Sunday, April 11. 2010Is There Any Future For Telstra At All?..........John Linton .....if they 'give in' to the Federal Government's demands? Being the weekend there is more time to read the weeklies and monthlies and catch up on the more obscure web sites and 'publications' that contain information about the Australian and other countries communications issues and technologies. Much of what I read was about the current 'discussions' between the Federal Government and Telstra on how to transfer Telstra's residential telephone and ADSL customer base from its PSTN to the mooted NBNco. The side issue of access to the ducting etc is neither here nor there - it's simply an arbitration issue on a true price rather than the stupid price dead lock that two unrealistic parties can make a dog's breakfast of. I couldn't help but get the impression that these negotiations, whichever way they come out, give every sign of being Telstra's "last hurrah" as a relevancy in Australian communications. Why do I make this statement? Well because, when all is said and done, does anyone ever want to buy Telstra communications services or rather does ANYONE want to pay outrageously high prices for ANY data or voice communications service? I mean does ANYONE ever want or choose to pay more for ANY service or product if they have a choice? The answer is there is some percentage of any marketplace that equates the highest price to 'the best' but that percentage has never been all that large. So what actually does happen to Telstra if, somehow against all financial rationality, an NBN does get built and via some large government subsidy does get to deliver communication services to a significant number of Australian users? Telstra would have committed some 50% plus of its most highly profitable revenue sources away from its own price controlled infrastructures to a 'commonly shared' priced infrastructure (where it will have picked up the lowest cost possible compared to its competitors but nothing like the price differential it had using its own PSTN) and it will have retained its bloated cost structure for selling, provisioning and supporting end users...and it's insanely bloated and grossly overpaid executive/management structure. It then has to compete with a bunch of companies it used to make huge profits from who have always been able to offer services at lower prices than Telstra itself did but who then 'enjoy' something like price parity on infrastructure costs and far better administration, sales and operating costs - and 'infinitely' lower management/executive costs. SingTel/Optus have become a larger mobile provider that Telstra because they had no need to buy infrastructure from Telstra....but SingTel never tried to sell their services at anything much lower that Telstra's sky high prices because they in turn were used to running a monopoly and were content to gouge the Australian customers at only slightly lower prices than Telstra did - bearing in mind that when Optus began its mobile deployment Telstra had 100% of the market charging prices that would seem unbelievable to today's users. Telstra have also lost over 50% of their initial 100% of the ADSL market - again a big chunk of that has been to Optus who, once again, chose to let Telstra set a sky high pricing model and then only slightly undercut it but other companies, notably TPG, have taken close to 15% (and still growing market share) by simply cost reducing the provision of service and NOT buying very much from Telstra in terms of infrastructure). Telstra is only the dominant provider of residential communications services in Australia because, largely, they make it too expensive for any other company to offer communications services by charging exhorbitant prices to connect to residential users in Australia. If that were to change then Telstra would not only lose the huge profits it makes from their shrinking wholesale customer base but they would face competition, even from Optus, that offered services on the same 'third party's' infrastructure used by Telstra but offered those services at 50% or greater discount to Telstra's costs. If I have got this 'analysis' even vaguely correct there is absolutely no chance that Telstra will agree to 'sell' its current PSTN customer base to the NBNCo because if it does the company will cease to exist in the not so distant future. The other inevitable truth about monopolies is that can't continue to exist in a non-monopoly' marketplace - they don't have any of the attributes required to deal with a non-monopoly environment.
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only too true, that's why telstra should build a FTTH only in city areas to compete against the nbn. No marginal areas.
NBN unviable in one swoop.( Oh sorry Mr conroy the cost has to go onto the budget) If the government tries any threats(structural separation, selling foxtel and withholding spectrum) the high court will see that it is only doing this to stop competition. The high court will insist the ACCC does what is supposed to! they will also be voted out at the next election ie nbn dead also. In fact why does the telstra board make a public statment that it will go ahead with it's own ftth whilst continuing negotiations with the nbn. Costs nothing and by god you'll see the government conclude a deal very very quickly ! Comments (6)
It's going to be an even more interesting few weeks.
But this whole back to the future attempted re-creation of the old Telecom Australia is just plain stupid. Comments (4)
with Telecom1 out of the picture a larger pie +more profit for every ISP in the land (all run more efficiently than telstra). .Boohoos share holders
pick a differnet stock, t$' becoming irrelevant fast ,marginal areas my arse Comment (1)
Sorry dave telstra will have a fibre network up and running before the nbn can dig it's first trench. just how much money do you think the taxpayers will let the governemnt waste before they say enough is enough ( bet you McKinsay report hasn't even got one page on what happens if telstra sets up a competing fibre network in profitable areas. probably no need we all know the answer!)thats how useless the gov is.
Ok for all these ISP running around saying they can give cheaper rates. Sure when you don't have to cough up the money to build the infrastructure or ensure returns on your capital investment. Don't see any ISP offering their money to build the fibre network, no they want either telstra or the government to build it. All they want is acess to it at cheap rates! Get a grip most ISP business models are being subsidised by regulation. the question is will the taxpayer be happy coughing up another $43 billion will marginal returns to subsidise all these ISP Comments (6)
No other company (bar Optus) could subsidise a national metropolitan rollout of cable but there are several that build fiber into new communities.
Unless a consortium got together and formed a PIPE Dream 2 I don't think anything would ever happen. Glen, with that said, you indicate that ISPs just want to access the network at cheap rates. I don't see anything wrong with this due to Telstra getting easy relatively unsupported revenue (compared to residential clients) - see John's article on Business is Business. Telstra is still charges their arm and leg fee for connection and line rental after all. Comment (1)
As far as broadband ISP's go:
I think the point about the bigger telcos like Optus only slightly undercutting the prices Telstra offer to be that needs underscoring. Surely if Telstra dies then all of the benchmarks for wholesale pricing are reset. Therefore playing hardball with pricing will see you moved to the bottom of the pile -- I submit that people don't care about "quality" like they used to even 5 years ago. It's all perception and word of mouth for the end user. Anyone follow whirlpool? End-users have realised that quality doesn't count for much when you can break a contract and churn in 24 hours. Comment (1)
Just have one simple question. Does the government really plan to get a reasonable return on capital for the nbn investment or does it intend to subsidise the network for the public good ?
If it does want a resonable return say goodbye to cheap ISP rates. If it is going to subsides it well all I will say is if they were building a nbn in singapore do you think telstra would get the contract or would they give it to singtel to make their national carrier stronger. I wonder ! Comments (6)
Dave telstra should separate all its profitable business into separate company structure and give then back to their shareholders, whom you seem to hate. ( Even though these people gave $62 billion to the government to pay off the nations debt, or is it just easier to forget that part!)
We should leave the failing fixed line( minus the ducts) and USO in telstra and let it sink. higher taxes for you dave You and your likes would have to pick up the bill for supplying the USO again. Comments (6)
The Federal Labor Government stated that it would finance and build the NBN2 because commercial carriers were unwilling/financially unable to do it.
It further said it would sell the infrastructure, at some future time, to private equity and repay the taxpayer funded deficit. No costs have ever been produced to show that this is possible - it probably isn't. As for Telstra selling ISP services at a reasonable cost - I doubt that is the case. Comments (4)
For it to sell the nbn in the future would mean investors would have to have a complete memory failure or it would have to offer significant risk yield to compensate for the possiblity of future governments decisions. ie turning their 62 billion investment into 23 billion.( telstra performance so far)
So lets be realistic the government will lose money As for telstra selling ISP services maybe so. But imagine this. Bigpond separated from telstra significantly reducing head count then aiming to be a low margin high volume business model. a large amount of ISP out of business in a week. I would imagine optus would follow suit which would only increase the carnage! Eventually ISP space would be filled by only 3 to 4 ISP( the big ones) operating on this business model. eventually when the cost of setting up a ISP costs increases they would be able to increase their margins. Comments (6)
"A low margin high volume"....Telstra is already a high volume internet provider and it can only make a profit at its exorbitant internet end user pricing because it forces other suppliers to sell at excessive prices because of its monopoly.
The concept of Telstra/BigPond having a clue how to set up and operate a low cost business model is laughable. However, assuming that is in fact possible, what could Telstra offer that a smaller and more efficient company couldn't? It's like GM, Ford, Chrysler trying to build a decent automobile or Toyota, Nissan, Honda trying to build a 911 or a Ferrari - there is no possible way they can do that. Comments (4)
Must disagree if bigpond was separated it's choices are to compete or perish.(ISP will be high volume low margin business the nbn will see to that)So yes many jobs will be lost.
what telstra offers that a smaller company couldn't is exactly that volume. Classic business play cut your costs to the bone drop your margins and play last man standing. The smaller ISP would have to merge or perish ( it's already happening) leaving once again 3-4 competitors. I would bet against telstra or bigpond in a game of life or death Comments (6)
Maybe you're right.
'History' says that has never happened. Comments (4)
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