Archive for June, 2001

RESIDENTIAL IT MARKET 20002001

Friday, June 1st, 2001

1.1 HOUSEHOLD USE OF IT – YEAR 2000

The regular ABS survey of household use of IT found that more than half of all Australian households (53% or 3.7 million households) had a home computer and more than one third (33% or 2.4 million households) had home Internet access by the end of 2000.

This compares to 1998 data when 45%, and in 1999 when 48%, of Australian households had access to a home computer, while in 1998, 16% and in 1999, 23% had home Internet access. The increase in the number of households with home Internet access (793,000 households) was much higher than the increase in the number of households with home computers (439,000 households) during 2000.

An estimated 6.4 million adults (47% of Australia’s adult population) accessed the Internet in 2000. This compares with 5.5 million adults (41%) who accessed the Internet in 1999.

Almost 6% of Australian adults (802,000) used the Internet to purchase or order goods or services for their own private use during the 12 months to August 2000. This is a rise from the 5% of adults (650,000) who did likewise during the 12 months to August 1999.

There was a steady growth in some of the more popular household technologies between 1998 and 2000. The proportion of households with dedicated games machines rose from 23% in 1998 to 33% in 2000; access to pay TV rose from 11% in 1998 to 17% in 2000; while the proportion of households with an answering machine rose from 35% in 1998 to 43% in 2000. There was little increase however, in the proportion of households with a fax machine, rising from 17% in 1998 to only 19% in 2000.

Table 9 – Household technologies and number of households – 1998; 2000

Year Total HHs Games machine Pay TV DVD* Answering machine Fax

1998 6,832,000 23% 11% n.a. 35% 17%

2000 7,080,000 33% 17% 6% 43% 19%

* Excludes DVD drives in computers

(Source: ABS)

1.2 MAY 2000

Key indicators from the May 2000 Household Use of Information Technology survey, released by the ABS included:

· Over half (54%) of all Australian households (3.8 million households) had a home computer in May 2000, an increase of 18% over the May 1999 estimate of 3.2 million households.

· In the 12 months to May 2000, an estimated 6.4 million adults (46% of Australia’s adult population) accessed the Internet compared to 5.5 million adults in the 12 months to May 1999.

· 6% of Australian adults (802,000) used the Internet to purchase or order goods or services for their own private use in the 12 months to May 2000. This is an increase of 23% over the 650,000 adults who did likewise in the corresponding period to May 1999.

· Books/magazines, computer software and music were the three most common (36%, 18% and 18% respectively) types of goods or services purchased or ordered for private use in the 12 months to May 2000.

· In the three months to May 2000, 8% of adults used the Internet to access government services, 8% of adults used the Internet to pay bills or transfer funds, 51% used the telephone to pay bills or transfer funds, 67% used EFTPOS and 74% used an ATM.

Over the 12 months to June 1999, Australian households spent an average of $284 on information technology goods and services. Households in the Northern Territory and Australian Capital Territory spent considerably more than the States, with an average spent of $542 and $502 respectively. For the States, the average amounts spent were: Victoria $325; Western Australia $272; South Australia $266; Queensland $264; New South Wales $259; Tasmania $244.

Table 10 – Household expenditure on IT goods and services, Australia – 1998-1999(a)

Average weekly household expenditure $

Home computer equipment (including pre-packaged computer software) 3.98

TV games and computer software 1.08

Blank computer media 0.11

Online charges (Internet) 0.28

Household expenditure on information technology goods and services 5.45

Total household expenditure on recreation 88.81

(a) Table includes selected categories from ‘Recreation’ and total ‘Recreation’

(Source: ABS May 2000)

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CANWEST SAYS NO – JUNE 2001

Friday, June 1st, 2001

CanWest has turned down TVNZ’s offer to broadcast TV3 and TV4 on its free-to-air satellite digital television service scheduled to launch in late 2001.

It cited the high cost to viewers of the proposed TVNZ set-top boxes and worries about the commercial independence of BCL. It is understood CanWest’s analysis of the proposal showed TVNZ’s digital plans to be unworkable. It rejects TVNZ’s claims that the service could have up to 50,000 subscribers by the end of 2002. At best, it believes the TVNZ operation will attract only a few thousand subscribers. Instead, CanWest is considering a deal to offer its channels through TelstraSaturn’s new digital platform, which is also due for launch in the autumn.

For more information see Web report: New Zealand – Broadcasting Market

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C7 SPORTS PAY-TV CHANNEL TALKS (AUSTRALIA) – JUNE 2001

Friday, June 1st, 2001

Surprise, surprise – following Seven’s crusade for competition and national security for Australia, the company started talks with Cable & Wireless Optus Ltd over terms of its unprofitable C7 sports pay-TV channel on the phone company’s cable network

The company is also trying to put the channel on Telstra Corp’s rival cable network, which carries the Foxtel pay-TV channel.

According to the Australian Financial Review there is speculation that Optus wants to end its contract with C7 at the end of the Australian Football League season in October after a rival group, including News Corp’s News Ltd, Publishing & Broadcasting Ltd’s Nine Network and Ten Network Ltd, won the rights to the competition from next season

The C7 channels are currently broadcast by Optus and Austar United Communications Ltd.

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KEY B2C MARKET TRAVEL – JUNE 2001

Friday, June 1st, 2001

Top Web-based travel companies presently own 30 cents of each dollar that American consumers spend online, estimates the PhoCus Wright Web travel consultancy. Travelocity and Expedia, online travel companies, have started to make a profit.

Online operations help keep inventory and shipping costs down, avoiding overheads. Top online travel sites offer easy navigation and price searching, plus offers of travel credit points and special deals.

The two companies, Travelocity and Expedia have both experienced increased business from online advertising – an uncommon occurrence for dotcoms. More and more consumers are using the Web to find cheaper travel products and services, and this market would even benefit more from tougher economic pressures.

There is some dissatisfaction that the new Orbitz travel exchange could hurt the competition, but it is believed that the current travel leaders, even with increased rivalry, could boost their profits 5 to 10 times over the next five years. It is predicted that in 2001, online travel bookings will experience a 59% increase over last year, and reach revenues of US$23 billion.

Travelocity is forecast to have profits of US$23.4 million and Expedia US$11.3 million by 2002.

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PCCW RUNNING OUT OF OPTIONS – JUNE 2001

Friday, June 1st, 2001

An interesting thought occurred to me when I was reviewing the disaster stories that are coming out of Hong Kong.

The foundation upon which PCCW was originally built, the NOW Internet service, has completely collapsed and, after the university degree con, Richard Li’s credibility is receiving a severe battering. As we predicted some time ago, the Hong Kong Telecom business, which was acquired by PCCW, hasn’t delivered anything like the revenue growth (and subsequent profits) that were promised by Richard Li.

It is quite possible that the future of PCCW and/or Richard Li are under threat. How long will the rich father be willing to support his son? How long will Telstra want to be involved in this disaster and continue to be damaged by association? How long are financial institutions going to support PCCW?

With the share price dropping daily Telstra must be tempted to take over parts, or even all, of PCCW. Within the Reach company most senior positions have been filled by Telstra managers – a fair indication of who is in charge. The alternative would be to eventually exit the whole deal, since it is obvious that, as we predicted when the deal was conceived, the partnership is a total mismatch.

By mid-2001, it was well and truly accepted that there was very little left of the original PCCW company. It is back to good old Hong Kong Telecom, which accounts for 97% of PCCW’s revenues! Unfortunately this small but profitable telco, operating in a declining domestic market, has been sucked dry in its efforts to service the $5 billion debt of PCCW. This is further proof that Telstra has bought itself a big lemon. If it had made the deal based on the Hong Kong Telecom business alone it could have saved several billions of dollars.

But you can’t wind back the clock and Telstra will have to make the best of the situation. One thing is certain – the Telstra business culture is much closer to the one at Hong Kong Telecom than it is to that of PCCW. So, while it has wasted a large sum of money, it will at least be able to get the Reach company off the ground – this is the only part of the deal that we have ever seen as being advantageous to Telstra.

Having said this, competition in this market is deadly. During 2000 prices dropped by 80% in some areas! Furthermore, the Telstra/HKT network is one of the smallest and one of oldest (based on SONET/SDH) of the eight or so carriers competing in this market. Not the best position from which to compete.

Since the collapse of the original PCCW concept, the Internet company basically doesn’t exist anymore. The mobile business remains a big question mark, as it would require a lot of money to get it off the ground and the margins in this business have dropped considerably over the last year.

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