John Linton .......Not only did 'something' truncate yesterdays post but 'overnight' it disappeared entirely and, for what it was worth, I had to re-post it this morning. I will attempt to make yesterday's point today which was that.....
...all business plans have a use by date which means that most companies need to constantly look at what there aim of being in business is and whether it's still relevant looking in to the medium term future. I referenced Vodafone that had succeeded brilliantly in growing a second tier and quite small mobile telephone company in to the largest mobile company in the world but that the rationales for doing that had faded over time and the verdict of the stock market was that it was a poor investment without a 'bright' future (irrespective of how it had 'kept all its promises' and was a luminary in its field of operations).
Since the Telecommunications Act of 1991 it has been a 'given' that the basis for existence of 'competitive' communications providers has been that Telstra was 'forced' to offer a wholesale price to 'other' companies and because Telstra was so inefficient ANY company of any size and competence (even start ups like Optus was then) could compete effectively by offering more responsive and better 'service' than Telstra and offer those services at a lower price. The whole concept of that period of government divestment of commercial services (Commonwealth Bank, Qantas, TAA, Satellites, Power stations, major highways, etc) was that privately owned companies could more efficiently provide such services than government owned utilities). And that worked out just fine until......
.....in the communications equation Telstra finally, after 15 years, ran out of the customer inertia that prevented a serious degradation of the various customer bases and realised that with the intervention of the then federal government in saying it would build a competing network the 'erosion' of its remaining customer base would quicken appreciably. So Telstra began to reverse the raison d'etre for the existence of almost all of the currently operating communication companies by selling communication services to end customers at lower costs than they did to wholesale customers. Now this is fair enough in the commercial world and even the ACCC doesn't see anything wrong with it as the intervening 20 years since the act was passed has allowed enough time for several true competitors to emerge (Optus, Vodafone) and several other companies to begin to build infrastructures that could be considered to be true alternatives to Telstra's infrastructure - especially if the last mile dependency on Telstra was removed by a government supplied alternative.
Only one minor problem - Telstra is still, with its depleted customer base, a $25 billion dollar behemoth with enough 'free cash flow' to not only continue to build out its fibre and wireless networks but to easily fund whatever 'marketing' programs it thinks will take away whatever number of customers from its 'competitors' it deems 'necessary'. So, now that the national government of the day has deemed Telstra to be 'just one of many RSPs' the original basis for communications competition in Australia has been swept away. Exetel as a tiny example, was only brought in to being because Telstra offered sufficient differentiation between the prices it sold ADSL services to retail customers and the prices it was prepared to sell wholesale to even a 'start up' that we could enter that market and grow an Australian telecommunications business.
But if Telstra decided that not only was there no wholesale margin but there was a price premium to buy at wholesale from Telstra then it's obvious that there is no longer any reason for companies to exist in the supply of services to the Australian residential markets. That's, pretty much, where things stand today and there's no reason to assume that there will be any change in the directions taken by Telstra in the future. The ACCC has already stated that ADSL2 is not a 'declared' service based on the claims by so many other companies that they have DSLAM networks that more than match the capabilities of Telstra and at a derisory $A1.50 per month to use Telstra's infrastructure to connect customers to their DSLAMs they have a massive price advantage over Telstra (I wonder what they'll do when 'NBN2Co' want to charge them $A30.00 for the same connection?).
So, like Vodafone, (in an incredibly more minute way) the reason for Exetel's existence which was to provide communication services at the equivalent or better level of quality, with better 'support' at a lower price than all other providers to residential customers no longer exists. Telstra, the only source of ADSL1 services and the only source of ADSL2 services outside the major cities now sells directly to our customers via telephone and door knocking at prices much, much lower than they sell the same connections to us via Telstra Wholesale. You don't have to be very bright to understand that you cannot offer a sensibly attractive service under those circumstances (and neither can anyone else for very long) and therefore your basis for being in the residential business has 'disappeared' in a puff of Telstra "welcome home" smoke and a billion dollar 'welcome home' budget.
Exetel, and perhaps some other communication companies will have to change their basis for being in business in the immediate future because the previous basis of providing services to a sizable chunk of the residential market places has 'disappeared'.
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