, and it
is something worth looking at. The Treasury has a Green Book appraisal process. I am sure you have similar here,
but probably not quite the same. It is worth looking at because it looks at some of the externalities that are
claimed from investments. It is very rigid about that. We need professional scepticism about this, but at the end of
the day I think it can be proven. There are some established ways of doing that.
   There is an example I did not mention. I like the small ones, not big savings, but also play to the quality of
service. Some local authorities in the UK are close to having a database with 90 per cent of the local population
on it who have agreed to provide their email addresses and so on. They are very close at this point in being able to
say, 'I'm not going to post anything to you. I'm going to email everything to you. I may email to you videos of the
councillors in their meetings. I will certainly send you the rates bill rather than post it.' It is not just the savings of
a couple million-
   Mr FLETCHER: Do we have any evidence of how many of those videos have been opened?
   Dr Williams: That is a very good point. My optimism breaks down at that point. We talked to politicians as
part of the report and they actually say that people are. I think Senator Conroy was saying that it is all too real: the
world of citizens now invigilating politicians very much through this way.
   Mr FLETCHER: I have a linked question on that. Have you given any thought in the UK or Australia as to
how much could be done with the existing infrastructure, for example, the notion of rates notices going out by
email rather than by snail mail?
   Dr Williams: Yes. I think it goes back to the beginning. I do not think business managers of these processes
have understood that was possible. Now they understand it is possible, it is about a way of working through and
re-engineering your business processes. I think that is the real call, the re-engineering of your business processes,
rather than just putting pipes in the ground.
   You said something to me about post earlier around comparative costs and I just wanted to come back to that. I
am not entirely sure of the argument you raised, but it is something around the fact that BT is able to use the ducts
that already exist from its historic investment in the UK. I am not sure whether that has been properly counted in,
frankly, in the cost of these things. The actual cost of that work may be lost in the process, as it were, but it saves
billions, the fact that they can use the existing ducts. In terms of comparisons that all needs to be understood.
   Mr FLETCHER: I think that is all for the moment.
   Mr STEPHEN JONES: I have a couple of areas. I have lost my accent a couple of generations ago, by the
way.
   Dr Williams: Where are you from?
   Mr STEPHEN JONES: It was a long time ago. You were talking about the digital champions and I would
like to follow up on those tangibility issues. In Australia, many within the business community are able to get
their heads around the tangibility of business-to-business benefits or even government service provider or
government agencies transacting with each other, and you have given examples of that through ubiquitous high-
speed broadband. I think it is less tangible for many households. I was wondering, from your experience, whether
you have examples about how ubiquitous high-speed broadband can make a difference to a low-income working
family in a suburb in Australia or an aged pensioner living somewhere similar or a household?



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    Dr Williams: For me, with my background, it is very important that this happens. The report is quite strong on
the two aspects that you raise, which is understanding that there are different kinds of challenges for public policy
and getting the best out of this technology with certain communities so, frankly, understanding that is a challenge.
    The second thing is about older people. There is a massive amount of effort in the UK and quite a lot of effort
in Europe as well, around reaching older people. My take on this is that there are ways of doing it, setting
yourselves the target of overcoming those divides and understanding what is required, but also the examples of
where people are using this technology becomes very persuasive for people in their own community as well. For
example, again in Wales—by the way, I am married to an Australian and I do have an Australian citizen daughter
and I am not obsessed with being Welsh—the examples of people discovering that they can access jobs, training,
education and opportunities far easier online than in face-to-face encounters, frankly, with middle-class
bureaucrats. There is quite a lot of that going on where people are discovering learning by this thing. I think that
is important and a quite optimistic result.
    I am particularly interested in the use by older people. I now discover that I am, indeed, a silver surfer because
I am over 50, so it is very important that we elderly get digitally included, but there is a massive amount of effort
in the third sector in the UK. Again, I think what is really interesting is that what older people are finding and
what we are finding with older people is that they are not just doing it introspectively, in front of a screen all day
with 10 hours of darkness. It is actually reigniting their involvement and their interest in community outside the
door. There is quite a lot of evidence about that, that there is more social interaction resulting from being online
rather than less, and it particularly affects older people. If you look in the report the advocates of digital inclusion
for the elderly have tremendous stories around what the elderly are now doing with this inclusion which is
actually making a difference in their communities outside the door, so I am quite optimistic about this.
    Mr STEPHEN JONES: I will ask you to dig back to your background in regional development. I represent
an area which traditionally obtains both its wealth and its employment base from manufacturing and coal mining.
We need to expand our employment and economic base. How will the NBN, in your view, assist or will it assist
in that process?
    Dr Williams: It is interesting. I think there is inevitably an opportunity and a threat in this. The opportunity is
that as manufacturing moves towards advanced manufacturing—and I have just done some interesting work in
Knox around advanced manufacturing in Melbourne as it moves from brawn to brain—the connection with
design and with using modern technology is pretty obvious. Also the capacity for the lifestyle entrepreneurs who
are design people, for example, to live where they want, but to connect with an international community of
experts on manufacturing product online is really interesting and it is happening.
    The threat is obviously also further social and economic exclusion for people who do not have the skills and
the capacity and that is why, I think, that Australia must not think that it does not have that challenge. The
challenge of not just incorporating people because it is socially beneficial to be involved in the national network,
but actually the economic consequences of getting excluded from that are really important. I think it is quite a
major task ahead.
    The final bit is optimistic also because there is evidence, particularly with kids from unskilled backgrounds that
do not like formal teaching techniques who are actually switched on, literally, by what you can do with this
technology. Hard-to-reach kids, kids that would have been involved in manufacturing years ago, are the ones that
find this particularly interesting, so I think there is an opportunity as well as a challenge there.
    Mrs PRENTICE: I am wondering where you saw Huawei being involved in the NBN rollout in Australia,
where you would like to be involved, and what do you see your role as going forward?
    Mr Mitchell: Obviously as the No. 1 provider of fixed networks we could play an important role.
    Mrs PRENTICE: In physically rolling it out?
    Mr Mitchell: No, the providing of the GPON equipment. The NBN has announced that Alcatel-Lucent is the
first provider of the GPON equipment. When they made that announcement they said a second vendor would be
announced within 12 or 18 months, which was in July last year. We are hopeful that we may be considered as the
second vendor but, as I said, I think we have a lot to contribute, especially for the fact that globally we are the
only company that actually has the wholesale equipment needed. There is a big difference between a vertically
integrated fixed network to a wholesale network that we are providing. The UK and Singapore are the only two
countries that are doing that, and they are both using our equipment wholly in that NBN build, so we are the only
company that actually has the equipment in the field, tested and being used at the moment.
    Mrs PRENTICE: What about going forward?
    Mr Mitchell: With the NBN or in Australia generally?

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   Mrs PRENTICE: In Australia.
   Mr Mitchell: Obviously we have just been announced as the major vendor for Vodafone in rebuilding their
whole 2G and 3G network. That has put us in a whole new category. Optus is also a major customer of ours and
we currently have all their regional mobile network. We are doing some great work with Vivid Wireless. We have
rolled out their 4G network in Perth and, as they look to roll out their equipment nationally, we hope to play a part
in that as well.
   In Australia, predominantly our business is in the wireless area, but obviously if we are chosen as part of NBN
that would actually change more to the fixed area. Is there anything else that you would like to add to that, Mr
Ballantyne?
   Mr Ballantyne: I think that covered it.
   Mrs PRENTICE: That will keep you busy.
   Mr Mitchell: I can add to that. One of the things that we have found, which may be relevant to your
committee, is that there is a limited resource in Australia of people skilled in next generation technology, and it is
going to be vital for the government to ensure that people are trained in that. Through RMIT we have done a
commitment to 2,000 places of training people because we do not have the skills in the Australian workforce that
we require for the next generation technology, whether it be wireless in the LTE, which will be the next
generation happening in Australia, or in the GPON area.
   Mrs PRENTICE: A lot of the focus is on universities. It would astound me if there was not a whole load of
trade and paraprofessionals that we would normally see through our TAFE systems and so on. Are you conscious
of whether there has been much development in the VET sector to address those emerging skill needs there as
well?
   Mr Mitchell: We have worked through RMIT to also do some TAFE training, but at the moment it is in the
electronic engineering and the design area, the more highly skilled places, that we are currently looking at. Mr
Ballantyne might be able to add to that.
   Mr Ballantyne: Yes. We are an equipment vendor. It is very high-tech stuff so the kind of skills that we need
are fairly high level, more likely to be trained at RMIT or universities. There is certainly a large skill requirement
for cable installers and external plant and so on, which I would suspect would go through the TAFE area, but it is
not directly relevant to us.
   Dr Williams: Just one thing, not so much on the training side but on the business side, that I discovered
recently which I think is really interesting is that the country with the biggest source of supply of patents around
applications for the technology is Korea. It is twice the US on a fifth of the population. The fact that they have the
NBN rolling out, but also this governmental involvement around applications plays to commercialisation of the
opportunity, but also the skills that are required being broader than just the engineering skills around the
implementation of the pipes as it were. I think that is quite interesting.
   CHAIR: It struck us as interesting that we have heard people do not just have a plumber or an electrician to
come to the house, they actually have technical structuring of the home. They want someone to come in and wire
up the sound system, the TV system and all these sorts of things and it is a whole new thing. I share the area with
Mr Jones and there is a whole new level of trades emerging.
   Mr SYMON: As an electrician in a past life I know a little bit about that subject. Dr Williams, again, I need to
say what a great report you put out earlier this year. It draws attention to so many areas which I do not think are
always looked at immediately. They are normally looked at later on. To be able to read your report and what has
happened in the UK and then look at the difference between what has not happened in those areas here has given
me lots of openings into areas that I had not really thought about before, so thank you very much for that.
   In your report you talk about the National Health Service, NHS Choices, and the savings that were made. It
was nominated there at £44 million. Can you tell me what time frame that was over because I imagine every day
that goes by that figure must grow?
   Dr Williams: That was a study done by the Imperial University, which is a serious bunch, and it was over one
year. That is effectively a Facebook program for interacting with patients. It was over one year, so since then it
has probably gone up to twice that because it was done two or three years ago. I would add to that, if you saw it in
the report, that 300,000 people in the UK accessed that site on one day. When there was a big concern about the
Swine flu at the time, people wanted advice and guidance and so they were diverted from going to their doctor by
having this capacity. There are all sorts of consequences to that. The £44 million is a very narrow figure and
probably does not reflect the real knock-on consequences of this.


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   Mr SYMON: I imagine that type of service is not much different. For the people that are accessing it, their
needs would not be much different to people's needs in Australia.
   Dr Williams: I would think that it is identical. This is the issue that I raised at the beginning about how you
organise yourself in terms of your conventional services, if you like, and then how it plays with this new
technology. There is obviously a great advantage in the UK where you have a single NHS platform. It does not
differ from one part of the UK to the next, which is a real issue in Australia where we are a lot more
differentiated. The same principle applies. These are not PhD students accessing the service. These are people like
everybody in this room and they are getting benefits from that and also developing skills. What is really
interesting is that people are putting videos on and are forming user groups between people with like illnesses or
issues of interest. There might be people who are providing care to cancer sufferers. They are beginning to put
videos on about their experiences. It seems to me that it is a very different world.
   Mr SYMON: Although it is not the NHS, Medicare is Australia wide and in the future I could see that as a
great example to be followed, going on from what you have reported on in the UK.
   Dr Williams: I think that makes sense. The issue is then about engineering it in such a way that you make a
lot of savings. Despite the access point to helping being different in Australia, people spend a lot of resources
doing that and take time off work and all of this kind of stuff. There are real benefits to the economy of having
something that you can access without taking time off to see the doctor.
   Mr SYMON: One of the other areas that I wanted to ask you about from your report was the growth in remote
communities and how access to broadband has actually turned around what were declining communities into
growing communities in the UK. Do you see that applying in the same way in Australia, or from what you have
seen do we have differences that might make that harder?
   Dr Williams: I think the differences make it harder, but not irrelevant. That is the point. It is horses for
courses, but there are places exactly the same that will not only benefit from this kind of thing, but we are
beginning to see it. A number of recent studies have shown some demographic turnaround. Families do not
always want to live in the inner cities these days, so there are some real forces at work already that mean, it seems
to me, that you can play with it in Australia.
   I think the fundamental proposition is this, and it works, which is that in the UK up until about 10 years ago the
rural areas had seen a massive depopulation. They are now seeing repopulation. The only parts of the UK that are
growing now are regional and rural areas, because people want to live in Scotland, Wales or in the north of
England if they can do the kind of job that they would have done in the city. They really want to do that for the
quality of life for their family. If they can access public services and private services online in a remote area then
they will do so for all sorts of reasons. That logic does apply in Australia. It would not apply everywhere, but it
will apply in areas where people will have thought are bound to decline. No, they are not, and some of these are
the sea change, tree change kind of areas that people want to live in. It is a necessary but not sufficient, in that all
sorts of other things play into this agenda. You cannot envisage the recovery of some of these areas without this
kind of modern tool, and I think it is as applicable to Australia as it is to rural Wales.
   CHAIR: This will be your last question because we are well over time.
   Mr SYMON: I could ask questions all day. With the public sector broadband aggregation talked about in
Wales and the delivery of services, you mentioned up to 90 per cent of some council services can go over that. I
have a fairly practical question which is one that bugs me quite often here in Australia. Email addresses are quite
intangible and many times quite itinerant. People change service providers, leave addresses behind and not always
when you send something to a defunct address is there a notification that it no longer exists. Is there any way or
system in the UK where that is overcome?
   Dr Williams: The answer to that is that I do not know. I was going to come up with a sinister answer which is
that they do know where you live. The honest answer is that I do not know, but I think that is a technical problem
which I am sure my colleague is thinking about night and day and will solve. I take the point.
   Mr Ballantyne: We will have to come back to you on that one. There was certainly a move a few years ago to
make email addresses portable, but it seemed to die and go nowhere.
   Mr SYMON: We have managed to do it with phone numbers in Australia. We are finally getting there. If we
can do it with things like that—
   CHAIR: Maybe people just like leaving dead email addresses behind.
   Mr Mitchell: Also what you will find is as we move to what they lovingly term 'the cloud' virtual, these things
will follow you because all you need is internet access. The data centres will be there. Google is already doing


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that with their Google documents, emails and that sort of thing, so you will see that happening more and more.
You could change your provider, but you would still have your information on what they call 'the cloud', which
are essentially data centres where you would be able to move that. There may be one—
   Mr Ballantyne: There are ways to do it. I have my own domain. It only costs about $120 for two years and it
does not matter which service provider I use for my broadband service, I just keep that one email address. That is
something where you have to be perhaps a little more knowledgeable than the average person to be able to take
advantage of it. It can be done already, but to make email addresses portable between service providers is still an
unsolved problem. I am not sure that it will be.
   Dr Williams: The economic opportunity that Australia has to develop cloud services are on the back of this
NBN and are particularly helpful to SMEs because they cannot always afford to do all of those services. It seems
to me that it is pretty big, but it requires the kind of thinking that we are talking about that comes at you from left
field.
   CHAIR: Mr Fletcher has one last question.
   Mr FLETCHER: I have two very quick follow-up questions to make sure that I was properly understanding
what you said before. First of all, Dr Williams, your view is that, for example, there is a standard methodology
used by the British Treasury which could potentially be used to do a cost-benefit type analysis.
   Dr Williams: I am resistant to say anything positive about the UK Treasury at all because the Green Book
appraisal is always a way of stopping projects happening as well, but it is pretty good on the externalities and, if
you like, network benefits of projects, so it is worth looking at.
   Mr FLETCHER: Mr Mitchell, I have a quick question for you. I want to make sure that I am right in my
thinking. You said you were a major fibre-to-the-premises vendor, but it is true that you are a significant fibre-to-
the-node vendor as well?
   Mr Mitchell: Yes. The GPON area where we are is fibre to the home and fibre to the cabinet, so both.
   Mr FLETCHER: I understand.
   Mr Ballantyne: It runs off the one box.
   CHAIR: I have not even begun to touch on many of the issues, including tele-working and alternative
business models. I think you gave a great example of a travel company where there is no office; everybody is
working and connected from home. There is some really transformative information in there that is profoundly
useful.
   We had a gentleman with an early ISP small company in Ballarat that talked to us. He said, 'You've got to stop
talking about the engine and start talking about the outcomes.' Communities want to talk about 'what I want to do
with the thing. Don't confuse me with the technology of how the engine works, I just want to know I can drive the
car to where I want to go', so to speak. I think what you have presented to us has given us a fantastic example of
that and is a very important contribution to our inquiry, so we greatly appreciate it.
   Thank you for your evidence here today. If we have asked you to provide any additional information you can
forward it to the secretary. You will be sent a copy of the transcript of your evidence to which you can make
corrections of grammar and fact. Once again, thank you very much for your time today; we appreciate it. We will
break briefly.
                                       Proceedings suspended from 10:49 to 11:04




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KRISHNAPILLAI, Mr Maha, Director of Government and Corporate Affairs, Optus


   [11:04]
   CHAIR: I welcome everybody back to the hearing and I welcome the representative of Optus to today's
hearing. Although the committee does not require you to give evidence under oath, I should advise you that the
hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the
respective houses. We do have a written submission from you. Thank you very much for that. Did you want to
make some opening comments to that of about five to seven minutes? Three would be fantastic; we did have a
promise of three minutes yesterday that was more like 30, so I am hoping your three is not as flexible, Mr
Krishnapillai. Would you like to make some opening comments and then we will have a question and answer
session?
   Mr Krishnapillai: Thank you very much. Thank you very much for the opportunity to speak today. Optus
welcomes the opportunity to appear before the committee today to further examine the role and potential of the
National Broadband Network. Optus supports a National Broadband Network which will deliver greater
competition and choice for consumers. In particular, Optus continues to be a strong supporter of the government's
vision of the planned National Broadband Network, NBN, and high-speed fibre as it has the potential to positively
reshape the fixed-line telecommunications sector in Australia and deliver significant benefits to Australian
consumers and businesses. As a product of competition policy itself, Optus will always challenge the industry to
operate as competitively as possible. We welcome the NBN and the separation of the vertically integrated
incumbent as fundamental steps in the right direction.
   For the NBN to deliver robust competition it requires a governance and management structure which is
accountable for delivering its pro-competition principles promised by the NBN policy framework; in other words,
with the right checks and balances. Back in February of this year, Paul O'Sullivan challenged the current way of
thinking by introducing the concept of possible new management and governance models to ensure commercial
pressures are brought to bear—and continue to be brought to bear—on NBN Co. itself. Optus encourages a focus
on the requirements of end customers and the benefits to our community through the competitive delivery of
services over Australia's broadband infrastructure. Competition and choice drive meaningful innovation and
improve customer service and technology in telecommunications. Innovation is accelerated and allowed to
prosper through a truly competitive industry. It is this competition which we believe drives a focus on the
customer and society's wants and needs.
   The real strength of the NBN will be the fact that we will see an explosion of applications delivered
simultaneously to end users, and not simply one or two in each specific sector. The sheer volume of data the NBN
will carry will in turn attract more usage which will see innovative new products and applications continue to
develop and grow. Speculation on the future can often be very fraught with danger as, by its very nature,
predictions can limit possible opportunities. Historically, predicting the possibilities of the information,
communication and technology sector has seen its fair share of mistakes and underestimations, however Optus
believes if the right framework is built now with a focus on creating competition and supporting research and
development, the opportunity is here to create an environment where innovation will flourish. All Australians
need to be proud to look back and see that we used this opportunity to create the infrastructure and the market
settings that ensure we remain a world leader in productivity and innovation. Thank you very much.
   CHAIR: Thank you. Thank you for the submission as well. I just want to take you to some of the principles
that are in the section on delivery of government services and programs in your report. In particular, you make the
point about the emergence of government 2.0 agenda and some of the opportunities there. You also talk about the
multichannel, event-driven contact services, more personalised touch points and potential fast, efficient, one-stop,
online shops. I am wondering if that is just a concept that you are talking about or if you have actually seen
examples of where that may operate or might be working that advised you in that, that you could point us to.
   Mr Krishnapillai: Which particular section are you looking at?—2.4?
   CHAIR: It is 3; the delivery of government services and programs. Under 3.2 you go through some of the
framework around that in descriptive ways, but I was just wondering if there are any examples behind that from
international experience.
   Mr Krishnapillai: I guess there are probably a couple of comments. The first one is that it is a general
principle that we are suggesting that when you have the availability of high-speed broadband and links to higher
capacity through data centre usage in the right way, we think there will be an opportunity for these sorts of things
to occur. In looking internationally, Australia is in many ways at the forefront, if you like, of some of the


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developments that are likely to occur in this space, so although Australia has done some e-government initiatives,
there have not been too many examples of that that have been developed in the last little while. So, I think the
short answer is we see the potential for it and we certainly have been working with a number of government
agencies to date.
   The Australian Taxation Office is an example of one of our customers where we have been working with them
on, primarily if you like, information technology driven solutions on communications. What we see as the next
step is integrating various databases and management of those databases in a way that is only potentially available
when you have the key missing link, which is high-speed broadband into every home. So, I think what we are
trying to outline is that although many organisations, corporate and government, have the ability to store
information and have broadband today, it is the linking into end customers and users and people in the community
that will change the fundamentals of how that goes back and forth.
   CHAIR: In terms of that I am just wondering about one of the things that was brought up with us in
Queensland when we were in Brisbane. A gentleman was talking about just a personal experience during the
flood events where he was aware that the map had been held by council and you could access that online, but of
course whereas previously people would wander in and have a look, all of a sudden you had an event and
everybody was trying to get on at the same time and access that and he said it was just impossible to do so. I am
just wondering from your company's perspective in the work you are doing are you helping departments identify
that and manage those sorts of issues about what end users will actually be looking for and wanting to utilise?
   Mr Krishnapillai: I think there are a number of steps along that path, but the key issue in that example is that
the capacity at any one time for multiple people to use networks is probably the key bottleneck and limiting
factor.
   CHAIR: Exactly, yes.
   Mr Krishnapillai: That is what the NBN is all about; actually overcoming that bottleneck. Even wireless
networks is an example because they are shared networks. If you try and pull information though wireless
networks in the same sort of way you have similar sorts of bottlenecks. So, I guess the main point there is that an
NBN will solve part of that, but it is sufficient, but not enough. You still need to have government departments
putting information online and that requires data centre expertise. You still need networks that are able to access
that and those tools to manage that within those organisations and then you also need better ways, if you like, of
individuals being able to have the speed and access at either end. So, there are a number of bits, if you like, to
that, but the key bottleneck, certainly in that example, is that you do not have the capacity which a fibre network
will give you.
   CHAIR: Just to take that one step further before I go to my colleagues, do you work very much with local
government as a level of government, which would seem to me one of those that is going to be particularly of
interest to end users, to people in communities, as in that example? I am conscious of the huge variety of sizes
and expertise and some of the capacity perhaps to pool and do common things across regional councils and so
forth. I am just wondering if you, as an organisation, have had experience with that level of government and
perhaps models that might be more effective for them?
   Mr Krishnapillai: Absolutely. We work with all levels of government in terms of providing communication
and IT services, but maybe if I step backwards a little bit as to why we have ended up where we are today. In
many ways we only address probably about 50 per cent of the corporate and government market. The reason for
that is that the key bottleneck for us is being able to get to regional centres without the backhaul or the linkages at
reasonable prices. To be blunt, Telstra's extortionate pricing in that area means that we are really unable to
competitively offer services in most regional areas, so as a consequence we do not work actively in the fixed
communication space in providing those services in certain areas. We are very conscious of only trying to
compete in those areas where we can differentiate, and effectively that limits our market. So, other than Telstra,
the entire telecommunications sector is therefore limited to areas where you do have backhaul competition and
that precludes then some of those regional areas. Once again the key bottleneck is backhaul and having enough
broadband access to people in those regional areas. The flipside, as I said, is that in city areas and regional
centres; clearly we do a lot of work with those organisations.
   CHAIR: That is useful, thank you. I think we will go the other way this time. Mrs Prentice, it is your turn to
go first.
   Mrs PRENTICE: You mentioned the need for robust competition. Is the current NBN Co. model that is
rolling out providing that or do you think here needs to be some changes; if so, what?



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    Mr Krishnapillai: Yes, we were actively involved in discussions with the government and the department
around the sorts of legislation that should be governing NBN Co. We were, in the end, largely happy with that. I
think the key assessment criteria for us was without any legislation they would have no rules and we were very
keen to make sure there was at least a governance structure in place. We are now comfortable that we have got to
step one, which is that there is a governance structure in place. We still remain concerned that we have created,
effectively, a monopoly, and we want to make sure that wherever possible there are as many checks and balances
and as much transparency in the ongoing operation of the NBN as possible. A couple of examples would be: we
would like to see greater transparency between NBN Co.'s deal with Telstra; we would like to see greater
competitive dynamic exerted on NBN Co. in years to come and we have suggested, for example, that you might
outsource management of parts of that network in years to come or you might put some competitive pressure by
having regional competing management structures even though you have a monopoly, if you like, ownership of
the infrastructure; we have also suggested we would like to see the board and governance structures more broadly
reflect industry and other parts of the community.
    So, while we are very happy with the first step because at least we have got governance in place, we can
certainly see some opportunities to have better checks and balances, transparency and competitive dynamic at
play.
    Mrs PRENTICE: Before, in your response to the Chair, you were talking about backhaul in regional areas.
What about the concern people have raised with us about backhaul into Australia?
    Mr Krishnapillai: International capacity?
    Mrs PRENTICE: International, yes. Is that an issue?
    Mr Krishnapillai: Like lots of things in telecommunications, sometimes these things go in cycles. It was not
that long ago that we had a massive glut of capacity in international routes and a number of companies going
bankrupt actually in those areas. There has been a very quick take-up. In fact, our example is probably a good
one, that the forecasts we put in place for our usage of international capacity were overrun very quickly. We think
we know a thing about forecasting but the demand over the last two to three years for data usage internationally
has been higher, I think, than anyone really expected in the industry if we are honest about it. Therefore, the need
for additional international capacity I think will certainly emerge again in the future, but we do not see that as
being an area that certainly requires government intervention. We think there will be solutions in place in years to
come that increase that capacity.
    Mrs PRENTICE: Thank you.
    CHAIR: Mr Symon.
    Mr SYMON: I would like to ask a question arising from your submission that I actually have not thought of
up until now about this area. What happens to all the old equipment? You talked a little bit about product
stewardship and I just wanted to ask how is changeover to fibre to the premise going to affect what Optus have
already installed to date? What particular impact does that have on your company?
    Mr Krishnapillai: I think there are a number of components to that. Over the last few years, more and more
equipment has become standardised in terms of how it operates, so the move to IP protocols and the move to
more international standards on the hardware as well as the signalling, if you like, of that equipment means that is
less of an issue than it would have been, say, five to 10 years ago; far less of an issue.
    The second point is that some of the networks that we have developed, such as HFC networks, are 15 years
plus old, and they are by their very nature using older technology to deliver those sorts of services. The third thing
is that clearly when you standardise to an NBN you are going to have a standard interface that you are going to be
required to work to, so all of us in the industry, and I suspect in the future, will be looking to standardise. That is
not necessarily a bad thing. To standardise the way we access the interface within a home is actually a good thing.
The point I made earlier around competition is that we want to make sure that there are no technical impediments
to competition so that anyone can come in and offer a service, be it a content service, a broadband service, an
IPTV service or whatever, but because there is a standardised interface you do not have that technical limitation. I
think that is an important point, that you do not have proprietary boxes, systems or interfaces in that place.
    Mr SYMON: As exist now.
    Mr Krishnapillai: Exactly.
    Mr SYMON: My house has three connections.
    Mr Krishnapillai: That is exactly right. So, I think that is part of the advantage with standardising and, as we
have said many times in the past, we were reluctantly accepting that there is a monopoly. Ideally you would want


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to have multiple different technologies in some ways. You want that competitive dynamic. What we have realised
over the years gone by is that when we have tried to roll out alternative facilities based infrastructure, such as our
HFC network, effectively we were carpet bombed back into the stone age and we were losing $300 million a year
and had to write down a billion dollars in that period. We have reluctantly accepted that you need a common
standard interface and common standard piece of infrastructure. As long as that is kept down at the, to use the
technical term, layer two level, basic roads, and then you have competition at layer three and above, then that will
be a good outcome.
    Mr SYMON: Therefore avoiding having multiple fibres or cables running to premises.
    Mr Krishnapillai: That is exactly right. So, you will have a single fibre into every premises. You do not
waste or duplicate infrastructure into homes where there are high capacity to pay and then have nothing left over
in a broader sense; you have a level playing field for that basic infrastructure. The key is, as I said, that we want to
make sure that NBN Co. does not start drifting up into layer three and above, nor does it start offering more and
more retail services. That is why I mentioned beforehand checks and balances; we are very keen to make sure that
you do not drift towards one company starting to offer all those services.
    Mr SYMON: What happens to your HFC network in the next decade?
    Mr Krishnapillai: We have got a very successful HFC network. Where we have infrastructure, we have been
very successful in terms of offering services and broadband but, as I have mentioned, it is a 15-year-old network.
We are currently offering 100-meg speeds in Melbourne, Brisbane and Sydney and those sort of speeds and
services that have been very popular and we will continue to do that over the next few years. The counterpoint to
that is that the reality is that, as I mentioned, HFC is an older style technology and it effectively is a coax cable
last mile type technology and at some point in the future that will be less relevant up against a full fibre network,
where we inevitably see this heading. So, we want to work with NBN Co. in terms of understanding their
roadmap and understanding where we want to take, effectively, migration of customers in the future to.
    Mr SYMON: Switching questions, I would like to talk about competition in rural and regional areas, but
particularly in the trial rollout sites. Have you been offering services in those areas over the NBN up to date?
    Mr Krishnapillai: We have chosen to wait until the mainland sites were a bit more advanced, so we did not
participate initially in the Tasmanian rollout. We are very keen to understand, as the large organisation that we
are, what sort of interconnect and IT systems we need to develop to make that work. We are actually a little bit
cautious about getting too involved, too early. We remain involved very closely with NBN Co. in terms of
understanding those product specifications and we are now working with them in terms of first release launch
sites in Australia so that we can start to offer services to end customers. We are still, I guess, effectively at the
technical area, rather than end customer, offering services level.
    Mr FLETCHER: You talked about the importance of backhaul as a constraint on competition in rural and
regional areas. It is also important, is it not, in terms of competition in the mobile area? Have you had any
discussions yet with NBN Co. about acquiring backhaul from them as they build out their network?
    Mr Krishnapillai: We have had initial discussions with them about where, obviously, the regional blackspots
program will be going to and how that will work. We, as you know, already have significant fibre for most of our
mobile network in place today, so when we start talking about the last 15 or 20 per cent, which is the regional
areas of those mobile networks, we are not in the position yet to establish whether changing lease arrangements,
which we have today, across to backhaul arrangements is appropriate. One of the challenges we have, of course,
is that you do not always have the base stations in the spots that the regional backhaul is going to at this stage, so
we do need to think through how that would be linked in to regional backhaul.
    Mr FLETCHER: Presumably one of the attractions to you of NBN is that fibre will now go almost
everywhere and so therefore it is more likely that any given base station would be now close to fibre and you
would be able to get fibre backhaul; is that right?
    Mr Krishnapillai: Correct. Absolutely correct. There are a number of issues in terms of higher speed mobile
broadband that we need to work through, one of which is availability of spectrum. The other one is simple
location of base stations. The third one is clearly the fibre capacity we have to link those base stations. We see
that as a big opportunity for regional Australia because at least one of those three will be not necessarily
eliminated, but minimised, in terms of our capacity to offer high-speed broadband via mobile in regional
Australia.
    Mr FLETCHER: In terms of the issue about points of interconnect and the number that there would be with
the National Broadband Network—which was originally proposed to be 14, I think, and settled at 120—had we



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been stuck with 14 points of interconnect, what would have been the implications of that for the existing fibre
networks owned by Optus?
   Mr Krishnapillai: The key principle we have tried to stick to for the last few years is that you do not want to
enter an NBN Co. monopoly at too low or too high a point. So, what we have said all the way through is that there
is already backhaul in about 120 points of interconnect. We were suggesting more than that; probably about 200.
We have fibre in those locations; so do two or three other players. That is not an area we would like to see NBN
Co. enter, so as a compromise solution we were happy with 120 points of interconnect because if we had not had
that—if we had gone back to the 14 points of interconnect which is effectively seven capital city duplicates—all
the fibre that we would have invested in in, good faith in terms of the regulatory settings as they have been for the
last 15 years, as have other telco players, effectively would have been stranded. It is not stranded in the sense that
we could not use it because clearly we could, but it is stranded in the sense that we built it on the basis that we
would service mobile base stations, corporate customers, government customers and user consumers. Effectively,
the economics of that backhaul—if you take out the end user consumer component and we still need to use it for
the other three—would have damaged quite significantly our ability to provide services to corporate, government
and mobile in those areas.
   Mr FLETCHER: The new provisions that have passed into law which impose restrictions on you or anybody
else now building out a broadband network to serve small business and consumers; can you just explain what
impact that is likely to have?
   Mr Krishnapillai: The principle there we have agreed with is that as much as we may want, as the second
largest telecommunications player in the country, to have that option, we are more concerned that it is a level
playing field, so that if one player is allowed to do it—for example, Telstra—then all players should be allowed to
do it. If no players are allowed to do it then that is a far more level playing field. So, although there is still
potential for us to offer—and we will continue to have the potential to offer—corporate, government and of
course our mobile network linkages, and we need that opportunity to keep some competitive pressure on NBN
Co., we are quite happy if there is a level playing field for us not, along with Telstra and others, to be able to offer
small business and consumer backhaul in those areas.
   CHAIR: Last question.
   Mr FLETCHER: You talked about the HFC network having been upgraded so you can now deliver speeds of
up to 100 megabits per second. Are there any benefits emerging or any lessons being learnt about customer take-
up there that are relevant to the public policy question about the likely take-up on NBN?
   Mr Krishnapillai: Many, I guess, but a couple of the shorter ones. An HFC network clearly is a shared
network. The more people who use it in a particular street, the lower speeds you end up getting. That is different
from a fibre network. The second issue is that the physical limitations of HFC as a technology are very different
from the almost unlimited potential for pure fibre. Effectively it is a fibre to the node—
   Mr FLETCHER: Can I ask a more crude and direct question?
   Mr Krishnapillai: Yes.
   Mr FLETCHER: How many people are taking up the service and what are they prepared to pay for it?
   Mr Krishnapillai: We are actually quite happy with the take-up, but I think it is one where we are looking to
build a customer base in years to come. There are not huge numbers of people taking up 100 meg speeds at the
moment, but I will go back to my earlier comment that we have seen 70 per cent growth in the last two years in
terms of data usage on fixed networks. We have seen very significant growth in mobile broadband data usage and
that is as a direct result in many ways of a lack of options on fixed communications networks. We have seen
major growth rates in usage in the last two to three years.
   Mr FLETCHER: Can you just explain to the committee how you price the premium speed services as
compared with entry level services? What is Optus's perspective as a leading telecommunications sales and
marketing company on that issue?
   Mr Krishnapillai: Clearly the pricing is at a level that we think suits the market. We are not looking to, at this
stage, gain very large numbers of customers. We are looking to develop a customer base of usage at that sort of
speed.
   Mr FLETCHER: Can you mention how much you charge per month?
   CHAIR: You cannot lead—
   Mr FLETCHER: Why not? It is a perfectly legitimate question. I would like to ask Mr Krishnapillai how
much Optus—


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    Mr Krishnapillai: Can I take that on notice, because it actually is not a simple answer and I would want to
give you a full answer in terms of the different plans we have for those HFC networks? As you are aware, we do a
couple of things. We bundle in content, we also bundle in with mobile and other services; and we also have
different levels of plans for different speeds. Rather than giving you, I guess, a one-line number answer, can I take
that on notice?
    CHAIR: I take the point; I think it would be of interest. We have had some evidence, too, of people looking to
different providers because they do provide a different focus. I know we had evidence that those in the gaming
industry, for example, will look for a different type of basic product service. In terms of your basic service, we
would be interested in the cost and what is provided, and how that has changed. I am conscious also that basic
services are not what they were two years ago let alone five years ago. We would like to get a sense of the speed
of that change.
    Mr Krishnapillai: What I think is interesting is the pricing on mobile broadband, which has dramatically
dropped in the last three to four years, primarily due to competition but also because in many ways the
alternatives are not there in terms of fixed communications. I think in a way that has artificially inflated the
growth of mobile broadband.
    CHAIR: Do you hold information on, for example, how many people would have Wi-Fied homes? I was
listening to the ABC in Illawarra before we presented yesterday, and there was clearly some confusion between
what is a mobile device that is operating fully mobile as opposed to operating in a Wi-Fi environment and how
many people were setting their homes up with routers and so forth.
    Mr Krishnapillai: As a company we cannot really capture that information. People have to tell us whether
they have a Wi-Fi router. What we do know is our customers who hook a Wi-Fi router on the end of an HFC or
other broadband connection; we could probably get a lot of that information.
    CHAIR: I would be interested to know some data on that..
    Mr Krishnapillai: I think we can get some of that. People often talk about mobile being a replacement for
fixed in those environments. That is probably the case if you have a Wi-Fi link in your home into a fixed
broadband network.
    CHAIR: Or a tower on every corner of the street.
    Mr Krishnapillai: That is exactly right.
    CHAIR: As MPs we shudder at the thought of that.
    Mr Krishnapillai: Or on every home, if you look at the data usage process in the last few years.
    CHAIR: It would be interesting, I think, for us to have some data on that. Mr Jones.
    Mr STEPHEN JONES: We have heard numerous witnesses talk about the importance of video as a growth
application, and that immediately leads me to think that that must mean that it is the next area of revenue growth
for a company such as yours. It is easy for us to get our head around what video means in the entertainment part
of the market. Where else, if anywhere, are you seeing growth in the use of video in business or other
applications?
    Mr Krishnapillai: I think there is clearly in the corporate market early stage adoption of video conferencing
as a replacement for travel, meetings and so on. Personally I think the real power of video will be when we start
using that for diagnostics and other areas like that. Certainly the area that we have been exploring and working
with is, for example, in the health application field. It is not just about a video diagnostic conversation. You
would start to overlay that with two additional things. One is the ability to have three-dimensional assessments, if
you like, through diagnostics in that sort of sense. The other one which is quite interesting—and there have been
overseas examples of this starting to emerge—is the ability to have one person at one end effectively having a
Wii-type solution, with movement-type linkages so that you can, as a doctor, diagnostically encourage people to
move in certain ways.
    One of the examples I think Mike Quigley raised a couple of weeks ago was the ability for stroke victims to be
given physiotherapy as very specific movements. That is only linked to the ability to understand that three-
dimensional and movement component. It is not just a video then; it is actually three dimensional and movement
generated. That changes the capacity bandwidth quite dramatically in the health field. I am not going to be
forecasting what is going to happen in the future, but dare I say that sort of capacity will have application in
education and in a range of other areas, such as agriculture, security and many other business applications—and
in many ways I suspect that we have not thought through yet.



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   Mr STEPHEN JONES: I can only assume the sort of capacity required to both download and upload those
sorts of applications would be wildly in excess of what is currently available.
   Mr Krishnapillai: Certainly in excess of 100 meg speeds, absolutely. It is the classic chicken and egg issue, is
it not? Without the capacity you are not going to get the innovation and development of those applications, but
without the applications you do not need the capacity. There will be, certainly in my view, an iterative process in
years to come. Certainly internationally you are starting to see that capacity of the hardware, the broadband link
and innovation around the IT systems to make it work come together to lift, if you like, the sorts of applications
that are available. 3D I think is probably the other thing that does, if you think about it, significantly change the
capacity requirements as distinct from just straight video.
   Mr STEPHEN JONES: I represent a regional electorate and it would be fair to say that competition certainly
in the retail area has been pretty ordinary in many parts of the electorate, as it has throughout regional Australia. I
am wondering whether the rollout of ubiquitous broadband through fibre to the home would lead a company such
as yours to enter markets where they had never been before.
   Mr Krishnapillai: Absolutely. As I mentioned before in answer to a previous question, one of the limiting
factors we have always had is that when we do not have the ability to access backhaul into those areas it is
difficult for us to provide a broadband service let alone a high-speed mobile service. It is one bottleneck—and
there are others—that stops us going to those regional areas. Two things are often misunderstood. One is why we
would not just go out there anyway. Effectively when you go into those regions region by region, as I said before,
you get carpet bombed out of existence. That is why you are not going to get that competitive response. Telstra
has a publicly funded existing network, and they can undercut in certain areas in certain ways.
   Secondly, there are other areas, certainly in the mobile network, where we have been gradually incrementally
pushing out. We have actually now got to 97 per cent coverage of 3G throughout regional Australia. That requires
us to build base stations. We built 600 base stations alone in the last 12 to 18 months. We need additional
spectrum to carry that capacity. We have bought additional spectrum and we are looking forward to the digital
dividend to make that available as well. Once you start getting those three things in place you then have all the
ingredients to start offering more regional services than we have done in the past.
   Mr STEPHEN JONES: Bundled services.
   Mr Krishnapillai: More bundled services, correct. Exactly. I was going to say, mobile and fixed as well.
   Mr STEPHEN JONES: Would you be able to give evidence to this committee about whether there would be
other telecommunications service providers that would be in a similar position, that is, to start offering in markets
and regions where they have never been before?
   Mr Krishnapillai: Clearly I cannot speak for other telecommunications companies, but if you think about the
prerequisites—
   Mr STEPHEN JONES: But you are putting together your marketing plans and your business plans
presuming it is not a two-horse race?
   Mr Krishnapillai: Absolutely. What I can talk to is that the prerequisites and the ability for other companies
to enter will certainly be much easier in those regional areas for us and others. In many ways, in fact, it will be
easier—it is counterintuitive I know—for smaller organisations, because the playing field will be levelled. In
many ways there are smaller organisations that will have potential to enter the regional areas. For example, small
local organisations offering ISP services. Today the big limiting factor, of course, is backhaul. That will be
largely overcome, because it will be a level playing field between us, Telstra, Optus and others. You will have
smaller organisations. Conversely, you will have other organisations like ours who will then have a broader scale
and who can justify additional investments, starting to push the boundary of where competition can occur further
and further out. It is certainly not one that will require scale, although scale will be an advantage, but it also, I
think, opens up the opportunity for smaller organisations in those areas.
   Mr STEPHEN JONES: Lastly, what do you think that will mean for end users in those regions—households
and small businesses in those regions?
   Mr Krishnapillai: Again, at the risk of forecasting the future, because I think that can be problematic, I think
what you will see is certainly smaller organisations being able to offer ISP and broadband solutions, but other
organisations starting to bundle in content, functionality and applications in the SMB and consumer market as
well. The potential for that to happen I think will be quite extreme. Like a lot of these sorts of things there is a
competition line. What we are trying to do with NBN, I think, is move that line further and further along where
you can get competitive services. For the last two to three per cent of Australia I suspect you are not going to see
competitive outcomes in those areas other than through some satellite and other services. But rather than the 30-

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odd per cent we have today with HFC networks, I think you will see that pushed up to around 75 per cent to 80
per cent, where you will actually have far tougher and more aggressive competition. It pushes it up.
   CHAIR: I want to take you to a point that you make in your submission. Your submission mentioned tree
changers and sea changers, those moving to rural and regional areas, to some extent taking pressure off our cities,
where so many people have to live because that is where those levels of services are available. We have had a lot
of evidence about the growth of home based businesses. Yesterday we met with two start-ups who are now small-
mediums really—20 to 30 employees—in the Illawarra region in the ICT sector and who started in their
backyards as two uni graduates. It is the common story of vitality and innovation in regions. It is really hard to get
any information on the size of the home based business sector. Not just in the professions as in accountants,
designers, ICT professionals, tradies, carpenters, plumbers but also people using the retail online presence. Do
you as an organisation with your customers who sign up, have an identifier of who is running a home based
business or do you still only have the model which is residential business?
   Mr Krishnapillai: We have a division within Optus called SMB, small business. The only thing I am a little
wary of is clearly that is commercial confidential information.
   CHAIR: Exactly.
   Mr Krishnapillai: We are very excited by some of the opportunities that we are able to offer small business,
particularly the move to cloud based solutions that integrate high end and sophisticated solutions into mobility.
   CHAIR: Do you have an identifier about place? When you say a 'small business', are they are shopfront
presence, are they a home based business; is there something to identify that for you?
   Mr Krishnapillai: Historically, because of the focus we have had, we have focused on those organisations
that have had a mobility component and linking in the mobile side particularly. The SMB side, into the Soho-type
offices and so on; in many ways that is a reflection of the other problems we have had in the consumer market
more broadly, that fixed communications have been effectively choked off because of those issues I mentioned
beforehand, and regional particularly has been choked off. The overlay of cloud, NBN and growth of mobility are
three things that will be the start of much higher use.
   CHAIR: I am absolutely conscious of the commercial-in-confidence issues, but if there are some interesting
trends or capacities there in terms of the innovative small business sector, which is at the end of the day where so
much new job opportunity and innovation actually does come from in our communities, that would be of
tremendous interest to us.
   Mr Krishnapillai: Absolutely. There are lots of examples.
   CHAIR: Mr Fletcher has one last question.
   Mr FLETCHER: Having checked on my Optus 3G iPhone and gone on the Optus website, it tells me that the
Optus Cable 'yes' Fusion, 500 gigabyte with $200 premium speed pack is $119 per month. Am I right to think that
that is if not the top end then one of the top end products being delivered over cable?
   Mr Krishnapillai: Yes.
   Mr FLETCHER: I notice under 'planned specifics' it says 'download speed' and then it says 'Cable, footnote
1', and then footnote 1 says, 'The Optus Premium Speed Pack upgrades your broadband connection to Optus's
fastest DOCSIS 3.0 based internet service ...' In other words, no specific speed is given. I am sure that is for
ACCC reasons. Do you think that will that be a factor, based upon Optus's experience of providing retail
broadband services and operating under the loving care and scrutiny of the ACCC, in what retailers are able to say
about the speeds they can deliver over the NBN?
   Mr Krishnapillai: Yes and no. HFC networks, as I mentioned before, are effectively a fibre-to-the-node style
network, which means that they are shared in terms of capacity. One of the reasons we cannot guarantee 100 meg
speeds to each individual in a street is it actually does depend to a degree on other users in that area, much like
mobile broadband. We can only talk about 'up to'. The reality is that we are with the DOCSIS 3.0 upgrade
achieving three to four times the speed that we were able to offer beforehand, and average users are getting 60-
plus speeds on those, but we cannot guarantee anything like that. The distinction between a fibre to the home
network, as you are aware, is that fibre does not have those limitations, particularly when it is point to point, as I
suspect the Huawei guys would have mentioned, and you do not have those limitations of a shared network in
terms of speed.
   CHAIR: Thank you very much. That is very interesting information and your submission is useful to us as
well. If the additional information you have undertaken to provide could be forwarded through to the secretary,
and of course we understand you can only provide what is appropriate. That will be fine. You will be sent a copy


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of the transcript of your evidence, to which you can make corrections of grammar and fact. Once again, thank you
very much for your evidence today.
   Mr Krishnapillai: Thank you very much.




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STANTON, Mr John Leslie, Chief Executive Officer, Communications Alliance


[11:47]
   CHAIR: I now welcome the representative of Communications Alliance to today's hearing. Although the
committee does not require you to give evidence under oath, I should advise you the hearing is a legal proceeding
of the parliament and therefore has the same standing as proceedings of the respective houses. We do have a
written submission from you, and an extensive and very useful one it was. Can I thank you for that first of all.
Would you like to make some opening comments to that—a maximum of five to six minutes—and we will have
some questions and answers. Thank you.
   Mr Stanton: Thank you, Madam Chair and members of the committee, both for the opportunity to put a
submission to your inquiry and also to appear before you today. Communications Alliance is the primary
telecommunications industry body in Australia. Our membership is drawn from a wide cross-section of the
industry, including carriers, carriage and service providers, internet providers, content providers, equipment
vendors, consultants, IT companies and others. By way of example, your three previous witnesses, NBN Co.,
Huawei and Optus, are all members of our alliance. We believe that the NBN, as planned for Australia, is a
credible solution for the challenge that has been set for it. We probably should think that, because there are about
200 people from our member organisations who have contributed heavily to the design of that network; both the
original reference architecture and also things like the B2B interfaces—all of the technical specs around the
network. We organised seven different working groups over the last 18 months who have contributed a lot of
industry based advice to NBN Co., the objective being that when the network lights up it works not just from an
access infrastructure point of view but also as a network on which service providers can actually deliver services
to customers.
   Our submission give examples that we have found around the region and around the world of where the
introduction of a ubiquitous high-speed network has made a big difference in terms of providing economic
benefits in the health, education and other sectors. We have looked at how economic benefits are realised through
cost savings, efficiency gains, competitive gains, the attraction of investment and so forth. We have also
highlighted in the submission the importance of a network being ubiquitous. This is a topic that has been touched
on by several people today, but it does make an enormous difference to the utility of applications as they are
rolled out on the network if that network does reach the entire target market. We do believe the NBN is a game
changer. We have also highlighted in our submission, however, that it is going to take a lot more than just this
network to derive the economic benefits that are possible, and that what is needed is concerted action at the
applications layer, as again several witnesses have highlighted, if we are going to really derive the value that can
come from this network.
   One of the things that we call for in our submission and elsewhere is the creation of a digital roadmap, as we
have called it for want of a better term, for Australia to coordinate policy settings at all layers of government to
try and make sure that we are aligned and able to derive value out of the network. Such a roadmap needs to
include things, in our opinion, such as a genuine concerted policy to digitise content in Australia. According to
some respected commentators, only about three per cent of the content that rests in Australia at the moment is
digitised and therefore there are limitations on how well we can provide things like e-government services and
others.
   I was recently staggered to find out that we have not even completed in Australia the digitisation of our
passport records. That is telling, because in the countries that have done this well early action was taken to make
sure that all government content was digitised. For example, the Koreans started doing this in 1987, before we
had even started dreaming about the topic, and acted early to digitise everything such that they could actually
drive a platform for e-government services. That has worked. More than 60 per cent of Koreans today are
accessing e-government services, and that is what has driven take-up of the high-speed network in Korea. If you
look, for example, at the Japanese situation, you have 100 per cent of the people in Japan now connected to high-
speed networks, that is, more than 30 megabits per second. Only 30 per cent of Japanese people are actually using
the internet. A much smaller proportion are using the internet for e-government services.
   It is crucial that government really get its act together in terms of having this sort of national strategy and
working to deliver services, which will in turn drive the development of other applications. Since I wrote this
submission, the relevant minister, Senator Conroy, has announced that he is going to release a digital economy
strategy at the end of May, which is a great thing and we look forward to seeing that, commenting on its contents
and hopefully playing a part in making it a success.


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    The other thing that I wanted to highlight briefly was the question of consumer education. Members of the
committee raised that earlier today. It is a topic we have highlighted in our submission, because it worries us as to
the potential for the rollout of the NBN to create challenges for consumers as they are trying to migrate their
services on to the network. Many consumers will face a more complex matrix of decisions as they try and manage
their migration and their communications experience on a fibre based platform. It is much more complicated
potentially than, say, switching over to digital TV. The government has supported the digital switchover of the
TV networks across Australia with very significant financial commitments. At the moment it has directed NBN
Co. to undertake a public information campaign, which extends beyond the NBN Co. network boundary into
areas of applications and services and so forth. We are working with NBN Co. to try to make sure that we have
industry advice available to them on those types of topics, but it is an area where, even if the public education
execution is done really well, there will still be challenges. If it is not done well at all, it could be something we
all live to regret. I think it is an area that needs to be highlighted as we go forward.
    CHAIR: You make some pertinent points, certainly in terms of the evidence that we have received to date,
and in particular the roadmap, which is referenced in the submission, and the subsequent announcement on the
digital strategy. I am not sure of your structure in terms of regional presence and connections. Could you could
fill me in on that? We have seen some very good regional digital economy strategies, particularly in places where
you had some local champions who are driving this in their region.
    Mr Stanton: We have about 170 members and they do include service providers and other players in all states
and territories, although like the industry itself we tend to have a fairly heavy Melbourne/Sydney concentration to
our membership. Certainly there are some good examples in regional Australia of digital economy initiatives, and
equally we have highlighted some of those from overseas in our submission and we have more information
available about those. In various parts of Japan, for example, where regional centres had fallen into a fairly
depressed state, there had been some good initiatives at the prefecture level to create digital economy and e-
commerce initiatives that have actually started to turn around places like Osaka, Kyoto and other cities. There is
good evidence to draw on as to what a powerful enabler it could be if regional governments are able to act. One
thing the Japanese central government has done is subsidise local governments around the country where they
come up with an infrastructure based or e-commerce based initiative. I think they are starting to see some success
there.
    CHAIR: From your observation, who mainly drives that? You say it is at the prefecture level. Is it that level
of government driving it in itself? Are the business organisations in those regional areas involved? What is your
observation of that?
    Mr Stanton: I think in some cases the impetus has come from the local chamber of commerce or its
equivalent, if you like, who have worked back through the regional government and up to the central government.
In other cases it has been simply local organisations of farmers, for example, in one of the projects in Japan, that
banded together and got themselves some funding for an e-commerce network to service high level restaurant
orders around Japan. The experience seems to be that, provided the vision is there at some level of the supply
chain, it can be driven through.
    CHAIR: This might be a bit of a tough question on your organisation committee membership, but one of the
other things we have observed where those sorts of things have happened in regions around this country is that
generally they have been linked to a fairly small infrastructure provider or service provider; that the big players in
this country do not tend to be connected to some of those examples that we saw in regional areas we have been to.
They have been independent internet service providers or independent communications providers—small
companies. Do you think there are ways to better involve our big players in those innovative areas that could
develop off the back of the NBN or do you think we need to be careful that we do not lose innovation by just
expanding big players through everywhere?
    Mr Stanton: I think you observed correctly that you are inviting me to have a little wade in a shark pool.
    CHAIR: You can say as little or as much as you like.
    Mr Stanton: My observation is that service providers at all levels get it in terms of the need to nurture
applications and the need to look for locally based initiatives. You are probably right; some of the smaller players
have been closer to the ground and maybe slightly more innovative in some respects.
    CHAIR: They are their own communities, so they look to them to support them. It is mutual and I understand
that.




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   Mr Stanton: If you look at a provider like iiNet, which is intrinsically Western Australian, very well known
and quite successful in its home state, it is probably logical that there tends to be a stronger connection there at
times.
   CHAIR: Thank you.
   Mrs PRENTICE: You are one of the few who raised the issue of e-waste and the environmental concerns.
You mentioned that you felt that it should be opt in and not opt out. We have had presentations before on the
problem of that method where landlords do not take it up because they do not want to and, therefore, that has a
delayed impact on future tenants and property sales. Would you like to elaborate on that and what you think
would be better options for batteries, if that is possible?
   Mr Stanton: Certainly. I think this is an important topic. If we go with a mandatory provision of batteries it is
quite wasteful in terms of the project costs. It probably adds $150 million to the infrastructure cost that you do not
need to spend. We know from past experience that a lot of these original batteries, if they are replaced, will end
up going into landfill one way or another. These things are recyclable, but the experience is that often they do not
get recycled.
   In terms of the economics and the environmental concerns, we do not think that a mandatory provision of
batteries makes sense. Perhaps more importantly, it does not make a lot of sense in many cases, because it will not
work. There are those people who have a desire to have a battery and have good reasons for wanting to ensure
that in a local power outage they have a few hours of continued service. There may be people with medical
conditions, monitoring and so forth. I think that is fine and we ought to make sure that they can have a battery.
But there are millions of people across this country who have already opted out of the fact that you can run a
standard telephone without power. They have gone to cordless phones, as I have at home. If I have a backup
battery in my NTU for NBN Co., but I do not have a backup battery for my cordless phone, I am off the air,
anyway. The only scenario that really works is if you are using VoIP through a laptop, because your laptop
battery will work for a few hours. People need to understand that just getting a battery from NBN Co. does not do
much for them unless they actually have battery backup for all the other devices that hang off it. When you couple
that with the near ubiquity of mobile phones these days, it seems to make no sense at all to us to actually mandate
that every home should have a battery.
   Mrs PRENTICE: Has it been mandated?
   Mr Stanton: No. The most recent statement that I read about it, which I think was in the statement of
expectations from the government, said that there would be consultation with emergency services and the industry
to figure out how best to approach this. Initially it was said publicly by the minister that the battery would be
mandatory, and in the NBN corporate plan it says that they are proceeding on that path, but the statement of
expectations says, 'We are going to take a look at it and we are going to consult with emergency services
organisations.' To my knowledge, that consultation has not yet taken place, or not with us, anyway.
   Mrs PRENTICE: Back on the whole principle of opting in and opting out, we have had quite a few
presentations. Does your association have a view on whether we should require people to opt out of NBN as it
rolls passed their door or, once again, are you suggesting opt in?
   Mr Stanton: No. Opt out makes sense from the perspective of the efficiency and the speed of rolling out the
network. It does not impose on anybody a requirement to take service. It just enables their property to be ready for
service when they or the next owner decide they might want to do that. If your street was being kerbed and
guttered for the first time and you did not happen to own a car, you would probably still want a dent in the
kerbing that would enable you to have a driveway later on when you did buy a car. That is the analogy that I
would use. I certainly think that an opt out regime makes more sense.
   Mr SYMON: I do not know where to start on this one. You had a section on built resource management, in
particular, in premises infrastructure. I think it was talking more from the household side of things. It was on
about page 16 of your submission. It was talking about wired and wireless solutions. Leading on to a point further
in your paper, the consumer, the customer as it were, does not always understand what they are putting in, in
terms of new technology. I note your submission also calls for a government sponsored information program in
that regard similar to what we did with the digital TV switchover. I am from a trade background. I understand a
lot more about in-premises wiring than many people, but that does not mean I am always up to date. For some
people, although they only want to use a product, they actually have to understand what it is that they are buying
along the way. Could you enlighten the committee with what you would see as a program that would possibly
educate the public in that regard?



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   Mr Stanton: Thanks for the question. Again, I think it is an important area. We have started doing some work
of our own to create a messaging platform for service providers, recognising that in most cases the primary
communication channel with the end user is going to be through the retail service provider that has that existing
customer. They will be talking to them about the new offerings, the product suites and how to migrate to the
NBN. At Communications Alliance we have started creating a messaging platform covering all of these areas—
the rollout, the contract services, equipment, fault management, managing multiple RSP relationships and so
forth—with the intention of giving that to all of our members so that there is at least a consistent base of
information that they can embed into their own marketing messages. They can use or ignore as much of it as they
want, but at least it provides consistent messaging around what the network can do and what decisions consumers
can make to advantage their move.
   I suggested a broad based campaign, of which we would like to be part, not dissimilar to the Digital Switchover
Taskforce, but industry led rather than bureaucracy led, as the Digital Switchover Taskforce is. That was
somewhat superseded by the government's decision to say to NBN Co., 'You will run a public information
campaign.' We work closely with NBN Co. and we have formed an industry group to provide advice to them on
their information campaign.
   I am not really pitching or catching on this one. If the NBN Co. campaign is well funded and well coordinated,
then it is a possible fix for the dilemma, but my concern has been not to see NBN Co. get saddled with the entire
responsibility for this when really their responsibility, to a degree, ends at their network boundary point.
   Mr SYMON: As Mr Quigley said earlier this morning, my concern is what happens in the house? Last year I
read media reports of people quoting figures of thousands of dollars to fibre up a house if you want more than one
point. Yes, you could probably do that and it would probably be the hardest house to access that would give you a
price like that. In many cases you might only need a wireless router in the house to achieve what you are after. If
the public does not understand that as a consumer up front, it leaves the door open for inappropriate or
overselling, as it were, in some instances when it comes from a lack of understanding of the product. Is there a
role there for the Alliance in education at that end, because I think that is missing so far?
   Mr Stanton: There certainly is, and we have included that in the material that we have been preparing that we
will channel through to NBN Co. You are right; there is potential for scaremongering, confusion and for all sorts
of unfortunate activity if people do not have the information that empowers them to make sensible decisions. For
many people they will need to do nothing, in fact, as they connect to the NBN Co. or an NBN based network.
They will simply plug into the NTU and away they go, or they may choose to do a little bit or a lot of cabling or
use a router. All sorts of possibilities are there, but getting the information to them is the important thing.
   Mr SYMON: Thank you.
   Mr FLETCHER: Your submission has some very interesting material in it. On page 16 you talked about the
question of in-home infrastructure. What would be the Communications Alliance's estimate of the proportion of
homes today that would have the suitable internal wiring to support reticulation of a 100 megabit per second
service?
   Mr Stanton: I would not have an estimate, to be frank. If you were talking about wired reticulation, the figure
may be quite low, but many people will opt for wireless reticulation as they do today.
   Mr FLETCHER: I presume the reason that you have raised it is you think there is an ongoing issue there that
will need to be addressed?
   Mr Stanton: I think there is, yes. It is partly to avoid the sorts of panic type stories that we saw in the
newspapers around the time of the federal election. Many people will be happy to take the fibre to one point and
reticulate it wirelessly. Many homes do not demand to have six phones and five computers around the house and,
therefore, do not need to start rolling out Cat 6 cabling all around their premises. It is a question of showing
people what their options are.
   We have talked in our submission about one of the initiatives that is taking place in this area, which is a so-
called smart wiring code by the Copper Development Centre that is designed to give people easy access to
knowledge about the sorts of equipment they will or will not need depending on what services they want and
where in their homes.
   Mr FLETCHER: On page 13 you tell us that only 30 per cent of the Japanese population use the internet.
What conclusions can we draw from that about the causality between building a fibre network and achieving high
take-up of the internet?
   Mr Stanton: I am sure I do not have a complete answer to this, but some of the factors, particularly when you
compare it with the situation in Korea, are firstly that prices are somewhat higher in Japan than they are in Korea

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for fibre based services. There is a real paucity of e-government services so far in Japan. They are working hard to
address that now, but it is clear that there is not the same motivation to use e-government services.
    CHAIR: 6.6 per cent of local governments; is that the figure?
    Mr Stanton: Exactly, yes. If you look at the degree to which services are available, it is still relatively low.
    Mr FLETCHER: Is it fair to conclude that delivering higher speed or higher bandwidth is not necessarily
linked to an increase in take-up or penetration?
    Mr Stanton: As I said, the network in itself will not achieve everything that we are looking for in terms of
digital economy development, because unless there is a reason to connect and to use it at high speed people will
not. They will need applications and they will need the opportunity to take advantage of what the network can
provide, but at the end of the day it is a layer 2 network. The magic is above layer 2. They are the sorts of things
that will drive economic benefit and substantial take-up.
    Mr FLETCHER: You have some comments on page 10 about industry structure. I do not think you used the
express term, but I think you are arguing about the problem of vertical integration in fixed line
telecommunications in Australia. Is it right that if you say that the policy solution is structural separation then
NBN would not be the only way to achieve structural separation?
    Mr Stanton: That is correct.
    Mr FLETCHER: I was also interested in your comments on page 5 about ubiquity and drawing a distinction
between ubiquity, on the one hand, and bandwidth or speed on the other. That makes a lot of sense to me. Is there
an implication that you could set a policy target to achieve ubiquity which is quite independent of the speed target
that you choose?
    Mr Stanton: Certainly. You could, as a government, choose to say, as the Japanese have, that we will ensure
that 100 per cent of the country has at least 30 megs or higher, recognising they had some previous investments.
All of their new rollout is 100 meg, but they have said, 'The line in the sand for our country is 30 megs or higher.'
Yes, they have pushed for ubiquity. They have used a very high speed network for the last piece of it, but they
have decided that 30 megs is a functional number for those who do not yet have fibre to the home.
    Mr FLETCHER: You give an interesting example about online filing of tax returns as the kind of application
that we hope will deliver benefits to consumers and citizens. What sort of data rate is required to do that and do
you have a view as to the percentage of households now in Australia that would have a connection sufficient to be
able to do that?
    Mr Stanton: Certainly filing an online tax return is not a particularly bandwidth intensive exercise. If you had
an ADSL-type connection you could certainly do it. The proportion would be at least those in Australia with
ADSL capability. If you were an extraordinarily patient person you could probably get one through on dial-up,
but that is an example where the development of the e-government application has generated benefits and does
not rely on having 100 megs. It relies on concerted government action to make these things happen.
    Mr FLETCHER: It strikes me as a good example of the point you are making elsewhere, which is that there
is a link between ubiquity and government developing applications. If you know that 100 per cent, 90 per cent, 70
per cent or whatever it is of the population have the requisite bandwidth, as a government or as a private sector
organisation you have the incentive to develop the applications. But the other interesting thing about the example
is that it reminds us that there are plenty of useful applications that can be developed at different ranges of speeds.
    Mr Stanton: That is a very fair comment, yes.
    Mr STEPHEN JONES: Generally, how would you rate the Australian population's propensity to take up new
technologies and services that are available to them, particularly broadband services?
    Mr Stanton: I would think that Australians are reasonably inclined to embrace new technologies. I would put
them more at the Korean end of the spectrum than the Japanese end of the spectrum. If you look at consumer
goods as they have been introduced over the years, even going back to VCRs, there was a very high take-up in
Australia by global standards of VCRs when they became available. In more recent times the success of the
iPhone and the iPad in Australia all point to a population that is interested in the benefits they can derive from
new technologies.
    Mr STEPHEN JONES: So there is every reason to be more bullish than bearish about the population's
appetite to take up new broadband services?
    Mr Stanton: I believe so.




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   Mr STEPHEN JONES: That leads me to a second round of questions, about where the ICT sector is going to
make its money over the next decade. Is the sector, generally speaking, optimistic about the prospects and how
does NBN factor into that?
   Mr Stanton: I certainly hope we are going to see an explosion of applications. Commentators have made the
point that the NBN, because it is a ubiquitous network with known parameters, is an ideal ground on which to
build applications. It is a bit like the iPhone. There is not much point in building applications if you try to project
them on to a mishmash of different technologies and you do not know whether they will work for the customers
you are targeting. I think we will see that in coming years. There will be a quiet period as people beaver away,
make mistakes, test things out, and then it will explode. There have been discussions this morning about video.
We are not talking about television, we are talking about video. The sorts of changes that intelligent IPTV can and
will make to the viewing experience and the way that we can use video in our homes will drive a lot of economic
activity, a lot of take-up and use a lot of bandwidth going forward. I have seen demonstrations in Asia of the way
that intelligent IPTV systems, even in their first generation, can scour the world for video content that they know
their owner likes, can edit it and present it in ways that create a much different viewing experience than we are
able to see today.
   Mr STEPHEN JONES: We have heard evidence in previous hearings from people which goes to the issue of
ubiquity and how we reach ubiquity. Some people are looking at the NBN through the prism of utility and say
that we have national building codes that mandate the requirement that new houses built should have access or
houses renovated should comply with that code in relation to electricity, ventilation, plumbing, sanitation and so
on. What do you say to the prospect that broadband access should be included or seen in the same way as access
to all of those other utilities?
   Mr Stanton: There is a reference in the statement of expectations that the government put out about the
industry and NBN Co. looking for a national standard for rollout of fibre. I think the majority of my members
would say that we certainly should be able to roll out fibre in ways that guarantee interoperability. The last thing
we want to do is move back to three or four rail gauges, to use your analogy, but that which does not stifle
innovation in terms of the way that fibre can best be deployed in different environments. There is a risk that a
single standard dictates a costly process that is necessary in some environments, but does not need to be replicated
in others. This is a work in progress. We have a working group looking at this at the moment and talking to NBN
Co. about it. I have had discussions with the ACMA in the initial stages in recent days about how we best solve
this problem so that we get guarantees of interoperability but standards that do not inhibit sensible economic
activity.
   CHAIR: We need to wrap up there. I am conscious we are over time.
   Mrs PRENTICE: I appreciate our passports might not be up to scratch, but the National Archives of
Australia leads the world in digitising historic records and is an example to other countries.
   CHAIR: Indeed. Thank you for your presence and submission, which is very useful to committee members.
We greatly appreciate that. If there is any additional information you can forward it through to the secretary. We
will send you a copy of the transcript of your evidence, to which you can make corrections of grammar and fact.
Any undertakings will be in that, just to remind you, although I am not sure whether there were any. Once again,
thank you very much for your participation. We will break for lunch and resume at 1.15 pm.
                                        Committee suspended from 12:22 to 13:20




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SINCLAIR, Ms Rosemary Anne, Managing Director, Australian Telecommunications Users Group


[13:20]
   CHAIR: I welcome the representative of the Australian Telecommunications Users Group to today's hearing.
Although the committee does not require you to give evidence under oath I should advise you the hearing is a
legal proceeding of the parliament and therefore has the same standing as the proceedings of the respective
houses. We do have a written submission from you but for the interest of those listening to the broadcast, would
you like to take about five minutes to do a bit of a summary of the main points of the submission?
   Ms Sinclair: In our submission I made the point that ATUG has been working on communications policies for
30 years, and I should acknowledge the contribution of Jane Prentice to that work in Queensland over many,
many years. It is rather nice to be in this particular forum continuing those discussions.
   Our focus has always been on the outcomes for end users, the availability of services and the affordability of
those services. We have always been interested in having services available for all Australians wherever they
happen to live or work.
   When I pulled this submission together I was reminded that we started thinking about this a very long time ago
really, right back to the Broadband Services Experts Group and through various national bandwidth inquiries on
and on up to the Broadband Advisory Group. I think every Senate and House inquiry and discussion that has gone
on we have made it our work to make a contribution to your deliberations. We support the National Broadband
Network policy. I always try to distinguish between the policy, the network and the NBN company which is
actually going to build part of the National Broadband Network.
   We support the policy because it delivers three things: a national fibre based communications network, much
better outcomes for remote and rural users, and much stronger competition amongst retailers. People talk a lot
about applications. We tend to focus on what we think the outcomes will be. We think there is going to be much
more convenience and effectiveness across the whole economy, new communications tools and services that we
are only just starting to see and significant increases in efficiency and productivity for industry and government
service deliverers such as health and education.
   We think that a lot of work needs to be done once we have built the National Broadband Network. The shift to
a digital economy is not going to be an easy shift. It is not going to be just a matter of: there it is, everybody can
use it. There are significant big pieces of policy that must remain the focus of parliament to ensure that
Australians get the benefit of this particular asset and policy. We have suggested a number of areas where the
committee might like to look at ongoing programs and strategies. A particular focus for us would be to continue
our work with regional communities. There is a lot of focus on the first and second release sites. There are a lot of
communities that are not listed amongst those 19 sites that need to understand the directions and developments.
   We think that there is a really important piece of work to be done developing digital literacy skills for
Australian workplaces. It is really marvellous that all our teenagers understand how to use Twitter and Facebook
and the like. It is very important that our workplaces and all our employees become skilled at the use of these
communications tools as well.
   We would like to see the effort on tele-work ramped up, I think, beyond the good work in terms of information
sharing now. We think the development of some policy framework so that people could take those off the shelves
and apply them in their organisations would really help to encourage employers to have a go at that. We would
also like to see specific support for the not-for-profit sector. We think that is a hugely important and growing
sector and support will have to be provided to get them on board, if you like, but also in the use of these services.
We do not think it is going to happen just by waiting.
   We would also like to see the NBN company itself much more directly engaged with users. We definitely
understand the distinction between retail and wholesale, but we think that this is such a big policy and big
program it is important that all Australians understand what the change means and are in a position to be able to
support the policy and be interested in the services when they are available.
   CHAIR: I would firstly like to thank you and the organisation for the submission and the number of exhibits
as well which were of great interest and particularly pertinent to the nature of our particular inquiry. You go
directly to the very issues. It is something that was said to us in Ballarat that we need to be talking about
outcomes and about what people want to be doing. The example given was for many people they want to know
what they can do with the car; how will it transform their life and being able to drive the car. They do not want to



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know how the engine is going to work or any of those sorts of issues. That is exactly what the information you
have provided for us goes to.
    As to participation and ensuring that we do not exacerbate the digital divide, you mentioned in terms of
engaging some of those demographics, have you seen what you would call a particularly good example or models
that government, either through the broadband department, or indeed in separate departments, education, health or
wherever it might be, that does well in this area and is something that we should perhaps be looking at
replicating?
    Ms Sinclair: Interestingly, to me one of the issues with the whole kind of e-government strategy is that the
focus is on internal efficiencies and making information available. It is not really a transformative strategy as I see
it. I would make the point across a range of different sectors, that at the moment we are still looking at internal
efficiencies and productivity, we are not really looking at engaging the community. I think there is a role,
particularly for local government and the regional development organisations, to play in engaging people
regionally. There have been programs in the past that have assisted people greatly. One of them was the Internet
Assistance Program which was put together under Senator Alston when he was the minister. That provided a
service where people could ring and get information about how to ensure that their service was running at the
maximum. I think that sort of infrastructure needs to be put in place. I know in my own community older people
are interested in using the internet and broadband but unless there is some family member available they get
stuck.
    CHAIR: I think Huawei through Dr Williams raised the point of utilising community based organisations—
generally the not-for-profits that you mentioned—to actually rollout the engagement with some of these groups,
and the Broadband for Seniors kiosk model was something that he saw as being able to be expanded. Given that
the not-for-profits require support and assistance themselves, is that a way that we can perhaps engage them?
    Ms Sinclair: I think that using the not-for-profit sector is a really good idea because they are engaging with
more disadvantaged members of the community. I think once that sector is enabled to play this role then I am sure
that they would be happy to do that. I have seen some very interesting examples of physiotherapists and people
like that who have been using the tools themselves. But I see them as providing a kind of frontline support for in-
home service delivery and I think you will hear a lot more about that from the witness following me. There are
some very interesting examples in the Hunter region where people are enabled to stay in their home because the
technology is not frightening; it is easy to use. You have got to have the network and you have got to have the
technology in the home. You have then got to have the skills and support available to people when they want to
ask the question because that is when people learn; when they have the question they go looking for the answer.
Support in advance of that I do not think is going to be very effective.
    The sorts of structures that we use to support the community now I think need to be engaged in this process.
On our regional roadshow we have seen terrific contribution from community libraries, for example. People are
not frightened to come to the library. The librarians are very valued members of the community. I think all of
those touch points are important.
    The other one that has occurred to us—and we have had some very informal discussions—is whether Australia
Post may play a role. It is a matter of finding those touch points where members of the community go with
confidence and thinking through what role those organisations might play.
    CHAIR: The other area that I wanted to explore from your submission is the issue of tele-working. Certainly
from the regional areas in particular we have had a lot of interest expressed in this area. Obviously the
infrastructure and the connectivity is a major factor in how realistic and viable an option that is. From your
membership are you aware of any other barriers? Are there any other issues? Government wants to foster things.
You mentioned perhaps a take-off-the-shelf guide. Could you just expand on what might have been a good model
you have seen anywhere in that area or any particular barriers that we need to consider?
    Ms Sinclair: The best models of tele-working are within the ICT sector itself. You have got high levels of
connectivity. You have got everybody with the devices and you have got people who are very skilled in this way
of working. I have not seen too many models of that translating into what I would call more ordinary parts of the
economy if you like. Having been part of the Tele-working Taskforce that Senator Coonan put together, we
explored this up hill and down dale and in fact wound up with an issue around management, comfort and
capability—
    CHAIR: The cultural issue.
    Ms Sinclair: Yes, so that is where we were thinking that if that is the issue then maybe what we need is to
perhaps take some of the work that I know AGIMO has been doing within the federal government setting out


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guidelines and policies and practices and so on and making those private sector friendly so that when people say,
'Oh yes, I would love to do that but there is a whole range of occupational health and safety reasons why I cannot',
you can say, 'Well no, chapter one of the manual deals with all of that.' When they say, 'Oh yes, but I do not really
know how to manage the performance of somebody that I cannot see.' 'Okay, here are some tools and strategies;
you might want to pick 3(iv) for your particular needs.' I think it is a matter of taking the work that has been done
inside government and working—
   CHAIR: Is there anybody in the private sector that is actually providing a consultancy service to businesses in
that field?
   Ms Sinclair: Not that I am aware of.
   CHAIR: It is just of interest to me that usually in those sorts of emerging HR type areas there is some work
being done privately.
   Ms Sinclair: The only work that I have understood is within some companies, but they are within the ICT
type sector.
   CHAIR: As we have taken evidence we have put to a lot of organisations the issue of whether they use tele-
workers it is interesting how few of them say that no, they do not. It is not necessarily extensive but quite a few of
the councils that we have dealt with in terms of managing return to work after maternity leave and things like that
is an example of one of the points at which they do it. But the thing is translating that into a broader sector—
   Ms Sinclair: Across the economy and more than just kind of every third Tuesday. The concern that I have is
when people say, 'Yes, we do tele-working.' What it actually means is that once a fortnight people get to work
from home. That is not what I really mean. When I was looking at this in the context of the Australian Rural
Women's Foundation about five or six years ago, they were desperately searching for ways to deal with the
economic impacts of the drought. One of the economic impacts of the drought was that the women had to go to
work in the towns, which meant that they were leaving their families and farms. It was really catastrophic. At that
time there was not the connectivity that would have enabled those women to stay on their farms and work in
whatever capacity, but once the NBN is rolled out we will have that connectivity capability. Whether we will
have the culture in Australian businesses to enable us to use it that way is my question.
   CHAIR: It is interesting that you identify that particular demographic because we heard from a small business
incubator in Townsville about the work they are doing with what they call 'mumpreneurs' which are women at
home setting up and running small businesses online. Clearly if you are talking about increasing participation
these are real options for women across the board.
   Ms Sinclair: Exactly, and that to me is the significant driver. If we are really serious about increasing
participation in the workforce to deal with the kind of living standard issues that are coming at us over the next
decade, then this seems to me to be part of the response.
   CHAIR: The other model that I will get you to comment on that we heard about in South Australia is partial
retirees, people who want to ease into retirement, move into their sea-change or tree-change area where they have
been dreaming of relocating to and do a bit of contract work as an engineer, accountant or bookkeeper, or
whatever they have been doing all their life but again the connectivity is the issue. That is another model I am
interested in with that sort of demographic as well.
   Ms Sinclair: Absolutely. I was only smiling because I think it was when Senator Alston was the minister and I
think at the time Peter Costello said that to deal with the future we are all going to need to work until we are 70. I
can recall saying to Senator Alston, 'I am quite happy to do that as long as I do not have to drive into town every
day. If you enable me to work from home then I am on board—no problem.' I think it is right, that demographic is
important as well. But people will not want to have to present at 9 o'clock wherever it is.
   CHAIR: It is fascinating and really useful information.
   Ms Sinclair: The issue for me is how to engage business in this. It seems to me that this opportunity to
increase workforce participation one way or another is a really key issue and a topic on which business through
the Business Council, through the Australian Institute of Company Directors, through the Australian Industry
Group and the like needs to engage.
   CHAIR: I think it was Mike who told us about a particular survey in the US where they introduced tele-
working where productivity actually increased, which I think perhaps helps to break down some of those myths
about the fact that someone is sitting at home in their pyjamas and how do you actually make sure that they are
working.



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    Mrs PRENTICE: One of the presenters earlier today talked about the need for robust competition. Of course
that is something that actually started ATUG on its journey some years ago. Do you feel that what is happening
with the NBN Co. is enabling that robust competition or can you see anything that needs to change?
    Ms Sinclair: This has been the subject of great discussion within ATUG because, as you point out, we are the
ones who really started the whole discussion about competition in Australia in telecommunications way back in
1980. We are very focused on that particular outcome. Along the way I guess we have had some real world
experience in terms of infrastructure competition and just how much infrastructure competition you can get in
Australia, given the size of the market and the geographic nature of this country. The conclusion that we came to
was that to get from copper to fibre into every premises in Australia, which is the outcome that we believe is
needed, is a single infrastructure builder in the local access market.
    We are pleased with the outcome on points of interconnection because we think that preserves infrastructure
competition in backhaul markets where that is economically possible. We are also watching I suppose in densely
populated CBD markets. We are really hoping that we get infrastructure competition there and we know we have
got fibre into some of the big buildings. But in the metro areas we think NBN is going to be required to build the
fibre local access network.
    Then the question becomes about retail competition on top of that and we are ever hopeful. We lived through
the kind of competition that we had from 1990 to 1997 and then 1997 to now. There are a number of players in
the market. With the NBN we are really hoping to see new players coming into the market. We have been very
engaged in this whole debate about level two, level three because we do not want the competition problem to just
move one layer up the stack and to allow incumbent players to use their position in the market to keep out the new
players that we hope will come in. We are seeing competition at certain points in the fibre part of the market. We
are seeing of course competition between fibre and the mobile networks. We think that is going to be a really
good thing. Then we are hoping to see expanded competition at the retail level.
    Mr SYMON: I suppose one of the things I found interesting that you have spoken about is the national
guidelines for tele-working arrangements in relation to OH&S. It strikes me there has probably been nothing done
in one particular area and that is the occupiers responsibilities versus the employer's. Even though it is probably
not directly related to what we are looking at with this inquiry it is one of those things. How do you extend the
reach of the NBN to other areas? You have then got to think of all these things that go alongside it.
    I am from Victoria and I am looking at my knowledge of that area. If I were a home based worker a lot of the
employer's responsibilities to me as an employee would actually be shifted because of the fact that I was the
occupier of the property. Have you done any work beyond what is in the submission on that?
    Ms Sinclair: Only to be aware of work, for example, in the UK where that particular issue was addressed. The
company that I am most familiar with was American Express where they had very particular guidelines about
where a home based office capability would be, ergonomic furniture and the like. That is why we have raised this.
It is not a matter of just saying, 'All right everybody, work away at home and if you fall down your own back
steps while you are working then too bad about that.' That is the sort of thing that really needs to be thought
through, but my understanding is that there has been quite a bit of work on that. It is just that I do not think it is in
the public domain.
    CHAIR: When I worked from home 10 years ago with a state government department they had occupational
health and safety guidelines about setting up your home office, but it is not widely shared or discussed.
    Mr SYMON: To my knowledge it is not reflected in acts of state parliament that cover that area, either.
    Ms Sinclair: This is what is very interesting about our digital economy work when we were doing those
forums. As we were having those discussions it occurred to us as well that to get to the real benefits of having this
kind of connectivity you have actually got to go back through a whole bunch of legislation that does not
immediately spring to mind as needing updating to enable a digital economy. But the way we were thinking about
it—and I will leave this with the committee—was that we said if we are going to get the benefits of the NBN then
we have got to be in a frictionless digital economy. So imagine that state. Just imagine that you are in a
frictionless digital economy; what needs to change to get from here to there? When you start thinking this way it
is really interesting how many times you go, 'Oh, clunk—clunk—that is not digital economy.'
    One example was with an insurance claim that somebody was doing. They are busily online doing this and that
and that all seems fabulous and then they got to a point with this particular company—I cannot think who it
was—where it said, 'Now we want you to download the PDF, print the PDF, sign the document and send it to us.'
I thought, gosh, I wonder is it in the Insurance Act that we have to have this? Is it in the working practice of the
industry? Is it in the company's own working practices? Is it because we have not got a completely robust


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authentication process for a digital signature? What is it that says after I have done all this online that I get to this
point where I have to have a piece of paper and send it off? Unless we can work our way through all of these
systems and change those processes we are not really going to get the maximum benefits.
    CHAIR: We were having a conversation at lunch about Centrelink processes where people are told to apply
online and have exactly the same experience where you get to a particular point where it says, 'Now print this off;
sign it and bring it into the office.'
    Ms Sinclair: Exactly. My son at the moment unhappily has got a dislocated hip so we have been having to do
the special consideration at the university. Everybody is saying that the university sector is completely online. It is
a marvellous, shining example of the digital economy, blah, blah, blah. We get to this point where we have to
bring in this piece of paper. There he is with his crutches and me without the disabled parking sticker on a city
road thinking now he has got to hobble from the car to Wentworth and up through somewhere else and present at
some counter. It is all these processes. That is why we say that this is not an easy task. It is not just a matter of
saying, 'Well, there it is folks, now off we go into the digital economy.'
    Mr SYMON: I think it is worthwhile that organisations such as yours are starting to think about that because
it is going to have to flow across into every level of government and the way everyone interacts in the country, in
many cases turning what was always a physical boundary into a digital box or boundary or whatever it may be.
This fits in there. At the moment, you are right, it does not.
    The other thing I want to touch on was that you spoke about digital literacy skills for other than younger
people. I think you are right, we have a fairly large gap of people who are currently in the workforce that were not
taught anything to do with this at school because it did not exist that bounce along with the little bit they pick up
from friends, or whatever. Do you have any ideas on what could be done as a wider education for a group like
that?
    Ms Sinclair: This one is a really easy one for this committee. All you need to do is to take the work that has
been done by Innovation and Business Skills Australia, one of those skills councils. They have actually prepared a
report on digital literacy skills for the workplace. That effort just needs to be funded. The curriculum is there.
Then we could engage all the registered training organisations and a whole bunch of other people. It is just that
that work needs to get off its shelf and be funded and progressed. They have been trying to get the department of
education involved but DEEWR says, 'Well, it is not winding up in a qualification as such and we do
qualifications.' That is right; they do qualifications. This is not that. This is an upgrade of skills in the workplace.
    Mr SYMON: Is there a subset of that report in relation to digital literacy skills for use at home, other than the
workplace?
    Ms Sinclair: We have been looking at that. I think that the core body of work could be updated or refocused
perhaps so that we had a program that could work for people in homes.
    Mr FLETCHER: It is a great pleasure to welcome you here, firstly as one of my constituents, but secondly I
just want to acknowledge your distinguished record of advocacy on behalf of the user community in your time as
chief executive. Building on some of the questions my colleague Mrs Prentice asked about the competition
implications of the National Broadband Network, what lessons do you think we can draw from the point of
interconnect issue which you spoke about earlier to avoid the risk of similar impediments to competition
emerging?
    Ms Sinclair: I think the issue that the points of interconnect discussion raised for me was that it is really
extremely important that everybody including NBN Co. understands that they operate within a policy framework
that is set by the government and parliament. I think the points of interconnect debate indicated that left to their
own devices NBN Co. will come up with solutions that make a great deal of sense to them but might not make
sense to the rest of us. I think that there is a danger which needs to be managed to ensure that NBN understands
that it is a response to market failure. That is what it is. It is not a grand and glorious adventure funded by private
equity investors, it is a response to market failure where government has said, 'We have all watched this market
for 15 years and we had grand expectations of it. We have discussed the iron laws of economics and what that
means in Australia and we have got to this point.'
    Even in the few years after we realised that we needed to move from copper to fibre, various proposals were
put forward and thought through and all really came up against the barrier of an ineffective wholesale market
where the person—Telstra—who was supposed to be an open-minded wholesaler, buying or building completely
rationally, that was not the case because of the problem of vertical integration. If we had had an effective
wholesale market then we might be having all sorts of discussions, but we did not. To make sure that NBN Co.



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understands that it operates within a policy framework that is set by government and monitored through the joint
committee is the ongoing management issue. I think that committee is going to have an incredibly important role.
    Mr FLETCHER: Taking the point you made earlier about access networks being in most parts of Australia,
arguably a natural monopoly in economic terms, is it ATUG's view that that needs to be buttressed as has been
done with the legislative provisions making it now a legal monopoly; in other words, preventing new entrants
building out high-speed networks designed to deliver retail services to consumers and small business?
    Ms Sinclair: It is a tricky one for us. We thought long and hard about it. At the end of the day we decided that
the commitment to a uniform national wholesale price was an essential underpinning to making sure that
everybody could be connected. We are not going to get to the benefits of a National Broadband Network if we
have got patchy connectivity because you cannot transform the health system if you cannot be absolutely sure that
people in the Hunter Valley, Sydney, Townsville and wherever else have got access to the same platform.
    Mr FLETCHER: On that important point, is it an implication of that that ubiquity of service or connectivity
is one dimension and speed is another and distinct dimension?
    Ms Sinclair: Yes, it is. If you look through all of our papers we place heavy emphasis on ubiquity. Our view
is that people are on a journey in terms of speed and what we have advocated very strongly—it comes back to
your point—is for an affordable entry level package because we want everybody on the platform as soon as we
can manage that.
    Mr FLETCHER: I think that point goes to an area where ATUG has been a consistent advocate for a long
time over many years. Could you comment on the issue of retail pricing and its importance in terms of take-up?
    Ms Sinclair—It is absolutely critical. In fact I find it interesting when people talk about rapid take-up of
mobile phones in Australia. It is simply not true. If you actually look at the curve from 1992 to around about 2003
that curve sort of putted along, putted along, putted along and then there is a big inflection and take-up was very
steep after that. A couple of things happened at that point. The first of course was that the network was much
more widely available than back then. The second was that the performance of the available networks was good
and reliable and consistent. But the third issue was that prices started to become incredibly affordable and at that
point people started to really take up the service. That is the lesson. If the price is affordable people will come on
board.
    What we have got in the market at the moment of course is relatively affordable wholesale prices. The question
is: what will the retailers do? I think it is really a watch-this-space issue. If the market is truly competitive then the
retail prices will be competitive and affordable. But if the market is not as competitive as we would like to hope
then perhaps we will have a problem with those retail prices.
    Mr FLETCHER: Do you think there is a trade-off to some extent between speed/capital cost, if you argue
there is a correlation between the speed that you said is your uniform target and therefore the capital cost of the
network on the one hand, and then on the other hand take-up to the extent that is influenced by retail pricing
which you would assume is going to be linked to capital cost?
    Ms Sinclair: That is interesting. I would argue slightly differently. The issue for us is upgrading from copper
to fibre. That is the long-term issue that we are interested in here, how you manage to go from copper to fibre.
Once that is the task then you have got a very significant construction, capital works activity, digging trenches or
stringing wires, whichever combo you are going to go with. The actual speed, as I understand it, is not the big
capital component in that task. So you can start off with 20 megabits and go to 100, then go to 1,000 by upgrading
the electronics, but the costs that you need to recover are those capital costs of laying out that piece of fibre to all
the premises. But the lifetime of that asset means that you should be able to get to an affordable price for
consumers, providing you are not looking at commercial investment hurdle rates which some players were
looking at a few years ago when Telstra for example was saying, 'Yes, yes, we will do it but our hurdle rate is 23
per cent.' That means it is unaffordable.
    Mr FLETCHER: Let me put the question another way. Picking up the comments you made before about
NBN's priorities and philosophy, I suppose, as a management team, do you think there is some risk that if that is
not carefully managed, because that is the kind of bottleneck now through which all pricing goes, that we could
undermine the policy objectives here?
    Ms Sinclair: Yes, I think there is a risk because it is human to want to make the biggest and best mousetrap
and return that you can. The issue here is to keep saying to NBN Co.: the return we want is the government bond
rate plus whatever the percentage is; we want to get the Australian people's money back with a reasonable return
but this is not a commercial entity so we are not looking for 15 per cent return on investors' funds here. I think
that the ongoing management of NBN Co. to ensure that the policy objectives are achieved is going to be a very


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important task. To me, it is the role of that joint committee to really undertake that task from a policy point of
view. People will say: we have got the Senate estimates process. But that is not really the place for such a policy
task to be undertaken and there are all sorts of other important activities for Senate estimates processes, but I think
that joint committee is really the place to say, 'We have connectivity coverage targets and we have got
affordability targets. We have got competition targets in terms of the policy and continued oversight is going to be
needed.'
   Mr STEPHEN JONES: I am looking at your written submission. I am interested in your organisation's
observations about what appear to be barriers to maximising e-health initiatives. You have listed a range of issues.
If you do not mind I will just read them and then you can explain them.
   Ms Sinclair: That would be good because it will remind me what they are.
   Mr STEPHEN JONES: Under the heading of health you say, 'Existing business models (Medicare) do not
support change.' That caught my eye. Could you explain a bit about that?
   Ms Sinclair: Yes, it is a very interesting one. I was very fortunate to sit on a group a few years ago for a
couple of years called the Australian Health Information Council which reported to the Australian health
minister's group and we spent a lot of time understanding e-health and what it meant. You have got to get past the
rhetoric to the reality of how health is delivered in this country to understand what you really need to change. The
way health is delivered—and I am thinking of the general practices rather than—
   Mr STEPHEN JONES: Primary care.
   Ms Sinclair: Exactly. People go to the surgery and they sit next to the doctor and the doctor does whatever
and the doctor gets paid when the person is in the surgery. As a general rule there is no mechanism in Medicare
for paying for e-delivered health services apart from psychiatric services in regional Australia and the election
commitment last year which created another small element for regional services. But GPs get funded through
Medicare when people turn up to the surgeries for attendance. It is another one of these things that we were
talking about earlier where you have to understand that system works that way and that is what has got to change.
   The health system has encouraged the use of broadband over many years. In 2004 there was a Broadband in
GP Practices program run out of the Department of Health and Ageing. That was very successful in getting the
GP practices connected but the use of that connectivity has been for internal efficiencies rather than health service
delivery because of this Medicare issue, as explained to me by the GPs involved in these discussions. That is the
sort of thing that has really got to be thought through: what other levers need to be pulled or buttons pressed to
enable systems to change to take advantage of National Broadband Network connectivity.
   I am sorry, I am waving at my NICTA friends behind me. One of their young researchers did an incredibly
interesting piece of research looking at 300 tele-health trials in Australia and around the world. One would have
to imagine if we have done this 300 times one way or another we ought by now to have pulled out the issues for
sustainability, that we ought to understand what you need to do to change the system. There is just a tremendous
amount of incredibly useful information in that report which says it is not just about having the fibre connected to
the hospital or the GP, you really need to understand the work practices, the way the money flows—a range of
cultural considerations. A lot of work has been done which I think if this committee were able to bring that
forward and translate that into policy programs it would mean that we could really start to get the benefits of the
NBN even in those first and second release sites.
   Mr STEPHEN JONES: The other thing that catches my eye in your submissions is that you have emphasised
and spoken briefly on the community sector. I think they share many problems with the small business sector in
that they are good at looking after their clients or customers or however they refer to them, or in the case of small
businesses making pies or fixing cars. Their expertise is not in the digital economy. A significant remit is how we
leverage off the NBN to assist small to medium sized businesses. How do we close that gap which is essentially
around time or expertise, I suspect?
   Ms Sinclair: Part of what is going to happen with the NBN is that we will respond to that problem of time and
expertise through the delivery of cloud services, and I really think that that is going to help enormously. In the
meantime there needs to be quite a bit of work, I think, done supporting small business, but all state governments
and federal—
   Mr STEPHEN JONES: I reckon if I went to just about every small business in my electorate, none of them,
or less than 90 per cent of them, would be able to describe to me what a cloud service was, by the way.
   Ms Sinclair: I think that is exactly right. But if you talk to the guy who is the executive director of the Council
of Small Business Organisations of Australia—Peter Strong, who runs a little bookshop in Canberra—he is very
engaged in thinking through what support small business needs. He makes your point, Mr Jones, that small

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businesses are people and that they are busy selling books, making pies or whatever and are not too worried about
cloud services, the NBN or whatever.
   Mr STEPHEN JONES: They probably have a Gmail account, by the way, so they are not unfamiliar with a
cloud environment.
   Ms Sinclair: Yes, they are actually using them, but are thinking to put their accounting services into the
cloud? We have had discussions with CPA Australia about the shortages of accounting professionals in regional
areas and the opportunity that the NBN delivers, if we can get the dots lined up, for small businesses to use
accounting services through the cloud. But this is not going to happen in a minute. Back to what we need to do to
support small businesses; the one program that we have at the moment is Business Online, but that is about
putting business online with a website. It is about building websites. It is not about how you might use that
capability to market your business, reduce your costs or improve your customer service. That next phase is what I
think needs to be done, where we actually build the knowledge and skills of the sector to take advantage of these
new marketing capabilities. This is the sort of thing that COSBOA is exploring now. What does it mean to use
Facebook to market to your community of book buyers, or Twitter or whatever? They are emerging capabilities.
Again, I suppose the core message is it is easier probably to concentrate on the hardware and the infrastructure,
but what is going to make the difference here is the skills and the usage, and that is kind of soft capital that we
have to work on.
   The feedback that I have had from them is that they are very interested to be engaged but very aware that there
are upsides and downsides. If you can buy a book from Amazon then you do not have to go to Smiths Alternative
Bookshop in Canberra. Smith's Alternative Bookshop, which is Peter's bookshop, has to do a whole bunch of
other things now to engage the customer base so that not everything is bought from the Amazon warehouse or
wherever it happens to be.
   CHAIR: Quite honestly, you have in many ways epitomised the importance of this inquiry and how it is
different from the other joint standing committee and its task, and how critical it is to be looking at these issues in
conjunction with that process.
   Ms Sinclair: Absolutely.
   CHAIR: It has been a tremendous submission and evidence, Ms Sinclair. I really appreciate it. Thank you for
your attendance here today. Any additional information we have asked for can be sent to the secretary. You will
be sent a copy of the transcript of your evidence—given all the evidence you have given over the years, I am sure
this is a familiar process to you—to which you can make corrections of grammar and fact. Once again, thank you
very much. This is very useful information for us.
   Ms Sinclair: It is a pleasure. Thank you very much.




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MARGELIS, Dr George, General Manager Australia, Intel-GE Care Innovations


[14:11]
    CHAIR: I now welcome the representative of Intel-GE Care Innovations to today's hearing. Although the
committee does not require you to give evidence under oath, I should advise you the hearing is a legal proceeding
of the parliament and therefore has the same standing as proceedings of the respective houses. We do not have a
written submission from you but we have some background information. Would you like to spend about five
minutes filling us in on what your involvement is in the area and any views you would like to express to the
committee?
    Dr Margelis: Absolutely. By way of background, my training is as a medical practitioner. I actually graduated
as an optometrist first; I went back and did medicine, and have been working in healthcare now for about 30
years. About 10 years ago I had a bit of a change in the context of what I was doing. I moved away from
delivering healthcare on a one-to-one basis and moved into the area of health informatics. That is basically how
we use technology to enhance healthcare delivery. There are many reasons for that, but obviously one of the big
things was the fact that one-to-one delivery of healthcare was becoming something which is very hard to do. I
realised there was actually a need for new models of care. I also recognised at that stage that information
technology had a lot in common with healthcare. In information technology we gather information, we store it, we
analyse it and we deliver it. As a doctor I ask patients information, I gather information from my patients, I store
it in my records, I analyse it in my head and I deliver something back to the patient, usually in the form of more
information. There is a very strong analogy between healthcare and information technology. Part of my job was to
try and mould those two together.
    At the beginning of this year Intel and GE formed a new company called Care Innovations. For the last five
years I have been the healthcare lead for Intel. Intel, as you may know, is the world's largest microprocessor
company. My role was within Intel looking at how technology can affect healthcare. We have looked at
healthcare in many areas—and I am sure you have had other submissions about healthcare—and healthcare is a
very broad area. There are already some great examples of how high-speed communication enhances healthcare.
When I was a junior medical officer one of my jobs was to run around the hospital, find the x-rays for that
particular doctor and make sure they were delivered in time, usually at 7 o'clock in the morning to their rooms
before surgery. Now any hospital will use a network, a system which takes that imaging and makes it available on
a computer. My junior medical colleagues no longer have to run around hospitals carrying pieces of paper after
six years at university.
    The area I want to focus on is more specifically on how we deliver healthcare services to the population over
the age of 65, very much focussing on the merging between healthcare and wellness. As you look at the
population over the age of 65, they are the population where we deliver most healthcare services. There is an
almost exponential relationship between age and need for healthcare services. The biggest challenge that market
faces is not good healthcare services—Australia, bless our hearts, has one of the best healthcare services in the
world—it is access to those services, and not just rural and regional. A classic baby boomer with elderly parents
and in-laws has to drive around Royal Prince Alfred Hospital four times to find a parking spot. As Ms Sinclair
commented earlier, they drop off an elderly parent and say, 'Wait here while I go and find a spot', before they can
get in and see a doctor, who is someone I probably graduated with. I actually had the inside leg to get in there, and
it was still a major issue in metropolitan Sydney, let alone looking at outside those areas. Access to healthcare
services for that population is critical for their quality of life.
    Our group has been looking specifically at what we can do to enhance that group's quality of life, and a couple
of key things came up. Firstly, this is a group that, as they get older, recognise they have limitations but also
recognise they want to stay within their own community. They do not want to be taken out of their homes and
moved into a nursing home unless they really need to. I have nothing against nursing homes. I spent a lot of time
working in nursing homes. If we can deliver services that enable people to delay or if possible totally remove the
need for them to spend their last years in a nursing home, we can improve that person's quality of life and also
improve the quality of life of their family. Again, the major issue we face in nursing homes was that family and
friends cannot come and visit when the nursing home is 20 kilometres away from work and they need to go and
spend the day. So, how we use these technologies in the home is critical.
    Ms Sinclair commented earlier about what we are doing in this space. We actually did a project here in
Australia last year with a group called Hunter Nursing Agency where we delivered technology into the homes of
about 50 patients who were at that stage receiving regular care by a home nursing service. Hunter Nursing is a


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nursing service and it has about 400 nurses. They basically go and visit people in their home and deliver
healthcare services. What we did is pick 50 of those patients who had the highest needs. These were patients
whose average age was about 83. We delivered a little white box into their home, which for all intents and
purposes was a small computer but was designed to be used by someone who did not know anything about
computers. So, the classic patient had never used a computer before in their life and had never had to worry about
those sorts of things. This device spoke to them, gave them very large onscreen prompts, took them through a
process of healthcare delivery and enabled them to also communicate with their healthcare provider remotely. So,
the nurse sitting at her desk at Hunter Nursing could videoconference to this patient and discuss their health
concerns. They could get information about their blood pressure, weight, blood oxygen, general wellbeing and
actually ask the patients questions about how they felt, and it did all that quite simply. Ninety-nine per cent of the
patients were satisfied with the way it was used. It was very easy to use. We had no issues around the technology.
The biggest challenge we faced rolling out these 50 units was getting a network connection in these people's
homes. The device needed two inputs—electric power and an IP address through a network connection.
   I had the resources of the world's largest microprocessor company running around trying to get those network
connections, and the engineers spent more of their time finding a network connection. We were in an area which
was supposedly 3G enabled and we had a 3G enabled solution, but the hit and miss nature of 3G in those
regions—and we are not talking back of Bourke; this was less than 100 kilometres north of Sydney; it was in a
metropolitan built-up area—meant we spent more time managing the network than we did managing the patient.
That was a real issue from our perspective. We really came to the understanding that, if we had access to
ubiquitous connectivity in these people's homes, our job would have been a lot easier. I would not have had my
guys running around the streets literally with antennas trying to find the best spot to find a 3G connection and run
a cable out of people's homes.
   Out of that project we came up with three key findings. The current technology that we were using was very
limited by the connectivity. We had the ability for good high-definition video conferencing and for good data
transmission, but we had to actually scale down the system to take into account that we only had at best 256K up.
We may have had one or two megabits into the house, but sending data out of the house was limited to 256K and
often a lot less than that.
   Secondly, the discovery that we needed to move away from a passive system, not just capturing information,
but an active system, using the technology to involve the patient more. That required a strong two-way
connection. We found video conferencing was a great way of doing that, but also delivering content to patients
that is relevant to them. For many years as a doctor we would give patients a piece of paper which describes their
condition, their treatment and how to take their medications. What we discovered is that by giving that same
information in the form of video we actually found that patients could work with it a lot better. They could
understand the information and they could use it more effectively. As a result, we found that delivering
educational content in two ways; by video and in text. Information like that when a patient took their blood sugar
and it was high, that was the best time to send them information about their blood sugar, and not to watch a DVD
about their diabetes.
   The third thing to look at was the whole idea of new concepts of treatment. Ms Sinclair touched on Medicare
and its reimbursement models. It is about things like managing medications remotely. Devices that can know
when a patient has taken their medication, prompt them in a context-aware way. Social connectedness—tools that
enable them to talk not only to their doctor and their nurse but to their family, friends and peers. We did a very
interesting project. The project we did in Hunter was one of about 30 projects we were doing worldwide. Our
project in Ireland focussed specifically on social connectedness. For example, it provided the same sort of
technology but enabled 30 or 40 elderly people to watch a concert simultaneously and then have a chat about it
over an IP enabled system. They did not have to pick up a phone and remember someone's number, they just
pressed the large onscreen button and away they went. Thirdly, we looked at how news services can be delivered
remotely. Those were the three key findings that came out from our system.
   We see the NBN as the enabler for that. The technology is being developed around the world. Next week in the
US there is the American Family Medical Association conference. About 25,000 people are registered to attend
and about 300 companies over there are showing their wares. The technology is being developed, but it is being
hampered by the lack of connectivity. What we have always done in healthcare is find workarounds for
limitations—in the same sort of way we got the young medical officer to run around and pick up the films
because that was the most efficient way to do it in that time frame—and we have slowed down our video or
worked with less information. What we can do by taking away that barrier is actually allow innovation to foster. It
is really interesting that Australian healthcare is recognised as amongst the best in the world. If we can actually


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enable that with some technology as well, we will actually have not only a great local healthcare system but
potentially a very exportable healthcare system as well.
   CHAIR: That is fascinating. You have identified some interesting potential. I will ask about two areas. Firstly,
we did take some evidence on the development of technologies for rehabilitation in the home—I think it was for
stroke victims—with exercise movement. It was put to us that the model is developed in a gaming framework so
that the person was encouraged to undertake their rehabilitation. They were with a group that connected online
who were all doing the same exercises, but it was constructed as a game and they were competing against each
other and able to interact. They were also getting a really important value-add on rehabilitation, which was
connection to others who had a similar problem, and participation. Has your organisation been looking at those
aspects as well?
   Dr Margelis: Absolutely. Some of that work may have been the work of Stuart Smith and a few others. There
is actually a very strong movement in e-games for health being fostered around the world. That sort of stuff is
already happening in other areas. My children have X-Boxes and Playstations and they play collaboratively with
people from around the world.
   CHAIR: Is the Wii targeted at the demographic for exercise?
   Dr Margelis: The technology is available and it is actually relatively inexpensive. It is now just a matter of
healthcare providers thinking about how they use it. To date our limitation has been that we have not had a way of
doing that. We have not been able to do that. The classic example is that cardiac rehab is done normally in group
clinics at a hospital. We are doing a project in Melbourne at the moment with a hospital where they have a cardiac
rehab program. Their biggest limitation is getting eight patients with congestive heart failure to their hospital for
that one-hour session, because it requires eight taxis to pick up eight people from around Victoria, get them to the
hospital, do the session and take them back home. It is important because they need to have that community
effect. One-on-one does not have the same effect. If they are in the room with their peers who have similar issues
they can relate to it, but there is no reason why that cannot be done virtually with the advent of video
conferencing capabilities and multiuser video conferencing capabilities. Again, just building the system to take
that into account can be very easily done.
   CHAIR: It also enables that group to provide support to each other beyond the experience of the health
provider saying you have an appointment or there is a group on.
   Dr Margelis: Absolutely. The biggest driver nowadays in healthcare is a move to patient empowerment—
providing patients with tools to play a more active role in their own healthcare. There are two issues. We know
we do not have a workforce. We know we cannot scale up our services. We know the population is going to age
dramatically over the next 20 years. For patients to take a more active role in their own healthcare it is really
important that they have the tools to do that. Not just to say, 'You are on your own. Go for it.' They have to be
provided with the tools that can enable them to do that. That will enable us to provide much better service.
   CHAIR: My understanding is that it improves recovery rates and so forth, anyway, so there are efficiencies in
that too.
   Dr Margelis: When you look at a lot of the recovery rates in people, especially with chronic disease or even
after things like a hip fracture, depression and their mental status is a significant variable there. The best way to
manage that is to actually get them to socialise; talk to people with similar problems and work through it and
understand their problems more effectively.
   CHAIR: One of the other things that has been identified to us in that area, which I would be interested in your
perspective on, is people who have conditions that are quite rare. With a good video based system like that you
have discussed you could actually connect them up. There may actually be only three of them in Australia, but
they will be able to form a support group and talk to each other. Have you seen that sort of thing?
   Dr Margelis: There is a well-known website called Patients Like Me, and it was developed by a group of
people with muscular dystrophy. Basically they all get online. It is not video based at the moment, it is mainly
discussion board based. They compare their experiences of rare diseases, and they have now developed various
parts of that program for different diseases. Again, what you find is that by people sharing their own experiences
they can get a lot more information. We often now hear of the situation where GPs will find a patient coming into
their rooms who knows more about their condition than the GP does, because as a GP you may only see that
condition once every 10 years, but if you are living that condition you have a lot of drive to go on the internet and
find information. I was speaking to one of my peers recently who told me that a patient rolled up with the latest
journal copy of the New England Journal of Medicine article. The doctor said, 'I haven't got it yet', because it
comes by mail from the US and takes eight weeks to get here.


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   CHAIR: That is right; 'You've already got it.'
   Dr Margelis: 'Here it is and what are you going to do about it?'
   CHAIR: That segues very nicely into my next question. In the previous parliament I chaired the education
committee. We were doing a teacher librarian inquiry and one of the big issues was teaching young people about
online information and accessing it. One of the big issues that had been raised consistently was what they call
'cyberchondria', which is actually the very poor quality of information in the medical field that you can come up
with. You put a couple of symptoms in the Google and you have a massive, terrible cancer, and GPs were all
nodding when we talked about this experience. Have you seen models of good-quality information? We did have
evidence about the UK Facebook based model. I am interested in your perspective on that about when people can
know they are going to a credible, reputable place to get information.
   Dr Margelis: The medical fraternity has been very strong about the concepts of evidence. There are various
classes of evidence and needing to recognise how information relates to those classes of evidence is key, and then
how you provide that to a consumer is the big area. As clinicians we know that we will go to Medscape or well-
known sources that are peer reviewed, indexed and referenced. Providing that information to the patients is a bit
harder, because we need to make sure that we do not limit them from things that they want to have access to. We
do not want to go back to the old patriarchal model of, 'This is the information your doctor wants you to have.'
Patients need to be able to have the right to track down their own information. It is really important to build up
their health literacy and help them understand what is good information, where you would find good information
and what the facets of good information are.
   If an article comes with a clip-on at the bottom which says, 'Send us $9.95 and we will send this to you', start
being sceptical about that information. Look for peer reviewed articles. Interestingly, with organisations like
Patients Like Me, you start getting the wisdom of the masses of those populations. You have a couple of hundred
of these patients, and some have gone down the wrong path and realised it and come back. Their feedback to
other patients is probably a lot more important than if I as a doctor tell them, 'No, that's the wrong way to do it.'
You find that the wisdom of the masses really starts to kick in once they can connect effectively.
   CHAIR: That is fascinating. Thank you for that. Mr Fletcher.
   Mr FLETCHER: Dr Margelis, that is very interesting. Thank you for sharing your expertise with us. Could
you tell us a little about the products that you have in the marketplace right now that use the network as it
presently stands?
   Dr Margelis: Currently we have three key products in the marketplace. One is called the Health Guide. As I
described earlier, it is basically a computer based system but designed with an interface that is extremely easy to
use. We actually did a lot of demographic work and work with patients who would use the system. There was a
lot of work about 10 years ago on this concept of, 'We will give patients computers. Give them access to the web
and that will solve their problem', and we quickly discovered that it was not quite that easy. So, it was thought
better to develop a system that was usable by someone who was computer illiterate, probably had visual deficits,
probably had motor deficits and did not want to spend their whole time learning technology. That was a challenge
coming from a company which had predominantly engineers as its basis, who loved designing gadgets. We had a
group of social scientists working within our corporation who actually lived in people's homes and watched how
they interacted with the technology. The first system was designed to take advantage of the television. We quickly
discovered that was the wrong way to go, because once you start intervening in someone watching Oprah at 3
o'clock in the afternoon with an alert to look after their medication, they associate that with a bad experience. We
had to take the device and turn it into a standalone device.
   The technology basically enables us to capture vital signs—blood pressure, blood sugars, blood oxygen,
weights, peak flows, various measurements—and, again, we have done a lot of work to make sure that it is all
standards based. As new technology has become available, they just plug into it. It enables us to do what a nurse
or a doctor would normally do in that situation. They will ask the patient questions. We will ask patients questions
triggered by reminders about how they are feeling; how did they sleep, are their ankles swollen, are they coughing
more than normal, are they having problems with their diet or are they having problems with their medication. We
are capturing that information and providing it to the clinicians who look after the patients in a usable format. The
way the clinicians receive the information is they log on to their screen. Again, clinicians do not need anything
dedicated. They can just log on to an internet browser and access this information with the right security. They
can see which patients are within normal parameters and which ones are outside. Then they can actually respond
to those patients.




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   The challenge we have had to date is that the way home healthcare has been done is that on Tuesday we visit
Mrs Smith. If Mrs Smith is sick on Monday and we visited her on Tuesday, that is good, but if Mrs Smith is sick
on Wednesday and we do not visit her again until next Tuesday, that is not so good. By being able to provide the
clinicians information about the patient's status continuously, they can actually make decisions on the fly about
which patients need care. Sometimes that patient will still need a nurse or a doctor to go and visit them and they
may even need hospitalisation. We are catching that information in close to real-time. This is not an emergency
response, this is capturing information.
   The second technology we have is called CareConnect. It is a similar technology but based more around the
social connectedness side of it rather than the healthcare, recognising that whilst healthcare is important for these
people, reminding them to go for walks, reminding them that Mrs Smith down the road is having a party—those
sorts of issues are key as well. The third technology is looking specifically at people with visual deficits, and how
we can use technology to deliver them up-to-date content either through the internet or directly from printed
pages.
   Mr FLETCHER: So, these are all commercial products in the marketplace right now?
   Dr Margelis: These are commercial products available now.
   Mr FLETCHER: Typically who is the customer? Is it a local health agency?
   Dr Margelis: With the Health Guides and Care Connect predominantly we sell those to the healthcare
provider. In the US it would be a health insurer or a health provider organisation; here it would be a nursing
agency or department of health.
   Mr FLETCHER: In terms of the trial you talked about and the equipment that you are using there, what is
the bandwidth that you would want to have on a uniform basis into a home for that to be usable?
   Dr Margelis: Because we tweak the technology to take advantage of the currently available bandwidth, we
could work with 256K up. What we found—and we actually did some work down in Tasmania with the first
rollout of the NBN—was the more that was available the better signal we could get through, and also it allowed
us to add extra functionality. For example, the device in someone's home may only use 256K today and that may
be the limit of their upload, but what you need to make sure is that they do not have a bad experience. If someone
else in the house is downloading at the same time or using a Skype at the same time that will affect it. We have
actually done a lot of the work to provide quality of service by having a VPN wrapper around both the video and
the audio and the data so that the patients do not experience those sorts of outages. But at least 256K; 512K would
be better. Once you start getting up to one and two megabits we actually find that the technology no longer
becomes an issue and we then start hitting constraints of the hardware. The hardware is advancing so rapidly that
they will overtake it fairly quickly.
   Mr FLETCHER: That is symmetrical?
   Dr Margelis: We are finding that symmetrical is what we need. Our limitation is the upload speed. Download
speeds have not been a major issue for us to date. Upload speeds have been our major issues.
   Mr FLETCHER: Thank you.
   Mr STEPHEN JONES: Mr Fletcher unusually asked a lot of the questions that I wanted to ask. The only one
remaining is: what is the typical cost of the unit?
   Dr Margelis: The hardware is probably around $1,000 to $1,500, and it comes as a cloud based service. That
cloud based service, depending on the number of users, is anywhere between $50 and $100 a month per patient.
Again, that sort of thing is only because of the small volumes. Once you start scaling up to larger volumes, the
back-end costs become minimal compared with the other costs associated with it, which would be the clinicians'
times or whatever.
   Mr STEPHEN JONES: And replacement rates of these machines?
   Dr Margelis: Of the 50 units we have deployed in our pilot, I think we had to replace one, which literally was
dead on arrival, and we swapped it out. They are designed on the same sort of architecture as our PCs are today.
Those of us who bought PCs 15 years ago suffered all the problems they had, but because nowadays they are built
much more robustly and much more standards based it is very minimal. It has not been a major issue for us. It has
usually been other problems that have caused us to take them out of the people's homes.
   Mr STEPHEN JONES: Do you lease them or sell them to end users?
   Dr Margelis: As a group we work through various partners and the partners usually go through some sort of
rental or lease program.


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    Mr STEPHEN JONES: Okay.
    Dr Margelis: And, again, that comes down to how healthcare is financed. They have operational expenditure
money, they do not have capital expenditure money. Therefore, they can write them off. It would probably work
out cheaper for them to buy them, but the model does not exist for that to happen.
    Mr STEPHEN JONES: I am assuming this is a platform on which you would seek to roll out a whole range
of other e-health services?
    Dr Margelis: Absolutely. It is designed around an industry standard platform—that is one of the key criteria
for our development—and as new technologies become available and as new models of care become available,
they just plug in. Again, that is the beauty of using a standardised IP protocol rather than a proprietary
telecommunications protocol. In the past some of these technologies have had proprietary communication
protocols, but that means you could only plug in stuff that works in that way. By using a standard IP protocol
delivered over the standard internet protocol, we can add new technologies to it as they become available.
    Mr STEPHEN JONES: Thank you.
    Mrs PRENTICE: Dr Margelis, there are obviously some great innovation opportunities. Did you have any
resistance when you offered patients this remote care?
    Dr Margelis: Generally it comes down to how it is presented. We present it to the patients as an adjunct to
their current care. This does not replace their current care, it provides something extra to their current care. They
still have access to the nurse and GP when they need it. What we need to do is have them understand how they
use the technology. Initially we had some difficulties describing that. Often we found that showing them a video
of a how a patient was currently using them enabled them to do it. You would go back a week later after you have
installed it and see how they go. Most patients picked it up very quickly. The important thing was that the nurse
they were speaking to on the video conference was the nurse they knew. So, it was not a remote nurse who they
had never seen before in their life; it was the care team who was normally looking after them. But rather than
driving out there and spending 45 minutes in the car to get there, they spoke to them over video conference.
    Mrs PRENTICE: So, it would be fair to say that the best way to train and educate them in that case is with
the person they trust, be it the nurse or the doctor?
    Dr Margelis: Absolutely.
    Mrs PRENTICE: So, therefore, the nurse and the doctor possibly need training in how to train patients?
    Dr Margelis: Yes; and again it comes down to training clinical folk about how they can use these
technologies. You cannot just drop these on their desks and say, 'Change the way you deliver healthcare
tomorrow. We need to have a change management process.' But it is understanding what their current process is
and not trying to change it. When I was working in medical practice I would speak to my patient and ask them
some questions. How do we automate as much of that process as possible to make it more efficient but without
changing the process? There is a strong argument that healthcare may need some radical change. But as a
practitioner I want to continue doing what I am comfortable doing. I know what information I need and I know
how I want to interact with my patients. I can then pick the patients who I believe will benefit most. Some of my
patients will not benefit. They will stay with the current system. But those patients who will benefit I can put on
to the system, and that will allow me to see more patients. That is the biggest challenge.
    Mrs PRENTICE: So, with respect to training going forward, we are better investing in digital champions in
the medical practitioners area than we are in trying to train remotely the elderly community?
    Dr Margelis: I think it is really important for clinicians to be trained on the advantages of the technologies,
but as Ms Sinclair touched upon as well before, clinicians are often also driven by what their reimbursement
models are. So, if they are not paid to deliver care remotely, there is really not a strong incentive to. My
colleagues in general practice will still tell me they have mortgages and school fees to pay. Therefore, whilst they
would love to do things differently, they will not do so if they are not going to get reimbursed for it. So, there is a
strong need for a re-examination of how reimbursement occurs around healthcare—moving it away from a face-
to-face, one-to-one interaction to either a population health based or an outcomes based model. The beauty of the
technology is that because you are actually capturing information in real-time you can reimburse on those
outcomes. You have hard data, not just subjective data.
    Mr SYMON: You talked about the problems with 3G. What happened when your communications link
dropped out? Did it require you to go out and manually reset it? What was the process involved there?
    Dr Margelis: From the management perspective, the backend system would tell us when a patient was not
able to connect. So if a patient had not connected for 24 hours it would be flagged in our system as a failure of


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connection. We could try to ping the system to see whether we could get the connection. Physically, when it did
not work, most times we would have to ring up the patient. Often it came to saying, 'Unplug the 3G dongle, wait
30 seconds and plug it in again. Try to move the antenna a bit closer to the window', but probably half the time
the nurse or engineer would go out there and have to fix up the system.
   There is a classic example. One of the challenges we faced, because of the way the 3G system works, was that
we paid for a certain period of internet access on to the 3G dongles. The day after those 3G dongles became dead.
Therefore, someone had to go out there, plug that 3G dongle into their computer, refill the credit, plug it back into
the back of the machine and away we go.
   Those are issues that can be solved with some advances, but they were the sorts of day-to-day issues we faced.
The fact that the signal would work one day and not work another day. The fact that someone had moved the
microwave a bit closer to the device and that was causing interference. Those are the sorts of day-to-day issues
that our engineers face. I must admit, my engineer who was used to working on large enterprise solutions came
back with a lot of learnings about the vagaries of working in the home.
   Mr SYMON: In terms of doing the same sort of monitoring but in far more remote areas, what have you
learnt from that system in terms of automatic resets for monitors and so on? Although you were doing a trial site
and you had to send people out, it was not as far as you may have to send them out.
   Dr Margelis: Absolutely. We have done a lot of work looking at how you remotely manage devices. I always
like to use the example of when I worked at Intel. There were 90,000 of us. We each had a laptop and each
morning when I turned on my laptop the system back in Santa Clara would check the status of my laptop, check
the status of my connection, make sure things were working. If they were not working, they would notify me and
do things early. We can do the same thing with these home monitoring devices. If we have a connection to those
devices we can manage 99 per cent of the problems of those devices remotely. If the screen blows up or the hard
drive fries, that is going to need a replacement, but usually that just means shipping a new one in and plugging it
in. Most of the issues can be managed remotely, if we have that always on ubiquitous connection. That is the key
thing; having that always on connection.
   I think Mr Fletcher commented earlier about ubiquity versus speed. Ubiquity is a given; that is the thing that
we really need today. The speed basically enables us to develop new solutions that we have not been able to
develop to date because of those limitations.
   CHAIR: And it is the symmetrical nature of that.
   Dr Margelis: Absolutely; symmetry is key.
   Mr SYMON: Thank you.
   CHAIR: Have you, in conjunction with the rollout of this technology, done any research on hospital
admission rates and maintaining people in their home for length of time outcomes?
   Dr Margelis: The project at Hunter is specifically looking at hospital admission rates. We are just waiting on
the finalisation of that data. Anecdotally, we showed a reduction in hospitalisation rates of about 50 to 60 per cent
in that group.
   CHAIR: Is that something you might be able to provide to the committee when it becomes available?
   Dr Margelis: Absolutely. We are also doing comparable studies around the world and we are happy to
provide that information.
   CHAIR: That would be great.
   Dr Margelis: Hospital admissions, especially in a targeted population of congestive heart failure, COBD and
hypertension, stroke risk patients, are key issues. We commented on the workforce before. One of the key issues,
of course, in the healthcare workforce is that there are many semi-retired doctors and nurses who currently cannot
practise their profession because they have to basically go to a practice or go to a hospital to practise their
profession. We are finding around the world many of these people are now saying, 'How can I deliver healthcare
from my home via a computer interface?' Home monitoring provides them with a new opportunity. We actually
now have an opportunity for bringing back into the healthcare workforce, people who—
   CHAIR: To employ those people. I think the government has a separate discussion paper that has just been
released on engaging the professions into the semi-retirement stage.
   Dr Margelis: Exactly, yes. It is a key area.




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   CHAIR: It might be something useful. It just struck me as well that if you are trying to engage elderly people
to participate an important sales point to them would be, 'People who use this sort of device have a 50 per cent
lower hospital admission rate.' From my own experience, I hate having to be readmitted to hospital and so forth.
   Dr Margelis: Absolutely. Even though I have spent 20 years as a doctor, hospital is the last place you want to
be.
   CHAIR: That is right; exactly.
   Dr Margelis: And if you are old and frail, it is even worse.
   CHAIR: I think that will be very useful information for us. If you could get that through to us; that would be
great.
   Dr Margelis: More than happy to get that information to you.
   CHAIR: Thank you very much for your attendance today and the information in these brochures.
   Dr Margelis: It is my pleasure.
   CHAIR: The additional information you can just forward through to the secretary. You will be sent a copy of
the transcript of your evidence, to which you can make corrections of grammar and fact. Thank you so much.
   Dr Margelis: Thank you very much.
   CHAIR: We will just take 10 minutes for a break.
                                     Proceedings suspended from 14:47 to 14:56




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ECONOMOU, Dr Dean, Technology Strategist, National ICT Australia


JAKUBOWSKI, Ms Elizabeth (Liz), Director, Government Relations, National ICT Australia


PERCIVAL, Dr Terence Michael Paul, Director, Broadband and the Digital Economy, National ICT

Australia


   [14:56]
   CHAIR: We are into our final sessions for today's hearing. There has been some information of great interest
to us. I welcome representatives of National ICT Australia to today's hearing. Although the committee does not
require you to give evidence under oath, I should advise you that the hearing is a legal proceeding of the
parliament and therefore has the same standing as proceedings of the respective houses. As I indicated, we have
an extensive submission from you. Thank you very much for that. It has been most useful information for the
terms of our inquiry. Did you want to make an opening statement of five to six minutes to that submission and
then we will have a question and answer session?
   Ms Jakubowski: I will make an introduction and then I will hand over to Dr Percival. I would like to
introduce both of my colleagues, who are quite eminent research scientists. Dr Terry Percival is NICTA's Director
of Broadband and Digital Economy. He is also a former Chief Research Scientist from CSIRO. Dr Percival
personally invented a digital satellite communication system and was co-inventor of what is known commonly
these days as high-speed Wi-Fi. Ten years ago he established the Centre for Networking Information
Technologies, a pioneering research centre at the time looking into the sorts of technologies that we are talking
about now, and which we will be doing on the NBN in the future. Also, in 2004, Dr Percival set up the virtual
intensive critical care unit with the Nepean Hospital, which was a world first insofar as it was the first application
anywhere of specialists at a tertiary hospital working with a more remote hospital out at Katoomba and
supervising the sort of care of critically ill patients in that area which involved more expertise. That was regarded
as a remarkable trial at the time. Dr Percival then went on to join NICTA and is also responsible for
commercialising technology in Australia that is regarded as one of our finest achievements to date, and that is
technology that is currently in over a billion phones around the world. My colleague on Dr Percival's right is Dr
Dean Economou. Dr Economou also worked with Dr Percival at the Centre for Information Technologies and
then went on to be Director of Health and Media at the Smart Internet Service Cooperative Research Centre,
which was also looking at digital economy applications. Dr Economou is currently with us as a technology
strategist. I would like to hand over to Dr Percival just to give you a brief introduction about NICTA.
   Dr Percival: NICTA is not yet a household name. We have been around about seven years now, but we have
not quite made it to a household name—unlike CSIRO where I used to work, which is a household name—so I
thought I would give you a very quick rundown.
   We are Australia's premier and sole research organisation dedicated to ICT. We have around 700 staff and
students across five labs in the eastern states—Queensland, New South Wales, the ACT and Melbourne. We bring
together world-class researchers from within our organisation and with our partner universities. Our key areas of
research are obviously digital economy and broadband, improving Australia's transport and logistics networks,
Australia's energy networks, improving safety and security in systems critical infrastructure, and optimising
government services and health services. There is a particular emphasis in that area on cloud computing
technologies.
   Much of what we are doing will be enhanced by the National Broadband Network. I just want to make it clear
that we have had some impact. We have our operating system technology in over 1.2 billion mobile phones now.
We have worked with the lending industry to transform the mortgage process in Australia from a paper based
system to an online system, which reduces the time for a mortgage approval from about 14 days to 14 minutes for
those organisations who are smart enough to adopt it, and most of them are now adopting it. We are also
developing world-beating technologies for the treatment of chronic pain and we are doing human trials on that at
the moment.
   I think today we should focus quickly on what we do that relates to the NBN. You have heard a lot from other
people—we have been listening a little bit online—about e-health and education. I do not want to go through
most of what is in our submission. I have just a few comments. This is a national infrastructure project. You really

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need to think 30 to 50 years ahead—a 50-year lifetime at least for optical fibre or maybe more. In fact, it is so
long that we are not quite sure. I built an optical fibre communication system linking several telescopes and the
Australia Radio Telescope at Narrabri in 1986, and they are still chugging away quite happily, so who knows how
long they are going to last. I think the good analogy is we want to build a Sydney Harbour Bridge and not a
Sydney Harbour Tunnel. I drive from Mr Fletcher's electorate to Mr Garrett's electorate every day. That takes me
through the tunnel. The tunnel clogged up after 10 years and the harbour bridge lasted 50 years before it reached
its capacity. The tunnel is a nightmare. I spend a lot of time sitting in my car spewing out C02 under Sydney
Harbour.
   New applications are coming. I think bandwidth demand is relentless and it is also going symmetrical. We are
seeing more and more trends for bandwidth demand to be symmetrical. The interesting thing is that underserved
areas are those that would benefit most. The remote areas where there is least service are the ones that are going
to benefit most from the NBN. It is a nice catchphrase to say that we want to move to a single speed digital
economy. We do not want to end up in a two speed economy, and the digital economy is really growing. We need
a campaign to educate everyone about the importance of taking up these new technologies. That is part of the
work that NICTA is actually undertaking. Although we are a research organisation we do see our job to be an
evangelist.
   Killer technologies—interestingly, people get excited about what they see at the moment, but in the labs we
have worked on high definition tele-presence. Everyone got excited when 3D TV came out. It is not 3D, it is
stereo. 3D TV is something different, and that is where you can actually move around and get a different view out
the side. That is coming in maybe five or 10 years, which will chew up even more bandwidth. Holograms are
coming. 'Help me, Obi-Wan Kenobi' is the famous one. They are being trialled in the labs now. They will come
out. Cloud computing is more than data centres, and we can talk about that if you are interested. Social
networking is growing huge capacity demands, and what we call smart everything—smart transport, smart
infrastructure, smart houses, smart electricity grids—all of that sort of thing needs communications.
   There are five important things about the National Broadband Network that I want to raise. Those five things
are ubiquity, ubiquity, ubiquity, ubiquity and ubiquity. With that, I think I had better be quiet.
   CHAIR: You have a very clear message, thank you. Dr Economou, would you like to add to that?
   Dr Economou: If you just want to ask questions; as there is so much, that is probably more efficient.
   CHAIR: Before I go to the actual submission, I would like to follow up on one of Dr Percival's points. You
identified that the underserved areas are those that will benefit most. One of the things that we have been picking
up through our process of evidence gathering is this tension between those that are most underserved often having
the least experience on which to judge their desire to utilise this new high-speed fibre based system coming to
their home. Therefore, it opens it to criticism that it is not everything it is cracked up to be and that not everybody
is signing up for it, anyway, which can then become self-fulfilling in and of itself, as opposed to, 'Why would you
roll it out into the areas where people have multiple competitive choices'—not probably symmetrical, to be fair—
but certainly in terms of capacity they get what they need and perhaps would utilise it more. Do you have a view,
as an organisation, about where the balance is on those competing issues and how to address them?
   Dr Percival: The people who do not know what they are missing out on need an education program, because
they are the people that will benefit most. There are two processes there. One is in some of the underserved
communities there are these community technology centres that were established in New South Wales a while
ago. I think there are about 120 around New South Wales. If those can now be connected with the broadband
network and used to set up—
   CHAIR: I am a New South Wales MP; I do not know what you are referring to. Can you explain to me what
they are?
   Mr STEPHEN JONES: There is one in my electorate.
   Dr Percival: These community technology centres were set up about six years ago. They are basically in a
church hall, a school hall or in libraries—a few PCs set up with a broadband connection—and they are available
for people to come and use. There are people there who can help you understand it.
   CHAIR: So they are staffed as well?
   Ms Jakubowski: They are actually staffed by a combination of volunteers. There was a federal government
program initially set up.
   CHAIR: I am familiar with the Broadband for Seniors kiosks.
   Ms Jakubowski: This is separate.


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   CHAIR: It is a separate program?
   Ms Jakubowski: Yes. It was initially a combination of infrastructure and some staff support. I think they were
partially staffed by someone like a coordinator, but then volunteers also supported it.
   Dr Percival: They can connect those and be expanded to provide access to social services, things like
Centrelink activities. They can tell people, 'You can come here', rather than drive 50 miles to the Centrelink
office. If you can set up some sort of tele-presence networks, that is an important area.
   NBN Co. is producing a bus, but it is going to take a long time to visit every centre. We are currently planning
with a community group of businessmen in Armidale to set up what is called a Smart House in Armidale. They
have purchased a house. This is a group of well-to-do businessmen who really want to put something back into
the community, connecting that to the NBN and we are looking at putting a whole range of demonstration
services into that. They are almost thinking of it as a tourist attraction. If that sort of service can be done in a
number of communities that is the sort of thing that can help people.
   CHAIR: We have consistently had a message that people need to be able to see what it is. You would agree
from your experience. You are all nodding there; you would agree.
   Dr Economou: The project that we talked about before, the Centre for Networking Information Technologies,
was very much about showing people what was possible. You can talk about tele-presence until you are blue in
the face. Until you have actually used it you really will not get it and you just think it is better video, but
something magic happens at a certain quality point where you feel, 'We are having this discussion and I don't
need to get on a plane.' You really just have to show people.
   CHAIR: I appreciate you are making the point about a technology bus being developed. I remember some of
my earliest interactions with high-tech education was with the Happy Harold drug and resilience program that
was put out for kids across schools. Happy Harold was a giraffe. I cannot quite remember the name of the
program. It was a high-tech bus, and they are still going around. It was the first time as a teacher—and we are
talking close to 20 years ago now—that you could see the power of that. Seeing these technologies available
made the rest of us teachers jealous that we did not have any form of that in our classrooms. You have given one
example of a house. Have you seen anything else that people might be able to look at in terms of demonstrating
opportunities in communities?
   Dr Percival: Smart House is one example, but it requires a group of people who have the vision to do that,
and Armidale is a fairly—
   CHAIR: Is that because it is an early site?
   Dr Percival: It is an early site.
   Dr Economou: The university has been involved in distance education. They have a rich heritage of making
things work remotely.
   Ms Jakubowski: There are examples across-the-board of different community organisations. There is a group
of CIOs in South-East Queensland, for example, and the leader of that is looking at getting greater awareness
about the possibility for government services to be more streamlined and integrated, particularly across local
government areas. I think the particular example he is looking at is land development applications. Every council
does it somewhat differently. They are looking at how, through something like the NBN, they can streamline the
process and roll out the same generic way of doing it for everyone so that the community understands what the
benefits are through a simple example like that.
   Mrs PRENTICE: Is it a physical bus? Is it like the Cisco bus in Incheon—the connected bus? Is that what
you are talking about?
   Dr Percival: It sounds like it. I do not know the Cisco bus. They are talking about a physical bus that they are
going to drive around.
   Dr Economou: There will be an inside and an outside, so you can get the impression of what really good
quality video conferencing looks like. It is a standalone bus. It is a space where you can come and experience all
sorts of interesting broadband applications. Once you see it you get it.
   Mrs PRENTICE: The Cisco bus in Incheon is where you plug in your computer and you can talk to your
office or to your home and monitor things while you are stuck in traffic. It would be good for here.
   Dr Economou: That is doing something similar. It is trying to demonstrate a different thing. The NBN bus is
trying to show more than that. It is like, 'This is the broadband world and it has come to you.' The Cisco bus is
trying to show mobile applications. It does not matter if you are moving or stationary, you still have a world of
connectivity.

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   Mr STEPHEN JONES: I think we are all imprisoned in the fossil fuel world.
   Dr Economou: You have reminded me of some comments that I wanted to make in case it did not come up.
We have talked about some very particular things. I just wanted to talk a little about productivity. You may or
may not be aware that 14 per cent of Australia's GDP is devoted to transport—moving stuff and us around. The
sorts of technologies that we have worked on at NICTA and with the RTA—I am not sure if you know, but
Sydney traffic lights are actually controlled by computers and there are sensors that adapt the traffic lights. That is
used on half the cities in the world, and the RTA still builds it. The algorithms are getting quite old so we have
been working on newer algorithms to optimise that, but also traffic lights that see the traffic coming so that you
only stop things when you have to or when you see a big truck coming.
   CHAIR: So I can stop yelling at them; is that what you are telling me? You could have it wired up so they
hear me yelling at them.
   Dr Economou: That is right. If the engineers do their job properly, that is exactly what will happen. The idea
with traffic is that you do not stop and start things unless you have to; you try to keep things moving. Also, there
is a constant trade-off between freight and passenger traffic, and Sydney is a particularly acute example. With the
sorts of technologies that we have been working on you can get 10 per cent to 20 per cent improvement in
throughput on the traffic. If you apply that to 14 per cent of GDP, that is 1.4 per cent of GDP, if we use smart
transport. To do that you do not just need the cars being smart, you have to have the roads being smart as well. All
that data has to be carried on something and a lot of it is video data. You do not want to put little detectors all
along the roads. It is much easier to put one really high-definition camera around and only fibre can be the
backhaul for that. One of the points we made in Smart Infrastructure was that NBN Co. should consider
connecting up things like traffic lights and other infrastructure points.
   Mrs PRENTICE: But all traffic lights are connected already.
   Dr Economou: They are very slow.
   Dr Percival: They used to use dial-up modems. They have now upgraded that to a DSL-type connection that
connects the traffic lights. That is just for the control pulses. If you have video in there, you get a whole new
range of options.
   CHAIR: I want to take you to some of the points in the submission. In particular, I notice your reference
under the section e-government to the PricewaterhouseCoopers report for the UK government on the transaction
costs; that face-to-face is about £10.53; telephone engagement is about £3.39; mail, £12.10—very dear stamps
over there obviously—whereas an online transaction cost is about £0.08. I am not convinced that there is less
human activity as you digitalise. As MPs we are conscious that with email, blog sites, Facebook, Twitter and all
those sorts of things there is a whole lot more human activity generated. I am just wondering how those costings
were arrived at—if you are aware of their report—and where the savings are?
   Dr Economou: People are still involved, but the question is: are they working efficiently and are they
frustrated, so what is their productivity? Going to medicine, as a different example, I just came back from the
Korea, Australia and New Zealand broadband conference. A company called MoleMap has a team of
dermatologists that specialise in skin cancer. It turns out skin cancer is a subspecialty. If you go to your average
GP he or she may not really know about whether something is a skin cancer and they might send you to a
dermatologist. The average dermatologist is barely better, at skin cancer, than that. So, there are people who
specialise in this. But the efficiency of getting a person into a doctor's office, making a booking and taking the
map makes it a very slow process. They have this team and you go to some sort of clinic where they take the
appropriate pictures, upload those pictures and then they have their team of dermatologists basically doing one
patient per minute. It is very thorough, but they diagnose one patient each 10 minutes. They have to use high-
definition video to examine the people properly. But normally it is about 10 minutes per patient, not one.
   The stats that came out from this MoleMap company were that they did 20,000 more patient consults with the
same sized team. The thing that is really marvellous is that you have taken this very specialised set of patients
with specialised needs and you have matched them exactly to the right people. Rather than everyone getting some
sort of average service, those specialists are getting the patients that are most relevant and those patients are
getting the best service. That is 20,000 extra patients covered by the same team. If you extrapolate that kind of
thing to the wider medical system you can see there are some real efficiencies. They think they probably saved
250 lives because those people are so specialised they would have caught things that others would not. You hear a
number like that, and that is just because the digital economy allows you to organise things and match the work to
the people.



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    CHAIR: We had evidence in Wollongong yesterday that people will, sadly, make choices about not accessing
expertise if it involves travel and significant disruption to their lives, in terms of cancer services. Evidence was
given to us that women will choose not to take particular breast cancer treatments if it involves extensive travel
and time away from family. Some of that follow-up expertise and so on could be done through videoconferencing
based services. I think you make a really important point about lives saved as well as efficiencies. Dr Percival, did
you want to add to that?
    Dr Percival: From a government services point of view, there are things like electronic conveyancing, which
is an area we are working with—it saves people taking a piece of paper to an office, say to Land and Property
down the road here. Again, you are waiting in a queue, the guy behind the counter is twiddling his thumbs and
goes 'Next' and then stamps a document. If you can do that online, you do not need the big waiting room, you do
not need the queue system, you do not get 'You have come to the wrong window'—
    Dr Economou: You do not have to drive.
    CHAIR: We had the user group making the point to us that much of online government service is still at that
point of, yes, you do all this and you print it out and sign it and take it in, or you have to present it with your birth
certificate and your 100 points of identification or whatever. They are some of the issues we are facing in terms of
really converting it to an online service.
    Ms Jakubowski: Rosemary Sinclair raised the example of her son and his dislocated hip—he basically still
had to physically hand in a form to say that he was disabled and needed a pass. It is one of the areas of research
for NICTA, having systems in government that are interoperable and then using our smarts to make sure you do
not have that roadblock at the end where there is still some sort of physical interaction. Increasingly that is going
to become easier to manage as systems develop. That sort of ubiquity and interoperability is going to ensure that
you do not end up with a PDF that you are signing at the end of the day or are having to put through a fax
machine or scan. It is very much the way of the future.
    Dr Percival: Maybe if you go into one of the community technology centres I talked about earlier, you have
high-quality videoconferencing and you have an electronic pad. Some people have difficulty filling out forms or
can be slightly dyslexic or illiterate, and basically they can be guided through on the pad in front of them—circle
the spot, sign here. All that sort of interactivity can be improved a lot with this sort of technology. We are
certainly doing research into what we call privacy and trust—you have to give up some privacy to get that sort of
trust level in there, but how do you trust the information, how do they trust you that you are disabled—
    Dr Economou: Or how do they know it is you?
    Dr Percival: You have to give up some privacy to do that and in balancing this we are trying to use numerical
numbers based on a whole range of things like that. That is a technology area that is developing.
    CHAIR: I think one of the earlier submissions referred to Singapore having an eBox program where there is
an actual coordinated contact online point for citizens with all government services. Are you familiar with that
model?
    Dr Percival: A single point of contact, yes.
    CHAIR: I assume the security and trust stuff is built around the point of contact, so whichever government
department—
    Dr Percival: Yes. The tax office may have that for online transactions—but I think it needs to go across all
government departments, and that is going to take a while.
    CHAIR: Many of us commented that we have all heard from people who have had experiences going to
Centrelink and being told they have to apply online, and they go home to apply online and they get to the point
where it says to print the form out and take it back!
    Dr Economou: If you have pervasive video it is easy. It could be the real reason they want you to come to
Centrelink is they want to see that it is you—they can just quickly look at the video and say it is actually John,
they recognise the face. That is probably all they really need. You need to get behind the process that said to bring
it into the office.
    CHAIR: And I certainly think that the 100 points of identification issue is a consistent theme throughout
many service delivery points.
    Mr FLETCHER: Your opening statement referred to your work in the mortgage market and rationalising
processes. Can you talk to us a bit about the mix of IT work and business process work that that involves?
    Dr Percival: A lot of the work was business process modelling, which is a branch of computer science
nowadays—how you actually sit down with people, how you digitally input what the business process is and how

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you monitor it. The other key issue that we had to address was what is called ontologies, which is basically the
name you use to describe something. In conveyancing you might talk about what is a boundary and what is a
fence line, and each organisation and state will use different terms. Basically we have ontology managers and
vocabulary managers that do that matching, based on context. When you are entering information, it means the
system will ask you whether you mean this or that, and that makes sure that what you are describing is the same
as the person in South Australia or the person in another company. They are the two areas we address. We found
similar technologies are important for the national electronic conveyancing system. We are also looking at
business rules for matching—electronic systems that can tell if your procedures actually match the legislation;
what you have to do and if you have to do something. You take the business process and then you take the
legislation, and you convert them both to electronic information and do a matching to see if the processes are
actually consistent.
   Mr FLETCHER: What did you learn from that exercise or from other work about the incentives of the
various players, and what is needed to incentivise players in a widely distributed system to come together and
operate in a standardised form?
   Dr Percival: I guess in the Linden case the organisations—the mortgage brokers, the banks, the finance
companies—were very incentivised because of the delays. There were basically 20-odd days off. They are the
people who benefited from the savings there. They were quite easy to get adopted because they actually reduced
the costs, which they did not pass on to their customers. They reduced their costs by $50, $100, $120 per
transaction. But we did not get that off our mortgage fee. In the health case, which George was talking about
earlier, and I have seen this talking to GPs, the benefit is to be patient. The health system has adopted it because
they are not directly seeing a cost benefit—the benefit is better patient care. That is a five-year-out thing—you are
going to need to build less hospitals, so it is worth doing it, but deploying a tele-health system is not in your
current budget this year. Finding where the pain points are is very critical to these sorts of activities.
   Dr Economou: Often it is only Treasury that ultimately sees that and models it. That is why you end up with
government intervening in the market. The individual players themselves are not, in the short term, seeing the
benefit but the benefit is to the greater whole and to the efficiency of the country and the liveability of it.
   Mr FLETCHER: That comes to a related point. As is well known, the political controversy about the NBN
links in part to different judgments about speed and technology and how much governments should be spending
on that. You underlined ubiquity. Can we take from that that you see benefits in ubiquity regardless of where the
speed point happens to be set at?
   Dr Percival: Once the speed point is set above a certain level, yes. Examples include education. People in the
department of education in Canberra are quite excited about this now because they see it is actually worthwhile
having a national digital curriculum and national collections of teaching material that are digitised. Obviously not
everyone is always going to have home computing—there are always going to be some disadvantaged people—
but it is going to be much more ubiquitous that students will all be able to get access from home to this sort of
content. So it is worthwhile putting a huge effort into creating this sort of content. The same with health care. You
are asking is there an inflection point. It has to be symmetrical. Children will be uploading their homework,
patients at home will be uploading their video, so you need 10 megabits now and as time goes on that will go up
and up and up.
   Mr FLETCHER: Based upon your experience in the mobile sector and the technology you have developed
that has been implemented so widely, what is your observation about the role of standards? And, if you manage to
catch the standards wave, then to a significant extent you can then rely on the operation of the market to
disseminate technology.
   Dr Percival: I do not quite understand the question.
   Mr FLETCHER: I would argue that the lesson from mobile take-up around the world is that standards were
set, a commercial proposition evolved and some applications turned out to be incredibly attractive in a way that
was not expected; for example, SMS was never originally expected to be an attractive consumer proposition, but
it became incredibly popular. If you are sitting as a policy maker saying, 'How are we going to allocate scarce
government dollars?', if you can say is there a way to set this up so that the private sector takes off and the market
explodes, the standards are there and then the thing disseminates by itself, that is pretty attractive, but that is a
hard thing to achieve.
   Dr Percival: It is hard. There have been some examples of standards that have flopped. WiMAX is a good
example. I was told five or six years ago that WiMAX was going to be everywhere and take over the world.
Mobile WiMAX was coming as well, but they have not happened. In the mobile space it is fairly easy to do a


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forklift upgrade because you just upgrade the base stations. In the fixed access network it is not because you need
to upgrade the physical layer, the copper or the fibre would need to change if you wanted to go to a different
technology. I think that is where the difference lies. Copper has been upgraded. It is not the same copper in the
street that it was 30 years ago because they need higher quality, better twisting and better isolation.
   CHAIR: It does not mean that in some places it is not the same copper in the ground.
   Dr Percival: Yes, which is why there are some problems in some places.
   CHAIR: I am conscious that my two colleagues from interstate have to catch flights so I want to give them a
chance to ask some questions and those of us who are local can come in at the end. I should have realised that
initially. Mr Symon.
   Mr SYMON: I have many questions, but I only have time for one. You have been speaking about it in terms
of infrastructure; it is not just for now, it is for 50 years and more in advance. I think still too many people do not
understand that time frame. The question I have around that is that you had some examples of drivers of
bandwidth usage. You spoke about genuine 3D TV and other things. If all of those come to be and are used, do
you expect that the graph that you have in your submission, which shows a very steep upward direction of usage,
to actually go over and above what is already plotted?
   Dr Percival: I suspect it is going to be pretty constant. The slope will stay about the same.
   Dr Economou: There are a couple of things to look at. The Koreans are probably five to 10 years ahead of us
and five years ago they had 100 megabits everywhere. They were lucky enough to put fibre in. In the next two
years they are upgrading the entire country to one gigabit. I was just at this conference and the average Korean
reckons 200 or 300 megabits is what they need and 100 is a bit slow. An SME guy was saying that 300 is a bit
slow. They said, 'Why do you Australians keep talking about bandwidth? As long as it does not get in the way,
who cares?' That is because they have so much that they never have to talk about it. That is an example of an
advanced society that is showing us, in a sense, what is happening ahead.
   You can look at it more fundamentally. Your eye has about 100 million receptors in it. HDTV has two million.
In terms of getting a visual experience that matches your eye, we still have a factor of 50 to go just for 2D, so we
have a factor of hundreds built in to recreate the experience properly. At the moment what looks like HD looks
really good compared to TV, but in 20 years it will look like a postage stamp and you will say, 'Why did we ever
put up with that?' You will say, 'You really need it.' The thing is that technology is making it possible. Samsung
screens get 20 per cent cheaper and 20 per cent bigger every year. The Japanese 15 years ago were working on
what is called ultra high definition TV, which is 16 times HD. The wedding is actually the first public event that
is going to be transmitted in that.
   CHAIR: Which wedding would that be?
   Dr Economou: Someone famous. So 16 times is coming and that, even compressed for broadcast, is 200 to
300 megabits. That is what we can perceive. All I can say in my time in this game and Dr Percival's as well, is
that we have never seen demand for bandwidth go down and whenever you try to double guess that it is going to
level out it just does not. At least there are some fundamental physiological characteristics of humans which say I
can see it going up 50 or 100, and beyond that is speculation.
   With the holograms that we were talking about, a one litre hologram, which is a still image that you can look
around, is 100 gigabits or more.
   Mr SYMON: One of these water jugs.
   Dr Economou: One of those water jugs is 100 gigabits of a hologram. At the moment MIT are experimenting
with holographic movies at five frames per second, with resolutions the size of a cup or whatever and you would
say that is baby steps, but 20 years or 30 years from now that may be mainstream and what appears to be trivial or
hokey or some kind of child's toy, like Twitter or something, ends up changing the world. You cannot bet on that.
All we know is that it has never stopped and if I were a betting man, an investor, and I was looking at the curves, I
would not be betting on it stopping, I would be betting on it going faster.
   Mrs PRENTICE: Following on from Mr Symon's question, we have had varying views about the need to
upgrade the capacity internationally. Do you have an opinion on that?
   Dr Percival: That is an interesting question. There are a number of optical fibre cables linking us to the US,
Asia and around that way to Europe. There is unused capacity, if you like, on those cables, but it costs money to
light it up. It can use dense wavelengths, division multiplex, and you can have more than 100 wavelengths on
those cables, but you need to add the extra equipment. I think there is a bit of price maintenance in some of those
areas. When the capacity really comes up then a company will threaten to lay another cable and then suddenly the


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prices look like they might be coming down. I think there will always be a pressure point on the international
capacity because it is expensive to light up these extra wavelengths on those cables and it is very expensive to lay
new cables. I worked on the first optical fibre cable that went from Australia to New Zealand and that was $120
million 20 years ago, so I dread to think what they cost now. That only had 1.5 gigabits on it.
   Dr Economou: Which seemed like a lot.
   Dr Percival: Again, our planners said, 'Why are you putting in the extra 500? Just do two 500 megabit links.'
We said, 'No, you should put in a third. It is only another $5 million for the extra one.' They said, 'Oh, all right.'
There is a pressure point there, but I think market forces will push that down. If they get the income they can
always lay another cable.
   Mrs PRENTICE: At the other end we were sort of disappointed in areas like Scottsdale where there has not
been a take-up when it has been provided. Whose role do you see that as being to encourage the community to
take it up? As Mr Quigley said to us this morning, he is just the wholesaler. Who should be encouraging them to
maximise the opportunity, and do you support the opt out or the opt in proposal?
   Dr Percival: The easy one is the opt out/opt in. I think it is a crying shame to encourage people not to get the
fibre put to their house. I think there is a lot of education required in that space. I was talking to my accountant
yesterday and he asked me that question. He said, 'Is it going to cost me if I opt in?' I said, 'No, you can just get
the fibre put in there.'
   CHAIR: If you do it as they are rolling through?
   Dr Percival: Yes. When it is rolling through you can just hook it up there. You do not have to pay a cent until
you want to connect to it. I think people should be very much informed of that. My accountant is a very smart
guy—he keeps me out of trouble—but the fact that he asked me that question yesterday was indicative that the
message was not getting through that people need to understand that it is not going to cost them anything if they
install it now and do not turn it on.
   In terms of Scottsdale, engineers and technologists like to have these laws. You may have heard of Moore's law
that talks about one thing. There is one called Metcalfe's law, which actually started out when the first fax
machine was made. The first fax machine was useless. The second fax machine was quite useful because you had
two fax machines that could talk to each other. When the third one came along there were three people that could
talk to each other. When there were 50 it became much more important. It goes up as the square of the number of
connections, and the same with this sort of broadband technology. So, that is the first thing you have got to be
aware of. Just having an isolated pocket in Scottsdale, it is going to get there but I think it is an education process
as we said before. The bus, the smart homes; I would really like to see some sort of smart homes—smart business,
in fact—set up. We in NICTA are currently just planning a showcase for this sort of thing for businesses in
particular, particularly small to medium enterprises we are targeting, and some of the larger companies where
they can actually see what—
   CHAIR: At your facility, this one?
   Dr Percival: There is a facility at our laboratories at the technology park where they can come in and look at
things about what cloud computing will actually do for them and all the different types of software as service
products that are available out there. Small companies cannot afford to have an IT support guy to maintain their
equipment and they cannot afford to buy the latest software from SAP or Salesforce. They actually can afford to
buy this incrementally from these cloud computing services so we are setting up a facility. It is in the planning
stage at the moment but it is certainly a sort of activity that we think is very important to educate people.
   Mr STEPHEN JONES: I am interested in the Korean example that you have used. I agree with some of the
observations that you have made in your submission about the importance of engagement. I think most of us learn
by either experience or analogies, so what the Koreans have gone through would be useful knowledge. What are
the apps that they are using which are taking up 100 meg?
   Dr Economou: There are a couple of things. There are commercial apps and there are government encouraged
apps. It comes down to rich media. There is video in everything, be it education, be it looking after elderly people,
entertainment. They are big on gaming—not gambling, as such—but that is only one of the drivers. Then there is
the government itself. I was talking to some of the guys that work in the Korean equivalent of Austrade and the
government mandates that when you do a course part of that course has to be done over video because the
government, by doing that when it trains its workforce, can take the load off the traffic system. Also it means that
they start to understand how to do the video conferencing first and so on, so in a sense government is an anchor
tenant for some of those applications. That then means that there is a cohort of people with experience and the
Korean government then measures what the effect was.


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   So, they do pilots, they see what the improvements are, they learn from that and then they spread it over the
whole country, but because they have got fibre they can scale it. So, ubiquity is like planting the seed and then if
you have got a scalable technology, the more you water it the more it grows, but the problem you have is the pot
is a finite size and at the moment our copper network did so well. For pretty much 100 years it did stuff we did
not expect and now we are pot bound. The fibre is actually the only technology that is unbounded and if you look
at the digital economy, you can get productivity growth from the digital economy that does not cost energy or
resources. A video-on-demand film does not use up any physical resources but it makes people money, or it could
be educational; it does not use up resources; it does not use the physical resources of the planet and yet it is worth
money.
   So, if we are looking at how we grow the economy in the future without destroying the planet and the
environment, that is an area where we can grow, so you do not really want technology to get in the way of that.
   Dr Percival: Visit the aged care in Korea now?
   Dr Economou: Yes. The other Korean example was really charming. We have all heard about the aged care
thing where you monitor the elderly, well the Koreans took it one step further. They have got the little sensors for
people, and there is a very large number of lonely Koreans for whatever reason—several million of them. They
had the sensors so that if you fall over or you are not moving there is an alert. Now, here in Australia if you have
those, someone has to go out, but the Koreans said, 'No, we can fix this. We will put high definition video in there
and if there seems to be a problem we will go and have a look.' So I asked the guy that was explaining it, 'Well,
why does it have to be high definition? Couldn't it just be normal old video?' He said, 'Yeah, but you can't tell if
they're breathing.' So, someone who is expert can look at that person and decide whether they are unwell enough
to actually send a physical person, which means they are making—
   CHAIR: We had evidence from an Irish fellow in Tasmania who was involved in an Irish program and he
said the point at which people stopped accepting monitoring in the home was video in their experience. I do not
know if that is a cultural difference matter but yes, it was a—
   Dr Economou: It may be, but in the sense this is a good one. So, we are only going to look if there was a
problem, so I think I would be more comfortable with that personally, but it was a very charming thing where
without the high definition you would have had to have a person go in there, and now what they have done is
made much better use of their scarce resources.
   CHAIR: Well, you would have a person go in there if they are not breathing, but it will be a different person
and at a different speed.
   Dr Economou: Macabrely, yes; that would be true.
   CHAIR: I just wanted to take up one other thing and then I will go to my colleagues if they have final
questions. My TAFE college has built a new engineering section and part of what they are doing with new
software is virtual machinery. So, in effect they would build the machine in the virtual world and then they can do
major problems which if you had the real machine would be millions of dollars. You cannot just throw a steel
ball, have it wander into the machine, see if you can solve what the problem is and go in and fix it, but in a virtual
world, in reality, you can do that in a very meaningful way. Some of the stuff that you are talking about has struck
a chord with me. Many submissions have talked about high resolution video for taking it to that next step. There
has been some evidence around gaming and transforming gaming to things like the SMART Infrastructure
Facility at my own University at Wollongong, and looking at some of the population movements connected to
transport infrastructure, for example, and so forth. In the broadband context I am just wondering if you wanted to
make some observation about the capacity to take the virtual into really meaningful applications?
   Dr Economou: It is funny you should mention the University of Wollongong. When I was designing the
research for Smart Services CRC, one of the researchers there, Farsad Safaei, built immersive audio environments
which later got sold to Dolby. It is like, shut your eyes and you think you are in the place and it could deal with
thousands of people. Then he said, 'How do I extend that to video?' So, he has got an immersive environment
which is a little bit like a game one, it has been built, but now the objects inside combine live video streaming. So,
if we were having this, we could be sitting in this virtual room, all coming in remotely but instead of an Avatar,
which I always find a little bit uncomfortable, it could actually be a live video of you coming in. So, if you think
about that and there is 10 people, that is 10 video streams, but they can be placed in a virtual space. That is one
side of it. Perhaps Dr Percival could talk about the virtual surgical training as an example which we both worked
on before.
   Dr Percival: Yes. I do not know if you have seen the haptic surgical training?
   CHAIR: The IBIS?


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   Dr Percival: Yes, we worked on that system. Did they show you the one using the temporal bone drilling?
   CHAIR: Yes. I think that is the one we saw.
   Dr Percival: Well, in that case I do not need to describe it because you have already seen it.
   CHAIR: It was interesting. I did ask some questions. The other thing with the virtual world that strikes me is
that, even if it is a machine and you are throwing a ball in to affect it, it is the human interaction of actually
stuffing something up even if it is in a virtual world. The more realistically you create the virtual world, there
must still be a reaction in a human to that.
   Dr Economou: It is also positive reinforcement for learning because the cost of making a mistake now is
much lower, so you make the mistakes faster and learn faster. That is one of the reasons virtual is good and
doctors do practise on us until they get good and I like the fact that they can practise on a really good model first.
   Mr FLETCHER: A number of the applications you have talked about, if I am understanding them correctly,
would require fibre connected to a whole series of institutions; for example, hospitals, medical clinics and so on.
That provokes me to ask: in a world where there were less money available for broadband than is presently
proposed, where would you prioritise spending the money? For example, would you put money into fibre
connections to all institutions of particular classes? Would you put money into an open access fibre backbone that
went into rural and regional areas as well as metro? Do you have any thoughts on that question?
   Dr Percival: I guess it is a tricky question. It is hypothetical, but there are problems at the moment that
revolve around the pricing models that we have. I think all New South Wales high schools now have an optical
fibre connection into them—sorry, the public ones, not the private ones—but a lot of them are throttled down to
10 megabits per second because of the cost, which is absolutely insane because it actually costs money to put the
box on the end that throttles down the speed.
   Dr Economou: So, it actually costs money to make the fibre slower.
   Dr Percival: Which is a bit crazy. Some TAFEs are getting connected and the academic research network,
AARNET, is certainly connecting anything that goes past its main trunk routes and is just sort of going out
wherever it can. What would be the priority? I think, obviously, all government departments should be again
connected by a fibre network; all the schools, TAFEs and I think community infrastructure. But again, the
problem is—particularly in the underserved areas we talked about earlier—if you put the fibre out to there, the
local council in a small country town, you are getting cost recovery from one customer and if you are putting a
passive optical network in there then you can get 3,000 customers. So, there is an economy of scale there which
would need to be considered. I think the other organisations that are going to benefit a lot that get missed are the
small to medium enterprises and even the home enterprises. I was surprised that I think it was Willunga in South
Australia—I cannot remember the numbers—where some 60 per cent of the homes actually had an ABN.
   Mr STEPHEN JONES: Sixty-seven per cent.
   CHAIR: Well, most plumbers and builders these days do not have a shopfront presence; they operate from
their home with a mobile and a laptop.
   Dr Percival: So, that changed our thinking a little bit. I must find out how many ABNs there are in Australia.
   CHAIR: They are hoping that the new round of ABS which is just about to get underway might give us some
better data because the last lot of data is 2006. Some of your earlier evidence and some from the user group as
well, I think, was that people identify themselves as a home based business and telcos themselves have their
business stream and a residential stream. So, if you are running a home based business, you are probably
registered under the residential stream and so where do they get recorded?
   Mr FLETCHER: Most of them will have a business rule that unless you have an ABN you cannot have the
business product.
   CHAIR: Yes, but even those with an ABN will probably still, when they sign up, think they are a residential
sign-up because it is to their home and the family is using it as well and so forth.
   Mr FLETCHER: Yes, they may very well not be acquiring a so-called business product from their supplier.
   CHAIR: Exactly.
   Dr Economou: The thing is when you are running a business from home your need to send things out rather
than just bring them in will increase, so you would not want to install infrastructure that throttles that second part
of the economy. So, part one of the digital economy has been sending people things; part two is people
contributing. I think there is going to be more and more small business done from home, but also people working
a lot more from home. Never completely, because you still have culture. Sorry; I have got a frog in my throat. We


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cannot really imagine the future completely accurately but there are some trends and there is—this is terrible. I
am having voice failure. It is an actual virus as opposed to a computer virus. Yes, so there are two parts to the
economy and that second part of the economy where people are contributing and shipping products that could be
PowerPoint files, graphic designers working from home or as we talked about before with some of the retired
doctors contributing their skills, we would not want to throttle that in future, so I think it is really important that
we understand that things are going to be two-way.
    CHAIR: Thank you very much for that. Obviously it is an area where we could explore into many, many of
the examples and outlines that you gave us in the submission, but the submission itself was very useful. Thank
you very much for giving us the time to explore some of your expertise over a significant amount of time in this
field. We greatly appreciate that. If we have asked you to provide any additional information, would you forward
it to the secretary? You will be sent a copy of the transcript of your evidence to which you can make corrections
of grammar and fact. Once again, they have been fascinating pieces of information and we have got a couple
more months, so if something comes up, you have got a sense, I hope, of where our interests lie so please do not
hesitate as you come across new information to send it through to us; that would be tremendous. Thank you very
much. I declare this public hearing closed. Thank you.
    Resolved (on motion by Mr Stephen Jones):
   That the committee authorise publication, including publication on the parliamentary database of the proof of transcript of
the evidence given before it at the public hearing today.
                                              Committee adjourned at 15:53




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