Archive for January, 2006

ANALYSIS OF TELSTRA’S NEW PLANS

Tuesday, January 31st, 2006

The $10 billion investment opens up the Fibre-to-the-Home market.

Job cuts
As predicted by us, massive job cuts have been announced by Telstra.

While this will certainly cause significant social pain, it is an inevitable outcome in an industry that is rapidly changing from one that is telecoms-driven to one that is Internet-driven. The transformation from a switched telephone network to a national computer network will reduce the equipment needed by 60%, and the required floor space by 80%. Obviously this means that only a fraction of the operational staff and associated support structure will be needed.

What this means for customers is that more new services will become available over this new network, at significantly lower cost. Over the next decade less than 10% of consumers’ telecoms costs will be based on traditional telephone charges. However, instead of spending the money on voice calls (mobile or fixed) customers will spend the same, or even slightly more, on a range of new TIME services (Telecoms, Information, Media and Entertainment).

The new network will allow Telstra to make that transition.

Fibre-to-the-Curb
The $10 billion investment plan allows for Telstra to move more quickly into fibre-based networks. It will begin to drive fibre further into the customer access network (CAN) – initially to the curb and then to the home. This will allow the company to increase the broadband speeds it can deliver over these networks. However, I predict that they will be metro-based, not national (regional).

These new networks will start reaching between 30% and 50% of the population within the next 3 to 5 years.

Regional Australia will rely on the Regional Fund.

While this is a predictable strategy it places much more pressure on the government to get the implementation of the fund right. There is no room for error here and certainly no room for pork-barrelling. While metro Australia will be able to count on the expertise of Telstra, not only for the technology but also for the planning and implementation, regional Australia could become the victim of fragmentation, politicking, infighting and simple incompetence

Mobile rationalisation
Back in 2000 we questioned Telstra’s move into CDMA. By operating two different technologies (CDMA and GSM) Telstra created an extra set of costs, which were unnecessary. This has now been rectified by the amalgamation of the CDMA and GSM networks.

This makes a lot of sense and I don’t foresee any negative impact on regional customers here.

As Telstra doesn’t have access to spectrum that could be used for wireless broadband it will be forced to use its mobile spectrum, and it has announced innovative plans to increase the capacity on the 3G network that will see the introduction of a range of new mobility services. (See: Australia – Mobility Market Overview, forecasts).

It will be interesting to see how Telstra fares in this wireless broadband space, once competing WiMAX networks become available from regional players such as Austar.

Customer focus still wrong
While the bulk of the announcements were in relation to infrastructure (which I very much applaud) at the same time Telstra continued its attack on the regulator and the government in relation to competition policies. Instead of embracing the new world of IT-based wholesale services, the company continues to speak of improved customer service at a retail level.

Sol is putting out the same message on this as the one advocated by Ziggy Switkowski in the late 1990s – and in the early 1990s by Frank Blount, his predecessor. Over all those 15 years the telephone queues at Telstra’s customer service call centres have only increased. The complaints to the TIO have not lessened and daily we read and hear about more customer service horror stories.

How is Sol going to change this entrenched culture? I would venture to say that it’s impossible, as the company is an engineering-driven organisation.

Telstra track record here is appalling and I can’t see this improving, particularly in the wake of the massive corporate effort needed to keep the company on track, in a technology sense, during the massive changes it now envisages.

Instead, I believe that they should have invited the service, information and content providers to become involved in providing new services. These wholesale customers should, at a retail level, be allowed to look after their own customers who are linked to their services through the Telstra network. Unfortunately, Telstra takes the opposing view, and argues for regulatory limitations to such developments. In the long run this will be detrimental to the financial future of the company.

Retail competition already a lost cause
It is most unlikely that the government will give in to Telstra’s bullying and this will mean that retail competition, especially in the broadband market, will flourish. This, in turn, will lead to the broadband service providers capturing a much larger share of the retail market from Telstra in the broadband market.

At the same time the incumbent is basing some of its future scenarios on the outcome of this in my eyes shaky retail strategy. As an outcome of that on the financial side they predict ‘only’ a 30% drop in profits and 2%-2½% annual growth. At present Telstra’s counterparts are registering zero, and even negative, growth – and, again based on a comparison with Telstra’s international counterparts, a 50% drop in profit over the next few years is, in my opinion, more likely.

Summary
It is certainly an exciting and ambitious plan. It goes a long way down the route I have been advocating for well over a decade, and creates the best possible scenario for Telstra’s infrastructure-based future, particularly in relation to the fibre optic developments foreshadowed above.

So full marks to Telstra in this respect!

At the same time, I remain cautious about the company’s future direction. This should be based on infrastructure and wholesale, and not on retail. There are companies far better-equipped to provide the new services needed in the new Internet economy.

You only have to look at the success of Google, Yahoo, eBay, Skype and ninemsn. How does Telstra think it will be able compete with them in the Internet retail space? Sensis and Foxtel could be positioned as good components of the new Internet economy, but certainly not within the constrains of their current vertical integration in Telstra.

Paul Budde

We invite your comments: Comments Off on ANALYSIS OF TELSTRA’S NEW PLANS

Multimodal documentaries from the ABC

Wednesday, January 18th, 2006

In early 2006 ABC TV and the Australian Film Commission launched an initiative for young documentary makers. Under the jtv docs initiative, a $300,000 fund will be created to finance several one-hour or half-hour documentaries in 2006.

jtv docs will be part of the ABC’s planned cross platform jtv brand, due for roll out in mid-2006. jtv is a massive expansion of the triple j brand. For the first time, content directed at the ABC’s younger audience will be broadcast across multiple platforms, including ABC TV, ABC 2, ABC Online and ABC Broadband, incorporating iPod downloads and mobile phone SMS technology.

The projects need to be innovative in terms of their style and focus on subjects that young Australians will relate to.

We invite your comments: Comments Off on Multimodal documentaries from the ABC

UNLIMITED POWER IN CYBERSPACE

Tuesday, January 17th, 2006

First story
Last week we found ourselves cut off from our domain name.

We had no idea whatsoever what had happened. Our ASP, Ipera, said that we needed to contact MelbourneIT as they apparently had cut us off. Their message was that we hadn’t paid our bill.

For the last ten years this has been managed through our ISP Hunterlink (Pacific Internet). Hunterlink had bought the Internet business from Ipera some five years ago – it became the ISP and Ipera the ASP.

Looking back into our records we did find an email from Hunterlink indicating some changes to their services. We replied to this with a request for further information, but never received an answer.

We also notified Ipera, as we were unsure of the demarcation line between the two companies in this situation. They also promised to look into it, and they also didn’t reply.

The end result of this appears to be that Hunterlink thought Ipera was now in charge and Ipera though Hunterlink was still in charge. When I contacted MelbourneIT on November 1st, they looked this up on their system and told me that we were a Hunterlink customer.

Of course we are at fault for not following up on the matter. That being the case, there should have been some sort of system at MelbourneIT to warn us of the problem. Their excuse is that they are not allowed to contact us, as we are a client of Hunterlink, to whom they say they had sent 11 renewal notices (Hunterlink denies that they have ever received these notices).

Forty per cent of our business is dependent upon the Internet, and I find it appalling that a company like MelbourneIT should have the power to potentially ruin our business.

Second story
On that same day I received an email from colleague Robert Brand informing me that his Rural Bash emails were bouncing back.

Not immediately suspicious, he resent his newsletter, only to find out that, again, a large number bounced back. He then figured out that those who were returned mainly had Bigpond email addresses. Following the trail he found out that this was a result of Telstra’s SPAM filter, which is operated by a company called Trend Micro.

Contacting that cyber company proved to be almost impossible, and only eventually succeeded thanks to a journalist’s inside information (Stuart Corner). Stuart was able to penetrate this company’s otherwise impermeable cyberspace bureaucracy.

With the media ‘threat’ from Stuart, Robert was able to remove himself from the SPAM list. He still doesn’t know why Trend Micro had put him on the list in the first place, what the criteria are for getting onto such a list, or how to be removed from the list in the event of a misjudgment or mistake on the part of the cyber industry.

Third story
Stuart also shared another issue with us. He switched his domain registration from MelbourneIT ($140 per two years) to HostWorks’ subsidiary, Intraserve ($39).

With some trepidation, fearing the same problem we encountered, he placed an order and received an email from Intraserve saying he should get a domain password from MelbourneIT, which he should forward to Intraserve.

The password never arrived. He forgot about it; Intraserve took no further action; and he went off the air when the registration expired.

MelbourneIT did send a password, but his Spam filter blocked it. Its rate of false positives is very low. Funny that it blocked none of their numerous renewal notices.

Stuarts’s bottom line – MelbourneIT can get away with charging exorbitant rates because what IT manager is going to put their job on the line for the sake of $100 by risking a move to a cheaper provider.

Fourth story
Indigitec, an Aboriginal art company lost one of its domain names and was off the Internet for two weeks because an ISP, who also managed their domain names refused to pass over the webkey to another ISP – the first ISP (Artnews) charged four times as much for the domain name as the new provider.

This was on top of a number of other complaints they had with this ISP. The commercial damage done to this small company was significant.

But wait, there’s more …..
When discussing this last story I was told of similar cases where ISPs went out of business and caused massive disruption to their clients in relation to emails and domain names.

Also, as this is happening rather frequently, there are US-based companies who monitor these dramas and quickly move in to buy up domain names that are being unlinked. Sometimes domain names are given back, but always at considerable cost, and often only with the assistance of lawyers.

These cases clearly show that the cyberspace industry will have to become far more prudent in its business behaviour if it wants to avoid regulation. There seems to be no self-regulation and no code of ethics – in general a very poor level of responsible business practices by a significant number of players in this industry.

It will only be a matter of time before the regulator starts asking questions about this industry – what checks and balances are in place, what powers they have to cut off domain names, block emails, etc. Policies should be put in place regarding compensation in case these companies fail to implement the proper practices and QoS procedures.

These case studies are a warning for everybody whose business depends on cyberspace activities – to be far more vigilant about cyberspace policies and procedures that affect their business.

In my follow up discussion with the IIA (Internet Industry Association) they have agreed to address this issue at their next executive meeting and are eager to know if this is perhaps a more systemic problem that needs to be investigated further. So let me know if you have any horror stories and I will pass them on.

Tips in relation to domain name issues
Ipera provided the following more common issues surrounding domain names. These are important for customers to know about:
Automatically renew domains names, without specific customer approval – this avoids the paperwork in relation to renewal notifications being lost.
Check when you change ISPs if you also need to port your domain over. This will prevent the ISP system seeing you as a closed account, which could result in your domain name not being automatically renewed when the time comes. Customers should be aware that when they swap providers they should move the DSL link, web hosting and DNS hosting all at the same time.
Some ISPs have poor reminder systems and regularly make mistakes re domain names – this is a source of new business for some of the other ISPs. Also, sometimes these systems work differently for closed and open accounts.
Many people register their domain names directly, and use an email address from their ISP. After the domain is active, they change their email address to a new corporate one, and stop checking the ISP account. As a result, when it’s time to renew, the customer doesn’t get the messages because they go to a disused account. It is important to have different administration and technical contacts attached to the domain records.
Make sure that ISPs send reminders every month for three months before the renewal, and that it also sends emails to the end customer warning them that the ISP has not renewed the domain.
Some customers purchase their domains directly, but with all the ‘spam’ deals going on regarding domains customers tend to become confused and to ignore emails relating to their domain name.

Paul Budde

For our Australian Internet and Online Services reports, see Australia – Internet

We invite your comments: Comments Off on UNLIMITED POWER IN CYBERSPACE

WHOLESALE VOIP & NEW MEDIA SERVICES

Tuesday, January 17th, 2006

Those of you who have been following my comments regarding VoIP will be familiar with my two-pronged approach to this topic.

I don’t believe in stand-alone VoIP (beyond the Skype gimmick used by many PC users) as the use of the service is very limited and seldom goes beyond the PC user him/herself. The fixed telephone remains intact and is still used quite a lot. Only a very small number of extremely price-sensitive users with the right PC skills will actually go beyond the fixed phone.

Then there is the integrated approach to VoIP, based on broadband and one of the two most critical elements of the triple play model (voice, data, video). VoIP is often the driver behind these packages – this is why customers make the move to triple play. In these packages the cost-saving elements of VoIP are the killer app.

The Skype/eBay approach is another excellent example of an integrated approach.

And, to complete the picture, video makes the model sticky.

So when the first VoIP services began to emerge I very much encouraged these early players to move into the wholesale market. I couldn’t see a serious business model for retail VoIP on its own.

Triple play models are ideally suited for ISPs and BSPs. Very few, if any, have an incumbent voice market, so every dollar they can make out of VoIP is good – for them, adding VoIP for $10 a month is extra income.

If you are a voice telco/reseller, however, it basically means that, instead of $30, you now get $10 from the customer – not a great incentive for a telco to start selling VoIP.

A brisk VoIP wholesale business has since emerged in many countries around the world, and this market is growing quickly, as very few of the ISPs have the skills to develop their own VoIP operation – and, furthermore, it doesn’t make sense in most situations, since the VoIP wholesale connection is a natural fit.

The next step in this wholesale market is the video component. Video-based services, mainly communications-based but also information and entertainment services, are going to be needed in this new telco environment.

The current media players are far too incumbent to play a significant role. They still see themselves as the retail operators of these services (newspapers, radio, TV) and their organisational structure does not cater for wholesale at all. It will be interesting to see how this new wholesale market will develop over the next five years.

There are certainly many more wholesale opportunities coming along in this New Media environment.

Paul Budde

See also: Global – Telecoms & IT (incl. IP & VoIP)

We invite your comments: Comments Off on WHOLESALE VOIP & NEW MEDIA SERVICES

Commercial television programming spending – 2003-2006

Friday, January 13th, 2006

 

Year

Australian programs

Foreign programs

Total

$ million

2003/04

646.2

334.5

980.7

2004/05

812.8

350.6

1163.4

2005/06

869.2

352.7

1221.9

2006/07

790.4

410.8

1201.1

(Source: BuddeComm based on ACMA data)

 

Expenditure on Australian programs in 2005/06 was $869.2 million, an increase of 6.9% from 2004/05. There was a 10.2% increase in expenditure on Australian drama programs, a 14.4% increase in children’s drama programs, a 35.2% increase in documentaries and a 41.3% increase in light entertainment programs.

         Seven Network’s share dropped from 22.4% to 21.5%;

         Nine Network was down from 20.7% to 20.3%;

         the ABC rose from 11.8% to 12.1%; and

         Ten Network and SBS were steady at 17.2% and 3.5% respectively.

We invite your comments: Comments Off on Commercial television programming spending – 2003-2006