Investment opportunities for Australian web and tech start-ups appear to be brightening with new research showing the Asia-Pacific region is leading the way for deals, as North American investors search for global opportunities. Internet DealBook is a global database that tracks angel, venture capital and private equity investment, along with M&A activity, across internet and technology-related private companies. The database is collated by Sydney-based venture capital firm Right Click Capital, which collects all the information from public news sources. The latest report, which looks at the first quarter of 2013, shows Asia-Pacific leads the regions with an average deal value of US$22.8 million, up from $17 million in Q1 2012. The Asia-Pacific was the only region to experience growth in average deal values when comparing Q1 2013 to Q1 2012, the report reveals. Right Click Capital partner Benjamin Chong says the strength of the Asia-Pacific augurs well for Australia. “A lot more people want to invest in the Asia-Pacific region and that’s being driven by investors in the US, and a smattering of European investors as well, but in large part North American investors wanting to get into the fastest growing part of the world,” Chong told StartupSmart. “Australia is one of the more advanced users of technology in terms of broadband penetration, and in terms of quality of businesses and their maturity in various markets. “For me, Australia has to be up there with the other top five countries in the Asia-Pacific.” A total of 910 deals were tracked from public sources in Q1 2013, down from 925 in Q1 2012. According to the report, North America continues to account for the vast majority of the deals tracked, recording US$7.2 billion, or 75%, out of the US$9.6 billion recorded for all regions. Chong says an increasing number of North American investors are looking at Australia as a gateway to Asia. “Australia, in one sense, is a good place to establish a beachhead operation because they understand the rules of the law. They understand the language here too,” Chong says. “Australia is not a bad place to make your first entry in this region because it’s also in the same time zone [as Asia].” With regard to deals by sector, the report shows the average deal values have fallen in all sectors except in media and eCommerce, which recorded increases of 14.1% and 17.9% respectively when compared to Q1 2012. “What I’d say is that these days, to get involved in an eCommerce-type business, if you’re going to be moving boxes, it requires quite a lot of investment,” Chong says. While the eCommerce sector saw average deal values increase, the number of investments actually decreased. The number of investments also fell in hardware and infrastructure, and mobile and apps. “For me, it was surprising that the games market and eCommerce were down on last year. I think games still have a way to go. “I thought there would be a rush of gold digging not only in computer gaming but mobile gaming… I would say we need to have a look at Q2 data before we come to any conclusions. “Maybe it goes to show – this is speculation – but maybe it’s because there have been a bunch of these game developers that have come [up with other funding] sources.”
Prime Minister Julia Gillard has announced plans to boost school funding by $14.5 billion over the next five years, with the federal government to contribute $9.4 billion while the states contribute the remaining third. However, while New South Wales appears keen to support the plan, the federal government has met opposition from the state governments of Victoria, Queensland and Western Australia. “This model would see Western Australian students penalised because of this state's high level of investment in our schools. This investment in part recognises that some of our students are among the most vulnerable in the nation," WA Premier Colin Barnett said. Turnbull confident of Telstra deal Shadow communications minister Malcolm Turnbull says he is confident a Coalition government would be able to reach an agreement with Telstra over its alternative broadband policy. Announced last week, the Coalition’s policy would see fibre optic cables laid out to street cabinets, or nodes, with Telstra’s existing copper covering the final mile to subscribers’ homes. “Tension with government has never been good for Telstra shareholders. I am very confident that we'll achieve speedily the slight rearrangements to the agreements we're talking about,” Turnbull said. Private insurer attacks comparison sites over affordability Medibank Private managing director George Savvides has attacked health insurance comparison websites, claiming brokers drive up costs for consumers, ahead of a potential public listing. “[Comparison sites] haven't really changed the dynamics of affordability. In fact, I'd argue they're adding to costs because of the commission,” Savvides told Fairfax. The claim is disputed by iSelect chief executive Matt McCann, who believes the services also benefit insurance providers. “Those [funds] that don't participate in the comparison channel have found it hard to grow in this market. And for us, funds wouldn't use us if we weren't an efficient form of distribution for their products,” McCann said. Overnight The Dow Jones Industrial Average closed down 0.08 points to 14,865.06. The Aussie dollar is down to US105.05 cents
“The superfast broadband of the order of 100+ megabits per second (Mbps) and into the gigaspeed bracket is de rigueur for any nation purporting to be a developed and advancing economy.” – Phil Ruthven, “A Snapshot of Australia’s Digital Economy to 2050”, IbisWorld, June 2012. The Coalition should firstly be congratulated upon launching today a detailed, closely argued policy proposal on their alternative vision for the National Broadband Network and how it can be implemented “faster” and at less cost than the current NBN. Malcolm Turnbull has moved the Coalition light years – or at least several million fibre optic kilometres – from the Luddite criticisms thrown up by the Opposition during the 2010 federal election campaign. And today, with his party leader Tony Abbott, he has released a coherent policy five months in advance of the 2013 election, in contrast to the Opposition’s broadband policy release just three days ahead of the previous federal election, on 13 August 2010. That said, it was sad to see the number of debating tricks employed in launching his national broadband policy. There was the conflation of the government’s NBN policies mark I (2007) and mark II (2009), and the selective omission of the “externalities” in the rollout of the NBN — (particularly the long negotiations with Telstra and the business-model-changing interventions of the ACCC) — in order to trash the reputations of both NBN Co and the government, in failing to meet rollout targets announced in either 2007 or 2010. And there is the claim that the NBN, as a “government-owned telecom monopoly”, somehow inhibits retail competition. In contrast, the Australian telecommunications industry recognises that it has only been through part of the current government’s NBN policy — the structural separation of Telstra and the positioning of the NBN building blocks as wholesale resources available to all retailers on equal terms of usage — that will allow totally equitable retail competition in the supply of broadband. There was also Mr Turnbull’s claim that in choosing the cheaper FTTN (Fibre to the Node) option, rather than Fibre to the Home (FTTH), the Coalition is following world’s best practice. This political delusion – not shared widely within the telecommunications industry – was recently burst by independent journalist Stuart Corner’s article in the Telecommunications Journal of Australia, “The politics of speed”, where he found that “82% of investment in FTTX (FTTH or FTTN) in 2012-17 in the world’s developed countries is estimated to be in fibre-to-the-home (FTTH)” – i.e. only 18% of that investment is destined for Mr Turnbull’s preferred FTTN. These debating points must be debunked because they are part of a smokescreen that portrays the current NBN as being needlessly gold-plated, incompetently managed, and ridiculously tardy in meeting Australia’s real needs for broadband – none of which I believe to be true. The reality is that we now have the chance to compare two policies pitched at different timescales of infrastructure need and use – and there are arguments in favour of both approaches. But we need to remember that, under both policies, there will be a world of difference between the timelines set in politicans’ election promises and the hard engineering realities of managing any project of such massive scale. Let me briefly compare the essential differences between the two policies. First, timescale. The current NBN is based upon meeting bandwidth needs, in the case of the lucky 93% with FTTH, for perhaps three decades beyond the rollout completion in 2021. (Just as the copper access network rolled out by the PMG in the 1950s was intended to last – and generally did last – for a further 50 years.) The current NBN’s vision satisfies two key drivers. The first is the need for Australia to grow its digital economy, as the only likely growth sector that can complement, and ultimately overtake, the mining industry. The Ibisworld report, from which I have quoted above, lays out a well-argued scenario in which by 2050 some 20% of the national GDP will be generated by the digital economy – if it is underpinned by ubiquitous high-speed broadband. The digital economy is already a larger employer than the mining industry, and it has the advantages of providing a much greater diversity of highly paid, high-value jobs, which can be teleworked virtually across Australia – given enough access bandwidth. The second driver is the inexorable historical growth in telecommunications access rates, which has been exponential since the 1950s – see the attached graph from Rod Tucker’s 2010 article, “Broadband facts, fiction and urban myths”. Rod Tucker (2010) This exponential growth prediction, which is the telecommuncations industry’s equivalent to Moore’s Law for computing, continues to get empirical support – for instance, Google is currently trialling 1 gbps applications in Kansas City. Story continues on page 2. Please click below. The current NBN policy is predicated upon building the major infrastructure – the network infrastructure – only once, and its lasting for decades. For this reason, the current NBN policy must be seen as being far more future-proof than the alternative policy. Optical fibre, already capable of supporting bandwidths in terabytes per second, is considered to have a lifeteime of 40 to 60 years. (A caveat is that the new satellites to be launched in 2015 to support the 3% of homes in remote areas will probably need to be replaced in 15 to 20 years. The fixed radio technology supporting 4% of premises can be replaced or upgraded much more cheaply, but should last a good 20 years without upgrades.) If the current NBN policy is predicated upon providing international competitive advantage to Australia over several decades, the Coalition’s NBN policy can be fairly categorised as a more cost-effective catch-up across Australia of the bandwidth that most households need now, in two stages. Firstly, within the parliamentary term ending in 2016, their plan aims to universally match the 25 Mbps “bar” now set by NBN Co’s fixed radio technology, announced two months ago (an impressive doubling of the previously planned 12 Mbps download speed, due to improvements in radio technology). In a second stage, to be completed by 2019, they aim to provide 50 Mbps minimum access speed to all FTTN and FTTH premises. This is an excellent aim for a cost-effective short-term (six year) plan. However, in many cases, the proposed new FTTN technology intended for use in 71% of premises will not reach this speed in areas of low copper reticulation (British Telecom’s solution in the UK requires the use of two pairs of copper per house connected, which is not universally available here), or in areas of ageing or particularly water-prone copper cables (a frequent situation). The Coalition’s solution is to provide FTTH in these exceptional cases. Without access to their business plan, one cannot see if they have factored in enough cases to affect their budget. Four quick points in conclusion. Firstly, the Coalition has minimised the likelihood of any rural backlash by basically leaving the current NBN plan intact in rural areas. Secondly, it has not (at the time of writing) released its estimate of the cost of paying Telstra to maintain in working condition the copper network that will link its new FTTN cabinets to customer premises. There is reason to believe that the Coalition will have significantly underestimated this. Thirdly, the Coalition has behaved extraordinarily like the Gillard government did in 2010 in building an investment case for the NBN that fails to factor in the real benefits to the nation’s GDP, such as to the digital economy – let alone attempting to “capitalise” the benefits of social inclusion through facilitating universal broadband access. Instead, the Coalition’s proposal reads like an engineering investment case alone – an impression reinforced by Mr Abbott’s statement today that his NBN, unlike the current one, will provide “a real commercial return”. Given all the cherry-picking that their NBN policy will allow to private developers, free at last to directly compete with the NBN’s access infrastructure wherever they can make a profit, there is good reason to think that the Coalition’s NBN will, as a result, inevitably operate at a loss. Lastly, the Coalition makes much ado about saving taxpayers' money through reducing the scope and scale of the NBN. In fact, the only taxpayers' money saved would seem to lie in lower interest payments made by Treasury in the period before the NBN breaks even – in a period of historically low interest rates. These savings need to be offset by the loss to the economy of all the construction jobs associated with FTTH – the most labour-intensive part of the current rollout. Peter Gerrand is an Honorary Professorial Fellow in telecommunications at the University of Melbourne. This article first appeared on The Conversation.
Above: Shadow communications spokesman Malcolm Turnbull. After months of general barbs aimed at the National Broadband Network, the federal Coalition has finally unveiled its alternative broadband vision for Australia. Opposition Leader Tony Abbott and shadow communications spokesman Malcolm Turnbull (pictured above) said that the Coalition would provide “very fast broadband, sooner, cheaper” to the Australian public. Turnbull said that the plan – which would provide 25 megabits per second, much slower than Labor’s alternative – was “consistent with the best practice around the world”. However, Communications Minister Stephen Conroy said the Coalition plan “fails miserably” and only the NBN would provide the high-speed broadband Australian business and consumers need. Despite the fact many Australian small businesses are lagging behind with their own web presence, economists have consistently pointed to the benefits of fast broadband. Figures released today by the Australian Bureau of Statistics show that consumers aren’t hanging around – there were 12.2 million internet subscribers in Australia at the end of December 2012, a 5% annual increase. There were a further mobile six million wireless broadband connections. So how do the two plans stack up? StartupSmart explains all. Labor’s plan What is it? The National Broadband Network How will it work? Expected to roll out over the next 10 years, the NBN aims to hook up more than 3.5 million homes and businesses by the end of 2015, with the eventual goal of 100% coverage of high-speed broadband. For 93% of Australians, the current copper network is to be completely replaced with optical fibre all the way from the exchange to the premises, a configuration called fibre-to-the-premises (FTTP). The next 4% get fixed wireless connections, and the most remote 3% get satellite links. All this is being run by NBN Co, a wholly government-owned company, which will be sold after completion. Last month, NBN Co admitted it was running three months behind schedule. How fast will it be? Up to 100 Mbps download and 40 Mbps upload. What will it cost? The government says $44 billion. The Coalition says more than $90 billion. Conroy says the Coalition figure is a “false claim”. What they say about it Nick Ross, ABC Technology: “Based on all the existing evidence, the Coalition's claims regarding the technology simply don't stand up to scrutiny. If for some reason it turns out they do, then they need to explain why just about every expert on the matter has got it so wrong.” Conroy: "The only way NBN Co won't make a return is if the Coalition is elected." Turnbull: “The NBN will continue to roll out but we will do so in a cost-effective manner, in particular in built-up areas." The Coalition’s plan What is it? Essentially, it is the same as the National Broadband Network, with a few significant tweaks. How will it work? The NBN rollout will essentially continue, but for most Australians, it will mean fibre-to-the-node (FTTN) – fibre from the exchange to kerbside cabinets no more than about 800 metres from customer premises, and using the existing copper for the last segment. Telstra’s copper network will be purchased for this purpose. The Coalition policy document states: "Suburbs, regions, towns and business districts with the poorest services and greatest need for upgrades will receive first priority." How fast will it be? Slower than the NBN. There will be a download data rate of between 25 and 100 megabits per second by late 2016 and between 50 and 100 megabits per second by 2019. What will it cost? The Coalition has the plan costed at $29 billion including $20 billion of capital expenditure. What they say about it Stilgherrian, technology writer: “The Coalition's core point is that while FTTP can certainly deliver faster broadband, and is the technology for the long-term, they can deliver a clear improvement for more Australians sooner and cheaper by being more flexible.” Turnbull: "[25 megabits per second] will enable anybody in residential situations to do everything they want to do or need to do in terms of applications and services, and is six times faster than the average speed people are getting right now.” Conroy: "If you understand broadband, if you understand that it is being used for more applications that require more bandwidth every single day, then you know that Malcolm Turnbull's network is a fail. "Malcolm Turnbull is going to build a one-lane Sydney Harbour Bridge because he says he can do it cheaper and faster."
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