BuddeBlog

Over the last few months, it has been my contention that Optus is retreating from the broadband market. I based this view on my observation of Optus’s activities in the market, and the announcements made by them during that time. My conclusions about Optus were:
No further investments in infrastructure;
No iTV roll-out beyond the 3,000 test connections;
After a decade of cable TV, only 65,000 cable modem subscribers;
The refocusing of the company on corporate customers and mobile subscribers.

I invited Optus to discuss this with me and a discussion subsequently took place with the company’s residential broadband leaders.

What I learned from this discussion was that Optus was not retreating from the residential broadband. My new understanding is that it has changed its direction. Instead of building out its own infrastructure they intend to pursue residential broadband opportunities based, of course, on their own HFC network and on developments of the (Telstra) wholesale market. While this wholesale market is currently unappealing for developing competitive residential services, changes are underway – these include line-sharing and the unbundling of the local loop, both of which are currently under investigation by the regulator.

I argued that this is more an opportunistic than a strategic approach. I consider that this would make Optus little more than a reseller, like the hundreds of others ISPs and service providers in the market. Optus’s counter-argument was that it had a far stronger brand than any of the other service providers and that their brand, linked with the very successful bundling of services, would differentiate them from the rest of the market. Their strategy is built on the brand rather than on the exploitation of the infrastructure. While there is nothing wrong with this –I even agree with it – at the same time it underscores my argument that the infrastructure is a natural monopoly and that there will be no competition at that level.

Optus’s financial recovery further demonstrates that its strategy is paying off and nobody can argue with that. However, in my opinion the scene has dramatically changed. There won’t be any major infrastructure investment from Optus, and this was the underlying promise from the company at their inception, back in the early 1990s – they were to be Telstra’s main infrastructure competitor. The reality of the times has forced them to change this direction, but it does make the company more of a service provider than a telco – albeit the strongest service provider of them all. Yes, profitability will increase but the longer-term larger cash flows are not going to be there. The size of the company will obviously be limited by the new direction it has taken. Financially far more prudent, true, but no real threat to Telstra anymore.

For a while they will still have their own HFC cable TV network, but in the absence of further investments this will become largely obsolete towards the end of this decade. Obviously they will make the most of it and there is still a long way to go before fibre-to-the-home takes over – and then, of course, the company will be a major SP on the fibre network.

My problem is that, given the current financial environment, I can’t argue against this strategy, but, at the same time, we are losing the only serious infrastructure competitor to Telstra. We have all learned from the last five years of deregulation that those who own the network run the game. All the others have to fight over the crumbs (Telstra has 95% of total industry profits). Optus’s choice is to go for the more profitable crumbs and forget about the big league.

See also:
Optus – Company analysis
Optus – The NetworkAustralia – New Telcos – The Market in 2002
Australia – Fifth anniversary of the Telecoms Act (2002)
Australia – Broadband – Developments and Analysis 2002

According to the Siemens International Telecoms Statistics – 2002, the Internet with its bandwidth demanding applications is increasingly pushing broadband access into the mass market. The prevailing access alternatives are DSL and Cable modem. With nearly 7 million broadband connections at the end of 2001 giving a household penetration of around 50%, South Korea is the clear leader worldwide followed by other Asian countries and North America. In most regions it’s expected that the majority of broadband subscribers worldwide will use DSL technology despite strong competition from the cable companies. Besides DSL and cable modem, other access technologies such as Broadband Fixed Wireless, Satellite, Wireless LAN or Powerline will find their niche markets.

See also:
South Korea – Broadband Networks and Services;
Global – Internet – Business Trends and Strategies;
Global – Internet – Statistics Overviews;
Global – Broadband – xDSL – Marketing;
Global – Broadband – Cable Telephony and Cable Modems;
Global – Broadband – Access Technologies;
Global – Industry – Powerline Communication.

Ihug has launched T2V, an e-mail service that enables users to type messages and send them as a voice message via a mobile or fixed-line, phone. There are six voices to choose from including Susan the husky female vixen, Frank the ‘charismatic’ male or a ‘freaky’ voice called the Whisperer.

In a management change, Martin Wylie has been appointed CEO of ihug, replacing founder Nick Wood. He joins the company after two and a half years as CEO of commercial law firm Simpson Grierson. Wood will retain his shareholding and position on the ihug board, and continuing to be involved in a consultative capacity.

See also:
New Zealand – ISP Market – Major Players;
New Zealand – ISP Market – Overview and Trends.

According to the Siemens International Telecoms Statistics – 2002, the overall wireline service revenues development shows a continuous growth over the years. Capital expenditures (CAPEX) of carriers were usually in the range about 20-25% of the service revenues in the past. In 1999 and especially in the hype year 2000, investments exceeded real market demands for network and equipment upgrading. The result: oversized inventories, network bandwidth overcapacity, inefficient utilisation of production capacities, price decline, and collapse of EBIT. In the long term both scenarios show again healthy growth rates at the same level of about 8-10% CAGR. A more optimistic CAPEX scenario would come closer to the normalised scenario until 2007 with therefore higher growth rates than 8% after 2003.

See also:
Global – Overview – Revenue Overview, Bench Marking;
Global – Industry – Telecommunications Investments;
Global – Infrastructure – Fixed Networks – International.

Hospitals and clinics in Australia’s remotest areas will benefit from the latest in diagnostic medical imaging based on a $1.2 million virtual private network (VPN) rolled out by Optus and national medical imaging company I-Med.

The VPN connects hospitals and clinics, enabling them to transmit digital 3D radiology images within a secure and managed Internet-based network. A virtual network is more cost effective than a traditional network, as users do not have to pay to own or lease dedicated lines, but can be connected wherever there is an Internet connection.

Radiologists based in major medical centers throughout Australia are able to view digital 3D images from rural hospitals and respond with a diagnosis to medical staff online – a process described as teleradiology.

With 1.5MB per second transmission and data prioritizing capability, massive radiological images can be transmitted quickly over the Optus network without impacting the performance for other users and applications.

CT scans using the latest equipment are complex and can be made up of up to 1400 separate images. These images can then be combined to create digital 3D models, which are rotated or viewed as a “virtual fly through” of body structures and organs for faster and more accurate diagnosis.

Teleradiology over a VPN will have an immediate impact on patient care as digital X-rays and three dimensional CT scans can be transmitted in minutes. For smaller and regional practices that do not have onsite radiologists, this will save precious time, eliminating the need to courier X-ray film or transport patients.

Already 39 clinics are connected to the I-Med VPN with plans to extend to 110 sites throughout Australia. In addition, dial up connections have been provided to 33 locations nationally to service mobile doctors.

Hosted at Optus’ Sydney data center, the VPN is monitored 24 hours a day, ensuring remedial action is taken within five minutes if a fault occurs anywhere in Australia.

See also:
Australia – Tele-conferencing, -working, -medicine
Healthcare, Tele-education
Optus – Company Overview