CommsDay Satellite Summit: “Putting Satellite to its highest value uses”

A few weeks ago I joined Communications Minister Malcolm Turnbull and Member for Maranoa Bruce Scott on a visit to the Longreach School of Distance Education. 

We spoke over the air with around twenty parents – living on properties in a radius some 400 kilometres around Longreach.  Most are served with satellite broadband – and this is the medium over which their children are educated.

It reminded me of going to a property near Alice Springs for the 2003 launch of distance education over satellite broadband, provided by Optus in conjunction with the Northern Territory and NSW Governments and funded under the Howard Government’s National Communications Fund.

Until a few weeks before the two boys on that property had received their education over VHF radio. That was only twelve years ago – so we have come a long way.

Today I want to talk about putting satellite to its highest value uses.  I am sure we can all agree that using it to educate children in remote Australia is such a use.

In my remarks today I want to speak first about satellite’s strengths, and the importance of using satellite in circumstances where its strengths come into play.

Next I want to review our progress with the NBN satellite service, including the way ahead for the Long Term Satellite Service over the next year or so. 

Finally, I want to highlight some broader policy questions that we are likely to face once we have the Long Term Satellite Service up and running.

Using Satellite Where Its Strengths Come Into Play

If I turn first to the strengths of satellite, our visit to western Queensland was a good reminder of some of the enormous distances we need to serve in Australia.

It is here that satellite has a great strength.

Unlike fixed line and terrestrial wireless technologies the cost of delivering a service by satellite is essentially constant, regardless of an end user’s physical location.

This makes satellite well suited for users in remote areas where it would be impossibly expensive to deliver fixed line services.

Even the previous Rudd-Gillard-Rudd government recognised this economic reality.  The McKinsey/KPMG NBN Implementation Study which it commissioned made this observation:

"Satellite services will continue to be important for providing broadband in the future due to the prohibitive cost of serving lowest-density areas with other technologies".[1]

But while satellite is the lowest-cost option for serving these areas, it is not cheap in an absolute sense. Indeed the capital cost of NBN satellite services per premise is approaching four times the cost of FTTN.

The recent report of the Vertigan panel made this point powerfully:

"Providing fixed wireless and satellite services costs nearly $5 billion but the benefits are only just above 10 per cent of that. The result is a substantial net cost to the community. The net social cost is equivalent to almost $7,000 per additional premises connected through the provision of fixed wireless and satellite services."[2]

I hasten to add that funding and providing satellite services is something the Coalition Government is strongly committed to doing.  It is very important that Australians have access to broadband wherever they live.  But we need to use satellite wisely. 

There are three clear implications of this for NBN.

The first is to price satellite services wisely – recognising that it is very expensive capacity.

NBN Co is currently developing plans for wholesale pricing and download quotas on the LTSS.  The aim is to offer a suitable entry-level service at an affordable price, while also allowing for higher download quotas for consumers willing to pay for the additional data.

The pricing construct needs to balance two competing priorities: first, the desire to allow RSPs sufficient flexibility in designing broadband packages to be sold to consumers, and second, the need for NBN Co to carefully manage the satellite’s finite capacity on each of its 101 beams.

NBN has laid out some key principles in a consultation paper issued to industry.

The product it offers to retail service providers will use tiered traffic classes and will require the retail service provider to meet a specified maximum average monthly usage cap.

Because the peak period usage quota is the average that the RSP will be held to, it is a matter for the RSP how it achieves this.  It can choose to offer one plan with a low download limit and another with a high download limit – as long as the average monthly usage during the peak, and the total maximum usage, meets the caps set by NBN Co. 

The second implication is to ensure that capacity is available for high value uses – such as education.

In March I convened the first meeting of a distance education working group at Parliament House in Canberra.

This brought together Commonwealth, State and Territory education officials and satellite experts from NBN Co to discuss ways to more effectively deliver distance education services to isolated students.

Significant numbers of students are involved. Over 7800 students receive distance education in Queensland, and nearly 1000 in the Northern Territory.

A key issue is the amount of data that students need to download each month over the broadband network.

Work by the Department of Communications suggests that a typical distance education student will download 15 to 20 gigabytes (GB) of data in a month.

This working group will engage with NBN Co to help ensure that the wholesale pricing and download options it develops for the long term satellite service will include options so that retail service providers can offer high quality services to meet the needs of distance education students and remote schools served by satellite.

The third implication for NBN is to reserve satellite for the situations where its special value comes to the fore – which makes it critical to draw the right dividing line between the fixed wireless and satellite networks.

Upon coming to government we found there was a view within NBN that if the company had previously planned to serve the customer with fixed or fixed wireless, but for some reason that now looked difficult, there was no need to worry because the satellite would pick up the customer.

This issue was canvassed in the Fixed Wireless and Satellite Review, carried out by NBN with help from external consultants, which found that the company’s ‘functional siloed organisation…inhibited visibility and effective decision making across fixed wireless and satellite.’[3]

Under the previous government, NBN Co planned to put 57% of non-fixed-line users onto satellite.  

The Review concluded that NBN Co had got this mix wrong. It recommended dropping this number to 40% - and significantly increasing the reach of the fixed wireless network.

This recommendation was critical to finding the right dividing line between fixed wireless and satellite networks. We need to preserve scarce satellite capacity for the areas where it is most needed.

Where we are up to with the NBN Satellite Service

Let me now turn to reviewing our progress with the NBN Satellite service.

Some Improvements to the Interim Satellite Service

The first priority was seeking to ameliorate some of the flaws in the NBN interim satellite service – a legacy of poor decisions by the previous government.

The service had become very congested. It was positioned as able to provide broadband to 250,000 households – but NBN Co only purchased enough transponder capacity to serve 48,000.

The problem was compounded because NBN had neither the technical nor contractual tools to police RSPs selling plans at levels which were not consistent with the available capacity.

While NBN Co had slightly more than 9 gigabytes of available data capacity per month per user on the interim satellite service, some retail service providers were selling plans offering monthly downloads as high as 60 gigabytes.

The actions of these RSPs led to a degradation of the customer experience not just for their own customers but for all end users on that particular satellite beam.

Under this government NBN has taken a number of actions to achieve some short term improvement.

First, $18.4 million was budgeted for NBN Co to acquire additional capacity to increase the bandwidth available to each user by about a third.

This has now been done, with capacity per end user rising from 30kbps mean busy-hour throughput (MBHT) to 40kbps.[4]

NBN Co also re-pointed some 1,200 end-user dishes to deliver further improvements to speed and reliability.

Additionally, NBN Co included new monitoring tools in its systems to better manage capacity.

This helped to prevent a small proportion of high volume users – what NBN Co calls ‘top talkers’ – from unfairly slowing the service levels of all other users.

Analysis by NBN Co found that the top 2% of users on the ISS were taking up around 20% of the capacity on the service.

As well as improving the experience for users on the ISS, the NBN ‘Satellite Support Scheme’ or NSS, was announced in July last year.

The Satellite Support Scheme allows for up to 9,000 additional premises to access to a subsidised satellite broadband service until the NBN’s Long Term Satellite Service is made available.

Building the Satellites and the Earth-Side

Of course, the main game in NBN satellite broadband has been working towards the launch of the Long Term Satellite service.

The two new satellites, weighing in at around 6,300kg each, have taken some three years to build.

Pre-launch tests of the first satellite are almost complete and final checks are now underway. NBN Co and Space Systems Loral, the company building the satellites, are now going over the final results of a range of tests including thermal vacuum testing, vibration dynamics, acoustics and deployment tests. NBN Co reports that the results to date are favourable.

Once the testing phase is complete the satellite will be put into storage until the launch date.

Equally important is the earth-side of the satellite program. NBN Co announced in February this year that construction work had been completed on all ten of its ground stations, which will act as network connection points for the Long-Term Satellite.

In addition, there has been a major programme of work to develop the IT systems that will support the provision of satellite services.

Systems handling order fulfilment, activations, and network alarms are already a part of NBN Co’s overall IT programme and these are now going through a complex integration programme with deployment and management partners Ericsson and Viasat.

Launch & commence service

The next priority, of course, is successfully launching the NBN satellites.

NBN’s first satellite in on schedule to launch from the Arianespace facilities in French Guiana in October or November this year, with the second one provisionally scheduled for the first half of next year. 

Launch is a risky process and a small proportion of launches fail: Arianespace’s failure rate is around 4 per cent.  So there will be a collective sigh of relief once we get through the launches.

Once in orbit, the operation of the satellites will be handled by Optus, which has been awarded a contract to provide tracking, telemetry and control services.

Following the launch, the satellites will go through a period of in-orbit testing before NBN Co begins providing commercial services.

Tests will include commissioning and calibration on each of the 101 individual spot beams; business readiness and operational readiness testing, end-to-end system testing; failover testing and disaster recovery; and an RSP customer trial to test IT systems are working with all of NBN’s RSP partners.

Manage transition of new customers onto LTSS efficiently

After the first satellite has been successfully launched and tested, it will be time to transition customers onto the new long-term satellite service.

NBN Co has contracted with Ericsson for it to manage the migration of NBN Co’s interim satellite users to the long-term satellite service.

There will also be the task of bringing on new customers who were either unable to access the interim satellite service, or who had not previously chosen to take up a satellite service.

NBN aims to run an aggressive migration program to get ISS users onto the LTSS as quickly as possible.

Users currently on the Satellite Support Scheme (NSS) will be brought onto the LTSS as new customers at a later time.

This will allow the funding already spent on the NSS to be used to its maximum value while prioritising LTSS services for users with more immediate connectivity needs.

Manage capacity prudently

Another task for NBN Co will be the prudent management of capacity on the LTSS. While the new satellites will provide a substantial capacity increase over existing services, it is still a finite resource which must be well managed.

Mindful of the mistakes made in the delivery of the ISS, NBN Co has designed Fair Use Controls for the LTSS.

The pricing elements I described earlier, such as tiered traffic allocation and average monthly usage caps for RSPs, have been designed to strike the right balance between flexible end-user packages and fair use principles to manage capacity on each of the 101 individual beams.

Caching

A key aspect of capacity management is techniques to manage the download of data – particularly rich data such as video – in a way which uses the available satellite bandwidth as efficiently as possible.

NBN has a contract with ViaSat, which is a leading provider of satellite broadband services in the US.  ViaSat uses proprietary data management tools to manage this challenge, and these tools will be available to NBN.

For example, ViaSat uses acceleration technologies to minimise the amount of network handshaking on the TCP protocol, by handling these interactions in the network before transmitting website content on the satellite to an end-user.

Secondly, ‘pre-fetching’ technology automatically caches the most frequently downloaded web content on the customer’s modem, so when a user goes to access a popular website the content is delivered much more quickly than if the site had to be downloaded in full across the satellite network.

ViaSat is developing improved versions of its tools to deal with the sharp increase in video content being delivered over broadband, and these improved tools will also be available to NBN.

Some Broader Policy Questions

Finally, I’d like to briefly explore to some of the broader policy questions which are likely to arise once the NBN satellites are launched and operational.

Voice over satellite

The first question is whether people will use satellite for voice services.

The latency of satellite is certainly noticeable on a voice call where both parties are using a satellite connection.  I experienced this myself just recently, making a mobile to mobile call in Birdsville – with both parties connecting to the Telstra base station there which has satellite backhaul.

But where only one party is connected via satellite, personally I do not notice the lag.  Others may be more observant than me.

The policy question is whether we should be using NBN satellite capacity to supply backhaul to support voice services in remote Australia – as well as the broadband services which NBN has been designed to offer.

Satellite backhaul is used today for voice services delivered over public telephones in remote indigenous communities. Funded by the federal government, this programme delivers around 300 public telephones, powered by solar panels, and these phones offer free voice calls to any fixed line nationally.[5]

These stand-alone units are now being upgraded to include Wi-Fi hotspots which provide government-subsidised internet connectivity of 20GB per month per hot-spot.

Since these phones have been installed over 500,000 calls have been made.

The cost of dedicated sat-phone handsets would be far out of reach for residents in these communities, but the utility of these public telephones provides a good example of the potential of satellite for voice services in very remote areas.

We are certainly interested in hearing the industry’s ideas about how best to leverage satellite capacity for voice services – and particularly if you have ideas about addressing lag issues.

Universal Service Obligation

This brings up a related question.  Is it ever conceivable that the NBN satellite could be used to directly deliver voice services under the Universal Service Obligation?

Let me give a bit of background, as the policy settings in this area have always been quite confusing - and were made considerably murkier under the previous government thanks to a typically Machiavellian gambit by then Broadband Minister Stephen Conroy.

The universal service obligation provides that all people in Australia, wherever they reside, have reasonable access, on an equitable basis, to a standard telephone service – that is, a voice telephony service. In practical terms, Telstra as the universal service provider gives effect to this obligation by connecting customers to its network, wherever they are in Australia, for a connection charge which does not exceed a specified maximum amount, which today is $299. [6]

Until recently, legislation imposed this obligation on Telstra, and it received a cross-subsidy from the rest of the industry towards its losses incurred in bearing the USO.

Conroy changed the arrangements, adding a new stream of government payments directed to the universal service provider. As Telstra disclosed to the market, the new USO arrangements had a net present value to the company of $700 million. The provider was supposedly to be chosen through a contestable process – but Senator Conroy promptly chose Telstra to take this role for twenty years. 

Conroy also specified that in the areas to be served by NBN fixed wireless and satellite – the last seven per cent of premises – Telstra would continue to deliver a voice service as the universal service provider over its existing legacy network. In most parts of Australia this is copper, but there are some people in remote areas who are served by a wireless system called HCRC (high capacity radio concentrator) or other technologies.

So we have a strange situation where a very large amount of taxpayers’ money is being used to build out the national broadband network to serve people all over Australia, with a combination of fixed line, fixed wireless and satellite services.

Yet at the same time there is a separate USO subsidy being paid so that people in regional and remote areas, whose NBN broadband services come over fixed wireless or satellite, will continue to receive a legacy voice service on a separate network using decades-old technology.

One potential reform direction would be to consider delinking the USO funding from Telstra’s legacy network. Instead, the subsidy could be provided, to the extent necessary, for the provision of specified services over any suitable network, and this could in turn allow Telstra’s legacy network in the last seven per cent to be withdrawn from service over time. 

Now in areas which are to be served by NBN’s fixed wireless network, it is very clear that a voice service over that network can be every bit as good as the existing voice service over Telstra’s legacy network.  We know this from the way that customers on the fixed wireless network are behaving today – with a growing number abandoning their voice service over the Telstra copper and instead using the fixed wireless service for both voice and data.

So an obvious change to Conroy’s convoluted arrangements would be to provide for the universal service obligation voice service to be delivered over NBN’s fixed wireless network, not Telstra’s legacy network, to premises in the fixed wireless footprint.

But when it comes to satellite, it is much less clear whether a voice service over satellite will be regarded by Australians in the last 3 per cent of premises as a satisfactory substitute for their existing voice service – particularly given such issues as the lag I mentioned earlier.

Frankly, we do not yet know – and we will not know until well after the long term satellite service has been launched and is operational.

I hasten to add that the Government’s position today is clear.  Every Australian is entitled to a voice service upon reasonable request under the universal service obligation. There is no plan to shift USO voice services from copper or HCRC to NBN satellite.

I should also add that there is an agreement between the government and Telstra regarding its responsibilities as universal service provider.  This means that reforms of the kind I have described could not occur unless changes were negotiated which were acceptable to that company.  And, having just successfully completed contract re-negotiations with Telstra as recently as December, we are not proposing to re-open negotiations.

However, over the longer term it will be interesting to observe how consumers behave. Will consumers in areas served by NBN Co’s Long-Term Satellite continue to want a voice telephony service over the copper infrastructure? Or over time will we see a significant number of consumers instead choosing a voice service delivered as part of their NBN satellite package?

Conclusion

 Let me conclude, then, with the observation that satellite is a very expensive technology – but when it is put to its highest value uses there is nothing which can match it.

The Abbott Government wants to ensure that the new NBN satellites are put to their highest value uses.  They represent a major investment of taxpayers’ money.

The lesson from the interim satellite service is clear. We must apply careful thinking in the way we price and manage wholesale capacity.  This is critical if service levels are to meet user expectations – and if critical, high value uses like distance education are not to be ‘crowded out’ by all kinds of other traffic.

We are working hard on this issue – to ensure that the new NBN long term satellites provide value for money to taxpayers, and good quality, affordable services to Australians in remote locations who typically have very limited alternatives for their broadband.

[1] Implementation Study for the NBN, March 5, 2010, page 290

[2] Independent cost‐benefit analysis of broadband and review of regulation, Volume II – The costs and benefits of

high‐speed broadband p11-12

[3] Fixed Wireless and Satellite Review, p 10

[4] The mean busy-hour throughput metric should of course not be confused with speeds received by end-users.  It is an average measure across all users on the entire network over a particular period of time for example one month.  The speed received by the end user is determined at the specific times the end user is using the service.

[5] http://www.activ8me.net.au/about/icp

[6] Strictly, there are two charges: one for the connection from the boundary of the Telstra network to the customer’s property boundary (network extension) and the other for the connection from the customer’s property boundary to the customer’s premises. But the key point is that there is a maximum charge for each component, which in rural and remote locations can be considerably less than the cost of the connection.