John Linton I have been asked to give a short presentation on what I thought would happen to the Australian communications market if the 'NBN2 became a reality to one of Exetel's suppliers next Monday so I used the time I usually devote to writing a blog to sketching out what I will talk about. Sorry if that's "cheating".
1a) How Exetel Sees Current Markets And Challenges
Exetel’s revenue growth dropped from 24% in FY2009 to 20% in 2010
ADSL services grew less than 5% in FY2010 and are planned to fall in
FY2011
All other services grew over 20% in FY2010
Exetel expects to continue to replace ADSL revenue loss with business services
gain in FY2011 – and replace ADSL profit loss at 10 x
Exetel expects wireless broadband revenue to grow strongly in FY2011 – if we
solve a few problems 1b) How the NBN will impact Exetel assuming it
goes ahead as currently planned
We have no experience with NBN fibre as yet
We have begun some tentative letter box drops in fibred areas but only received a few actual
orders due to no official turn on yet.
We were very encouraged by the Telstra Point Cook fibre trial which, depending
who you believe, showed Exetel as getting over 20% of the alleged 300 fibre
orders placed so far in that small suburb.
Until the current election is decided we have not made any assessments of what
impact NBN will have on ADSL over the coming year – almost none is the current
guess.
2. Potential
future Telco industry structures under an NBN – retail and wholesale
A fascinating speculation – where it’s possible to see
some possibility of opportunities for small companies like Exetel
It, obviously, depends on what ‘discount’ structures are employed by NBNCo and
what attitude any discount receivers take to wholesaling
We currently have a wholesale agreement direct with NBN Tasmania and are
assuming we will be able to have the same arrangement with NBN Mainland – that
is simply an assumption.
If NBNCo, firstly goes ahead, and then goes ahead in some sort of reasonable
way/speed then the wholesale residential market changes completely with neither
Telstra nor Optus having any real reason to continue to exist as a residential
supplier of wire line telephone or data services.....by choice.....and possibly
not by being able to make huge profits from wire line services because neither
are effective as resellers without their own networks to artificially control
end user prices. Both have resisted VoIP and will pay the price for that delay.
So a possibility is how Telstra and Optus proceed – mobile only?
If there really is some sort of real central government control for national
fibre then there is not a very bright future for either Telstra or Optus and
the wire line service market will change completely.
It seems problematic whether there will continue to be a recognisable wholesale
and retail market for telecommunications services in the not too distant future
3. Wholesale
market future trends under an NBN and what you see are the opportunities for
Optus Wholesale across fixed broadband/data/voice in the residential and business
markets
If there is a significant discount structure provided
by NBN Mainland then little needs to change – Optus and Telstra will be able to sell to
‘wholesale customers’ at lower than those customers can buy from NBN direct and at some
sort of acceptable margin – you would assume.
IP can continue to be sold
Wireless remains a growing and major service
VoIP rates could be made a major service but the current pricing is so far away
from competitive that it would need a complete re-think.
“Content”, in whatever form that will take, appears to be the major opportunity
Business links remain ‘untouchable’ by the NBN, at least for the time being and
needs more concentration on....unfortunately ‘protecting current revenue’ is
going to be very hard to deal with by Telstra, Optus and many others.
4. What
alternate/differentiated strategies could Optus Wholesale pursue to ensure its
relevance and growth in an NBN world
Is Optus going to wholesale NBNCo fibre?
If so is Optus able to offer any advantage over offering the NBN fibre services
being bought direct by Exetel?
If yes – then nothing changes from the current arrangements Exetel has with
Optus – we leverage your buying power to obtain a financial benefit.
All other services, particularly wireless and large scale data and, possibly,
IP remain the same as they are today
Content, particuarly entertainment, remains a key attribute of residential
fibre services.
5. Where/how
do you see the Optus Wholesale and Exetel relationship growing and continuing
to succeed in an NBN world
We see very little changing as residential fibre is not
something that we are particularly interested in right now and the questions
previously asked have exhausted this topic pretty much.
Fibre affects Optus/Telstra because you make so much revenue/profit from
PSTN/non-voip calls – that it is something for you to deal with.
Exetel (apart from the ADSL2 services that include a bundled phone line/calls)
has no wire line telephone rental and very little ISDN/PSTN call revenue so it
is of no concern to us. (voip revenue now exceeds wire line telephone call
revenue and continues to grow)
MoIP will begin to affect Mobile revenue and Mobile will continue to eliminate
wire line revenue – as you know much better than I do.
Exetel is planning to have no residential ADSL revenue within the forseeable – I
would assume that Optus would be wise to do something similar.
in the mean time Exetel will continue to buy more mobile data and more business
services to more than off set the loss of ADSL revenue - to either company - at least that is the plan.
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