Archive for June, 2006

Business and IT and transformation program

Friday, June 30th, 2006

Overview

Project Reitz is an integrated business and IT transformation program across Optus Consumer and SMB. The purpose of Reitz is to deliver reliable, simple, convenient solutions for Optus customers through the redesign of its business processes and IT systems. A major component of the program is the replacement and rationalisation of Optus’ legacy customer care and billing systems to provide a single view of the customer.

The project was announced in mid-2006 and was planned to be delivered in four phases.

The first three releases covered the Optus consumer and small business division, with the exception of about 500,000 users of the HFC residential network in Sydney, Melbourne and Brisbane. This included the migration of Optus mobile and Unbundled Local Loop (ULL) customers on to a new platform, as well as the introduction of online functionality allowing customers to manage their accounts online and also buy new products and services.

Around 70% of the project had been completed by mid-2008. All migrations and changes for the first three releases were completed by the end of 2009.

Suppliers

Project Reitz uses two systems developed in-house by parent company SingTel. The project consists of three major pieces – sales, billing and order process/order management.

Existing Project Reitz suppliers include Oracle’s Kenan billing system and Accenture as Optus’ main systems integrator, although emerging India-based competitors Satyam and Wipro have also been working with Optus.

Project cost

When the project was first announced, Optus said it would spend $100 million in that financial year (2006/07). The project had cost $160 million. It is unknown how much the final stage will cost.

Benefits from transformation

Reitz is aimed at consolidating platforms, ultimately giving Optus a single view of customers, increasing the amount of self-service and online activity that a customer can do themselves, and improving synergies with SingTel.

With the transformation almost completed, the focus within Optus has now shifted to ensuring good returns on the significant investment made on the internal IT systems. One area of particular attention was to make better use of Optus’ substantial data warehouse for marketing purposes with the consolidated systems. Optus aims to refine its customer information to increase its understanding of particular needs and to subsequently improve marketing communication with customers with much more tailored messages and offerings.

IP-VPN market developments

In September 2007 Optus launched ‘Optus Evolve’, targeted at the MPLS-based IP-VPN market.

In June 2008 Optus launched two new services in its IP portfolio with the launch of Optus Evolve Voice and Optus Evolve Internet. Optus Evolve Voice gives customers a single access point for their voice and data needs using an IP trunk to connect to the phone network. Optus Evolve Internet meanwhile provides a high quality, fast and reliable Internet link via the Optus Evolve network.

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ABS survey – Boom in consumer high-tech spending

Thursday, June 29th, 2006

According to a survey released by the Australian Bureau of Statistics (ABS) in June 2006, household spending on digital technology goods has significantly outstripped weekly spending on alcohol, utilities and medical expenses for the first time as consumers respond to falling prices.

Spending on technology goods doubled from 2003 to 2006, as prices have fallen 40%. This market occurrence of increased spending with falling prices is known as ‘digital deflation’.

According to figures provided by the ABS and released in a CommSec report, weekly household spending in the broad category of audio-visual equipment was close to $13.50 in March 2006, while beer and wine sales were $10.10 per week. The statistics indicated that digital technology adoption had sky-rocketed since 2002, when households spent around $6 a week on information technology and around $9 a week on beer and wine.

Falling technology prices and the mass availability of cheap products has been a key driver for the change in spending patterns.

One of the key indicators used to track digital deflation is the price of Dynamic Random Access Memory (DRAM), used in computers and mobile devices. According to CommSec, the price for 256Mb of DRAM fell from more than US$6 in June 2004 to just above US$2 in February 2006.

The most demanded items by consumers include iPods, digital cameras, LCD TVs, mobile phones and computers.

By the end of 2002, the annual cost of telecommunications services rose 4%, but by March 2006, prices had turned around to fall 2% on the previous 12 months.

The report predicts continued growth for Australian technology retailers such as Harvey Norman and JB Hi-Fi; however, falling prices and lower product margins are likely to increase the volatility of the sector.

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Telstra’s open ended roaming charges

Wednesday, June 28th, 2006

In November 2004 vRoam Global criticised Telstra for making only a small concession to more transparent mobile roaming charges – after Telstra released fixed pricing for calls back to Australia from just 16 countries.

Australia is lagging behind other countries, where carriers have had to provide consumers with pricing indexes for years. Here, global mobile roaming is one of the few services where you only find out how much you will be charged after using the service. It’s a consumer’s right to know in advance how much it costs to roam. The European Union has been pushing for increased transparency, and its recently announced roaming pricing Website will assist travellers.

Telstra’s local calls while roaming are still subject to huge variations with no fixed rates and there are still hundreds of countries with no fixed pricing structure.

In June 2004 Vodafone was the first Australian carrier to release a set pricing structure for mobile roaming customers. Optus followed in July 2005.

Although customers can now gauge how much they are likely to pay for mobile roaming, the cost is still exorbitant. In Vodafone’s case, when it released its pricing information, the actual cost of roaming was increased almost across the board. The same appeared to be the case for Optus.

Table 2 – Example of a one minute call from USA to Australia while roaming

Vodafone Optus Telstra vRoam

$2.30 $2.72 $3.08 $1.51

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Australia Roaming – International comparisons – 2003

Wednesday, June 28th, 2006

While the following information is from 2003 the examples were still valid in 2005.

OECD

Australia is not alone in having to tackle this area of market failure. A number of regulators overseas have recently found evidence of market failure in fixed to mobile and international roaming prices stemming from market power over call termination. ATUG sees no difference between the arguments in those jurisdictions and the situation prevailing in Australia.

In its Communications Outlook 2003, the Organisation for Economic Co-operation and Development (OECD) makes particular reference to the issue of fixed to mobile interconnection:

‘Interconnection remains an important issue preoccupying regulators. The last several years have seen increased concern with regard to fixed to mobile termination where mobile operators terminating calls are viewed as having a bottleneck position. In a number of OECD countries rates for terminating calls on mobile networks have been steadily decreased in the last several years. However, a number of initiatives have been taken by regulators to put further pressure on mobile termination charges. Within the EU, the designation of mobile operators as having significant market power in the interconnection market has led to the imposition of cost-oriented termination charges which are applied on a non-discriminatory basis in a number of countries. Operators in some countries are required to publish their termination rates and some countries have intervened directly to set maximum termination prices, impose price caps or impose reductions on these charges.’

The European Commission

The EC has begun to act on excessively high mobile charges, passing legislation that allows member governments to regulate wholesale mobile pricing. INTUG says that Asia-Pacific governments need to do the same or risk breaching their WTO commitments.

INTUG is backed by large multinational telecom users and also acts as a peak organisation for national user groups such ATUG and TUANZ. It made its criticisms in a submission to an APEC Telecom Working Group plenary conducted in Moscow in August 2002.

UK

The decision by the UK Competition Commission in January 2003 ought to cause carriers in Australia to reflect on wholesale charges for termination and relevant retail prices, and spur action at the ACCC in its 2003 review of the mobile market.

The UK Commission thought the prices were 30-40% higher than they should be. Its decision will lead to reductions of up to 45% in termination charges over the next three years to 31 March 2006 to a ‘fair charge.’ The UK Commission decision says that termination charges should be ‘cost-reflective’ and that long-run incremental costs are the right base.

The Commission scored a major victory in June 2003 when its ruling to lower these charges by 50% over the next three years was upheld in court.

South Korea

South Korea’s Ministry of Information and Communication (MIC) has also announced plans to cut fixed-to-mobile calling rates by 5% starting 1 July 2003, lowering tariffs to 15.7 won per 10 seconds. The move came after top carrier KT Corp gained a 10.3% reduction in fixed-to-mobile access rates in January but declined to pass the savings on to subscribers.

The MIC will apply the rate cut retroactive through January in the form of free calls. In addition to the rate cut, KT Corp will offer subscribers a choice between four minutes of free fixed-to-mobile calls monthly for six months, or eight minutes of free fixed-to-mobile calls monthly for three months.

International roaming

The same problem of lack of transparency and cost orientation of mobile termination rates arises with international roaming rates and fixed network calls to international mobile phones. Users are now seeing increasing ‘surcharges’ for these calls. To take the worst two recent examples, the charge to call a mobile in East Timor has gone from 97c per minute to $3.00 per minute and similarly for PNG where the change is from 85 cents per minute to $2.21 per minute. Market pressure is apparently not strong enough to check these excesses – hence the need for decisive regulatory intervention, and global co-ordination.

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Internet media companies -v- telcos

Monday, June 26th, 2006

With the telecoms industry rapidly changing from being telephone-focused to being application-focused, the convergence that people like me have been talking about for more than a decade is slowly becoming a reality.

Like anything else, this will take the form of evolution, rather than revolution. As a matter of fact, one could argue that a third of the process is already underway; another third will be done over the next three years or so; and the remainder will take until around 2015 to complete.

But, nevertheless, those in the know are the ones that are involved in the very crucial first phase. These are the companies that are positioning themselves for the future. And those companies at the big end of town in telecoms, IT and the media who are not yet involved in this convergence will find themselves on the back foot, and will have difficulty surviving the full onslaught of convergence.

With telecoms moving into applications it is no wonder that companies such as Google, Microsoft, Yahoo, eBay, Skype and Amazon are building the infrastructure for those applications. Each one of these companies is building data centres the size of football fields. Google, however, is by far the most advanced (450,000 servers worldwide) and it will be quite an exercise for the other Internet media companies to catch up. The closest is Microsoft, with 200,000 servers (to be extended to 800,000 over the next five years).

Those who haven’t even begun won’t have a hope of catching up any time soon. And this group includes most of the telcos. There are a few exceptions here, but even the most progressive telco, BT in the UK, doesn’t come close to what the Internet media companies are building. There are others, such as KPN and France Telecom, who are also more serious about this market than many of their colleagues in Europe.

What this will mean for most telcos over the next 5 to 10 years is that they will be relegated to pipe builders. For a decade I have been talking about value-added infrastructure requirements such as data centres, content hosting, ASP, Internet outsourcing and so on. And, yes, some progress has been made – but nowhere near what is necessary for the developments that are already taking place in digital media.

I have been suggesting that each telephone exchange in the country should be turned into a data centre.

Over the last five years telcos have been cutting costs, and in many situations the value-added infrastructure developments have been the main victims in this bean-counting exercise. Simply keeping their basic telephone network up and running under the pressure of competition in their traditional markets created enough of a headache for them – looking to the future seemed to be impossible for most of the incumbent telcos.

This is a real pity, as the value-added infrastructure would have been a natural fit for them and a way to tap into new revenue streams. Sure, some will be able to buy themselves into this market, but I would not be surprised if they are being increasingly sidelined.

For the abovementioned Internet media companies to protect the business that they have been able to build up over the last five years it will be necessary for them to operate more and more independently from the network services (quality, speed, unbundling, etc), that telcos are prepared to offer them.

The ridiculous network neutrality debate is a case in point. The Internet media companies are supporting millions of businesses – and their applications and advertising – and these operators will need to be able to deliver first-class services to their end-user customers. And they will not allow the telcos to create a new ‘broadcast quality’ broadband oligopoly that they want to keep for themselves.

Luckily, in most other countries outside the USA there is a good opportunity for more infrastructure-based competition, and this will prevent broadband monopolies from developing in these countries. Network neutrality, therefore, will be less of an issue in countries with infrastructure competition; the USA, at best, has a duopoly and this is one of the main reasons broadband in the United States is slipping behind the rest of the world in terms of penetration and quality.

Paul Budde

Emerging Digital Media
Roundtable with Paul Budde and Industry Experts – 19th July 2006
Over the last year I have been writing many articles about the re-emerging Internet economy.

While we had the right vision in the late 1990s, the timing was wrong. What was missing at that time was the infrastructure needed for the Internet economy. I have always maintained that there was nothing wrong with the so-called dotcom businesses if their organisations were built upon sound business models. Unfortunately these companies had to wait around for broadband before they could really take off.

Of course, another group of cowboys, driven by greed, also entered the dotcom market, and they all went under in the subsequent dotcom crash.

On a global scale, we have seen the emergence/survival of companies such as Google, Yahoo!, eBay, Skype, Amazon, MSN, News Limited (MySpace) as the key players in this economy. This is only the tip of the iceberg and millions of other organisations will eventually become part of the new Internet economy. Most will simply add this as a new strategy to their existing business models, but also a whole range of new companies will build dedicated Internet businesses and/or will service this new industry.

There are especially good opportunities for ISPs and content/service/media companies to merge and take more of a leadership role in this market.

Companies earmarked for leadership include Reeltime, Anytime, Legion, destra and some of the other players in the m-commerce space. They certainly are at the head of the pack. While Sensis has thrown itself up as a key player, we haven’t seen much innovative action there, and it will have a hell of a job to stop the deterioration of its paper-based services before it can fully participate in the Internet economy.

Cost:
$395 per person (excluding GST) – this includes morning/afternoon coffee and lunch

Venue:
The Observatory Hotel
89-113 Kent Street, Sydney

To register:
Via our registration form;
or Call Christine: 02 4998 8144;
or E-mail Christine: pbc@budde.com.au.

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