Archive for August, 2004

IP CENTREX OR VOIP OUTSOURCING

Tuesday, August 31st, 2004

It will be the SME market, not the corporate, that will drive new growth in the VoIP market. Corporate and government organisations have been using ICT for many decades already. However, until very recently automation for most SMEs had not gone much further than owning a few PCs.

SMEs don’t have the skills nor the inclination to take all these new task onboard within their own organisations and are looking for companies that can assist them in developing a range of new IT based facilities, they would like to see them developing back- and front-end offices that can be virtually integrated within their own operations. Tasksourcing rather than outsourcing ids what they are after.

A second avenue into the SME market is via the telephone market – PABXs and Key Systems.

Several years ago Telstra sold the business they owned to what is now Damovo and Commander, but it is at present desperately trying to retrieve some of that market. They have now come to understand the weak position they have in the SME market and to realise that the main avenues they had to a successful operation in this market have been sold to others.

However, this market is much trickier than that of the ISPs. While a significant part of the PABX/Key System market is already based on services, they are mainly built around telephone equipment (hardware). Compared to most SME data equipment, traditional telephone equipment is over-priced. This will further be accentuated by VoIP – telephone costs will continue to decrease and ‘expensive’ PABXs and Key Systems will become obsolete.

As soon as a more general awareness exists regarding the VoIP options in the SME market I expect a further downturn in this hardware market. However, if this market falls back into the hands of Telstra, that company will be able to delay the transition to VoIP for a considerable period of time. Although Telstra would gain an avenue into the SME market by offering VoIP, broadband and/or combinations of these new disruptive technologies, that process would inevitably involve cannibalisation, and I can’t see them doing that in a hurry.

Commander/RSL Com is in a similar position. While, on paper, the combination hardware/services looks great, the implementation of the type of concepts that would appeal to SMEs is very difficult to achieve when one has to operate from an incumbent position.

The various IT elements that are going to be an increasingly more important part of SMEs telco requirements will be discussed at my next Roundtable (23 June): Expanding through a virtual company; task-sourcing, data centres, ASP, CRM.

See also:
Australia – Carriers and Service Providers – International Carriers
Australia – Industry – Outsourcing and out-tasking
Global – Industry – Outsourcing

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OUR BROADBAND PREDICTIONS ARE STILL ON TRACK

Tuesday, August 31st, 2004

It is interesting to see the various research organisations going all over the place with their broadband forecasts.

In the early 00s we asserted that there was pent-up demand of approximately 2.5 million broadband users in Australia and that this level of penetration would be reached two to three years after serious broadband competition had kick-started the market.

In 2002 we said that we expected that level of penetration to occur in 2005/2006.

At that time our 2.5 million forecast paled in comparison with the one made by Ovum. They anticipated no less than 5 million broadband users by 2005. And IDC estimated that by then there would be 3.6 million DSL subscribers and 800,000 cable modem users.

We said we believed their predictions to be over-optimistic.

In mid-2004 we were proved to be right, when IDC changed its forecast to 2.8 million broadband users by 2008. We won’t comment on the Ovum prediction.

In mid 2004 ACNielsen informed the market that they had counted 2 million broadband subscribers in Australia. They also include certain dial-up users with unlimited usage, as these users in theory could be ‘always-on’. However, nobody else in the world does classify such users as broadband subscribers.

We stand by our forecast of 2.5 million by late 2005.

Table 1 – Broadband subscribers – 1996-2005
Year
Subscribers

1996
2,500

1997
5,000

1998
7,500

1999
10,000

2000
70,000

2001
140,000

2002
310,000

2003
720,000

2004 (e)
1.5 million

2005 (e)
2.5 million

(Source: Paul Budde Communication)

See also:
Australia – Broadband – Market Stats and Forecasts
Australia – Broadband – Developments and Analysis 2004
Australia – Broadband – xDSL – Overview and Stats

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PLENTY OF GROWTH IN CROWDED OUTSOURCING MARKET

Tuesday, August 24th, 2004

Business potential in the outsourcing market is growing at a great rate, driven by broadband and IP-based services, but the number of players is increasing also. There are, of course, the traditional IT players that have been active here for many decades (see below). The telcos are moving in this direction as well – not only Telstra, but Optus and Macquarie Corporate Telecommunications have also been active in the outsourcing market for several years.

The telco IT leader in the field, however, is BT. Back in the late 1990s they moved very successfully into this area. They did encounter their share of problems, notably a contract with the NSW Government, but they learned quickly, and developed a range of interesting telco IT concepts and services (better known as ICT – Information Communication Technologies).

Unfortunately, however, the company was caught up in a number of corporate disasters – such as the failed Concert alliance with AT&T; the massive over-investments in 3G spectrum in the UK; and numerous ill-fated international acquisitions. But the company is now back on track, even though it will still be a while before the recovery is complete. They have now laid the proper business foundation to allow them to regain their position as a leading international telco. So it didn’t come as a surprise to me when they also re-emerged in the ICT section of the market, building on their previous successes and no doubt profiting from the lessons learned in the past five years. But, as always, it will all come down to the actual business operation, and BT will have to prove that it is able to do it this time round.

At present the company is again aggressively competing for ICT business, both internationally and in Australia.

The other major international contender in this space is Equant. This company has always been very focused on data communications and has scored numerous successes over the years. Also, they were fortunate enough to largely escape the telco crisis – during this period they absorbed the ailing international telco joint venture, Global One.

AT&T has also repositioned itself. After the divestiture of Concert, and particularly since 2003, the company has been active once again. However, it is still struggling at home, trying to find a new direction for the future.

Others operating in the multinationals market include MCI, Sprint and NTT. In the region, however, SingTel is well-positioned to profit from its regional telecoms activities in the market, and this will form a good basis for expansion into ICT services.

Optus will, no doubt, play a major part in this.

It is also interesting to observe what is happening with Telecom New Zealand/AAPT. TCNZ has been a leader in the use of outsourcing. It has outsourced most of its IT requirements to EDS. They thought they would be able to build IT-based services for their customers through this relationship, and that is what they are currently doing. However, the company has also indicated it is looking at acquisitions in the IT market – perhaps not reversing its earlier decision, but rather fine-tuning it. Like other telcos, they now realize that their future will lie increasingly in ICT.

The ISP market is also ideally positioned to move further into this market. They already serve millions of Internet customers, and they are very familiar with IP technologies. The ISPs are also leading the charge in broadband. As most of the new ICT developments will take place in the SME market, this market is set to achieve by far the most significant growth in ICT.

Outsourcing will be the topic of my next Roundtable (23 June): Expanding through a virtual company; task-sourcing, data centres, ASP, CRM.

See also:
Australia – Carriers and Service Providers – International Carriers
Australia – Telecoms & IT – Outsourcing Market
Global – Telecoms & IT – Outsourcing

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TELSTRA NEW ATTEMPT TO CRACK THE CONTENT MARKET – 31/05/04

Tuesday, August 17th, 2004

Telstra never gives up. Since the mid-1980s the company has had an insatiable urge to move into the content market; however its many attempts over the last 20 years have resulted in dozens of failures in this area.

In the mid-1980s they bought a financial information service from John Fairfax, a software service from PBL and, amongst many other media interests, had a 50% joint venture with Penthouse. In the early 1990s they moved into all sorts of business information services, including insurance and livestock. Entertainment services were revisited in the late 1990s, with a joint venture with MSN (Microsoft), an attempt to buy Channel Nine and a whole range of so-called multimedia content ventures.

In the 00s the company continued undaunted by all its failures and signed a five-year deal for Internet and mobile rights to Australian Rules football. It also created an online streaming site for V8 Supercars and, this year, an online music site selling audio files to download. One of the latest additions has been a DVD rental operation.

To show that they were still keen to move into bigger and better media business, in 2004 discussions took place around a plan to buy John Fairfax.

The various content activities were handled by a number of divisions that came and went. It started off with Viatel, then Telecom Plus, followed by Telecom Multimedia, On Australia and finally Big Pond. Since the mid-1990s a second division was set up, mainly to look after the company’s 50% interest in Foxtel.

In May 2004, Telstra merged its two main media groups: the content division of its Big Pond Internet group and the existing Telstra Media organisation, forming Telstra Big Pond Media.

Big Pond Media now holds Telstra’s investment in Foxtel, its broadband streaming content services, its online music and DVD rentals businesses.

In line with my predictions over the last 20 years, none of the abovementioned activities has been successful. But Telstra, being Telstra, will not give up and is still happily going to throw more money into its media ventures in the hope of eventually hitting upon something that works.

Fat chance!

Like all the other telcos in the world who have tried and failed, Telstra will never be able to become a successful media company. Its core business is technology, basically the opposite of the media’s core business, creativity. The business models, concepts and cultures are so far apart that, as a vertically-integrated telco, the company will never be able to turn itself into a media company, nor will it be able to operate a media company on that basis.

Paul Budde

See also:
Telstra Corporation Limited – Infrastructure Analysis – 2004
Australia – Analysis – From telecom to media monopoly
Telstra Corporation Limited – E-commerce and Multimedia
Australia – Pay TV – Analyses of the Digital TV Market

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TELSTRA NEW ATTEMPT TO CRACK THE CONTENT MARKET – 25/05/04

Tuesday, August 3rd, 2004

Telstra never gives up. Since the mid-1980s the company has had an insatiable urge to move into the content market; however its many attempts over the last 20 years have resulted in dozens of failures in this area.

In the mid-1980s they bought a financial information service from John Fairfax, a software service from PBL and, amongst many other media interests, had a 50% joint venture with Penthouse. In the early 1990s they moved into all sorts of business information services, including insurance and livestock. Entertainment services were revisited in the late 1990s, with a joint venture with MSN (Microsoft), an attempt to buy Channel Nine and a whole range of so-called multimedia content ventures.

In the 00s the company continued undaunted by all its failures and signed a five-year deal for Internet and mobile rights to Australian Rules football. It also created an online streaming site for V8 Supercars and, this year, an online music site selling audio files to download. One of the latest additions has been a DVD rental operation.

To show that they were still keen to move into bigger and better media business, in 2004 discussions took place around a plan to buy John Fairfax.

The various content activities were handled by a number of divisions that came and went. It started off with Viatel, then Telecom Plus, followed by Telecom Multimedia, On Australia and finally Big Pond. Since the mid-1990s a second division was set up, mainly to look after the company’s 50% interest in Foxtel.

In May 2004, Telstra merged its two main media groups: the content division of its Big Pond Internet group and the existing Telstra Media organisation, forming Telstra Big Pond Media.

Big Pond Media now holds Telstra’s investment in Foxtel, its broadband streaming content services, its online music and DVD rentals businesses.

In line with my predictions over the last 20 years, none of the abovementioned activities has been successful. But Telstra, being Telstra, will not give up and is still happily going to throw more money into its media ventures in the hope of eventually hitting upon something that works.

Fat chance!

Like all the other telcos in the world who have tried and failed, Telstra will never be able to become a successful media company. Its core business is technology, basically the opposite of the media’s core business, creativity. The business models, concepts and cultures are so far apart that, as a vertically-integrated telco, the company will never be able to turn itself into a media company, nor will it be able to operate a media company on that basis.

Paul Budde

See also:
Telstra Corporation Limited – Infrastructure Analysis – 2004
Australia – Analysis – From telecom to media monopoly
Telstra Corporation Limited – E-commerce and Multimedia
Australia – Pay TV – Analyses of the Digital TV Market

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