Video streaming drives new Telstra investment in ADSL backhaul

The NBN could be arriving any time in the next four years for customers, but Telstra is set to upgrade its ADSL backhaul.

Despite the shift in Australia from a Telstra-owned fixed-line copper network to the National Broadband Network (NBN) with slightly less copper, the nation's incumbent telecommunications provider is still looking to upgrade parts of its ADSL networks.

Speaking at the company's Investor Day in Sydney on Thursday, Mike Wright, Telstra group managing director of Networks, explained that despite the laws of physics and copper run lengths, the company felt 85 percent of its ADSL customers are close enough to benefit from the new backhaul investment, with Telstra looking for ways to service the remaining 15 percent.

"What we do know is that 85 percent of those customers are close enough that we can invest in network core and the backhaul to give them a good streaming experience," Wright said.

"Because we are doing this early change in the technology architecture and the connectivity layers, the extra ports and routes that we build for capacity are totally reusable for NBN on 95 percent of those ... in fact, most of the costs will simply be the reconfiguration of the network.

"Most of this is backhaul capacity from the DSLAM itself ... in the ADSL world, we connect from our core network down to our DSLAMs; in an NBN world, we connect from our core network across to the points of interconnect -- so we can swing that capacity across to that."

Telstra chief operations officer Brendon Riley said the company would be looking to increase its traffic throughput fivefold over in the coming years while still keeping costs steady, and part of that plan is to keep ADSL in the mix.

"We've got to support the transition to NBN, and when we look at the original timetable for NBN to where we are now, it's clear that the ADSL network needs to perform strongly for a little bit longer," Riley said.

"So we are going to take some steps to make sure that our customers are getting really good quality experiences on our ADSL network -- investing in more capacity, and more ports to do that.

"That investment that we drive into the older part of our network, I'm pleased to say 95 percent of that will be reusable as we finally transition off copper, and we can leverage that into [future network] environment architecture."

The telco is looking to rearchitect its underlying network and collapse its vertical platforms into a programmable horizontal software-defined cloud layer under an initiative dubbed "Network 2020".

One of the changes with this approach will be treating all connections similar to mobile ones. Wright explained that the core network would "look and feel" like it is using mobile protocols for identification and activation.

"Today and historically, we've treated the networks as separate verticals. If you move home, we deconstruct your home connection to the gateway, and your billing, and you go and reconstruct it elsewhere," he said.

"By making all connections mobile, essentially everything we deploy in the network, right down to moving home, doesn't need any work applied to it. You move your gateway, everything goes with it."

As part of the changes, Telstra is set to shut down its 2G network on December 1, with the 3G network set to close after 2020 while it continues to push 4G connectivity as its new baseline. The company also said it would look to exit non-IP products such as its Public Switched Telephone Network, and look at reducing and closing a number of exchanges.

In its new network architecture, Telstra is looking to make extensive use of software-defined networking (SDN).

"One of the fundamental changes in this new architecture is the concept of network slicing," Wright said. "All of our networks today and the products that run over them are static, in that the architecture is fixed and no matter what your needs are for bandwidth or latency or use case is, you go through the same routers, the same gateways, and the same elements on the network."

Wright said slicing would allow the telco to optimise the network for different use cases, as well as making it more robust and flexible.

"If you need low latency, we can put the network elements in software in different parts of the network. And if you need to be at the core of the network near a datacentre, you can exit near that datacentre," he said.

"An incident on one part of the network or one use case that becomes problematic doesn't have a flow-on impact to the rest of the network.

"And, indeed, if it's true that robots are coming from the future to kill us, we can turn off the data layer and stop them, and at least ring each other and tell each other the vacuum cleaner's going to try to kill you.

"So the layering of that network gives a level of protection at many different levels."

Wright also said the changes would allow Telstra to make better use of its dark fibre assets and routes.

Penn: AU$1b investment in regional Australia 'uneconomical' if roaming declared

Telstra's approximate AU$1 billion investment in rural and remote mobile coverage over the next five years would be "uneconomical" if the government declared wholesale domestic mobile roaming, Telstra CEO Andrew Penn said, also speaking at Investor Day.

The CEO said the telecommunications provider is "very concerned" about the impact on incentives to invest, and how that would affect customers across the nation.

"Our current strategic investment program includes considerable ongoing investment in regional and remote Australia. This includes AU$350 million over the next three to five years to expand coverage and capacity for the last 2 percent of the population geographically. And this continues our historic practice of targeting about 15 percent of our mobile network capital to the most remote corners of the network," Penn said on Thursday morning.

"It also includes AU$240 million in support of mobile blackspots rounds one and two.

"And, in addition, our AU$100 to AU$200 million co-contribution fund where Telstra is willing to commit capital for projects jointly funded by community and other parties to support infrastructure investment, that would not otherwise be viable on a stand-alone basis. We've made a number of these investments recently, such as with the Northern territory government, also in Queensland with fibre to Birdsville, Burketown, and Aurukun.

"This represents a projected investment of more than AU$1 billion in regional Australia and remote coverage over the next four to five years. This is the investment that would be uneconomical if mobile roaming was to be declared."

Telstra, Optus, and Vodafone Australia have been debating the roaming matter since the regulator announced its investigation into it in September, with Telstra immediately saying that such a program would stymie competition in regional and rural areas and remove any incentive for Telstra to invest in its regional network.

Last month, Vodafone Australia CEO Inaki Berroeta called roaming the "hot topic" of the industry, labelling responses to the enquiry as "bordering on hysterical". Berroeta argued that despite "emotional" responses from Telstra and Optus to the contrary, there is no evidence that a declaration of domestic roaming would decrease investment in mobile infrastructure.

The regulator's recent discussion paper on the matter said that allowing telcos to use Telstra's infrastructure in remote areas would improve choice, competition, and pricing.

Also on the topic of uneconomical, Penn said that while the NBN will have a AU$2 billion to AU$3 billion impact annually on Telstra's earnings before interest, tax, depreciation, and amortisation (EBITDA), Telstra has a AU$1 billion net cost reduction target from FY22.

The net cost reduction target equates to a more than 2 percent year-on-year reduction, and over AU$2 billion of gross productivity achievement, offsetting the EBITDA loss from the NBN so that only AU$1 billion to AU$2 billion remains.

The net cost reduction target will be achieved at the same time as the telco looks at "the convergence between technology and telecommunications".

Penn said that along with the other two pillars of Telstra's business going forward -- improving customer experiences, and driving value and growth from the core -- the third and most important pillar is to build growth in businesses close to the core.

"We need to invest in the capabilities that will enable us to be successful in this environment," the chief executive said.

"It means that we need to continue to invest in things such as the Smart Home ... where the home network is going to be critical in the future; ecommerce for small and medium-sized businesses, as we see small businesses take advantage of network application services as we have been similarly very successful with large businesses; cloud services and other applications and services that sit above the layer of the network are all becoming increasingly important to our customers and both provision of those services and how those services are brought to life over our network is a critical part of our strategy.

"It also means that we need to continue to develop and grow our software capabilities through some of the innovations that you've seen us to in the past, whether they be startups or accelerators, as well as through agile through [sic] our partnership with Pivotal."

100 percent of the network build needs to be software defined, Penn added, backing up Wright's comments.

Telstra will be spending AU$1.5 billion on building "networks for the future", AU$1 billion on further digitising the business, and AU$500 million on improving its customer experience. This will deliver a target return of around AU$500 million per year from FY21, Penn said.

"Of the AU$500 million benefit, approximately two thirds will be from additional revenue and one third from cost improvements. In conjunction with our ongoing productivity program, we expect to reduce net underlying core fixed costs by over AU$1 billion by FY21," Penn explained.

Penn also provided an update of Telstra's AU$250 million network remediation program announced in June after the seven network outages, saying it is "progressing well".

"Most of the key underlying initiatives have now been implemented, and recovery times, particularly in mobiles, have been significantly reduced," Penn said.

"We've also continued to engage with independent experts in relation to the network resiliency, and this is confirmed that we continue to have very strong network capabilities when compared both locally and globally. Encouragingly, since June our strong network performance and the launch of the new brand has seen positive trends in relation to NPS, brand consideration, and perception measures generally."

The AU$250 investment was made in three major areas: The AU$50 million to be spent on improving mobile network resiliency by creating better real-time monitoring and speeding up recovery time; AU$100 million on increasing the core fixed-line network's reliability and resiliency; and AU$100 million on upping its ADSL broadband capacity to cope with demand.

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