John Linton I don't think I can be described as a 'Telstra Lover' having commented on more than a few occasions about their various predatory and just straight illegal, in my opinion, practices.....but I think the reported statements by the senior management of Internode, iinet et alia about Telstra's recently announced ADSL price reductions are an embarrassment to the people making them and are so childish they are incredibly embarrassing for the industry as a whole. They make the Australian communications industry sound like a sheltered workshop. The whining senior managers of some of Australia's larger service providers are barking up completely the wrong tree - Elizabeth Knight provides the logical reasons behind Telstra's recent announcements - and the new realities in the communications markets:
http://www.theage.com.au/business/telstra-sheds-its-role-as-top-shark-in-the-pond-20100727-10ufz.html
Firstly let me say that Telstra's new pricing is long overdue and only reflects the fact that companies like TPG have been decimating their customer base for some time resulting in Telstra continuously losing net customers for over twelve months. What did anyone expect them to do about that? I wouldn't have thought any, reasonable, person would have expected them to meekly watch that trend accelerate? So they cut their plan prices (at least in theory) to what looks like attractively low prices - assuming you want a 24 month contract and also want to bundle in your a wire line telephone service and a mobile or too. So what?
Any other ISP that had its own DSLAM could match that offer and make money, or at least as much money as Telstra makes on that pricing by simply matching the price. What they probably can't do is to offer the $200.00 or so credits that Telstra is also offering to sweeten the deal further. However Telstra has made themselves an 'also ran' in terms of being an ADSL provider since 2001 so it is well past time for Telstra to become a competitive provider again......before they lose the 'critical mass' of customer base size and have a whole new set of problems to address.
The problem for iinet, Internode, iPrimus et alia is that they have had a feather bed ride courtesy of Telstra's excessive pricing for so long they have forgotten, if they ever knew, how to actually sensibly price a service against ongoing competition. They cry crocodile tears about "wholesale" pricing but those with DSLAMs already get connection to an end user's residence for $A2.50 per month and it is hard to see how even if that price was reduced to zero (which would be completely unreasonable) it would make any difference so it is hard to know what they are bitching about.
Exetel doesn't have any ADSL infrastructure (for reasons I have set out over the years) and will be very badly affected by Telstra's new pricing and even more badly affected by their 'special offers' of multi hundred dollar "sign on credits" via their expensive marketing/direct selling/advertising campaigns. A combination of the 'ADSL Wars' that have been raging over the past year and the mooted NBN caused us to re-think what our involvement with residential ADSL would be some 2 years ago when we realized the possible results of what we predicted would happen - I doubt that our 'insights' were unique and I doubt whether any other actuality was ever going to be possible. It's a standard aspect of commercial life.
Exetel, in its very small way, has stayed 'alive' in a very competitive set of market places by NOT using the simplistic price mechanism used by so many other ISPs (including all of the current sook/whingers) - their contribution to Australian ADSL pricing was simply to take Telstra's prices and offer similar services at a few percent less (Exetel's pricing was always based on taking our total costs and adding a few percent). The problem with the sook's pricing policy is that while it works very well for some time it eventually reduces the incumbent's market share from the 100% they started with to less than 50%. At that point, all over the planet for 4,000 or so years, the incumbent uses the remainder of its power of size to re-assert its market numbers by taking the cold shower of cutting its prices and firing enough personnel to pay for the reductions in its grossly fat profit margins.
Commerce 101 for the under fives.
So - what will happen about Telstra's new pricing? Almost certainly nothing 'legally' or via the ACCC (ADSL2 is not a 'mandated' service and Telstra can point out it doesn't have 50% or more of the market in any case). What has to happen is for other providers to either compete with Telstra or decide that Telstra will now do to them what they have been very content to do to Telstra for the past ten years - sell services to customers at costs lower than those once lean and keen companies did but have now become the new "Telstra" overpriced services. Meanwhile Telstra will grow its market share in Zone One and will take over 100% of the market in Zones 2 and 3.....unless other ISPs decide to reduce their own internal costs to allow them to reduce their own bloated end user prices.
......and the really bad news?....these won't be the last price reductions by Telstra.
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