John Linton
My eye was caught by this article earlier this morning:
http://www.itwire.com/content/view/28463/127/
which, while it contained nothing factual or specific, among the generalisations there seemed to be the glimmer of a 'message' that Telstra might be considering changing some of its more pernicious practices - I stress that there is a barely discernible glimmer of that inference. Logically, if an 'NBN2' ever did become a reality then there would be a need, in quite a few instances, for a competent wholesale engineering company to provide a variety of services to a level below what some new form of Telstra would buy 'NBN2' services for. While I doubt that an 'NBN2' will ever be built within my life time that wouldn't stop Telstra Wholesale 'reconsidering' its current position if for no other reason than it has lost some significant percentage of its wholesale business to the ISPs who have built their own DSLAMs and to Pipe, NextGen, UEcomm etc who have been providing inter and intra city back hauls and inter State back hauls at an increasing rate.
While commercial logic and monopolies don't ever find a meeting point, monopolies under threat of losing some of their monopolistic controls do sometimes have to make changes to their established practices - and I'm not saying that is the case right now - just speculating on what may happen in the future. In theory, Telstra ought to be able to sell any wholesale service at a lower cost than say Optus or AAPT and still make more money than if it sold the same service to its 'retail' operation because it has a vast economy of scale and long written off costs that are not available to those other 'smaller competitors. Of course, it has never done that because it never had to and because it, as a combined entity, liked to take both the wholesale margin and the retail margin on all services by setting the wholesale prices at the Telstra 'retail' buy price PLUS the 'retail' profit margin effectively getting both margins irrespective of whether it sold to a wholesale customer or its retail operation....something only a monopoly can do. But....the current proposed legislation signals a possible end to that situation and you would have to think a sensible attitude for Telstra to now, or at some time in the future, take would be to begin to explore actually developing a true wholesale/retail pricing scenario - at least on a contingency basis.
I would think that's unlikely to happen right now but then I also think that it will happen 'eventually' - because it is an unequivocal result of any sort of 'Telstra separation' and therefore Telstra will need to begin to 'experiment' with various options even if its only on a jic scenario. What that may or may not mean I have no idea but I was interested earlier in the year to see the first semi-serious attempt by TW to attempt to meet the IP pricing we were considering at that time - of course they didn't come close enough for serious consideration and prices have continued to drop since we made that decision - but it was the first time in almost fifteen years of buying IP that I have ever seen such a serious attempt at meeting the general market price for a main stream 'product'. As they now own their own cable their price should have been much lower than a wholesaled SX price at that time (March 2009) but true to their track record they never can seem to believe that an identical service sold through them isn't worthy of a significant price premium. However - as the "S" word becomes closer to reality maybe that will change?
Time always only moves on and even monopolies have to eventually make changes to their long cherished policies in the face of very real changes in circumstances. One of those changes, and we are talking over the coming decade if at all, is that Telstra Wholesale's largest customers (Optus and AAPT and possibly iPrimus) will reduce their spending with TW if any part of the 'NBN2' is actually completed and that companies like TPG and iinet will continue to move services away from TW and onto either their own networks or on to the mobile networks of Optus and, perhaps, Vodafone. Doubtless UEcomm, Pipe, Nextgen and whoever is contracted to build out the 'NBN2' will continue to take away TW's back haul business (and also Telstra Retail's back haul business) and what remains of TW's and TR's IP business may well melt away like snow in the summer if SX continues to protect its own IP business with more price reductions over the course of 2010.
There is absolutely no reason why TW couldn't sell small companies like Exetel IP, HSPA, ADSL2 and Fibre services at the same or lower prices than the providers we currently use and make more profit than our current providers do......if they wanted to. They never have wanted to for all the reasons that are available to monopolies. Perhaps that will change over the coming years? I can see a lot of advantages for all sorts of people (including Telstra) if Telstra actually decided to run a true wholesale business at true wholesale profits - either in its current form or as a 'separated' entity....but then I'm biased.