Archive for July, 2004

Pacific Wireless Australia

Saturday, July 31st, 2004

Pacific Wireless Australia

Pacific Wireless Australia (PWA) has been operating a wireless data network in the Melbourne metropolitan and surrounding areas since June 1999. The existing network is a Point-to-Point and Point-to-Multipoint IP based delivery system that services a number of business, educational and government customers.

Enterasys are the current equipment vendors to PWA and Enterasys started in 2001 to release its third-generation Point to Multi-point technology.

The unlicensed spectrum and the new technologies will enable PWA to build-out and expand on its current network to more rapidly deploy a carrier grade wireless IP network, across the metropolitan and regional centres of the Eastern states of Australia. This network will provide ‘last mile’ broadband access that is in many areas, unavailable from the large cable based Telco’s as well as offering ‘price competitive’ alternatives to the wire-line services of existing Telco’s networks where other technology based infrastructures do exist.

The core service provided by Pacific Wireless is a Broadband telecommunications link for business users. This can be as small as 256Kb/s in capacity, or as large as 54Mb/s (54,000Kb/s) or greater. The sales and marketing strategy for Pacific Wireless has been ‘reactionary’ rather than proactive, and the Company has used resellers to offer the PWA service to ISPs and other high data usage customers. This approach has been taken out of necessity rather than by preference due to the limited resources available within the Company, but despite this position, PWA has been successful in winning multiple broadband wireless contracts, and has established itself successfully in a marketplace dominated by major Telecommunications Carriers and well-funded emerging Broadband Service Providers.

PWA is in the process to obtain new funds and plans to use the combined investments to conduct a network expansion, firstly in Melbourne, and then into other capital cities on the east coast of Australia.

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Orantel update

Saturday, July 31st, 2004

Global financial house Deutsche Bank is one of the main backers of a telco project in central western NSW, known as Orantel, based around the regional centres of Orange and Bathurst. Orantel’s chairman, Mr Charlie Zoi, is a former senior executive at Telstra. The service has also received financial support from the Bathurst and Orange city councils. The $30-40 million Competitive Local Exchange Carrier project was expected to be up and running by the end of 2001 but was still being evaluated in 2002.

Orange is also the scene of a new interactive television rial. See: Australia – Digital TV – Interactive TV Overview and Analysis

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DAMA-net from World IT

Saturday, July 31st, 2004

Our understanding is that the company is no longer active in Australia.

In August 2000, Telstra’s VSAT business based on DAMA-Net was sold to World IT.

During the 1990s, Telstra developed a VSAT system to provide rural Australia with sophisticated telephone services. The Demand Assigned Multiple Access (DAMA) system handles voice; fax and data traffic with quality equal to or better than typical terrestrial systems. It gives users the advanced features of the latest city-based telephone services including:

• call diversion;

• call waiting;

• facsimile;

• capacity to connect to the Internet through dial-up sessions.

The dial-up sessions for facsimile and Internet access can be conducted at 14.4Kb/s with development to 28.8Kb/s already programmed. Extension to include Integrated Services Digital Network (ISDN) is also possible.

The PanAmSat-2 satellite footprint used by Telstra covers all of Australia and New Zealand. Customers connect to the new system using 1.2-2.4 metre dish antennas, depending on location. Providing rural users with services like call waiting and call diversion will be a new capability for satellite technology.

Telstra’s rural satellite service is based on Scientific-Atlanta’s Skylinx Digital Telecommunications Network system. It can supply this level of quality and service cost-effectively because it uses Demand Assigned Multiple Access (DAMA) technology. Traditional satellite and land-based systems give each user a permanently assigned connection. DAMA allows ‘bandwidth on demand’. When the user picks up the phone, the system sets aside the capacity needed for the call.

Exhibit 2 – The DAMA system

Scientific-Atlanta’s Skylinx is an example of VSAT technology. A DAMA VSAT network uses a pool of channels that are made available to any station in the network. Upon demand, a pair of available channels is assigned and the call is established. When the call is completed, the channels are returned to the pool for another assignment.

Since Skylinx networks use satellite channels on an as-needed basis, instead of having them permanently assigned, there are no dedicated station-to-station links. This capability lowers the number of channels needed to service the entire network. A Skylinx network avoids having to ‘double-hop’ through a satellite, reduces space segment costs, and improves signal quality. The reduction in satellite bandwidth, which can be as much as eighty percent, coupled with lower equipment requirements, adds up to dramatically lower operating costs.

Because the amount and type of telecommunications traffic varies from site to site, even within the same network, a variety of terminals are needed to support individual site needs. Smaller or larger capacity antennas can be mixed in the same VSAT network so that each site uses the most economical and efficient terminal, enabling the network equipment to match the site’s current requirements while leaving options open for future expansion of capabilities.

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Customer Focus

Saturday, July 31st, 2004

The battle for the consumer

While the nextgen developments have commenced in the enterprise arena, the battle for the consumer is still largely being waged within the old structures. The buzzword here is still bundling.

While there is nothing intrinsically wrong with that model, it has its limitations and it won’t help the telcos in their eventual transition to nextgen.

Consumers have learned the tricks of the trade during a decade of price competition. Voice call prices have come down by 25% to 80% and, without any other obvious consumer advantage, the industry has conditioned the consumer to make decisions based solely on price, fixed or mobile.

The consumers have become experts here. They know when the free time starts and finishes; who is on which network and when is the cheapest time to call them; how to switch carriers (overwrite) in order to make those cheap calls to country xyz, etc.

So customers who are interested in bundling deals quickly figure out where they will save money without interfering with their usage pattern and then they sign up, getting an extra 10% discount and leaving the carrier with a lower margin. Very rarely do large number of customers move across as a result of bundling. The net return for telcos must be minimal and the limitations of bundling are becoming clearer every day – as a general rule, bundling takes place at the bottom 40% end of the residential market.

Customers will jump to parallel networks as soon as they perceive them to be offering value, and, in contrast with the bundling issue, this is not based on price alone. Value plays a key role and, as we have already said, it is difficult for the carriers to deal with this issue.

See also: Global – Industry – Strategies – Trust (Post Sept 11)

New business models

This brings me to what is probably the most important issue – changing business models. One-to-one marketing is the key to success with most future large-scale developments like the ones listed above. A large proportion of the costs of the various technologies (mobile, broadband, Internet, etc) will be paid for by organisations that wish to establish one-to-one contact with their customers. In exchange for a certain amount of private data, these organisations will pay for part, or all, of the customer’s access costs. This model is not all that different from how people pay for other media services such as magazines, newspapers, TV programs, etc). Customer service and branding will become crucial factors in this model of operation, since customers will only be prepared to supply personal data if they consider the company to be ethically sound and trustworthy. And so, to be able to participate in this new e-economy, companies will have to lift their game as soon as possible.

Once these models have been developed a clearer business picture will emerge for the operators of the networks. But customer relation management systems will remain the fundamental ingredient for success. Very few companies have developed sufficiently sophisticated systems – ones that not only record their customers but, far more importantly, track them, interpret their needs and communicate with them.

These systems will, of necessity, be under the control of the customers (permission-based). Users can indicate when they are ‘in the market’ for certain information which might lead to sales. This will involve a steep learning curve and behavioural changes by the service providers, and could mean that the impact of these developments will not be widespread for some time – possibly not until the second half of this decade. Some early success, however, can be achieved in business market and high-end niche consumer markets.

See: Australia – Business Market – Customer Relation Management and Permission Based Models

Customers love the telco industry

Once the aforementioned structural changes are in place, it will be the user who will be in the driver’s seat. Already more products and services are being produced than we can consume – there is an oversupply in virtually every market. Customers will be at a premium. This is one of the reasons for our prediction that the permission-based marketing model will become a dominant element in the telco industry. The good thing here is that, unlike some other industries, the telco industry is hot (or cool).

Exhibit 3 – Customers love the telco industry

• They are making more calls

• They are spending more money on PCs, Internet and mobile

• Seasoned users want high-speed always on Internet

• Businesses want e-services

• Residential killer ap: e-entertainment (2003+)

• Business killer ap: B2B: Underutilised in Australia!

(Source Paul Budde Communication)

However, as already mentioned, the problem is that at this stage the industry is not properly aligned to opportunities. And in the immediate future, we see the users continuing to lead the industry in instigating change. The first signs of this people power can already be observed:

• UK businesses have complained to the EC in Brussels to speed up national competition in the UK, since BT is unable to deliver the broadband services that UK businesses need to compete in Europe (see above). There has been a Parliamentary enquiry into this also the regulator has stepped in to address this situation (for more details, see United Kingdom – Voice, Data and Internet Services).

• The Dutch Parliament has expressed its concern regarding the capability of KPN to deliver the level infrastructure needed by a modern society.

• People in rural Australia, as well as those in cities such as Melbourne and Sydney, are frustrated that telcos are not providing the broadband networks they need and so have decided to bypass the slow-moving telcos (see Business and Residential Markets).

• Both in Canada and the US the broadband industry has been put on notice that if a more open industry is not forthcoming the Regulators will begin to open up their networks.

This is a beginning, but businesses and residential users need to become far more vocal in their demands for world-class telco service. The incumbent telco industry needs to be prevented from delaying the introduction of the new order; the way should be opened up for others who will offer a better customer service and who will use the e-economy to bypass the telcos, publishers, banks and other members of the establishment who have a vested interest in maintaining the status quo.

Exhibit 4 – Customer demand

• Customers want specialisation (no room for generalists)

• Customers want commodity prices for commodity products

• Consumers will pay premium prices for premium services

• Produces should be bundled according to customer requirements, not as stipulated by the telcos

• Desperate need for broadband access

• Start with always-on Internet (currently a premium service worth $50 pm)

• Content will follow automatically follow once infrastructure is in place

(Source Paul Budde Communication)

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ISRAEL’S TELECOM MARKET TO CONSOLIDATE (MAYBE) – MARCH 2004

Wednesday, July 28th, 2004

The structure of competition in Israel’s telecom market is potentially at the point of great change. However a cynic might comment that it usually is in that state but rarely does it actually happen. The most recent major event is an agreement by mobile operator Partner to buy a controlling stake in cable TV operator Matav-Cable Systems Media Ltd. Israel’s three cable TV companies have formed a consortium, Hot Telecom, for the purpose of operating as a fixed-line telecoms competitor to Bezeq. Hot Telecom was granted a full fixed-line telecoms licence in November 2003.

Thus the market could be on the point of consolidation into two major operators providing services across the board. Partner/Hot Telecom could develop into a rival for incumbent Bezeq (which itself is in the process of buying out the 50% share of mobile operator Pelephone that it does not already own). This would leave the third major mobile operator, Cellcom, somewhat out on a limb, although Cellcom is competing aggressively with Bezeq in data services to the business market.

The ‘fly in the ointment’ is the fact that the Partner deal is dependent on a proposed merger of the cable companies actually going through, something the three companies have been attempting for a couple of years now, without success.

If the process takes as long as other long-pending major events in the industry – which include the privatisation of some or all of the state-owned majority share in Bezeq and the appointment of an independent industry regulator – it could be a long wait.

Meanwhile the market seems to have developed quite happily anyway, producing mobile and broadband Internet penetration rates which are amongst the highest in the world.

See also:
Israel – Key Statistics, Telecommunications Market Overview, Data Communications and Internet;
Israel – Mobile Communications and Broadcasting.

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