Archive for February, 2008

Wholesale market going backwards

Friday, February 29th, 2008

In the past Telstra has likened its wholesale customers to ‘leeches’ and ‘parasites’. Naturally this makes it difficult to take the company seriously when it now tries to convince the industry that it provides genuine wholesale services to these customers.

The wholesale companies spend $2.5 billion a year with Telstra, yet the company (or at least its American management team) treats them with contempt.

Telstra has, in no uncertain terms, indicated that it would like regulatory holidays in order to roll out new fibre-based infrastructure. This can only be viewed as an attempt to limit competition.

Telstra has also indicated that it wants to keep its EBITDA well above international telco level. This would lead, as it indicated last year to broadband charges of around $85-$95 per month, an amount that was flatly rejected by the then Minister for Communications, Helen Coonan.

Whenever it can get away with it the company will not provide wholesale services – such as is the case with ADSL2+, for instance. Other wholesale services that had been built up over the last decade by Telstra’s Wholesale Directors, Doug Campbell, Rosemary Howard and Deena Shiff (under a strikingly different regime) have been significantly wound down under Sol Trujillo. The company is now generating less revenue from this division than it received last year. And this is happening in a world where global wholesale services are rising by 20%+ per annum.

But, as proved by the latest financial results, this hasn’t done the company any harm. On the contrary, revenues and profits were up, and we believe this was achieved at least partially to the detriment of competition.

Telstra’s rhetoric has quietened down of late, but the remarks and actions mentioned above are all on the public record.

Are its wholesale customers genuine?

I am sure Telstra does have a point – that most of its competitors are trying to pick the eyes out of what is available to them. They are only going for the richest pickings. But do they have a choice? Telstra’s wholesale margins in the industry remain such that 90% of the industry profits go to Telstra and the rest of the 700 or so telcos have to squabble over the remaining 10%.

If they were to reach beyond the most lucrative parts of the industry they would very quickly go broke, as many players have done over the last decade.

How safe is it to invest in facilities-based infrastructure?

It is honourable and just that the ACCC encourages facilities-based competition, and we have seen that the key players are all very actively involved in that. But Telstra’s cooperation should be judged on the comments that the company has made over the last 2½ years. The competitors probably do dramatise the situation somewhat, but the fact remains that Telstra is very hostile towards them. Furthermore, we are on the brink of the launch of FttX networks, at which point these DSLAMS will become obsolete, and we have no idea what the next regulatory regime will look like.

To make the situation even more complex, all of these players depend on Telstra, in one way or another, for their survival. Even those with totally separate infrastructure are targeted by the company; these players are undermined via selective price competition – eg, when a new backbone service becomes available Telstra has been dropping prices by 60%-80% over these routes.

And the Pay TV overbuild of the 1990s looms large in the memory of any company giving consideration to building alternative infrastructure. There is nothing to stop Telstra from doing this again if somebody else were to begin rolling out competitive infrastructure. Currently the company is exploring its legal options to undermine the rollout of a competitive regional network proposed by OPEL. The threat alone will be enough to stop anybody from doing anything serious here.

The industry’s vision for the future

It was interesting to see that, in its presentation to the Minister, the Communications Alliance came out with roughly the same set of principles as those drafted by the industry’s FttH Special Interest Group. These reports were both presented to the Minister in the same week.

The only real difference between the two groups lies in the emphasis. The FttH SIG seems less confident of the ability of the market to deliver an efficient and fair outcome. From an economic perspective Communications Alliance’s position (opting for limited regulations) is a correct one; however, the FttH SIG does not believe that Australia has a sufficiently balanced market at this stage. Telstra is represented in Communications Alliance, so obviously some compromises were needed. On the other hand the incumbent decided not to participate in the FttX SIG, so the 140 companies involved there were not constrained in that respect.

It will be very interesting to see how the government and the industry as a whole will define open access. The future of our industry will totally depend on that single issue. If we don’t get that right we will see a continuation of the carnage and abuse and total disrespect for the regulator that we have seen over the last few years.

That is not a future I would look forward to.

If we do get it right, however, everything else will fall into place, as is happening in Europe.

The buck stops with the Minister, and that is an unenviable position to be in. Nevertheless he is the only person in the industry who can set the rules, and the last two and a half years have shown that self-regulation has not united the two camps – Telstra, on the one side, and the rest of the industry on the other.

Paul Budde

See also:

Australia – Industry – Wholesale Market – 2008

Australia – Broadband – Network Operators and Wholesalers

Australia – Competition Issues – 2008

Australia – Labor Government Policies – 2008

Australia – Broadband – ADSL – Overview and Statistics

Australia – Broadband – DSLAMs and ADSL2+

Australia – FttH and FttN Market and Industry Analyses

Australia – National FttX Strategy – 2008

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WiMAX equipment market taking off

Friday, February 29th, 2008

The WiMAX market sequentially grew 11% for the quarter and 46% for the year, with worldwide sales of fixed and mobile WiMAX equipment hitting just under $800 million in 2007, says Infonetics Research in its latest WiMAX and Mesh Network Equipment and Devices report.

WiMAX has been deployed in more than 80 countries worldwide, and commercial networks will continue to grow in number and size in 2008, the report shows. Infonetics forecasts the WiMAX market to grow to $7.7 billion in 2011.

Several recent developments are giving a boost to the WiMAX market. Among the most significant developments: Cisco’s acquisition of mobile WiMAX vendor Navini Networks, the market entrance of specialist ASN gateway vendor WiChorus, the launch of WiMAX phones and Ultra Mobile PCs, and the new Open WiMAX initiative, which promotes disruptive, all-IP open WiMAX architecture, and should lead to best-of-breed solutions with inter-vendor interoperability.

Other highlights from the report:

  • Mobile WiMAX equipment grew in high double-digit percents every quarter of 2007
  • Worldwide sales of ASN gateways, which aggregate traffic from mobile WiMAX base stations, grew nearly 10-fold from 2006 to 2007
  • The number of worldwide WiMAX subscribers (fixed and mobile) topped 2.2 million in 2007, led by the Asia Pacific region; the majority are fixed WiMAX subscribers
  • Alvarion maintains its lead in worldwide fixed WiMAX equipment revenue share in 2007, followed by Airspan
  • Motorola is the leader in worldwide mobile WiMAX equipment revenue share in 2007, followed by Samsung

For more info see:

Broadband – Wireless – Global Overviews

Broadband – Wireless – Technical Reports

Broadband – Wireless – Regional Overviews

Broadband – Wireless – Country Profiles

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The Enterprise Voice & Data market

Friday, February 29th, 2008

The enterprise telephony market grew 6% between 2006 and 2007, to $9.6 billion, according to Infonetics Research’s latest Enterprise Telephony report. The market was buoyed by strong IP PBX systems equipment sales, and dragged down by TDM PBX/KTS equipment sales.

For the quarter, the overall market is down 7% from 3Q07 to 4Q07, as it followed a typically high third quarter (many vendors have their fiscal year-end in the third quarter), the report shows.

2007 ended up being a good year overall for the PBX market, despite rapidly declining sales of TDM systems, which were down over 20%. The market continues to witness the migration to IP PBXs, but new in 2007 was evidence that end-users are benefiting from IP in a direct and meaningful way. Until now, most of the benefits have gone to the network manager, such as IP trunking– things the user couldn’t care less about. But this is starting to change, slowly but surely. For example, shipments of softphones were up 55% to 385,000 last year. These are the users that get to directly experience what’s new and different with IP communications, by taking their office phone with them.”

Other highlights from the report:

  • Worldwide IP deskphone and softphone shipments are up 29% in 2007 from 2006
  • The top 5 PBX/KTS system vendors account for 3/4 of total market revenue: Avaya, Cisco, Nortel, Siemens, and Alcatel-Lucent (in that order)
  • Cisco was the only one of these with a meaningful increase in market share, and jumped from 5th to 2nd in 2007
  • Sales of TDM systems managed to stay above the $1 billion mark in 2007, likely for the last time
  • Hybrid IP PBX systems account for 2/3 of all lines shipped in 2007; pure IP systems account for 18%
  • The North American market had the weakest overall line growth in 2007; CALA had the strongest line growth, Asia Pacific the second strongest

For more info see:

See also:

Technology – Data 3 – Networks Within Buildings

Technology – Data 4 – QoS, MPLS and VPLS

An Index to Technology reports

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FttH networks to boost lacklustre US broadband penetration

Thursday, February 28th, 2008

During 2007, total broadband subscribers continued to grow solidly, although in terms of broadband penetration, the US continued to edge towards the bottom half of the OECD tables. Broadband DSL subscriber growth continued to outpace cable subscriber growth, though cable broadband still leads in terms of market share.

Nevertheless, with the telcos aggressively deploying fibre networks, the telcos will soon overtake the cable companies in terms of broadband market share and the US will start moving back up the OECD broadband penetration rankings.

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US fixed lines continue to flounder whilst VoIP flourishes

Thursday, February 28th, 2008

The number of traditional fixed line customers in the US continued to drop sharply during 2007, with Verizon and AT&T both reporting declines of around 10% in residential wireline accounts. The growth in VoIP was a major contributor to this decline, in particular cable VoIP, with subscriber growth rates around 75%.

Thus the major telcos continued to focus on their fibre deployments in response to increasing competition from the MSOs’ VoIP and triple play offerings. State-by-state video franchising reform continued apace, thus facilitating the deployment by the RBOCs of Internet Protocol TV (IPTV) on their expanding fibre networks. By late 2007 FttH deployments in the US were growing at over 110% per annum.

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