The key developments taking place around broadband by mid-2008 are:

• Preparing for the future (NBN, FttH)
• Improving the current situation (ULL, etc)

These are parallel processes and they each have their own dynamics.

The first issue eats up most of the time of the executives, strategists, politicians and the media.

The positive outcome of this is that the Australian people are among the best informed in the world in relation to broadband. And our government’s vision is leading edge (e-health, tele-education, smart grids). This is setting us up well for further developments.

However, in relation to the present situation we are lagging behind the rest of the world. This has been due to the self-regulatory regime, which allows Telstra to delay innovations by many years.

First discussed in an ACCC paper in 1999, ULL was finally launched as a commercially viable product in late 2007, whereas this took place in Europe in 2003.

We are catching up, with close to 10% of broadband lines now unbundled, and this is allowing the competitive broadband providers to execute far greater control and innovation over the services they deliver to their customers.

However the rest of the world is moving on too. Both the EU and the OECD have targets for 20-50Mb/s for the period 2010-2015. It could take us five years to build a network that will only deliver 12Mb/s. So the gap is widening rather than narrowing.

Perhaps help may come from a different source. The copper cables can deliver up to 50Mb/s – that is, if organisations are allowed to make clever use of the network. ULL (with products like ‘naked DSL’) is making innovative scenarios possible. Some players, such as iiNet and Internode, are already delivering services well above the government’s goal of 12MB/s.

The earlier mentioned penetration level of 10% is critical, since below that figure the incumbents won't come up with a competitive response. In those circumstances it is better for them not to rock the boat too much; it is more lucrative to keep the rest of the market on their traditional (more expensive) conditions than to become more competitive. Telstra, after claiming victory earlier this year when it was excused from having to introduce ADSL2+ as a wholesale product, is now 'voluntarily' offering the service. This is a clear indication that competition is starting to bite.

Competition in the ULL market has been driven by companies such as iiNet and Internode and, to a lesser extent, Optus, Primus and others. However, there is now an industry-wide groundswell towards these services and Telstra will have to think up some new tricks to combat this. In the past it reacted to a serious increase in competition by changing prices (overnight), withdrawing wholesale products and introducing cumbersome wholesale conditions. But as the regulator becomes cleverer it will be increasingly difficult for Telstra to stop competition through trickery. It can't rely on that behaviour to the same degree as has previously been possible, and it will have to become more competitive and customer focused if it seriously wants to make progress in the retail market.

The key in relation to the 'future' debate for the ULL providers is to have in place a good transition regime from copper- to fibre-based competition. Otherwise they will lose all the gains they have made so far in relation to competition. One potential ploy, already foreshadowed by Telstra, could be to simply stop the copper-based services and bring customers onto a fibre network that only Telstra operates.

None of the current ULL successes has anything to do with the present government. These are the long-delayed results of the very slow moving self-regulatory regime instituted by the previous government in 1997.

The current government is, quite rightly, focusing on the future. It is absolutely critical that they get this right, hence the in-depth debates on the NBN.