John Linton
It's been a while since I bothered to read a Telstra annual report but, from my rapidly failing memory, I seem to remember that Telstra still derives a great deal of revenue and profit from providing wire line calls. Ever since the Federal Government began to introduce 'de-regulation' of the telephone, and associated services, market back in early 1990s Telstra has managed to maintain, and increase, both the revenue and profit it derives from telephone calls by simply raising the price of telephone line rental as other companies forced it to reduce its telephone charges.
I doubt that many people remember what a PSTN telephone line could be rented for in the early 1990s (certainly not me) but I have a vague memory that it was slightly less than ten dollars a month. I do remember what Telstra charged for a call to the USA which was over $2.00 per minute. So today a call to the USA costs the user of a sensible call provider around 5 cents a minute (and even less over VoIP) while the telephone line required to make that call has risen by over 300% in most cases. Even with that draconian increase Telstra is beginning to see the decline in the combined line rental and call income which is predicted to steepen quarter by quarter from now on.
I'm becoming more knowledgable about telephone service income streams which has been necessitated by Exetel's moves to become a supplier of mobile, VoIP and over ride call services and, since July 2006, line rental - as part of the Optus based ADSL2 services. Exetel started selling over ride services over three years ago, mobile services two and half years ago and VoIP services around 2 years ago. Since we started the revenue we earn from telephone services has increased month on month at a slow, but steady, rate and has always delivered much better profits than the ADSL businesses with which it's associated.
The 'killer' service today is, of course, VoIP which can be provided at a call quality indistinguishable from a toll line but at a fraction of the cost of even the most heavily discounted over ride or pre-selected telephone call service. Of course, VoIP still needs a telephone line to deliver the DSL service that is needed to provide VoIP but the ACCC has forced Telstra to provide those lines at a fraction of the cost of the 'standard' PSTN telephone line.
Every small ISP and Telco, except Telstra, is pushing VoIP as a key service. Of course, if Telstra wished to do so it could do the same (and Telstra almost certainly uses VoIP within its own network and to the far edges of its 'hand-offs' to other carriers) but it can't offer a true user pays VoIP service because, for once, incumbency/monopoly acts against Telstra as they would have to give up their juicy wire line rental and excessive call charge income to do what every other carrier, telco and ISP is doing. Poor Telstra.
As Exetel's telephone revenues have steadily increased we have put a little more effort in to expanding and developing our telephone services. When we delivered the first call via over-ride some three years ago we used a third party company to do our telephone billing (which cost, proportionately, a lot of money) but we have used our own, inhouse developed, call billing systems for almost two years now - firstly for wire line then mobile and now also VoIP calls. It was with some trepidation that I made the decision to install our own VoIP switch almost twelve months ago but, after some minor teething problems in the test phase, both the switch and the billing from the switch have been problem free.
Exetel uses its own VoIP services in its North Sydney offices and for its remote employees/directors in Perth, Mosman and Sri Lanka without noticing any difference between the VoIP service and the Telstra PSTN service they replaced (the Sri Lankan VoIP service may well be even better than the Sri Lanka Telecom toll service).
I was reminded yesterday via an email from a business associate that the calling card market in Australia is still very much alive and still very profitable. We will begin to discuss with him how Exetel can provide the technology and management of VoIP call delivery for calling cards that his company will market. When we discussed this initiative with the Exetel personnel who would be involved in putting this service in place the VoIP engineer responsible for our VoIP switch told us that he had already put in place a 'calling card' voip service (using his home Exetel ADSL2 service) which is used by him and his friiends to make no call charge calls to Hong Kong (where he and his friends had family). Nice to have such enterprising people working for you but even more interesting to me (with my very limited knowledge) was the fact that VoIP calls incurred no charge to Hong Kong because the HK (and Macau) telephone system doesn't charge for local calls (only line rental).
Looking at the Optus/Virgin 'all the calls you wish to make at no additional cost' offer and the similar offers that are now appearing plus the continuing trend to using mobile rather than wire line to make calls it must be pretty frightening for Telstra whose planners will be constantly revising downwards the income and profit from their monopoly services - especially as they are also strangling ADSL development in favour of some new fibre/cable delivery platform - which by the time it's in place will not be very useful for carrying much telephone call traffic at anything like Telstra's current charges.
The intense competition in every part of the communications market is driving the need for additional and lower cost services at an ever quickening rate. Exetel, a very small company, has 11 major new product/service/development projects in process at the moment compared to 3 such projects a year ago.
Small companies have an advantage of speed to market and adaptability which large companies don't have. Perhaps, like risk taking, our only advantage in dodging around beneath the feet of the elephants.