Archive for December, 2000

THE ABC, A COMMERCIAL INSTITUTION OR A WAY OF LIFE (AUSTRALIA) – DECEMBER 2000

Friday, December 1st, 2000

As a society we have never had it better. Sadly, but inevitably, poverty and unemployment are still with us; however, for the most part, Australians live in comfort and security. And, from this perspective of well-being, people are beginning to look beyond the dollar and to value other, more intangible, experiences.

During my travels over the last year I have become aware of two local communities where a decision has been made to support agricultural projects which could not survive unaided. In these communities – one, a small community outside Portland Oregon, and the other an historic village, Ootmarsum, in the Netherlands – people have voted against development of the local farmland, setting the value of the existing environment above economic progress. These small-scale farms are no longer economically viable, but they are maintained through subsidies from local councils. The pay-off for the citizens is a feeling of involvement and they are willing to pay premium prices for the resulting farm produce.

Another example of community responsibility is the New South Wales Convict Trail Project, of which I am chairman. This project oversees the restoration, maintenance and promotion of the convict-built road between Sydney and Newcastle. The road was built in 1831 but its historical significance had been virtually ignored until the mid-1990s, when the communities of Bucketty and Wollombi took on a caretaker role. Today, close to 1,000 volunteers are involved. The seven local councils concerned, as well as the RTA, NPWS and three Ministers, support the project. And the NPWS have now attached a figure of more than $13 million in tourism and heritage value to a 40Km stretch of that 220Km road.

I have taken a rather circuitous approach to the question of the ABC but, in my view, the Australian Broadcasting Commission is much more than a simple media operation – it is part of the Australian way of life – an icon – and it is something that we can’t afford to lose. In the 18 years that I have lived in this country I have never met an Australian, apart from certain self-interested politicians, who did not consider the ABC to be an intrinsic part of the Australian way of life. Some people prefer the radio; others enjoy the special TV programs; everybody trusts the ABC news. A large proportion of our community regularly watch or listen to the ABC.

So, what is this worth? Isn’t it about time we made the economic rationalists aware of the value of the ABC? We, as a nation, need and can afford the luxury of a well-funded ABC – an ABC that surprises and stimulates us with new programs, that challenges our senses, involves us in controversial issues – an ABC that dares to challenge politicians and the vested interests in our country.

The people in Portland and Ootmarsum had to stand up and be counted to achieve their subsidised farms. The people in Bucketty and Wollombi didn’t get the Convict Trail Project off the ground without a battle. So let us take a stand and fight for the ABC in its traditional form, or, even better, compel the government to inject more money into the ABC. Our country can afford to do this. By all means make sure that the organisation conducts itself efficiently, but leave room for creativity and innovation. We, the people of Australia, apparently value these things much more than our politicians – isn’t it about time we told them how we feel?

Paul Budde

We invite your comments: Comments Off on THE ABC, A COMMERCIAL INSTITUTION OR A WAY OF LIFE (AUSTRALIA) – DECEMBER 2000

CLEAR FOR SALE – DECEMBER 2000

Friday, December 1st, 2000

CLEAR Communications’ management is reportedly drumming up money to buy out British Telecom, which wants to quit businesses outside Europe and Japan.

British Telecom has not indicated what it wants to do with CLEAR, but CLEAR Chief Executive, Peter Kaliaropoulos, has been reported travelling to Hong Kong and Australia to look for financial backing.

A buyout is unlikely to come cheap since British Telecom will want to recoup as much as possible of the US$600 million or more it has invested.

British Telecom is believed to have already rejected a US$600 million offer from Telstra.

(Source: Asia Telecom Daily)

We invite your comments: Comments Off on CLEAR FOR SALE – DECEMBER 2000

IP WORKS – GREAT, BUT WHERE ARE THE BUSINESS BENEFITS – DECEMBER 2000

Friday, December 1st, 2000

Just when you thought it was safe to have another look at IP telephony, the initial reports are not glowing.

True, the technology has come a long way since the mid-1990s and we certainly are starting to see some good carrier-grade services, as well as good equipment.

IP telephony will undoubtedly be remembered as the technology that created tremendous changes in the way we look at communications. It puts an end to the separation between voice, data and video – it is truly a convergence technology. I recently saw a Cisco demonstration seamlessly linking people’s homes and their offices with applications such as security, entertainment and communications, all smoothly interwoven. Just imagine the benefits of this technology for call centres and CRM – not to mention the voice applications that will be able to operate as data communications.

IP telephony does offer great opportunities in a green field operation. This is exactly what the Department of Justice created in New Zealand. This is now one of the largest VoIP systems in the world. The department replaced all of its 164 PABXs with a Cisco based IP network. The system has only been in place for a few months and despite some early user problems, the changeover has been heralded by both the Department and Cisco as a great success.

IP telephony offers great opportunities in a green field operation – but how many green field operations are there? We mortals have to live with the status quo and so IP systems will have to be integrated into existing telecommunications networks – and that is where the problems start.

For example, communications between an IP-based system and a traditional PABX-based system are creating lots of problems.

Call forwarding and call transfer have not yet been sorted out properly and callers arrive at a dead-end. Since there is no background noise (and no option for music on hold at this stage) people often don’t know whether the call is still active or whether it’s lost in the system or disconnected. Many people simply hang up in situations like this. Also call back, boss/secretary, PIN security and access restrictions, as well as some other standard PABX facilities, are not yet supported by IP telephony.

Compatibility with conventional voicemail systems is another problem. Some instructions that are embedded in the software follow key-strokes used in the USA, not in Australia. As the telephone handset is basically a PC in the form of a telephone, but without full PC facilities, many instructions (such as abbreviated dialling) need to be set up via an actual PC.

Feedback from people using IP telephony reveals a high level of frustration amongst users. This has led to several companies revisiting their systems and attempting to bypass the old system altogether. However, this often necessitates a total overhaul of the datacoms network, since the increase in traffic would otherwise result in congestion and computer crashes. On a cost-only basis, such upgrades are often not warranted, particularly given the current decrease in traditional call charges.

While the advantages of the IP technology are now evident, a problem still exists in proving tangible benefits to corporate users. Because something becomes technically possible doesn’t really mean that, from a business point of view, it is, for example, going to save money or time. The real breakthrough in this market is going to happen when the telcos begin to introduce new business models that are no longer based on selling minutes, seconds or access, but whereby IP-based technologies are used to develop new business applications. Customers are going to buy the applications and services rather than the commodity voice or data products that form the basis of these applications.

Suppliers in this market are now well aware of these problems and are therefore addressing this issue, mainly through partnerships and joint ventures between traditional telecommunications suppliers and new data communications companies. For example, NEC has formed a partnership with Cisco and Cable & Wireless Optus.

NEC is the PABX market leader in Australia and therefore has a vested interest in protecting its existing market and, at the same time, in finding a way to participate in the new IP-based market.

Siemens took its first step towards offering an enhanced IP telecommunications platform with the acquisition of US-based IP switching provider, Unisphere Networks, last year – and last month they acquired, also US-based, BroadSoft Inc with the aim of furthering their strategy of offering service providers an integrated end-to-end solution for building packet-based networks for converged voice and data.

A third example is the recent float of the combined Plessey/Commander company. The Commander system that has been implemented by Telstra over the last decade is most probably by far the largest installed key system plant in Australia. They also have clearly indicated that their next step will have to be IP-based.

We invite your comments: Comments Off on IP WORKS – GREAT, BUT WHERE ARE THE BUSINESS BENEFITS – DECEMBER 2000

MORE M-COMMERCE HYPE – DECEMBER 2000

Friday, December 1st, 2000

I recently received yet another glowing report on m-commerce. This time the Boston Consultancy Group (BCG) put their weight behind a study covering the subject.

Following a global survey, that organisation have concluded that people are unhappy with m-commerce; that more than a quarter give it away after trying it a few times; that basically everybody finds it too expensive; that it is hard to use; and so on. Yet the company forecast that in a mere two years, 300 million worldwide will use m-commerce to the tune of US$100 billion (US$50 billion residential and US$50 billion business). The estimate for Australia is a ‘modest’ US$1 billion worth of m-commerce revenue for the business-to-consumer market.

Despite the many problems that the BCG has recognised, they base their optimistic conclusion on the fact that the Internet was not popular either when it was introduced, and they believe that m-commerce will catch on even quicker than Internet.

I am at a loss to understand how a reputable company such as BCG can reach such a conclusion. They report that in Australia the survey was conducted in conjunction with Telstra – a company that, of course, has a vested interest in the success of m-commerce. Similar reports have been presented by other management consultancy groups and we have covered these in our various analyses. But these companies are increasingly forming joint ventures and other associations with the telcos in the areas of e-commerce, ASP, B2B, etc. Surely that must influence their status of independent observers? I think it is most important for companies using consultants to establish what business relationships they have, since those can taint the outcome of their reports and their advice.

We have made similar statements regarding the financial analysts – most of them, also, have a vested interest in talking up share prices and we have all seen what disastrous results that can have.

But, to return to the BCG report, I truly find their conclusions quite extraordinary. Most people are unhappy with WAP. True, there are some diehards and, yes of course, we are all aware of the Japanese iMode phenomenon, but to proceed to the conclusion that m-commerce will be a $100 billion market ?

While there was some initial resistance towards the Internet in the mid-1990s, I have never heard reports of a quarter or so of its users logging off in frustration – on the contrary, growth during the mid-1990s was in the hundreds of percentage points.

There is nothing happening in m-commerce that even remotely resembles the Internet phenomenon. And even taking into account the positive acceptance of the Internet, now, after 5 years, we have just generated something like AU$10 billion in e-commerce. Advertising on the Internet is worth less than AU$1 billion. And the BCG want us to believe that m-commerce will be double the size of e-commerce (which grew over a 5-year period) in only two years’ time.

I stand by my earlier predictions that m-commerce will constitute less than 5% of total mobile revenue by 2005. The killer app on the mobile phone is voice. Voice is a commodity and prices are dropping rapidly (20%-25% pa at current rates). In order to discourage churn (30% plus) the operators will have to throw in free, or very low cost, value-added voice services. This will include on-hold, redirections, directories, voicemail, SMS, etc. Mobile data, as in m-commerce, will remain a very small part of this. In a few areas it will develop PDAs – palm computers etc will be used in the business and professional markets for very specific applications, typically catering for people on the move. This will be an interesting niche market, since people are prepared to pay premium prices for both the hardware and the services. There is no necessity for discounting and if operators offer the right applications churn will be virtually non-existent in this area. We estimate that this market will grow from the current 50,000 to 200,000 users by 2005.

Furthermore, the 5% of mobile users that will utilise the mobile data applications on their mobile phones will do so for transactional services, bookings, banking and other applications based on numbers that are easy to key in. As for the rest, given the appropriate business models, young mobile phone users will adopt WAP and SMS services more easily than other groups and there are certainly applications that can be further developed there. The problem, however, is that, apart from the funkiness of SMS, the other reason these youngsters are using it is to save on expensive calls – SMS traffic is huge in the off-peak periods when it is free or very cheap.

It is easy to dazzle analysts with stats of multi-millions of SMS messages, but are they generating new revenues and how much and at what cost? Despite its success, iMode has only slightly increased profit margins for the Japanese operators. The ARPU might increase by 15%-20% but the costs of marketing and network upgrades is equal to, or higher than, the revenue gains. Also, at the same time competition is driving prices down in the savage youth market that doesn’t concern itself with loyalty.

By the end of this decade we still believe that m-commerce will be less than 20% of all e-commerce activities. We base this on the premise that people will not suddenly completely change their behaviour. They will always prefer to use most of the e-services from their homes and offices. E-entertainment will be by far the largest residential e-commerce application by 2010 and this will mainly evolve around the TV set, PC or whatever other home device is on the market at that time. And it is highly unlikely that this will involve the mobile phone.

As an alternative to fixed wire, fixed wireless technologies will, of course, make an impact in regional centres and other niche markets, but in these situations the TV and PC will be linked to the networks and again it will not be a mobile phone device that will be used for the majority of our e-services.

On a more positive note, changing business models will see permission-based marketing activities also entering the mobile market. In order to establish a one-to-one communication relationship, certain companies will be prepared to pay for part of the costs of communications services such as calls, mobile, Internet, broadband, pay TV etc, in exchange for access to certain personal details that make it possible for the companies to create this one-to-one model. However, to do this the total structure of the telco market will have to be transformed. These permission-based marketers need open networks; they want to establish their own virtual network operations. Furthermore, very sophisticated customer relation management systems (CRMs) will have to be developed, connected to gigantic data centres which track customers.

At the same time companies will have to establish a relationship of trust with their customers, so that they feel comfortable disclosing their personal details. This has more to do with human behaviour than with technology. Both the companies involved and their customers will have to go through a steep learning curve and we all know from past experience that this takes time – certainly more than two years.

Paul Budde

We invite your comments: Comments Off on MORE M-COMMERCE HYPE – DECEMBER 2000

THE ‘TERABIT CHALLENGE’ – DECEMBER 2000

Friday, December 1st, 2000

WorldCom is testing a massive bandwidth transmission system from Fujitsu Network Communications Inc, moving vast amounts of bandwidth in a real-world fibre environment. WorldCom has named this testing the ‘Terabit Challenge’.

Fujitsu is supplying its FLASHWAVE OADX a next generation DWDM transmission and optical add/drop platform that provides up to 176 channels, each capable of carrying 10 gigabits (billion bits) per second of traffic. The system uses 88 channels in each of two bands of the transmission spectrum, the C and L bands, using 50GHz spacing between each channel.

The Terabit Challenge began in October and is scheduled for completion at the end of the year. Network deployments are targeted to commence in 2001.

The Terabit Challenge network environment reflects the real world that carriers face as they attempt to deploy ever-higher bandwidth to fill the needs of their business and residential customers. Product implementation is expected to begin once successful testing has been completed.

We invite your comments: Comments Off on THE ‘TERABIT CHALLENGE’ – DECEMBER 2000