John Linton It's again that time each year, for the past 7 years (since I first became involved with ADSL), that I have taken a few minutes to look at the coming 12 months in terms of what I think will happen to ISPs (including Telstra) over the coming twelve months. I used the time on the flight home earlier this morning to think about what Exetel can expect in the way of competitive pressures in 2009. My predictions on 2nd January 2008 can be found here:
http://johnl.blogs.exetel.com.au/index.php?/archives/161-What-Will-2008-Bring-To-ISPs-In-Australia.html
as a guide to how useful my views may or, much more likely, may not be.
One thing that 2008 finished off was the almost total elimination of the 'lunatic fringe' ISPs. There are still a couple left but they too have almost completely disappeared from sight and, I suspect, will cease to exist completely in the coming few months.
My random assessments of the 'top ten':
Telstra BigPond
Telstra has continued its 'marketing programs' aimed at converting its wholesale customer's ADSL1 users to BigPond users via 'one off' "special offer pricing" that is below the cost of the same services sold to companies such as Exetel and, I suspect, also lower than those sold to other much larger ISPs - but I wouldn't know.
It seems highly likely that Telstra will ramp up its ADSL2 offers and those users who can get ADSL2 from Telstra will be very 'tempted' to swap their ADSL1 service for the higher speeds of ADSL2 via a series of 'unbelievably low priced' "special offers". It seems to me that Telstra will do everything possible to cease suplying ADSL1 to wholesale customers, at least in its current form, as soon as possible wherever it has ADSL2 ports.
With their elimination from the 'NBN Tender' they will do everything possible to use their current ADSL2 and HSPA networks to render any faint hope that an NBN can be delivered in some sort of 'this century' timeframe as unlikely as possible while they get their paybacks from their ADSL2 investments maximised.
By already 'sucking in' some of the 'independent' ISPs in to becoming Telstra ADSL2 resellers and with the 'carrot' of also letting them re-sell (if not wholesale) their HSPA service at 20 mbps type speeds in the foreseeable future they have a fairly simple way of eliminating the urgency/need for an NBN of any description.
Prediction: Will continue to grow ADSL2 and HSPA customer base at the expense ot their own and their competitor's ADSL1 customer bases.
Optus
From what I can see Optus had another growth year and, based on its increased advertising spend, must have done very well in growing its total broadband customer base and its market share - so the two largest broadband providers have both continued to grow their market shares via similar "half price" and other give aways as they try and match each other in the who can give away the most 'war'.
Their 'poisoned chalice' involvement in the NBN 'tender' will almost certainly distract them and put an end to their own growth of their ADSL2 roll out so Telstra's 'tactics 'have had an early pay back.
They will have to cut Telstra's current HSPA lead but this will also be hampered (in terms of allocated capex) by their need to stay involved with the NBN.
Prediction: Will cease growing its ADSL2 customer base and be restricted in how it can promote 3G broadband while trying to get NBN over the line.
iPrimus
No change from last years assessment which basically eventuated as predicted. Their lack of any real broadband ADSL2 roll out or a 3/4G service means they have nothing to offer other than continuing to resell Telstra's ADSL1 and wire line telephone wholesale services at uncompetitive pricing.
The ongoing squeeze by VoIP on land line rental and land line call revenues will make life difficult for them for the foreseeable future.
Prediction: Will continue to lose market share and relevance in the Australian market place
AAPT
Continues to have no direction and no owned infrastructure and a parent in a lot of financial trouble. Still has significant presence and significant revenue but is a 'me too' in a marketplace crammed with 'me tooers'.
Prediction: Will continue to fade away until Telecom NZ finds a buyer for it.
iiNet
Their take over of WestNet was strange and their subsequent reversal of the reasons for the take over was even stranger (not moving the eligible WestNet customers to their own DSLAMs but resigning with Telstra Wholesale on some "unbelievably good deal").
Then there was the even stranger decision to become a "3" dealer"? What was that all about?
Their pricing/"WestNet's" pricing continues to be pitched at an unsustainable long term level and they have almost nothing, if I was in an unkinder frame of mind I would say absolutely nothing, to offer the Australian marketplace as they continue with their bizarre "race for growth for growth's sake" with no discernable advantage to either their customers or themselves from doing that.
Prediction: will run out of money and be bought out
TPG
David Teoh completed the"sale of the century" in gettting $A150 million in cash and almost 40% of SOT in shares in May this year and continues to promise profits of $A90 million plus for the current financial year from the combined Soul/TPG entity.
No-one else, including Telstra, delivers such profits (as a percentage of revenue) and the vast majority of communications companies don't deliver any profit at all.
Mind you - the predicted 2008 profit disappeared in the predicted "unforseen issues" in the taken over company's books so it will be interesting to see just what profit is delivered but as a public company the predictions will now be more accurate.
SOT continues to heavily advertise and has continued to develop its network so, far more than iinet, SOT has a 'reason to exist' as it does offer a low cost/high usage alternative to Telstra for a range of products but it may have to address the danger of burying its network with high end users at low prices.
Prediction: TPG continues to grow and, as far as can be determined, continues to make a lot of money. It is the likely "third provider" in the current Australian marketplace.
InterNode
As far as I can see Internode has lost its reason to exist in today's communications marketplace and is a likely target for takeover if any other company has enough money in today's financial environment.
Their decision to wholesale Optus ADSL2 and then, even weirder, wholesale Telstra ADSL2 is bizarre for a company that claims to only offer value to its customers.
Prediction: Will need a 3/4G service to remain relevant.
NetSpace
I never hear anything either positive or negative about NetSpace - to the point where I hear nothing at all.
It's been around for a long time so presumably it will be around for a bit longer.
Prediction: No idea.
DoDo
The continuing sheer awfulness of this company's whole approach to providing communications services in Australia continues to indicate that this company cannot stay in the communications business.
Prediction: Will go broke sometime this year
Adam Internet
I know absolutely nothing about this company but companies of this size can only have a future as a takeover candidate for someone bigger - given the money is right which in 2009 is not likely.
Prediction: No idea
The 'absorption' of WestNet, Soul and PeopleTelecom by other entities in 2008 plus the demise of almost all of the 'lunatic fringe' tiny ISPs has left the Australian consumer, at least the more adventurous ones, with an increasing lack of choice amongst a set of "me too" offerings from a set of suppliers who don't appear to have any discernable reasons to be in business except to copy each other as closely as possible and make as much money as possible from delivering as little as possible.
Of the current crop of suppliers of communications services only TPG (SOT - must stop using "TPG" this year) appears to make any 'value offer' with Optus, iinet, internode etc just taking Telstra's high prices and offering the same service configurations at a few dollars a month less. Not very imaginative or any reason to be in the business at all.
Exetel? Too small to bother with but may survive and grow in 2009.