NBN Impact on Industries in Australia

1. National Broadband Network Update - Dec, 2010
Analysing NBN’s Impact Across Industries
Presenter: Vishal

2. Agenda
Why NBN
NBN - Moving from One Monopoly to Another
Government and Telstra Agreement - Meaning & Hurdles
Politics Behind NBN - Government and Opposition at Loggerheads
NBN Business Plan
Impact of NBN on Telstra, Telco & Media in Australia
Post NBN - Australian Stock Exchange, Australia Post, David Jones
Impact of NBN on Australian Industries - Retail, Health, Education, Utilities, Software
Post NBN - Fifth Domain Warfare
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3. Circular Quay 1900
1809 - 1st Australia Post
Prosperous Place in Beginning of 20th Century
Industrialisation – Steam Engine(shipping) and Telegraph
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4. Circular Quay 1920
Few Cars compared to Trams
No one knew how this is going to change the society
Applying the methods of steam driven economy to car economy has failed
Source: NBN - Freeways of The Future
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5. Harbor Bridge - Over Build
6 Traffic Lanes, where people didn’t own the car
30 yrs later, removed tram lanes
40 yrs later, plans of duplicating it
Today, most Australian connection come into
Northern Sydney, Growth is Exponential Source: NBN - Freeways of The Future

6. Harbor Bridge - Over Build ??
8 Traffic Lanes

7. Application Evolution
7 Source: NBN Co

8. Bandwidth Demand
Source: NBN Co
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9. Monopoly
Only PSTN wholesaler in country
One Seller many Buyer, including retail arm as a Buyer
No competitor for seller, hence value is created for seller only
Customers are forced to pay beyond their WTP (premium price)
Law of one price is missing
What I can Pay
Telstra
Optus iiNet iPrimus
Retail
Agree on this Price
Telstra Wholesale (Copper)
What I can Sell for
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10. Monopoly - NBN
Retail Service Retail Service Retail Service Retail Service
Retail
Provider Provider Provider Provider
Layer 2 Tunnel Layer 2
Layer 3 IP
Protocol Wholesaler Backhaul
Wholesaler
(Includes Backhaul) Wholesaler
Wholesale
Layer 2 Ethernet Access Network -Wholesaler
Until 2020 -2030, it will be a Monopoly, after that it will be sold to pay off debt
10 Source: NBN Co

11. Telstra & Government Agreement
Non - Binding
Telstra and NBN
Decommission Infrastructure
Copper HFC
• Progressive • Progressive de-activation except
decommission Foxtel
• Traffic migrated to • Traffic migrated to NBN
NBN • NBN Co. pays Telstra per
• NBN Co. pays Telstra disconnection
Ducts & Pits Lead In conduits Backhaul Exchanges
NBN Co. uses fit-for-use NBN Co. uses fit-for-use NBN Co. uses dark NBN Co. uses rack
infrastructure within NBN conduits which are fiber and managed space in Telstra
network design connected into ducts solutions exchanges
NBN Co. uses
11 Source: ZdNet & NBN Co.

12. Telstra & Government Agreement
Telstra
Signed a non-binding agreement with Government
In principle assumes structural separation of (Ret. & Wholesale) without enabling legislation being passed
Leases it ducts, pits and exchanges, 20 to 30 years
Migration of its 9 million copper (PSTN) and HFC customers on NBN Co Fiber
Reduced CAPEX requirements and relief from funding major parts of its USO. Contract for 10 years - 2022
Multiple Revenue Streams
Written commitment for not to be barred from LTE (4G) Spectrum
Relief from the regulatory burden of local access disputes (local loop), lawyers are out, and marketers are in
Government
Practical agreement for structural separation of Telstra (without legislation being passed)
Regulatory reforms long demanded by the Australian Competition and Consumer Commission (ACCC)
A wholesale open-access network available nationally to RCSPs on equitable access conditions
Source: Gartner, 10B Telstra Agreement,2010
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13. Telstra & Government Agreement
NBN Co
Access to Telstra's backhaul network infrastructure for a more rapid FTTP roll-out, revenue starts early
A wholesale open-access network available nationally to RCSPs on equitable access conditions
Telstra as its largest retail customer
Hurdles
Telstra shareholders to approve the agreement by 2011 (1st Quarter)
ACCC to approve it, consultations with NBN Co to finish by Nov, 2010
 Telstra Separation with NBN Co Legislation Passed by Senate and Lower House
13 Source: Gartner, 10B Telstra Agreement,2010

14. Telstra & Government Agreement - Pre Business Plan
43 Billion Capex
40%
60% NBN Co. 100%
Raised by =
Govt. Funded Bonds 43 Billion
=
(not on Govt Bal. Sheet) (no trail for this no’s since
26 Billion
= inception)
17 Billion
11B to 9 Billion
2 Billion
26 =
Telstra =
Billion Leases
USO
Telstra Ducts,
(Telstra -
Pits &
2022)
Exchange
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15. Telstra & Government Agreement - Post Business Plan
35.7 Billion Capex
24%
76% NBN Co. 100%
Govt. Funded Raised by =
= Bonds 35.7 Billion
27.1 Billion =
8.6 Billion
13.8B 11.3 Billion
2.5 Billion
27.1 to =
=
Billion
49.6 Billion Telstra Leases
Telstra Ducts,
USO
(Telstra -
Pits &
8.6 2022)
Exchange
Billion
13.8 Billion by 2020 To Telstra
Source: NBN CO Business Plan Summary 15

16. Telstra & Government Agreement
7 Year Stock Trend
P/E ratio below 15 (Avg on ASX) – not a growth stock, only dividend stock
If 28c fully franked dividend cant be maintained stock price will plummet as stock is hold by
Superannuation firms and baby boomers (low risk appetite). NBN payments will help in maintaining div.
16 Source: Yahoo 7

17. Post Business Plan - No Agreement
37.4 Billion Capex
28%
72% NBN Co. 100%
Govt. Funded Raised by =
= Bonds 37.4 Billion
27.1 Billion =
10.3 Billion
17 Source: NBN CO Business Plan Summary

18. Politics on NBN
Opposition
Lost crucial support of two Independents, Tony Windsor and Rob Oakeshott
Wants productivity commission to study the cost benefit analysis, as it suggests to deliver a commercial
rate of return, not the low 6-7%, lost the motion in parliament by 73-72
Wants Infrastructure Australia to do the analysis
Wants Business Case to be published
Government
Conceded to Greens to let parliament decide privatisation of NBN after it’s completion.
Source: Gartner, 10B Telstra Agreement,2010, The Australian
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19. Politics on NBN
Budget & Debt
Vital for Labor Govt. to be in surplus (for historical reasons) to drive Economic Credentials. Liberals are using
this as a scare campaign. In comparison to other OECD we are doing quite well
19 Source: Comm Sec, 2010

20. Impact of NBN on Industries
Telecom,
Media
&
Manufact.
Entert.
& Utilities
Logistics
Financial Healthcare
Services &
NBN Biomedical
Retail
Tourism
Education
Govt. &
Learning
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21. Impact of NBN on Telstra
Structural Separation
Functional Separation
Partial Structural Separation
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22. Partial Structural Separation - Likely Approach
Adjusted Structural Separation (Least Initial Cost)
The wholesale and retail (including TE&G and TB) continue to
function as separate units with minor modifications such that
wholesale has NBN as one of the primary customer. Retail Wholesale
Part of the access (copper and HFC) is decommissioned and
customers are migrated to NBN. NBN uses Telstra ducts/pipes Impact
and backhaul (spare bandwidth) for a service charge.
The current arrangement could be used as an initial phase
towards a complete structural separation in future BSS
Impact
ROI dependent on providing access to duct/pipes, use of OSS
backhaul and migration of customers
ITS
Access Core &
Impact
N/W Edge N/W
Network Services
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23. Impact on IT
Fulfillment
Cutomers
Assurance
Inventory Strategy, Infrastructure & Product Operations
Operations Fulfillment Assurance Billing
Strategy & Infrastructure Product Support &
Commit Lifecycle Lifecycle Readiness
Management Management
Impact Impact
Impact
Inventory
Enterprise Management
Shareholders Employees Other Stakeholders
Note: No impact on Billing is perceived
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24. Post NBN Information
Asymmetry
Australian Stock Exchange 1.37
(Adverse
Trillion Selection)
2,260 Listed Companies
1.37 Trillion Market Cap.
Impact - 25% of Listed Companies
24 Source: The Age, The Australian

25. Post NBN – Retail, David Jones
Functional Innovative
Virtual Showroom (pre view shopping)
Products Products
Co - Creation
Supply Chain
Sales Staff and Teller will use smart device like iPad
Efficient
Consultations on Skype/Google Voice Match Mismatch
Entire World as Display
Supply Chain
Responsive
Mismatch Match
25
Source: HBR - What is the Right Supply Chain For Your Product, PSFK , Future of Retail

26. Post NBN
1st Australia Post in 1809 at Circular Quay
Today, 4,000 postal outlets, including 2,500 in rural. Maintain 10,000
street posting boxes.
Declines in letter offset by the growth in parcels, retail and business-
to-business express delivery
“When email was invented, Telstra gained and Australia Post lost.
Anything that acts to shift economic activity from the physical to the
digital would automatically benefit communications providers “–
Lindsay Tanner
Embraces Digital World, e-Services new biz. unit, focusing on
opportunities such as secure, identity-verified, digital
communications, e-commerce
Parcel Delivery for Online Stores (DJ, Myers, Zara)
Superannuation Centres
26 Source: The Age, The Australian, Auspost

27. Post NBN - Seminar or Lecture
Melbourne, AUS
California, USA
Source: The Future Apps of NBN, 2009
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28. Post NBN - Software
Turning Products into Open Platforms
Moving from licensing model to Utility and Brokerage (using API’s)
Commodity Software or Business Process will be enabled via Cloud
28 Source: Source: APIs and Open Platform –Federico Cargnelutti

29. E-Health - Building a Wired Health Care System
Today Tomorrow
Allied Health
NGO
Allied Health
and NGO Private Sector
and Diagnostic
Diagnostic Sector Providers GP’s
Professionals
Professionals
Personal
Jurisdictions Health
Profile
Pharmacists Jurisdictions Online
Informati
Pharmacists Consumer on and
GPs Customer Communi
ties
Clinicians
Family and
and
Communities
Family and Private Nurses
Clinicians
Communities and Nurses Providers
Consumer
Customer Clinician
Customer Policy Maker
Customer
Objective is to provide the right information to the right person at the right place and time to optimise health
care outcomes
29 Source: Deloitte, National Health Strategy, The Way Forward, 2010

30. E-Health is Inevitable
Public hospital doctors in Victoria to get iPads in 2011, Victorian Govt.
30
Source: Deloitte, National Health Strategy, The Way Forward, 2010, The Australian

31. E-Health
Multi Scale Bio Medical Imaging
Medial Research Collaboration
Education
31 Source: The Future Apps of NBN, 2009

32. Utilities - Smart Grid
From Supply Driven to Demand Driven: Market forces
& convergence of more active customers has created the
need to evolve the traditional energy value chain
Towards an industry with multidirectional flows of
information
32
Source: IBM Smart Grid Framework, How Stuff Works , Smart Grid Blog

33. Post NBN - Fifth Domain Warfare
At speed of light, Global in nature, Preparation is less visible
Stuxnet is a Windows -specific worm discovered in June 2010
Function is to take control of industrial facilities. Searches for
very high speed electrical motors, controlled via SCADA
systems. These are used to spin gas centrifuges, which is one
way uranium can be enriched into fissionable material.
33 Source: Wikipedia, Symantec, The Economist

34. Summary
The 21st century infrastructure project needed for a service economy like us
Monopoly of Telstra in PSTN space is removed by Monopoly in Wholesale space (Fiber only)
NBN has become a political battle
Telstra & NBN – both need each other for their survival
Lot of industries will be impacted and new services and business model will emerge
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35. Thank you
End of Document
For further information, please contact:
Name: Vishal
Title: Client Services Manager
Address: Infosys Technologies Australia Pty Ltd
Level 5, 818 Bourke St
Melbourne VIC 3000 Australia
LAN: (03) 9860 - 2429
Mobile: 0438 580 349
Email: vishal01@Infosys.com
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