John Linton
We are still no closer to finding sensible ways to generate more wireless business that we have achieved to date - our recent changes of a few weeks ago have increased daily orders by around one third which was a start but only that. I would like to see the new ABS figures before making any 'irrevocable' decisions but that may be becoming an excuse not to do anything.My major concern is not the one trotted out about "never be enough spectrum" to actually provide a widespread fast and meaningful service - it's the exact opposite - that we won't be able to generate enough wireless business to get the sort of prices we need to be able to offer a meaningful wireless service. I have been around long enough to have been an early user of an Optus mobile telephone in the early 1990s and I understand that developing a 'use anywhere at the highest quality' roll out is only a matter of time with some issues along the way so the ability of the service is of no concern to us strategically and the newcomers will eventually shut up about their personal issues - it won't lessen anyone's personal problems it just isn't indicative of what is happening and will happen.
The latest move by both Verizon and ATT in the USA more clearly indicates the current and coming issue - increasing the number of wireless subscribers more rapidly:
http://online.wsj.com/article/SB10001424052748703657604575004670249993004.html?mod=WSJ_Tech_LEFTTopNews
From my experience in the communications industry you don't cut your prices by 30% because you are meeting your targets and when you are in a market with one other main competitor you don't cut your prices by 30% without the full expectation that your competitor will do the same/very similar. You also don't cut your prices by 30% without expecting to be able to deliver the additional services such a move will generate nor do you expect to lose money by reducing your established revenue stream from that type of customer you already have. So why would two major companies make such a move?
I can only think of two reasons, perhaps more accurately, two inter-related reasons. To actually provide the services you think will generate the required volume to be able to sell at those prices you need to grow the volume - almost certainly the reason. Alternatively you think your progress in reaching the volume you need to make it possible to sell at the volume you need is being impeded by the prices you are currently charging. So it's an interesting insight that the two largest mobile telephony/data providers in the USA believe that unlimited voice calling and unlimited data usage plans are profitable at $US70.00 (less than $A80.00) while Australian carriers, at this exact current time, think so differently. No point in trotting out any nonsense about market size/population density etc. Why? Because prior to a few months ago the Australian mobile carriers voice plans were almost indistinguishable to those of Verizon and AT&T in the USA. The data plans were certainly different but, based on voice charges, that was/is just 'early adopter price gouging' on an 'immature' network.
Now, I obviously don't know what percentage of their user bases buy those companies high end/unlimited plans - perhaps its only a very small number. Therefore this could be just a brave move to stimulate interest in the other offerings below $US70.00 a month. However what is being said is that there is now a 'ceiling' on the price of mobile usage and its 30% below what it was yesterday (you can't include more than "unlimited" in a service price). Therefore all other plan prices will move downwards - at least you would think so. What percentage of Australian mobile users would take up an $A80.00 unlimited call/data usage plan? Presumably quite a large number. So it seems to me that the Australian carriers will eventually catch up with the US carriers and offer something similar as their roll outs become closer to 'maturity'........or they become more 'desperate' for market share......it doesn't look like they will go in the other direction any time soon.
It is the clearest indicator yet that mobile data pricing has a long way to fall in Australia and that it is almost certainly going to fall sooner rather than later.....even the recent Telstra pricing is an indication of that. At the moment the mobile carriers retail plans are around an apparent $A10.00 gb (give or take the marketing flim flam) whereas the US pricing is at less than half that (I'm assuming that unlimited results in a reality of around $A5.00 per gb in actual usage over the whole plan user base).
I think that's good news, possibly really good news, for Australian users but I don't think it helps Exetel at all. I can only take perverse comfort in thinking that its much worse for a number of other companies.