Government should drive broadband growth

At Tuesday's release of Pacific Internet first quarter financial results Dennis Muscat, MD for the company's Australian operation, said Australian governments had hung back, expecting industry to take the lead.

Australian broadband was not as affordable or reliable as it should be, he said. "Our government has been tardy in this area. There's been several reports now not acted on, out on a bookshelf gathering dust," Muscat said. "What's needed is a tsunami effect, as in Japan, [South] Korea and Hong Kong."

He said that although the Australian broadband sector was picking up, prices remained high for businesses and consumers alike while the overall reliability of the nation's DSL network was still questionable.

In Australia, broadband was growing about five percent a year to South Korea's 50 per cent and Japan's 20 per cent.

The government should "do something", Muscat said. Lifting Australia's broadband sector to parallel those in Asia would enable businesses to harness improved broadband networks linking international offices and customers, a move he believes will offer significant savings long term.

Pacific Internet last year announced it would concentrate on broadband to claw back revenue lost as dial-up subscriber numbers shrank.

The company's take-up of new broadband subscribers is still growing but appears to have slowed, with broadband revenue up 13.9 per cent on the previous quarter.

Last quarter, Pacific Internet reported broadband sales revenue grew 132.3 per cent, especially in Hong Kong, Singapore and Australia.

But broadband is now the group's biggest earner, contributing 36.8 per cent of total revenues, up from last quarter 2003's second-place and 26.5 per cent of the company's annual US$90.5 million revenue.

"We've grown about 1300 subscribers [in Australia] in the last three months," Muscat said. "We're in the black and we've been profitable for [the last] five consecutive quarters. There are not too many ISPs on the NASDAQ you could say that of."

Overall revenues for this quarter fell two per cent to $US22.2 million, while costs increased slightly and operating income halved to $US600,000.

About 30 per cent of Pacific Internet's business is done via its network of 182 dealers and reseller channel partners in Australia.

Targeting the SME dealer channel, the company is hoping to grab a 5 to 10 per cent share of an expected 70,000 new DSL connections rolled out in Australia this year.

Next six months, the company sees its best chance in business customers drawn to technology such as VoIP and VPN.

The SARS outbreak in Asia could prove a double-edged sword in this case, encouraging firms to invest in remote communications infrastructure that could support technologies such as video-conferencing, while limiting revenues in the short term. "SARS hasn't hit our first quarter revenues but could going forward. It has hit business confidence, yet the Internet can provide answers around that. Where there is a problem, there is also an opportunity," Muscat said.