John Linton At the risk of being really boring I am finishing sharing the thought processes on some of the changes we are making to the ways we are considering addressing the future of providing residential communications services if most of our assumptions concerning the likely political future of Labor's destruction of the current supply of such services survives the next Federal election - a call beyond our ability to evaluate either now or, I expect, before the result of that election is known.
I think that one of the grossest mis-assumptions by the current government, 100% of the media and more than a few of the communications companies that have been quoted on the topic is that "very little will change in terms of services supplied to the end user" and that pretty much the same commercial companies will continue to provide data and voice and entertainment services to the same sorts of numbers of people as they do today.....just the 'NBN2' will redistribute who gets how much of the profits. Perhaps I'm wrong in that belief and most people really do understand that will not be the case and Exetel's assumptions are all wrong.
The first thing that will happen if the 'NBN2' proceeds to delivering the infrastructure to 90% of Australian residences is that Telstra will not play any major part in providing services to those customers. How could it possibly do so? If the stricty limited competition that has existed in the Australian communications market over the past 8 years has shown anything it has shown that a bloated Telstra simply can't compete with even start up companies using its own over priced wholesale services. Sure, over the past 3 years, when Telstra has actually competed on price it has slowed/slightly reversed that situation but ONLY at a loss of $A800 million in FY2011 and ONLY by even more grossly overcharging its remaining wholesale customers to restrict competition against it. If the 'NBN2' continues to provide a much greater coverage then Telstra has no base cost advantage over ANY other 'NBN2' wholesaler but it retains its grossly bloated cost structure without being able to force its wholesale customers to pay too much for base services.
The same, to various lesser extents, applies to the next largest few data and telephony providers - in different ways. They each lose any operational advantages they have developed from investing in their own infrastructures and therefore they each lose any infrastructure cost advantage and are left to compete on 'added values' because, if the Labor mantra survives, then every 'NBN2' buyer buys at the same price. This leaves "support" and IP costs as two issues of cost differentiation and 'entertainment' services as content supply differentiators. This is unfortunate for at least some current suppliers of data services as they are, at least currently, locked in to situations where they are paying too much for both IP and for support and have no real 'content' supply ability - FoxTel remains the only game 'in town' and that's locked up by you know who....and, of course, the government funded 'NBN2' will solve FoxTel's wider distribution coverage problems.
To succeed in providing NBNCo services we believe two things will be primary drivers. The first is sensible/low pricing (there are virtually no real differentiators between an NBNCo service provided by any wholesaler) and the second is fast and effective problem resolution (support). What isn't available to anyone is any claim of some sort of superiority of delivery and therefore no ability to ameliorate the bloated costs accumulated by those current suppliers who have been foolish enough to allow that to happen. I could be totally wrong about every thing I have written. However I don't believe that is the case and Exetel will proceed on the bases of what I have shared with you over the past three maunderings. Unlike so many other people - I am not a casual, disinterested observer.
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