BuddeBlog

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Paul Budde Communication Pty Ltd

PO Box 2643

Bucketty NSW 2250, Australia

Web site: http://www.budde.com.au

Tel 02 4998 8144, Fax 02 4998 8247

Tel Int. 61 2 4998 8144, Fax Int. 61 2 4998 8247

E-mail: paul@budde.com.au

Until the 1960s and 1970s companies were seen as part of our communities. There were very strong links between companies, their directors, their employees and the community at large, including social organisations, sporting clubs, local events, etc.

This environment has greatly changed over the 1980s and 1990s. Globalisation has meant that companies were no longer operating within local or even national communities – events thousands of kilometres away had a direct effect on local companies. The result of this has been that the social aspects of companies were eroded under the pressure of profits, productivity, shareholders’ value, etc.

Eventually the ties that bound the companies and society together – albeit in a paternalistic way – were weakened. Massive lay-offs destroyed employee loyalty and a very cynical relationship was established between companies and their employees. This culminated in the 1980s, when it looked like the only thing that was important was money.

A surprisingly large number of traditional telecommunications companies around the globe are still stuck in these greedy 1980s. However a new order is emerging, bringing with it new ways of looking at doing business. While it is understandable that old structures will have to be replaced with new ones in this rapidly changing world, maybe we could still learn something from the managers of the Sixties.

Most companies now do accept that profits and shareholders value cannot be looked at in isolation. Companies will first of all have to look after their customers in order to be able to survive in our very competitive society. Once that is done the ‘financials’ will follow on from there. But they must also realise that the key to a successful customer service is their staff. They are the people that can make or break the company. It is early days yet, but in 5-10 years’ time you will see ‘employee-power’ becoming a critical force in medium-sized and large organisations. Slowly people are recovering from decades of restructuring, retraining, lay-offs, social security hand-outs etc. A very large proportion of our current employees are already more or less self-employed. They operate as contractors, part-timers, consultants – rather than as traditional full-time employees. They understand that they will have to manage and educate themselves in order to improve their situation and they are doing this in droves through special colleges, management courses etc.

With the current developments in IT technology these ‘new employees’ are embracing new PC developments, Internet. e-commerce, high-speed access, etc. They clearly understand that optimum and innovative use of IT improves their work position, their lifestyle and their income.

This group will reach critical mass within the next 5 years and will cause dramatic changes within organisations. There will be a significant shift in power away from current management structures based on rationalism to a far more inclusive management style. The ‘new employees’ will have a significant influence on their company’s future direction and will, through their more independent position, be able to contribute far more on a management level than any other generation of managers and/or employees before them.

This much more mature class of employee will be able to lift the company’s position in the market in a very dramatic way. Companies who are able to embrace this new trend will add an extra competitive edge to their market position. They will be better placed to face the future with a much more educated and motivated workforce of associates rather than employees, in the traditional sense of the word.

And, as companies are beginning to understand that customer service is the key to future success, the new employees are realising that they have to ‘sell’ their knowledge and their skills to their employers (rather than just their ‘bodies’) and that they have to provide value-add to the organisation in order to maintain their work positions within the company.

This will mean a much more customer-friendly attitude than currently exists amongst many indifferent employees.

Equally, companies will have to change their attitude and start looking at their employees as associates who are important elements of the company’s decision-making structure.

Over time future directions will be influenced by how successful companies are in attracting the right type of employees. New products and services will be based on the specific skills and knowledge that these new employees can contribute to the organisation. (Already quality IT staff is very hard to find and internationally the success of call centres will be based on quality of staff, rather than on a cheap workforce.)

In an environment where companies and their employees are becoming equals we will also see a change in the social structure of organisations. While it will always be necessary for companies to make a return on their investments, elements other than mere profit will become important as well. Already we see that people are making quality choices. No longer is money the key driver in employees’ decisions regarding their jobs. Lifestyle is becoming a far more important factor, and a range of issues are taken into consideration, including travel time, teleworking, work-sharing arrangements, living environment, etc. Work is there to improve or maximise the lifestyle — not simply to make a lot of money.

Similarly companies will have to revise their attitudes. They will be judged on how they contribute to the entire community’s lifestyle. Companies’ social, environmental and community contributions will be taken into account, not just the number of jobs they create. Quality rather than quantity will be the key. This will mean that, from a social aspect, we will have come the full circle. However, in this new order the company is an equal partner, not the paternalistic, often exploitative, dictator of the old days.

On this note I would very much like to thank you for your ongoing business.

It has been another great year for us. We consistently receive excellent feedback from you and this enables us to constantly fine-tune our services and to introduce new services that enable us to anticipate your needs.. We see you as partners in our business and in order to be able to provide a maximum service to you, we do need your comments, ideas and suggestions — we thrive on them!

From all of us here at Paul Budde Communication I would like to wish you, your colleagues and your loved ones a very peaceful Christmas, a relaxing holiday break and lots of success and good fortune in the year leading up to the next millennium.

Merry Christmas

Paul Budde

There are several initiatives for broadband services such as cable modems, high-speed Internet and cable telephony.

Telstra and Optus are currently leading the developments with trials and offerings combining voice, data and video services. Others, such as Austar and OzEmail, are also contenders in this market.

Penetration in 1999 is still very low, with fewer than 100,000 customers connected to broadband services – mainly cable telephony subscribers from Optus. US-based Strategis Group predicts that this figure will grow to 600,000 subscribers by 2003. Sixty per cent of these would use cable modem services and the rest DSL and ISDN services.

Business use will be the major driver of broadband services (over 90% of all revenues). Currently they spend $5 billion on data services. A large part of this will migrate to broadband; currently annual growth in this market is between 15%-20%.

ACA

Just days before the end of 1998 the first two voluntary codes were registered with the ACA:

· Call Charging and Billing Accuracy Industry Code

· End-to-End Network Performance Industry Code

Furthermore, an issues paper was released on whether the ACA should require carriers to provide pre-selection for fixed-to-mobile services. Technical matters, as well as costs and benefits issues, were canvassed. As we have indicated before, we see this as a very important issue, as the current regime is costing Australian consumers some $1 billion. In December 1998 the ACA indicated that it would end Telstra’s lucrative monopoly in this market.

Another pre-selection issue was addressed in a discussion paper on multi-basket pre-selection, issued in December 1998. This would allow customers to pre-select a different service provider for different services (mobile, long-distance, international, etc).

ACCC

In December 1998 the ACCC delivered its draft decision which will end Telstra’s monopoly over the local call market. It is the most significant decision since deregulation of the sector. The ACCC’s draft ruling is now open to response from the industry. Assuming declaration goes ahead in February, negotiations between competitors and Telstra on issues such as pricing will take some time. However, if Telstra takes the issue to arbitration, an effective decision on local call competition may not be made until well into the Year 2000.

In January 1999 the ACCC proposed that Telstra’s interconnection charges be slashed by half, rejecting Telstra’s Undertakings. The ACCC estimates that other carriers pay Telstra over $400 million a year in interconnect costs and most of these savings will be passed on to consumers. This could result in reduced prices of national long-distance calls by up to 15%.

The ACCC also singled out the non-price terms and conditions of Telstra’s Undertakings as being unreasonable. These provide Telstra with a significant amount of discretion about how, to whom and when interconnection would be provided to its competitors and this would create considerable uncertainty, plus an advantage for Telstra over its competitors. However we are afraid that Telstra will use all its powers available to considerably delay the introduction of the changes.

The ACCC has also acted on complaints from the industry and is investigating Telstra’s plans to phase out access to its copper wire network for high-speed data services by December 1998. The DSL technology allows service providers to use the POTS to deliver a range of new services. High-bit-rate Digital Subscriber Loop (HDSL) is currently on offer from Global One, Magna Data and One.Tel. By forcing service providers to use Telstra’s alternatives they have to pay higher (non-competitive) charges. Prices would go up from around $3,500 to $28,800 per annum. In October Telstra agreed to keep the service in place until the ACCC has finalised its inquiry into access to Telstra’s local loop network.

Department of Communication

The review on price-caps that started in mid-1998 was directed at putting a regime in place which will run until 1/1/2001, with a further review planned for 2000. The proposal was to include additional caps as from 1999. As the review was not completed in time it was decided that the existing price-caps would be extended till July 1999.

Extensive Regulatory information is available on our Web site (www.budde.com.au)

After a very lacklustre 1998, the market started to pick up again in December of that year, mainly driven by the new pre-paid products.

Until December overall growth for the year was just above 10%. Over a third of all mobile sales for that year took place over the Christmas period, lifting the annual growth to 16% which, while the lowest on record, has to be judged against a very high installed base.

Mobile market growth – 1986-1998

Year Number of subscribers Annual growth

1998 6,000,000 16%

1997 5,200,000 30%

1996 4,000,000 71%

1995 2,350,000 108%

1994 1,125,000 66%

1993 675,000 53%

1992 441,000 52%

1991 291,000 58%

1990 185,000 90%

1989 95,000 200%

1988 32,000 700%

1987 4,000 100%

1986 2,000

(Source: Paul Budde Communication, Wireless Market Australia 1999 – www.budde.com.au)

On the one hand, the slowing down in growth reflects the maturity of this market, but it also has to be judged on the high call charges that apply. In more competitive markets (Europe/USA) we have seen drops of up to 80% over 1998. Within one year most western European markets went from being the most expensive to being the most competitive in the world. At the same time North American users slowly started to profit from cost savings offered by the new digital services (PCS). It is expected that call charges in Australia will drop as well, depending on how effective the new competitors can be.

However, true competition will only arrive when the ACA forces the operators to implement national roaming.

Mobile subscriber snapshot (by carrier) – January 1999

Operator Analogue Digital Total Market share

Telstra 1,100,000 2,200,000 3,300,000 54.6%

Optus 270,000 1,600,000 1,870,000 30.9%

Vodafone n/a 875,000 875,000 14.5%

Total 1,370,000 4,675,000 6,045,000 100.0%

(Source: Paul Budde Communication, Wireless Market Australia 1999 – www.budde.com.au)

Over the year both Telstra and Vodafone saw their market share increase. Optus was unable to keep up and lost market share in the digital mobile market.