John Linton
.........and the raging fire behind you is almost within touching distance..........if you are a wire line based communications infrastructure owner in Australia
We made some progress yesterday in getting some of the basic 'understandings' on how the FY2011 plan would be based and the rough time frames for making the various 'adjustments' to the way we define the sources of the revenue streams from the different services. There is a very long way to go and only 6 weeks to compete this work which is taking, and will take, far more time and effort than in any previous years - at least that I can remember. The additional work is mainly caused by the changing nature of the ADSL marketplaces and trying to work out how to adapt to those changes. But the changing nature of the ADSL situations is by no means the only issue that needs to be considered for a company of Exetel's size.
There is no, well none that I can see, doubt that Rudd will 'turn on' the Tasmanian Phase 1 part of the 'NBN2' network come July 1st 2010 - if he doesn't then the current Labor government will almost certainly see itself become that rarity in Australian politics - a one term government - and that means some resolution of the current 'negotiations' with Telstra will have to happen well before the next Federal election. Early indications are that fibre, even at Telstra's pricing will find a market in any area that it is offered. If Telstra decides it will 'go its own way' then it has the ability to offer fibre to well over a million residences in Sydney and Melbourne and could, for a relatively low investment (well within its financial means) expand that fibre offering to double or treble that number of 'big city' users.
I constantly comment that wireless broadband continues to become faster and with more download capability at lower costs per gb and the ABS reports seem to show that wireless broadband will overtake ADSL in terms of number of users before the end of 2011. The combination of new fibre offerings in an increasing number of areas, the inexorable growth in wireless replacement of ADSL and an already saturated ADSL marketplace is the sort of "triple whammy" beloved of editorial speak. There is NO doubt (irrespective of what uninformed people try to say) that ADSL is already 'yesterday's technology' and the challenges that the three current developing situations poses to ADSL service providers is growing each passing week.
So, as I see it, the providers are already offering, what for all but a minute percentage of users, is more speed and downloads than they actually need, can use or even want to use for something like $A50.00 per month. Where next? For the first time in any market that I am even vaguely aware of Australian ADSL providers have reached a stage where they have nowhere to go. Few, if any, current customers can use the amount of data they are being offered for $A50.00 per month. Yet the churn rate of users between providers is increasing and the total number of Australian ADSL users probably continues to decline. What is your next move?
It's certainly true that all but a minute number of residential users of ADSL services have more speed/more downloads/acceptable price than they have ever had in the past or will ever need for years to come and they are now enjoying a service that entirely meets their needs at prices that are as good as anything that has ever been seen in this country for ANY product or service. If there was no competition then both buyer and seller would be perfectly happy. But that isn't the case. Too many providers have given their shareholders an expectation of continual growth and, as far as can be seen from the public record, have given the investor community future forecasts based on continued growth. But where is that growth going to come from?
Only one place - growth can only come from their competitors and that means more 'marketing dollars' and lower prices to 'lure' customers from one provider to another - not a pretty prospect for companies that have also set expectations on profits. That may, just, be possible except for the continued growth of wireless broadband and imminent availability of fibre services will continue to shrink the size of the total market available to ADSL providers. This in turn means that the only way to meet some of the ADSL providers 'growth' forecasts (which incidentally drive the internal costings on which current pricing is based) is for there to be less 'competitors' - it has never been any different in commerce.
So, at least for us, we need to find a way of increasing our wireless broadband and fibre broadband customers as there appears to be no sensible basis for assuming we can find a way of increasing our ADSL market share.
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