John Linton
....or is it?
I was puzzled by the statement from Internode a week or so back that the ADSL market in Australia was "plateauing" but put it down to Internode's very high prices and Telstra's aggressive targeting of other ISP's customers with incredibly low priced offers (or perhaps just some invented excuse for moving their management around). I read the Eftel 'annual ASX report' yesterday in which pretty much the same statement was made in an attempt to explain away their lack of growth (6% which is barely above the WA inflation rate and equates to no growth as they raised their prices during the reporting period which means that their net customer numbers almost certainly declined) over the previous 12 months:
http://www.asx.com.au/asx/statistics/announcementSearch.do?method=searchByCode&issuerCode=eft&timeFrameSearchType=D&releasedDuringCode=W
(statement in the middlish of the first page)
Couple those statements with the comment by Futuris:
http://business.smh.com.au/business/out-of-telecommunications----well-almost-20080901-4762.html
Yesterday Futuris's departing boss, Les Wozniczka, again made clear
his disdain for the decision to effectively torpedo the Opel consortium. "Unfortunately, the decision by the … Government to cancel funding
for the Opel rural and regional broadband network meant the pursuit of
our telecommunications strategy became untenable and the Amcom
shareholding non-core," he said in a statement.
So, if you just read those three comments in isolation to any other information available in the financial or communications media you would reach the conclusion that Telstra has made it untenable to be in the ADSL business in the long term and that even in the short term there is a decline in growth and "financial pressures depressing revenue".
Sounds like it's past time to go and do something else......except I don't see any indication that the ADSL/Broadband market is "plateauing" or "under severe financial pressure" or that "there is no future in a longer term communications strategy".
From what I can see, and I acknowledge my views are limited and based on what happens within Exetel's customer base and the quantities and sources of new orders for Exetel services, there is absolutely no 'slackening' in demand for broadband services - quite the reverse - I see a strong growth in ADSL2 with no associated diminishing of ADSL1 order intakes, a slight but consistent growth, and a very, very strong growth in HSPA service demand (I don't see that first hand but from statements by hardware suppliers to the mobile carriers and statements by the mobile carriers themselves).
Eftel's lack of growth over the past 12 months (and based on the reported figures almost certainly an actual decline in customer numbers) is obviously caused by their price increases which make their offerings no longer competitive for a very small ISP.
Internode's strange comment almost certainly reflects the fact that as, ADSL in particular, has become far more of a 'non-technical' service they are struggling to justify their 'premium pricing' (substantiated by their recent price lowering/download increasing at the same price) and their take up is therefore becoming restricted by that pricing in an increasingly 'commoditised' market. However there is a major disconnect between the broadband statement and their reported revenue growth (of 38.6% to $A116 million) and their employee growth (of 11.5% to 329) over the FY2008 year. (no "plateauing" evident in those figures).
Futuris obviously has seen no return from its Amcom investments and saw no likelihood of return in the near/medium future and was happy to get its money back rather than seeing it continuing to decline and put that money into something that would make a return.
Having dismissed the comments of those three companies as being far from any general truth, there are obvious signs that the big carriers are doing better in the broadband markets than at any time in the past and that is both reflected in their recently published financial results and their 'control' of the base infrastructures. Telstra has a 2 year head start (because of its own decisions and views) in the 3G HSPA marketplace that it dominates - not because it's a monopoly this time but because it was quicker 'off the mark' than either Optus or Vodafone. Telstra and Optus have invested in ADSL capabilities to a far larger extent than any other Australian companies and therefore have got a much larger share of that 'new' market which has, in large part, 'cannibalized' the 'old ' ADSL1 market and therefore has contributed to an increase in general ADSL market share. In those terms it is obvious that smaller companies (which include the three referenced above) will have lost some part of what they once had as a 'competitive advantage' and if, as their comments seem to indicate, they didn't 'move with the times' then perhaps, for them rather than the general supplier base, their 'markets' are "plateauing" or "under severe financial pressures".
The one thing that remains a constant in the technology business is that it constantly changes, not just in terms of products and services and the ways they are delivered, but in the ways they are supported and the ways they are regarded by the buyers of those products and services.
40 years ago a mainframe computer was only understood by a tiny number of 'elite' professionals. Today, an average 8 year old Australian in third class understands more about how to get better value from a computer than any 'guru' in 1968 - and not only understands how to do that but actually does it unpaid and, largely, without study or instruction.
It seems to me that these companies/managements who say that the market is "plateauing" are correct - the demand for the 'old fashioned' priced services they are trying to continue to offer hasn't just "plateau'ed' - its falling sharply.
Broadband, delivered by any medium, is no longer a 'technology' service - it's a commodity in the hands of the advertising budgets of the major carriers (who also control the infrastructures).
If you give it a moment's thought - nothing has ever changed - in that everything continues to change but some companies don't think change should continue once they've committed to a technology that remains the subject of continual change. Time to revise their ROI assumptions I would think.