broadband strategy

How Telstra gained speed to market

– without blowing the budget
When Telstra set out to transform its transmission network, it was not simply to
counter exploding traffic volumes.
Telstra used the restructuring as part of a long-term plan to get ahead of
the competition. How the Australian operator pulled it off is a lesson in how
intimately network strategy is coupled with business strategy.
▶ TRAFFIC VOLUME ACROSS Telstra’s fixed and Australia’s natural environment is a chal-
mobile network has doubled over the past lenge for any type of national infrastructure.
few years. Yet the company’s annual capital Australia is a vast country, with an area com-
spending on the national transmission infra- parable to mainland Europe or the continen-
structure actually declined over this period. tal US, but with a population one-tenth of
This is no small feat in itself, but the most the size. Most of the country’s population is
important gain in terms of competitiveness located in major cities along the east coast.
has been that the revamped network allows In essence, Australia has a highly urbanized
Telstra to move much more quickly and cost- population occupying a small part of a large
efficiently when launching new services. and mostly inhospitable land.
Telstra started to transform the structure Outside of the cities and fertile coastal
of its national transmission network in . areas, Australia is a tough environment for
The original telephony-oriented architecture telecommunications, with monsoon floods
was replaced with a much more powerful in the north and droughts and bushfires
and flexible Ethernet-enabled architecture. in the south. Telecoms equipment has to sur-
Telstra can now bring both fixed and mobile vive temperatures over c and the remote-
ip-based services to market more quickly ness of many sites means it can take a main-
than ever before, reducing the time it takes tenance team days to reach and repair a faulty
to realize revenues and ultimately, profits. node.
Examples include faster and faster broad- Despite these geographical challenges,
band speeds and a range of innovative new Telstra has built a highly resilient national
services such as Telstra’s iptv offering, transmission network that connects all cit-
called T-Box. ies and towns. Today, this network carries

EBR #3 2010 • 45
 strategy broadband
Australia
Population: 22.48 million
Land area: 7.6 million sq km
TELSTRA ANNUAL REPORT 
▶ Annual revenues USD 21 billion
▶ Number of subscribers (in millions)
Basic access 8.66, fixed broadband 3.99,
mobile broadband 10.56
▶ Employees 31,157 (full-time staff in
Australia)
▶ PayTV Owns (50 percent) and operates
HFC network for Foxtel
▶ International operations New Zealand,
China (mainland and Hong Kong)
46 • EBR #3 2010
the majority of Australia’s traffic, cur-
rently approximately  petabytes per
month. This figure is doubling every two to
three years.
ADAPTING TO BROADBAND
Historically, Telstra was the incumbent ptt,
with its focus squarely on telephony. The
introduction of mobile phones and business
data services in the s and cable tv and
g mobile phones in the s greatly
expanded its business range. Through-
out this period, and well into the s,
Telstra’s transmission network followed a
traditional model mirroring the telephony
hierarchy of local, tandem/transit and main
telephony switches.
The introduction and success of first gen-
eration broadband on adsl and data servic-
es on mobile networks in the early s
showed Telstra that fixed and mobile data/
ip traffic would soon overtake telephony traf-
fic. Also, the traditional model of adding ca-
pacity link-by-link, as needed was shown to
be insufficiently flexible when planning and
budgeting for transmission services. The
deployment of new services was also fre-
quently constrained and delayed by the need
to expand the capacity and routes before-
hand.
In  a new hierarchical transmission
architecture was established and then pro-
gressively put in place. This program of
“Ethernet enablement” matched the transi-
tion to the use of Ethernet interfaces on new
Decoupling capacity growth and capital expenditure
Capex
2004 2005
The curve shows total volume of traffic, predominantly IP/data, carried over Telstra's network. The bars show long haul capital expenditure
(Australian dollars) including all fiber design installation costs and SDH and DWDH equipment costs. Source: Telstra.
ip-dslams and new g mobile base stations.
Transmission planning was simplified
through adding gigabyte capacity, rather than
e links on specific routes.
The establishment of the new architecture
was followed by a two-year period of accel-
erated investment to realize the new model.
For  to , capital expenditure on
long-haul transmission equipment decreased
somewhat – yet the capacity of the network
has continued to grow to support a doubling
of traffic volumes – an effective growth rate
of about  percent a year to the end of .
Today, Telstra’s total traffic volume is more
than  petabytes per month.
DECOUPLING CAPACITY AND COST
How has Telstra effectively decoupled capac-
ity and capital expenditure?
Between  and , Telstra installed
sufficient fiber capacity, meaning expensive
construction work for new fiber cables was
rarely required. Deploying scalable capacity
based on the new architecture, Telstra has
been able to leverage the original investment
in transmission equipment to continually in-
crease the capacity on its existing cable plant.
Added to this, the cost of capacity provided
by transmission equipment has been driven
down, so over the past  years, the cost per
gigabyte has dropped considerably.
Other carriers around the world lease
transmission capacity from third parties. For
them, the growth in broadband traffic leads
to increasing operational expenditure, but
PB per month
50
45
40
35
30
25
20
15
10
0
2006 2007 2008 2009 2010

little – if any – growth in revenues. Telstra,
on the other hand, has invested in the cables
and routes and can now leverage off these
assets and enhance transmission capacity rel-
atively cheaply and flexibly.
New technology breakthroughs are also
providing further cost savings for Telstra.
The vast distances involved in many routes
across Australia mean that a chain of
optical repeaters must be used to create
the transmission path, and historically
Telstra had spaced these repeater sites at
km intervals.
New transmission equipment can span
much longer distances. Consequently, a
program to eliminate intermediate repeater
sites has begun, leaving optical spans of
km. A recently built section in the
remote Arnhem Land area in northern Aus-
tralia has a span of km. The benefits of
fewer repeater sites include enhanced relia-
bility, saving on building maintenance and
site rent and reduced energy consumption
and emissions.
So, despite the somewhat higher power
lasers and optical amplifiers required to span
these longer distances, the net result is a re-
duction in capital and operational expendi-
ture, emissions and an overall improvement
in link performance.
SUPPORTING NEW BUSINESS
The business benefits for Telstra go beyond
simple cost savings. Telstra has now built a
national transmission network that covers
every town and city in Australia; a network
that has ample capacity, and on which scal-
ability for growth is largely decoupled from
equipment investment spending. New net-
work services can be rolled out rapidly, and
at low incremental cost.
For example, from  to , the net-
work has been leveraged to support annual
speed increases on g mobile broadband from
.Mbps to .Mbps to Mbps to Mbps.
The scalability of the national transmis-
sion network and the fact that the majority
of mobile base stations now have gigabit Eth-
ernet interfaces, means Telstra has been able
to repeatedly increase the speeds of the g
hspa access network without a specific trans-
mission upgrade program. Instead, capacity
has been increased incrementally as part of
the ongoing updating of transmission speeds
from .Gbps to Gbps to Gbps.
As an early adopter of the next generation
of mobile telephony msc-s nodes, which are
used to establish telephone calls through the
mobile network, Telstra is transforming the
mobile network core from  msc-s nodes
deployed all over the country, to four nodes
deployed in two diverse locations, to create
a national pool. This means considerable sav-
ings. Such a highly centralized network is
only possible because the underlying trans-
mission network is reliable and has more
than enough capacity to support the traffic,
even under “fail over” conditions.
The new transmission network is also the
foundation for Telstra’s new iptv service. To
support the delivery of content for its new T-
Box service, Telstra is building a content dis-
tribution network (cdn) that caches video
content at key transmission points around
Australia. Telstra has introduced the cdn
quickly, because the transmission architec-
ture is well suited to hosting the cdn server
farms at the access edge and because the scal-
ability of the transmission network means
that no special transmission upgrade pro-
gram is required. Rather, the video capacity
requirements are simply rolled into the over-
all capacity growth program.
The network strategy adopted by Telstra
is not limited to exploiting cost efficiencies.
It is firmly grounded in the operator’s future
business requirements. Telstra’s success with
its network transformation is a lesson about
the close connection between network strat-
egy and business benefits, as well as between
technology solution provider and carrier. ●
AUTHOR
▶ COLIN GOODWIN is
Broadband Strategy Manag-
er for Ericsson Australia-NZ,
responsible for the Fixed and
Transmission product lines.
He has more than 25 years of experience in telecom-
munications, first in technical development and sup-
port, then in consulting on technical and financial as-
pects of telecommunications strategy, and then in
product development and management. Before join-
ing Ericsson in 2001, he worked as a Senior Product
Manager for Telstra. Colin has a Master of Engineering
Science from Monash University, Australia.
(colin.goodwin@ericsson.com)
AUTHOR
▶ MARK CHASELING is a
Network Strategy Consultant
specializing in fixed network
transformation in Southeast
Asia. He has more than 14
years of experience in telecommunications, begin-
ning in network operations, planning and technical
development before moving into management and
consulting. Before joining Ericsson in 2008, he
worked as a Senior Engineer for T-Mobile Interna-
tional, responsible for defining its pan-European IP/
MPLS commercial and technical strategy. Mark has
an Honours degree in Telecommunications Engi-
neering from the University of Technology in Sydney,
Australia and a Master of International Business from
Melbourne University, also in Australia.
(mark.chaseling@ericsson.com)
broadband strategy
The brand sensitive issue
of resilience
▶ FROM TIME TO TIME, the telecoms
industry sees reports of carriers that have
experienced highly disruptive extended
transmission outages. While the media tend
to focus on the inconvenience to end users
and the loss of service revenues to the oper-
ator, the main damage to the operator is a
long-term loss of brand value and customer
dissatisfaction.
Telstra is acutely aware that the national
transmission network is essential to the
valuable revenues derived from the services
that run over it. Telstra positions itself as
providing premium services and its brand is
synonymous with high quality and reliability.
A decision was made in 2009 to enhance
the resilience of the transmission network
by adding further diverse routes between
major cities. These “third routes” comple-
ment the existing coastal and inland routes
between capital cities.
This did not necessitate a major cable-
laying program. Rather, the third routes are
logical paths that make use of previously
unused wavelengths and fibers in existing
cables. Consequently, deploying physically
diverse routes between major cities only
required small stretches of new cable to be
laid and only a modest investment in new
active transmission equipment.
The existence of a well-structured hierar-
chical network and a consistent set of
equipment with a common management
system means a third route can be added
quickly and economically. The project is due
for completion in 2011.
By comparison, many carriers have pro-
curement processes that drive them to treat
transmission purchases on a link-by-link
basis, meaning they have a patchwork of
transmission solutions and technologies
and element management systems that
defy integration. Such an approach makes
innovative programs such as Telstra’s third
routes impossible.
Transmission network
cost distribution
Transmission
equipment
Cables buildings
power
Civil works
Source: Ericsson
Typical cost breakdown from Ericsson global
accounts.
EBR #3 2010 • 47