BuddeBlog

Between 2005 and 2010 Telstra was implementing a major transformation to the business systems supporting service to customers of all the major customer-facing units. Telstra was likely to spend around $1.5 billion transforming IT systems as part of a broader package of $20 billion of spending planned on company transformation.

A key element of the IT program of work involved migrating customers to a new billing environment. However as the migration occurred Telstra suffered a surge in billing complaints for fixed-line, mobile and broadband services.

According to the Telecommunications Industry Ombudsman, billing complaints relating to fixed-line, mobile and broadband products increased at least 100% in the six-month period to March 2009. However, by April 2010, complaints had fallen by about one third.

Telstra employs an enormous variety of systems environments to support its varied product range. The most notable are the customer relationship management systems provided by Siebel and Kenan billing platforms.

As part of the transformation program Telstra anticipates cutting the number of IT systems and applications employed from 1,500 at the project’s start to 300 by the end of the works in 2010. However the program has suffered extensive delays and budget increases, and further spending is likely to be required beyond the period initially anticipated by the company’s Board in 2005.

There are two parts to the IT transformation. The initial project focussed on transformation of the business support systems (known as Release 1). Primarily work was carried out on the billing and customer support systems, and was completed in 2009. The second stage of the project focussed on transformation of the operational support systems (OSS) (known as Release 2). This stage has run concurrently to the first stage but is likely to only finish in 2010.

We are more than ready for the debate, Sol
It is pleasing to hear that the new CEO is prepared to engage in a robust debate about the future of telecommunications in Australia. He says that ‘debate is a good thing’. I agree, and I’m challenging him to make it a proper two-way dialogue.

But, first of all, I must say that I was not impressed by his rather patronising comment – that he liked the fact that ‘people are beginning to discuss this’.

I would point out that we have been doing just that since 1988, but to date Telstra has been unwilling to participate in industry debates on the topics that he is currently addressing – other than through media statements, lawyers, and actions – which often could only be interpreted as being anti-customer and anti-competitive.

Telstra is so large and powerful that it apparently felt it didn’t need to take a cooperative role in the discussions. However, I will gladly give Sol, as the new CEO, the benefit of the doubt, draw a line under the past, and invite him this time to make it a proper bilateral debate.

So let it begin …..

Let me say at the outset that I have no real concerns with most of the key issues he addresses. And I know that this applies to most of the industry members. So this should make for a good start.

USOs
For years Optus and ATUG, along with myself and many others, have been saying that we have failed to use this, in principle, sound policy to adjust to the rapidly changing telecoms environment. So it is great that Telstra is now (however belatedly) adding its voice to the discussion.

The POTS is no longer the issue, but broadband and future-proofing are.

While some commentators tried to take Kate McKenzie’s remarks in the very narrow sense of Telstra not being prepared to deliver a basic telephone service, it was clear to me that Kate, and subsequently Sol, were talking about the broader issues.

And I agree – the USOs need an overhaul and a fresh approach.

HiBIS was a great step in the right direction – compliments to the government – but the Minster has recently walked away from this issue by not wanting to include broadband in the USO regime, saying that that she doesn’t want to pick a technology.

The Minister knows as well as I do that broadband is not a technology, but a concept. And you can qualify this by indicating that customers should be able to access good quality video-based tele-health, tele-education and tele-entertainment services. Engineers can apply the concept of broadband to many technologies, and we can further finetune this based on the table below.

Residential Broadband (BB) growth predictions – next ten years
Time frame
User development
BB speeds
Key applications

2003 – 2005
Early adopter
300-500 Kb/s
Always-on Internet

2005 -2007
Seasoned user
2 Mb/s
Internet plus photos

2007 – 2009
BB part of life
6-10 Mb/s
Triple-play/video entertainment

2010 -2015
Fully-integrated BB
25-45 Mb/s
Telework, education, healthcare, hobby, entertainment

(Source: Paul Budde Communication)

The regional telecoms fund proposed by the Nationals is an excellent way forward, and hopefully we can increase this to $5 billion. (I was the first one to identify this as the amount needed to future-proof regional infrastructure – back in 2003.)

Telstra will be the main beneficiary of such a policy, and I have first-hand experience of the great work Telstra Country Wide (TCW) does. I have great confidence in this organisation, and it is good to see Sol’s commitment to it.

But, Sol, what is in it for the rest of the country if most of that money flows back to a company that already makes an annual profit of $4 billion plus? As an astute businessman you are well aware that, in the end, profit is the bottom line.

Like the government, you also spoke of an impressive list of competitors in Australia. What you didn’t mention was that all one thousand of them share the remaining 5% of the industry profits. Let’s add that to the debate agenda also.

There are several alternatives that can be used to address this issue of inequality. One option in the regional context could be to separate TCW from Telstra and allow it to maximise its infrastructure assets – which would be great for shareholders – by opening up this network to other content and services providers, in a truly transparent way, with no special favours to Telstra Retail.

If most of the subsidies flow back to TCW then let us debate what is in it for the customers, and for the rest of the industry. To use your examples – what does this mean for jobs, growth, productivity, regional competitiveness, higher wages and enriching communities?

But, as so many observers have now indicated, Telstra or no Telstra, the policies surrounding the regional fund need to be based on sound strategies, not on pork-barrelling.

Industry cooperation
You spoke of the need for the industry to work together. I couldn’t agree more, but we can’t do this without you, and Telstra has often been absent from any discussions about the commercial and regulatory issues that you now raise. At ACIF however, Telstra does play a leadership role in the less contentious areas of technologies, could this be extended?

On the commercial and regulatory issues you mention, Telstra most of the time has adopted a ‘take it or leave it’ approach.

What we need is the leadership of Telstra to work together. You are the biggest player in town and I look forward to your initiatives on industry cooperation. Over the years (since 1988) Telstra has been invited to participate in a number of industry initiatives taken by myself and others, but to date we haven’t seen any positive response.

Also, any debate will necessitate an openness by Telstra on these difficult issues. But a debate must be a two-way street. We are interested in hearing of your concerns and, as I have said, we share common ground here. But you should also take the industry and consumer group issues seriously. Their views have regularly been submitted to the dozens of government Inquiries in relation to the future of telecoms in Australia – so far to no avail.

On Regulations
Again, I agree wholeheartedly with Telstra on this. Let’s get rid of as many as possible of the old regulations that are hindering progress. I am horrified by the potential regulatory nightmare that the issue of ‘regional presence’ will bring with it, in my opinion a totally unnecessary exercise, a waste of time and effort and I can’t see what it will do for the future proofing of the regional network, but lets first wait and see what Telstra’s response to this will be.

But, once again, this should not be a one-way street, which ends in Telstra becoming an even larger monopoly. We hear your concerns about having to make innovative new Telstra products available to competitors on a wholesale basis, but what is the alternative?

What’s in it for the customer – further increases in access charges? These have already more than doubled over the last four years, with hardly any alternative last-mile infrastructure providers available to customers. Telstra dominates this market with a 90% market share.

And what’s in it for the industry – more unsustainable wholesale products with little or no margins?

It is easy to complain, but what is your alternative? The rest of the world thinks the answer to your problem is to start with operational separation, but you completely reject this. So let’s talk about it – what are your other ideas?

I was asked by Telstra to retract my comment that Sol simply wants a bigger monopoly, but what else can I conclude if Telstra asks for less regulation when it has a well-documented track record of anti-customer and anti-competition behaviour?

You ask us to trust you, but we have yet to see you meeting us halfway. We have no idea whatsoever what your approach would be on creating a more transparent environment, and we are very worried that you could prolong such a debate for many years. As you, yourself, said – see how things will change over the next years, if we don’t resolve these issues more swiftly we will forever remain looking into the rear mirror.

Are you aware that nobody in your company, in the industry, in the regulatory organisations or in the government has any idea what Telstra’s high lever strategies are? You might see this is a rather sweeping statement on my part, but I believe I have probably conducted more ‘exit interviews’ with senior Telstra managers than anyone else in Australia and none of them have been able to shed any light on Telstra’s vision for the Australian telecommunications market.

Best services and best prices
Again, I am in full agreement with you on this issue. As an industry we have to ensure that all Australians receive the best services at the best prices.

How do we achieve this – through competition, of course.

So how can you help to establish sustainable competition – and I am more than happy to take into account that we also need to have an environment that stimulates real investments from Telstra and others. We see that competitive environments, such as those in Japan, Korea, France, Netherlands, Canada and the USA, stimulate competition as well as investments. A central plank in the government policies in those countries has been to prohibit telcos from owning cable TV networks.

So how do you see us stimulating competition when Telstra owns both the telco and the cable TV infrastructure, and, at the same time, has the power, under the self-regulatory regime, to defend its dominant position by overbuilding new networks to undermine competitive investments (Optus and Unwired examples).

Some of Telstra’s investments in this area were purely defensive and had nothing to do with providing better services, innovation, etc.

You would do the country a big favour if you separated Foxtel from Telstra, included Sensis in the new company, and created a new and formidable media competitor in this country.

If it should happen that Telstra were to stop being a big bully in the marketplace, and even so Optus, AAPT and other foreign-owned telcos operating Australia still refused to invest in Australia, then I would be right there by your side calling these companies to account.

Sol, I agree with you that ‘there is nothing wrong with argument and debate’ and will gladly answer your call to engage in that debate, without clubs, on your podium.

I would like to go on record saying that I have never encountered unreasonable people within Telstra, and I have the greatest respect for what I consider to be some of the best telecoms people in the industry who work for your great company.

It has been the Telstra culture that has stifled the debate, not the people. You have the power to break through a regime that has historically channelled debate within the industry, through lawyers and PR staff.

There are 1,000 companies, able regulators and well-represented industry and consumer groups in this country who are all eager to debate this with you and your management – not as barbarians with clubs, but as reasonable people who respect each other.

Paul Budde

On 24 and 25th of August we publish close to 2,000 pages of research on statistics, developments, trends, and forecasts on the Australian telecommunications market. Packed in 10annual reports this will provide all the essential facts and figures needed for the robust debate. So I hope you will join me at the ‘State of the Industry’ Roundtables in Sydney and Melbourne. For more info see Roundtables and Seminars.

As advised by my son who wrote this article.

By Ravian Budde
As it seems that the future of ‘legal’ digital music is to be found in subscription-based music downloaded from online music databases holding vast quantities of music, the realm of the portable music player has become even bigger and the line between dedicated portable music players and mobile phones has become blurred.

Already available in America, subscriptions to services like Yahoo Music Unlimited! and Napster To Go, allowing access, and unlimited downloads to millions of songs (more than you could possibly listen to!) are available for US$6.99 a month.

But how do you protect your content? The most popular format today, MP3, doesn’t come with any inbuilt security features and is therefore the format of choice with which to digitise your music collection and share it across the world, via peer-to-peer file-sharing software like Limewire, or E-Mule.

Currently, the format of choice for protected content, adopted by the American music industry, is Microsoft’s WMA (Windows Media Audio) format, which provides inbuilt licensing features that offer a wide variety of protection options. Of course, all digital protection can, and eventually will, be cracked and protected content can then be hacked into and freely distributed, using a piece of software downloaded for nothing from the Web. But only the tech-savvy users will have the know-how on how to achieve this, and therefore most end-users will be legitimately buying their music online.

For Apple, whose ‘i-Pod’ has become synonymous with the portable MP3 player (my father recently provided a great example of this when he said to me: ‘Son, I want to buy an i-Pod’. I replied ‘I wouldn’t recommend the i-Pod Dad’ to which he replied ‘Oh well, I meant an MP3 player’!!), this choice of format standard is a slight problem, as the current i-Pod range does not support the WMA format – and no word has come from Apple as to future support.

Apple’s i-Tunes store has been a big success overseas by using its AAC-protected format that allows secure access; but their service is still based on a per-song download cost, which can be limiting for future expansion into providing other services alongside music, such as video-on-demand, or online multiplayer gaming facilities.

Even though the i-Pod has dominated the portable MP3 player market (it pretty much created the market!!), its features are more limited than most other players that provide voice recording, digital inline recording facilities from a Hi-Fi, for instance, calendar and organiser functions, alarm clock wake-up, inbuilt radio tuner, and connection to a computer without propriety software – proving that business is much more driven by the market than by the actual product itself!

As the airwaves become more effectively utilised by technology providing faster speeds at cheaper prices, the future for portable music definitely looks to be ‘download on the fly’ compatible music players. If I’m on the train and suddenly The Cure’s Love Cats pops into my head, I want to (within 2-3 minutes and without it costing me an arm and a leg!!) download the track and listen to it on the spot. With subscription-based services this feature will be available to me and I won’t have to worry about my download bill, as I am paying a flat fee.

Currently in Australia, the price for hi-speed mobile access is still too high to feasibly provide this service, but hopefully the carriers will soon see the light.

The newer range of mobile phones that are being released are aiming more and more toward the portable music player market, providing memory card slots for expandable memory, and even some hard-disk-based phones that provide large storage capacity for long hours of listening, higher quality sound, intuitive player software and hi-speed computer connectivity.
Sony Ericsson’s new W800i, for example, is being strongly marketed for its high-quality music-player features.

We saw that camera phones had little or no effect on the digital camera market, but will it be the same with the phone-music-player versus the dedicated-music-player? As technology becomes cheaper, bigger, better, longer lasting, more connected and increasingly energy-efficient, the all-in-one-high-quality-personal-digital-does-most-things-you-want-box seems like it may be a possible solution.

PS (This is Ravian’s PS to me) The Creative Zen Micro looks like a good choice for you, or I would recommend getting a music-player phone that will allow you to connect to these online services in the future, but at present most of them are not all that hot.

Your comments are welcome.

Recent developments, both in the USA and Australia, indicate that newspaper publishers are struggling to find their way into the new media world.

Back in the 1980s the publishers were the first to move into the new online era. This was pre-Internet – it was based on the proprietary videotex system. My friend and colleague, Fred Kappetijn, was working at the large Dutch publisher, VNU, and there were exiting new projects, using not just portals, but also interactive cable systems. In 1982 I organised a conference in the Netherlands around an interactive cable TV system, which was planned for 90,000 households in the south of the country.

Yes, all of this almost 25 years ago – the concept and vision were there, but unfortunately the technology wasn’t ready for it.

It was interesting as, at the same time, Australian publishers were lobbying their government to block cable TV in Australia (Davidson Inquiry) and they were also opposing Telecom Australia’s move into videotex. In any case, a change of government in 1983 saw a shift to the online position.

However the cable TV blockade lasted until the late 1990s. Interestingly, this has not benefited the publishers in Australia, and it turned Telstra into a formidable media competitor. If they’d had any vision the media companies would have embraced cable TV and, like their European and North American counterparts, would today be in a much better position on the information superhighway.

They are now being held to ransom by Telstra (Foxtel) and by the disgraceful media policy that has been written by the government with the assistance of the traditional media companies.

Media companies are now struggling to find their way out. They are no longer claiming that the Internet is simply a fad; that blogging and ipodding is something for kids. The reality is that these developments are well and truly eating into their businesses. Google and Yahoo are better positioned to embrace these new media developments than most publishers, and the telcos have cemented a role in the media industry that they are not going to relinquish.

I don’t think they will be overly successful in the content world, but the old infrastructures of printing presses and FtA broadcasting systems are well and truly on the way out.

By Rupert Murdoch’s own admission, it is interesting to note that News Limited was involved in a lot of the new developments fairly early in the piece – but they still failed to grasp the importance of the Internet. They have now announced their latest action, the purchase of the Internet company Intermix, which constitutes a belated effort to catch up in this market.

This is sending shockwaves through the printed media industry. If Murdoch feels he has been caught out, despite all of his interest in the new media, what price those publishers who, over all these years, have never even bothered to look seriously into these new media?

Exhibit 1 – Intermix Media
Intermix Media is an Internet company that owns more than 30 entertainment websites, ranging from games to dating to cartoons.

Its most valuable properties include a controlling stake in MySpace, a popular ‘social networking’ website geared to teenagers and twenty-somethings looking to chat, blog, share music and find dates. MySpace.com generates of 6.5m page views a month, ranking it ahead of Google and just behindHotmail on this metric.

I have written many articles about the lost cause of the commercial FtA broadcasters. They didn’t just ignore the new trends – they very deliberately boycotted them and, with their heads in the sand, hoped it was all a bad dream that would vanish. They are now caught in their own web of bad policies, created in conjunction with their politician mates who are always ready to do something special for their media buddies.

I would say that currently the position of the newspapers is slightly better than that of the broadcasters. Broadcasters have very little content of their own that they can bring to the new media –newspapers at least do have that content.

The content issue is hotting up even further. Latest blockbuster releases in the USA have not brought in the usual numbers (and revenues). The studios already understand the power of the new media and, for example, already have their own VoD service on the Internet.

At present, broadcasters, theatres, video stores and pay TV operators all depend on the various release windows that Hollywood dictates. It will only be a matter of time before these windows are changed. With hundreds of millions of people on broadband Hollywood knows that it can make a killing by having the premiere of a new blockbuster on broadband. They will have very little respect for the release windows. As soon as the time is ripe they will simply change them, and this can only be a few years off at the most.

Publishers in a similar way will have to find new ways to participate in the news ways in which news, information and entertainment will produced disseminated and distributed.

Paul Budde

See also:
Global – Convergence of Media & Telecommunications

It is good to see such widespread discussion on the sentencing of the former WorldCom boss, Bernie Ebbers.

It is also quite appropriate for it to happen now, as the industry begins to recover and the first large-scale new investments are arriving in the market once more (as I reported from Europe a few weeks ago).

The Ebbers case hopefully provides closure on a few very black years in our industry.

While I have very little sympathy for corporate crooks one has to wonder how many other corporate highfliers have, at one time or another, teetered on the brink of corporate misconduct. I am sure quite a few have crossed, and are still crossing, that line.

Most people fully understood that in the early 00s we were dealing with a bubble – yet a very large number of investors and shareholders gave in to greed and went along with it, actually cheering people like Ebbers on. He even appeared as Man of the Year on the cover of Time Magazine at one point.

At the time I regularly commented on the many ridiculous forecasts that my colleagues were producing regarding various growth aspects of the market, mainly concerning e-commerce and mobile. But nobody wanted to hear what I was saying. The majority preferred the fanciful forecasts from the well-respected research firms.

And these companies did very well out of it, as most telcos loved their foolish predictions and paid big dollars for them. So my sector of the industry also played a role in the maintaining the bubble. I do believe, however, that the worst culprits were some of the financial analysts and accountants who devised some very clever scams around the hype.

True, several people have been punished, but the majority got off with a scare, a slap on the wrist or a request to maintain a low profile for a while.

It is Bernie Ebbers’ misfortune that he has now been punished for the combined ‘sins’ of our industry. I know, from talking to many people about this, that his sentencing is reverberating throughout our industry, and beyond that in many other corporate boardrooms. In this respect I do feel a bit sorry for Ebbers, but a severe sentence was necessary to make everyone sit up and take notice.

Will the combined industry – and, indeed, the combined corporate world – learn from this? I doubt it. If another bubble should arrive at some time in the future, most of those who were involved in the crash of the 00s will have moved on and a new breed of executives will be in charge. Greed will once more hold sway and a few scapegoats will again be punished for the sins of the many.

However, I do believe that for the next few decades at least we will be pretty safe. The Ebbers shock will remain with us for some time. The punishment is appropriate, but I do feel slightly sorry for Ebbers, who has to pay the price for the transgressions of a hell of a lot of others.

Paul Budde

See also:
Global – Analysis – Markets and Forecasts
Global – Analysis – Telecommunications Industry