BuddeBlog

Despite all the various submissions, arguments and discussions it looks as though the government will very much stick to its original telecoms plans:
Minimal structural changes to Telstra (on a voluntary basis only)
No investments in regional infrastructure (beyond some token handouts)
Watered-down version of the ACCC proposed price controls.

In July the Minister indicated that her preferred way of operational separation ‘can go well beyond the scope and impact of accounting separation without taking the heavy-handed and costly step of structural separation or forcing radical restructuring of Telstra’.

For the first time, however, she did provide some more details:
The new regime should provide wholesale customers of Telstra with greater certainty and clarity in relation to Telstra’s operations;
It should also give them confidence that they will receive treatment from Telstra Wholesale equivalent to that provided to Telstra’s own retail arms;
It should allow the regulator to more quickly and effectively scrutinise Telstra’s activity and compliance with its regulatory obligations; and
It should provide Telstra itself with greater regulatory certainty.

She rejected the British model as a valid option for Australia. However, importantly, she did highlight the fact that a company like BT can see commercial benefit in reaching an agreement of this nature with the regulator. In her own words she also confirmed that the underlaying issues that led to the British solution are also relevant to the Australian situation.

While I agree with her viewpoint here this will also need to be looked at from the position taken on the issue by Telstra’s new CEO, Sol Trujillo – ‘no separation whatsoever’. This doesn’t leave a lot of room for compromise, and even when a politically forced compromise is reached Telstra will not be too committed to actively pursue it.

This highlights the problem the industry has with the government’s approach – over the last ten years it has not received any evidence that Telstra can be trusted with this kind of voluntary (self-regulatory) arrangement.

The government also reiterated its previously announced policy to impose a licence condition on Telstra, requiring it to maintain a rural presence. In the absence of any details this could be a further threat to competition, and in the absence of any firm obligation regarding Telstra’s requirement to roll out true broadband infrastructure in regional areas a regional presence is pretty useless. The Minister also rejected the Nationals’ plan for a government-based infrastructure commitment for regional Australia.

As an example of the token handouts that we can expect in coming weeks the government announced an extra $50 million for the HiBIS fund, most of which will flow directly into Telstra coffers. The Minister indicated that the handouts will end up anywhere between $160 and $250 million – a far cry from the $5 billion needed to future-proof infrastructure in regional Australia.

Paul Budde

I was in London when OFCOM made its decision on BT and reported on this along the following lines.

OFCOM decision boosts pro-competition camp in Australia
While in London I was involved in several very interesting discussions about this. The debate is very interesting. With nothing like a T3 hanging over their heads, the British financial analysts are rather disappointed that the structural separation did not go further. They believe that, in the long run, full separation is inevitable, and that this would lead to a completely new set of dynamics in the markets, around new merger and acquisitions.

In Australia the financial analysts are saying the opposite – a clear indication that their current analyses are based on greed, aimed at the lucrative privatisation fees. They know they’ll get another go at a fat Telstra in a few years’ time, when that company also faces a proper structural separation, at which point they will probably look forward to participating in the follow-up merger and acquisition feast – a perfect double-dipping opportunity for them.

It just shows how genuine all those current political and financial analyses are!

In general terms, everybody in the UK seems to be happy. I spoke to various players and they are all satisfied with the outcome. It will be followed up with proper legislation, which gives them confidence about transparency and enforcement. The fact that BT is happy with the outcome (a range of draconian regulations will be scrapped) means that there is a good chance that it will be quite cooperative in the process.

One organisation that was slightly disappointed was the British Consumer Association. They would have liked to see full structural separation as they don’t trust BT to offer better consumer services.

But even those who were critical welcomed the move, at least as a first step in the right direction. It was a rare experience in the telecoms industry to be present at an event where everybody was happy. OFCOM was delighted with all this praise and was very positive in its belief that this would lead to rapid changes in the competitive telecoms environment in Britain.

Already in London I knew that this outcome would have little influence on the Australian Liberal Party policies. To date they have ignored all advice on this issue from every independent source and are only interested in their grab for T3 money to finance their next political campaign. Without proper democratic checks in place, after July 1 they will close in for the kill.

However, I do believe that the British developments will be carefully studied by the National Party. The OFCOM report will provide the NP with excellent ammunition to further strengthen their case.

The call for similar separation in Australia has received another boost. Just before I left for Europe, the Regional Cities of Australia held a conference in Sydney, initiated and organised by Wagga Wagga Council, at which the impact of T3 on their local communities was discussed.

They are extremely alarmed about the lack of understanding from Canberra in respect of guaranteeing the future-proofing of the telecoms infrastructure, which is a Federal responsibility. They correctly concluded that they will probably be the most affected by T3 and they therefore will take a strong stand before Minister Coonan, urging her to make sure that their long-term telecoms infrastructure needs are secured. They have discussed a range of options that will be further fine-tuned in follow-up workgroup meetings. (The Regional Cities are looking from support from as many regional cities as possible and are seeking for signatures to their initiative – those who can assist pls let me know)

For everybody in Australia with a genuine commitment to the national interest of telecoms the OFCOM report is a real boost, at least to morale, and it demonstrates that we are on the right track in requesting the Australian Government to make a similar move. It certainly strengthens the case and will further fuel opposition against T3 in its current format. With the assistance of the National Party there is hope that Australians will fight to secure good telecoms (people power), based on future-proofing the network (FttH or equivalent outcomes).

Paul Budde

See also:
Australia – Regulations – T3 reforms
United Kingdom

Save Unwired – competition on trial once more
The next few months will be critical for Unwired.

Will their business case stand up? And will they be able to maintain their competitive position in the market? Of course, in the end it is Unwired who will have to prove that it took the right decisions; but, at the same time, this is yet another test case for competition in Australia.

Here we have a very innovative telecoms company offering a service that, even on a global scale, rates as innovative. Yet this infrastructure-based company is finding it very difficult to survive.

At its launch the company was in a good business position, with 30% of the Sydney area not covered by DSL. But, half a year later, Telstra had closed the gap and covered 95% of the area in which Unwired operates with their own DSL service. Now there is obviously nothing wrong with Telstra trying to defend its market, but this clearly demonstrates that if we, as a country, don’t have a national policy regarding telecoms infrastructure, infrastructure-based competition will never get off the ground.

The classic example of this (which is cited all around the world) has been Optus. Same story – the company was rolling out the most innovative triple play network in the world, but was then totally overbuilt by Telstra, and, $7 billion and ten years later, we were back to the monopoly.

With a company as dominant as Telstra (the most vertically-integrated telco in the western world) I would dare to say that nobody, absolutely nobody, will be able to successfully compete with the incumbent on an infrastructure basis.

If we take this as a given, then the next step is to ensure that we get a regulated monopoly which won’t stifle the innovation that we would otherwise be getting from companies like Unwired –and here you can add Nextgen, IP1, Comindico, Flowcom, and half a dozen others.

However the government is putting greed before the national interest; it wants the highest possible share price for Telstra and is prepared to strengthen its monopoly to get it.

So the government should not then pretend that it would like to see infrastructure-based competition, because, if that were indeed the case, it would have to create the right environment for new and innovative investments, and it would have to protect those investments from the dominance of the incumbent.

This is precisely what happens in the USA, Canada and Europe.

See also: Wireless Broadband Australia

BinCom Satellite Systems Limited is an Australian communications carrier established to provide high-speed broadband telecommunications services to Australia and regions of the southern hemisphere using satellite links.

Historically terrestrial telecommunication links were engineered to transmit voice traffic only and increasingly these links are being used to deliver on-line applications.

In many markets, the current infrastructure is inadequate to, or incapable of, reliably delivering these applications. In other markets, the infrastructure simply does not exist to deliver these applications.

BinCom intends to fill this gap in telecommunications infrastructure within Australia and regions of the southern hemisphere using VSAT satellite technology.

BinCom Satellite Systems operates a satellite communications network from its offices in the Perth CBD. Through this network the company can provide a range of services including:

• standard telephony including fax;

• high-speed Internet;

• private data networks;

• broadcast and multicast streaming multi-media;

• switched data services for video conferencing;

• interactive distance learning;

• interactive business TV broadcast.

The company began commercial services through a voice and data gateway from its network control centre in Perth in June 2000. Its high-speed voice and data satellite services, which have been deployed to over 30 sites located in various locations Australia wide, use VSAT. The service is currently being expanded, with the completion of this project expected by mid-2002.

By Bruce A. Prior – Greybeard Systems Pty Ltd

Following on from last year, I have investigated current GPRS pricing. At that time, Telstra was the only provider of GPRS. Now I am able to compare Telstra with Optus, Vodaphone and the 3 Network

The good news is that there are more choices. Telstra’s price remained unchanged from 2003. Having not taken up any GPRS offers myself, I used the same traffic figures from lat year (5.43MB). The resulting able looks like this.

Table 1 – GPRS Pricing comparison – 2004

Operator Highest ($) Lowest ($) Best Plan

Telstra 129.87 67.31 $25.00

Optus 86.96 29.88 Internet Plan

Vodaphone 150.00 21.67 5MB Bundle

3 Network 150.00 21.73 Casual

As usual the comparison is made complex by the multitude of plans available for each vendor. Slowly, the cost is coming down. Telstra and Optus still persist with a ‘Flagfall’ charge which is very strange given the ‘always on’ nature of the service. Vodaphone and 3 Network appear to be the cheapest for the given volume. Given that 3 is Code Division Multiple Access (CDMA), the number of compatible devices is restricted to their own range of products. Optus was difficult and confused about what rates were on offer as well as such things as ‘How many Bytes constitute a Megabyte?’ Vodaphone figures are liable to alter if one ‘roams’ onto another network. This is liable to happen where they use 3rd party agreements.

Overall I would say that if I were controlling ‘Road Warriors’, then one could now consider GPRS as a mobile data access technology.

Please feel free to call me should anyone wish to see the full spreadsheet used for the comparisons – bruce.prior@greybeard.com.au.

CommodiTel Limited is a new type of telco with a low-cost business model that has already had a major impact in both the European and US telecommunications market. It has positioned itself as a service provider to retailers who wish to offer their customers the benefits of their own branded and priced telecommunications, without the costs and risks of establishing and managing their own network.

They are the first dedicated pre-paid Mobile Virtual Network Operator (MVNO) in Australia.

MVNO’s allow retail operators to set-up their own mobile telephone network without the massive infrastructure and capital costs normally associated with being a telco.

In Australia, CommodiTel is also pioneering pre-paid discount mobile SIMs exclusively over the Internet, through its wholly-owned division Revolution Telecom. By keeping distribution and cross-subsidy costs to a minimum, Revolution Telecom is able to offer some of the cheapest mobile rates in Australia.

In November 2004 they launched Australia’s first retailer-branded pre-paid SIM card, using the Vodafone network. The 7-Eleven SpeakUp pre-paid card, will be sold through all 340 stores of 7-Eleven Australia.

Companies such as 7-Eleven, Tesco and MTV have successfully introduced branded pre-paid SIM cards overseas, notably the US, UK and Denmark.

Retailers of branded pre-paid SIM cards are able to offer special services, introduce customer loyalty programs, direct market to users, and set their own tariffs independent of the carrier. As a result retailers are able to determine their own call pricing, special services, alternate call credit expiry rules and different pricing structures.

The CommodiTel product allows retailers to establish their own virtual mobile telephone network without the significant infrastructure and capital costs associated with being a telecommunications company.

SpeakUp starter packs retail for $15 and include a SpeakUp SIM card, easy-to-use connection and user instructions, and $20 worth of call credits to get started – making it one of the most attractive retail starter kits available, where call credit value exceeds the price of the kit.